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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 March 31, 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
    Incorporation or Organization) |  | (I.R.S. Employer Identification Number)
|                                                                  
|7925 Jones Branch Drive, McLean, VA                                |  | 22102                                  
|(Address of Principal Executive Offices)                           |  | (Zip Code)                             

Registrants telephone number, including
area code: (703) 873-2000

Not Applicable




(Former name, former address and former fiscal
year, if changed, since last report.)

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 April 30, 2004 the registrant had
outstanding 19,843,281 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 March 31,
2004


INDEX

|         |  |                                                                                                            |  |        |    | 
|-------- |  | ---------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|         |  |                                                                                                            |  | Page  
|         |  |                                                                                                            |  | Number
|         |  |                                                                                                            |  |       
|PART I:  |  | FINANCIAL
    INFORMATION                                                                                  |  |        |    | 
|ITEM 1:  |  | FINANCIAL STATEMENTS                                                                                       |  |        |    | 
|         |  | Condensed consolidated
    statements of operations for the three months ended
    March 31, 2003 and 2004 |  |        | 3  | 
|         |  | Condensed consolidated
    balance sheets as of December 31, 2003 and March 31,
    2004                   |  |        | 4  | 
|         |  | Condensed consolidated
    statements of cash flows for the three months ended
    March 31, 2003 and 2004 |  |        | 5  | 
|         |  | Notes to condensed
    consolidated financial statements                                                   |  |        | 6  | 
|ITEM 2:  |  | MANAGEMENTS DISCUSSION
    AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                  |  |        | 12 | 
|ITEM 3:  |  | QUANTITATIVE AND QUALITATIVE
    DISCLOSURES ABOUT MARKET RISK                                             |  |        | 20 | 
|ITEM 4:  |  | CONTROLS AND PROCEDURES                                                                                    |  |        | 21 | 
|        
|PART II: |  | OTHER
    INFORMATION                                                                                      |  |        |    | 
|ITEM 1:  |  | Legal proceedings                                                                                          |  |        | 22 | 
|ITEM 2:  |  | Changes in securities                                                                                      |  |        | 22 | 
|ITEM 3:  |  | Defaults upon senior
    securities                                                                        |  |        | 22 | 
|ITEM 4:  |  | Submission of matters to a
    vote of security holders                                                    |  |        | 22 | 
|ITEM 5:  |  | Other information                                                                                          |  |        | 22 | 
|ITEM 6:  |  | Exhibits and reports on
    Form 8-K                                                                       |  |        | 22 | 
|EX-11   
|EX-31.1 
|EX-31.2 
|EX-32.1 
|EX-32.2 



2



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##### Table of Contents






PART I: FINANCIAL INFORMATION




Item 1: Financial Statements

LCC International, Inc. and
Subsidiaries



Condensed Consolidated Statements of
Operations


(In thousands, except per share
data)


(Unaudited)


|                                                                       |                               |                    |        |        |   |   |        |        |  
|---------------------------------------------------------------------- | ----------------------------- | ------------------ | ------ | ------ | - | - | ------ | ------ | -
|                                                                       |                               |                   
|                                                                       |                               | Three Months Ended
|                                                                       |                               | March 31,         
|                                                                       |                               |                   
|                                                                       |                               | 2003               |        | 2004  
|                                                                       |                               |                    |        |       
|REVENUES                                                               |                               | $                  | 17,140 |        |   | $ | 45,049 |       
|COST OF REVENUES                                                       |                               |                    | 14,599 |        |   |   | 38,097 |       
|                                                                       |                               |                    |        |        |   |   |        |       
|GROSS PROFIT                                                           |                               |                    | 2,541  |        |   |   | 6,952  |       
|                                                                       |                               |                    |        |        |   |   |        |       
|OPERATING EXPENSES:                                                    |                               |                    |        |        |   |   |        |       
|                                                                       | Sales and marketing           |                    |        | 1,956  |   |   |        | 1,768  |  
|                                                                       | General and administrative    |                    |        | 4,738  |   |   |        | 6,233  |  
|                                                                       | Restructuring charge          |                    |        | (152   | ) |   |        |       |  
|                                                                       | Depreciation and amortization |                    |        | 796    |   |   |        | 756    |  
|                                                                       |                               |                    |        |        |   |   |        |       
|                                                                       |                               |                    | 7,338  |        |   |   | 8,757  |       
|                                                                       |                               |                    |        |        |   |   |        |       
|OPERATING LOSS                                                         |                               |                    | (4,797 | )      |   |   | (1,805 | )     
|                                                                       |                               |                    |        |        |   |   |        |       
|OTHER INCOME (EXPENSE):                                                |                               |                    |        |        |   |   |        |       
|                                                                       | Interest income               |                    |        | 96     |   |   |        | 59     |  
|                                                                       | Interest expense              |                    |        | (8     | ) |   |        | (51    | )
|                                                                       | Other                         |                    |        | 1,249  |   |   |        | 152    |  
|                                                                       |                               |                    |        |        |   |   |        |       
|                                                                       |                               |                    | 1,337  |        |   |   | 160    |       
|                                                                       |                               |                    |        |        |   |   |        |       
|LOSS FROM OPERATIONS BEFORE INCOME TAXES                               |                               |                    | (3,460 | )      |   |   | (1,645 | )     
|BENEFIT FOR INCOME TAXES                                               |                               |                    | (1,298 | )      |   |   | (91    | )     
|                                                                       |                               |                    |        |        |   |   |        |       
|NET LOSS                                                               |                               | $                  | (2,162 | )      |   | $ | (1,554 | )     
|                                                                       |                               |                    |        |        |   |   |        |       
|NET LOSS PER SHARE:                                                    |                               |                    |        |        |   |   |        |       
|                                                                       | Basic                         |                    | $      | (0.10  | ) |   | $      | (0.06  | )
|                                                                       |                               |                    |        |        |   |   |        |       
|                                                                       | Diluted                       |                    | $      | (0.10  | ) |   | $      | (0.06  | )
|                                                                       |                               |                    |        |        |   |   |        |       
|WEIGHTED AVERAGE SHARES USED IN CALCULATION OF
    NET LOSS PER SHARE: |                               |                    |        |        |   |   |        |       
|                                                                       | Basic                         |                    |        | 20,958 |   |   |        | 24,275 |  
|                                                                       |                               |                    |        |        |   |   |        |       
|                                                                       | Diluted                       |                    |        | 20,958 |   |   |        | 24,275 |  
|                                                                       |                               |                    |        |        |   |   |        |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



LCC International, Inc. and
Subsidiaries



Condensed Consolidated Balance
Sheets


(In thousands, except per share
data)


|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |        |        | 
|------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | ----------- | ------ | - | ------- | ------ | ------ | 
|                                                                                      |                                                                                                                                         | December 31,                            |         | March 31,  
|                                                                                      |                                                                                                                                         | 2003                                    |         | 2004       
|                                                                                      |                                                                                                                                         |                                         |         |            
|                                                                                      |                                                                                                                                         |                                         |         | (Unaudited)
|ASSETS:                                                                               |                                                                                                                                         |                                         |         |             |        |   |         |       
|Current assets:                                                                       |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      | Cash and cash equivalents                                                                                                               |                                         | $       | 28,943      |        |   | $       | 23,151 |       
|                                                                                      | Restricted cash                                                                                                                         |                                         |         | 1,568       |        |   |         | 1,409  |       
|                                                                                      | Short-term investments                                                                                                                  |                                         |         | 520         |        |   |         |       |       
|                                                                                      | Receivables, net of allowance for doubtful
    accounts of $466 and $446 at December 31, 2003 and
    March 31, 2004, respectively:     |                                         |         |             |        |   |         |        |       
|                                                                                      |                                                                                                                                         | Trade accounts receivable               |         |             | 27,456 |   |         |        | 33,087 | 
|                                                                                      |                                                                                                                                         | Unbilled receivables                    |         |             | 35,007 |   |         |        | 35,555 | 
|                                                                                      |                                                                                                                                         | Due from related parties and affiliates |         |             | 180    |   |         |        | 206    | 
|                                                                                      | Deferred income taxes, net                                                                                                              |                                         |         | 3,547       |        |   |         | 3,468  |       
|                                                                                      | Prepaid expenses and other current assets                                                                                               |                                         |         | 1,726       |        |   |         | 2,240  |       
|                                                                                      | Prepaid tax receivable and prepaid taxes                                                                                                |                                         |         | 662         |        |   |         | 672    |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | Total current assets                    |         |             | 99,609 |   |         |        | 99,788 | 
|Property and equipment, net                                                           |                                                                                                                                         |                                         | 3,818   |             |        |   | 3,675   |       
|Investments in affiliates                                                             |                                                                                                                                         |                                         | 764     |             |        |   | 1,027   |       
|Deferred income taxes, net                                                            |                                                                                                                                         |                                         | 1,407   |             |        |   | 1,683   |       
|Goodwill                                                                              |                                                                                                                                         |                                         | 11,115  |             |        |   | 11,574  |       
|Other intangibles                                                                     |                                                                                                                                         |                                         | 843     |             |        |   | 775     |       
|Other assets                                                                          |                                                                                                                                         |                                         | 1,035   |             |        |   | 1,474   |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | $                                       | 118,591 |             |        | $ | 119,996 |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                             |                                                                                                                                         |                                         |         |             |        |   |         |       
|Current liabilities:                                                                  |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      | Line of credit                                                                                                                          |                                         | $       | 1,840       |        |   | $       | 1,544  |       
|                                                                                      | Accounts payable                                                                                                                        |                                         |         | 11,485      |        |   |         | 10,550 |       
|                                                                                      | Accrued expenses                                                                                                                        |                                         |         | 21,152      |        |   |         | 23,537 |       
|                                                                                      | Accrued employee compensation and benefits                                                                                              |                                         |         | 5,525       |        |   |         | 6,373  |       
|                                                                                      | Deferred revenue                                                                                                                        |                                         |         | 471         |        |   |         | 1,453  |       
|                                                                                      | Income taxes payable                                                                                                                    |                                         |         | 967         |        |   |         | 924    |       
|                                                                                      | Accrued restructuring current                                                                                                           |                                         |         | 2,903       |        |   |         | 2,580  |       
|                                                                                      | Other current liabilities                                                                                                               |                                         |         | 286         |        |   |         | 175    |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | Total current liabilities               |         |             | 44,629 |   |         |        | 47,136 | 
|                                                                                      | Accrued restructuring non-current                                                                                                       |                                         |         | 3,432       |        |   |         | 3,210  |       
|                                                                                      | Other liabilities                                                                                                                       |                                         |         | 762         |        |   |         | 793    |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | Total liabilities                       |         |             | 48,823 |   |         |        | 51,139 | 
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|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 19,814
    shares issued and outstanding at December 31, 2003 and
    March 31, 2004, respectively |                                         |         | 195         |        |   |         | 198    |       
|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
    March 31, 2004, respectively   |                                         |         | 46          |        |   |         | 45     |       
|Paid-in capital                                                                       |                                                                                                                                         |                                         | 106,262 |             |        |   | 106,964 |       
|Accumulated deficit                                                                   |                                                                                                                                         |                                         | (36,602 | )           |        |   | (38,156 | )     
|Note receivable from shareholder                                                      |                                                                                                                                         |                                         | (1,557  | )           |        |   | (1,557  | )     
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      | Subtotal                                                                                                                                |                                         |         | 68,344      |        |   |         | 67,494 |       
|Accumulated other comprehensive income 
    foreign currency translation adjustments |                                                                                                                                         |                                         | 1,424   |             |        |   | 1,363   |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | Total shareholders equity              |         |             | 69,768 |   |         |        | 68,857 | 
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                      |                                                                                                                                         | $                                       | 118,591 |             |        | $ | 119,996 |       
|                                                                                      |                                                                                                                                         |                                         |         |             |        |   |         |       

See accompanying notes to condensed consolidated
financial statements.

4



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LCC International, Inc. and
Subsidiaries



Condensed Consolidated Statements of Cash
Flows


(In thousands)


(Unaudited)


|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |        |   |     |        |  
|------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------- | -------------------------------------------- | ---------------------------------------- | - | ---- | ------ | ------ | - | --- | ------ | -
|                                                        |                                                                                 |                                  
|                                                        |                                                                                 | Three Months Ended               
|                                                        |                                                                                 | March 31,                        
|                                                        |                                                                                 |                                  
|                                                        |                                                                                 | 2003                              |                                              | 2004                                    
|                                                        |                                                                                 |                                   |                                              |                                         
|Cash flows from operating activities:                   |                                                                                 |                                   |                                              |                                          |   |      |        |       
|                                                        | Net loss                                                                        |                                   | $                                            | (2,162                                   | ) |      | $      | (1,554 | )
|                                                        | Adjustments to reconcile net loss to net cash
    used in operating activities: |                                   |                                              |                                          |   |      |        |        |  
|                                                        |                                                                                 |                                   | Depreciation and amortization                |                                          |   | 796  |        |        |   | 756 |       
|                                                        |                                                                                 |                                   | Provision (recovery) for doubtful accounts   |                                          |   | (728 | )      |        |   |    |       
|                                                        |                                                                                 |                                   | Loss on equity method investment             |                                          |   |     |        |        |   | 97  |       
|                                                        |                                                                                 |                                   | Restructuring charge (recovery)              |                                          |   | (152 | )      |        |   |    |       
|                                                        |                                                                                 |                                   | Changes in operating assets and liabilities: |                                          |   |      |        |        |   |     |       
|                                                        |                                                                                 |                                   |                                              | Trade, unbilled, and other receivables   |   |      | (450   | )      |   |     | (6,212 | )
|                                                        |                                                                                 |                                   |                                              | Accounts payable and accrued expenses    |   |      | (404   | )      |   |     | 2,298  |  
|                                                        |                                                                                 |                                   |                                              | Other current assets and liabilities     |   |      | 235    |        |   |     | (223   | )
|                                                        |                                                                                 |                                   |                                              | Other non-current assets and liabilities |   |      | (1,189 | )      |   |     | (1,235 | )
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Net cash used in operating activities                   |                                                                                 |                                   | (4,054                                       | )                                        |   |      | (6,073 | )     
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Cash flows from investing activities:                   |                                                                                 |                                   |                                              |                                          |   |      |        |       
|                                                        | Purchases of property and equipment                                             |                                   |                                              | (250                                     | ) |      |        | (460   | )
|                                                        | Proceeds from disposals of property and equipment                               |                                   |                                              | 32                                       |   |      |        |       |  
|                                                        | Investments                                                                     |                                   |                                              |                                         |   |      |        | (360   | )
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Net cash used in investing activities                   |                                                                                 |                                   | (218                                         | )                                        |   |      | (820   | )     
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Cash flows from financing activities:                   |                                                                                 |                                   |                                              |                                          |   |      |        |       
|                                                        | Payments on line of credit                                                      |                                   |                                              |                                         |   |      |        | (5,813 | )
|                                                        | Borrowings on line of credit                                                    |                                   |                                              |                                         |   |      |        | 5,531  |  
|                                                        | Proceeds from issuance of common stock, net                                     |                                   |                                              | 20                                       |   |      |        | 22     |  
|                                                        | Proceeds from exercise of options                                               |                                   |                                              |                                         |   |      |        | 682    |  
|                                                        | Decrease (increase) of short-term investments                                   |                                   |                                              |                                         |   |      |        | 520    |  
|                                                        | Decrease (increase) in restricted cash                                          |                                   |                                              | (229                                     | ) |      |        | 159    |  
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Net cash provided by (used in) financing
    activities |                                                                                 |                                   | (209                                         | )                                        |   |      | 1,101  |       
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Net decrease in cash and cash equivalents               |                                                                                 |                                   | (4,481                                       | )                                        |   |      | (5,792 | )     
|Cash and cash equivalents at beginning of period        |                                                                                 |                                   | 37,507                                       |                                          |   |      | 28,943 |       
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Cash and cash equivalents at end of period              |                                                                                 | $                                 | 33,026                                       |                                          |   | $    | 23,151 |       
|                                                        |                                                                                 |                                   |                                              |                                          |   |      |        |       
|Supplemental disclosures of cash flow information:      |                                                                                 |                                   |                                              |                                          |   |      |        |       
|                                                        |                                                                                 | Cash paid during the quarter for: |                                              |                                          |   |      |        |        |   |    
|                                                        |                                                                                 |                                   | Income taxes                                 |                                          | $ | 3    |        |        | $ | 182 |       

See accompanying notes to condensed consolidated
financial statements.

5



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##### Table of Contents



LCC International, Inc. and
Subsidiaries



Notes to Condensed Consolidated Financial
Statements


(Unaudited)


(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.

6



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##### Table of Contents



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, our net
loss and net loss per share would have increased to the pro
forma amounts indicated below.

|                                                                                                    |         |                       |        |       |   |   |        |       |  
|--------------------------------------------------------------------------------------------------- | ------- | --------------------- | ------ | ----- | - | - | ------ | ----- | -
|                                                                                                    |         |                      
|                                                                                                    |         | Three Months Ended   
|                                                                                                    |         | March 31,            
|                                                                                                    |         |                      
|                                                                                                    |         | 2003                  |        | 2004 
|                                                                                                    |         |                       |        |      
|                                                                                                    |         |                      
|                                                                                                    |         | (in thousands, except
|                                                                                                    |         | per share data)      
|Net loss as reported                                                                                |         | $                     | (2,162 | )     |   | $ | (1,554 | )    
|Deduct total stock-based employee compensation
    expense determined under fair value based method |         |                       | (615   | )     |   |   | (637   | )    
|                                                                                                    |         |                       |        |       |   |   |        |      
|Pro forma net loss                                                                                  |         | $                     | (2,777 | )     |   | $ | (2,191 | )    
|                                                                                                    |         |                       |        |       |   |   |        |      
|Net loss per share                                                                                  |         |                       |        |       |   |   |        |      
|As reported:                                                                                        |         |                       |        |       |   |   |        |      
|                                                                                                    | Basic   |                       | $      | (0.10 | ) |   | $      | (0.06 | )
|                                                                                                    |         |                       |        |       |   |   |        |      
|                                                                                                    | Diluted |                       | $      | (0.10 | ) |   | $      | (0.06 | )
|                                                                                                    |         |                       |        |       |   |   |        |      
|Pro forma:                                                                                          |         |                       |        |       |   |   |        |      
|                                                                                                    | Basic   |                       | $      | (0.13 | ) |   | $      | (0.09 | )
|                                                                                                    |         |                       |        |       |   |   |        |      
|                                                                                                    | Diluted |                       | $      | (0.13 | ) |   | $      | (0.09 | )
|                                                                                                    |         |                       |        |       |   |   |        |      

(4) Other Comprehensive Income
(Loss)

Comprehensive income (loss) is defined as
net income (loss) plus the change in equity of a business
enterprise during a period from transactions and other events
and circumstances from non-owner sources. Other comprehensive
income (loss) refers to revenues, expenses, gains and
losses that under accounting principles generally accepted in
the United States of America are included in comprehensive
income (loss), but excluded from net income (loss). Other
comprehensive income (loss) consists solely of foreign
currency translation adjustments at March 31, 2003 and
2004. Comprehensive income (loss) for the three months ended
March 31 is as follows (in thousands).

|                                                              |  |      |        |      |  |   |        |  
|------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                                              |  | 2003 |        | 2004
|                                                              |  |      |        |     
|Net loss                                                      |  | $    | (2,162 | )    |  | $ | (1,554 | )
|                                                              |  |      |        |      |  |   |        |  
|Other comprehensive loss, before tax                          |  |      | (619   | )    |  |   | (65    | )
|Income tax benefit related to items of
    comprehensive loss |  |      | (232   | )    |  |   | (4     | )
|                                                              |  |      |        |      |  |   |        |  
|Other comprehensive loss, net of tax                          |  |      | (387   | )    |  |   | (61    | )
|                                                              |  |      |        |      |  |   |        |  
|Comprehensive loss                                            |  | $    | (2,549 | )    |  | $ | (1,615 | )
|                                                              |  |      |        |      |  |   |        |  

(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 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 $23,000 for the first quarter of 2004 for payments made by
us pursuant to this agreement. We received reimbursements from
Telcom Ventures of $65,000 during 2003 and $21,000 for the

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first quarter of 2004. At December 31, 2003
and March 31, 2004, outstanding amounts associated with
payments made by us under this agreement were $6,000 and $8,000,
respectively, and are included as due from related parties and
affiliates within the consolidated balance sheets in the
accompanying financial statements.


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 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 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. We acquired the shares from Westminster Capital
B.V. (Westminster). Detron has certain ongoing
transactions with Westminster. Under a five-year lease agreement
for office space, Detron recorded approximately $17,000 and
$36,000 of rent expense for the quarters ended March 31, 2003
and 2004, respectively. During the first quarter of 2003 and
2004, Detron seconded various idle employees to Detron
Telematics, Westminsters wholly-owned subsidiary and
recorded revenue of approximately $0.1 million and $46,000,
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 March 31, 2004, the restructuring charge calculation
assumes we will receive $11.1 million in sublease income,
of which $6.8 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.

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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 sublease income |                                                              |                |     |            |   |       | 535   |        |   |   | 535   |       
|                                                   |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                   | Restructuring charge                                         |                |      | (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 |       
|                                                   |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Charges against the provision:                     |                                                              |                |      |            |   |       |       |        |   |   |       |       
|                                                   | Payments for excess office space, net of sublease
    income |                |      |           |   |       |       | (626   | ) |   |       | (626   | )
|                                                   | Leasehold improvements and other assets
    written-off      |                |      |           |   |       |       | 7      |   |   |       | 7      |  
|                                                   | Other                                                        |                |      |           |   |       |       | 74     |   |   |       | 74     |  
|                                                   |                                                              |                |      |            |   |       |       |        |   |   |       |       
|Restructuring payable as of March 31, 2004         |                                                              | $              |     |            |   | $     | 5,790 |        |   | $ | 5,790 |       
|                                                   |                                                              |                |      |            |   |       |       |        |   |   |       |       

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

|                              |  |              |       |           |  |   |       | 
|----------------------------- |  | ------------ | ----- | --------- |  | - | ----- | 
|                              |  | December 31, |       | March 31,
|                              |  | 2003         |       | 2004     
|                              |  |              |       |          
|Accrued restructuring current |  | $            | 2,903 |           |  | $ | 2,580 | 
|Accrued restructuring         |  |              | 3,432 |           |  |   | 3,210 | 
|                              |  |              |       |           |  |   |       | 
|Accrued restructuring total   |  | $            | 6,335 |           |  | $ | 5,790 | 
|                              |  |              |       |           |  |   |       | 

(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 unsecured claim against NextWave that was acquired by us
in connection with our acquisition of Koll Telecommunications
LLC in 1997 (the Koll Claim). We have engaged in
discussions to sell our interest in the Koll Claim.

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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.

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. Our
capital contribution was paid in three equal installments of
approximately $357,000 each and the first installment was made
on the date of closing. The second installment was made in
October 2003 and the third installment was made in January 2004.
LCC/ BOCO offers design, deployment and maintenance services to
wireless carriers in China. 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.

(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 $1.5 million as of
March 31, 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
affect on our consolidated results of operations or financial
condition.

(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.

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Segment detail is summarized as follows (in
thousands):

|                             |                         |                |       |       |       |               |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        |   |        |        |        | 
|---------------------------- | ----------------------- | -------------- | ----- | ----- | ----- | ------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                             |                         |                |       |       |       |              
|                             |                         | Americas       |       | EMEA  |       | Segment Total
|                             |                         |                |       |       |       |              
|                             |                         | 2003           |       | 2004  |       | 2003          |        | 2004   |        | 2003 |        | 2004  
|                             |                         |                |       |       |       |               |        |        |        |      |        |       
|Three Months Ended March 31, |                         |                |       |       |       |               |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        |   |        |       
|                             | Revenues:               |                |       |       |       |               |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        |   |        |        |       
|                             | From external customers |                | $     | 6,366 |       |               | $      | 26,990 |        |      | $      | 10,324 |        |   | $      | 17,228 |        |   | $      | 16,690 |        |   | $      | 44,218 |       
|                             | Inter-segment revenues  |                |       |      |       |               |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |       
|                             |                         | Total revenues |       | $     | 6,366 |               |        | $      | 26,990 |      |        | $      | 10,324 |   |        | $      | 17,228 |   |        | $      | 16,690 |   |        | $      | 44,218 | 
|Income (loss) before taxes   |                         | $              | (730  | )     |       | $             | 2,100  |        |        | $    | (719   | )      |        | $ | (884   | )      |        | $ | (1,449 | )      |        | $ | 1,216  |       
|Total assets                 |                         | $              | 8,741 |       |       | $             | 39,286 |        |        | $    | 38,730 |        |        | $ | 52,588 |        |        | $ | 47,471 |        |        | $ | 91,874 |       

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        
|                            |                                                 | March 31,                 
|                            |                                                 |                           
|                            |                                                 | 2003                       |        | 2004  
|                            |                                                 |                            |        |       
|Revenues:                   |                                                 |                            |        |        |        |   |         |       
|                            | Revenues for reportable segments                |                            | $      | 16,690 |        |   | $       | 44,218 |       
|                            | Revenues for non-reportable segments            |                            |        | 450    |        |   |         | 831    |       
|                            |                                                 |                            |        |        |        |   |         |       
|Total consolidated revenues |                                                 |                            | 17,140 |        |        |   | 45,049  |       
|                            |                                                 |                            |        |        |        |   |         |       
|Assets                      |                                                 |                            |        |        |        |   |         |       
|                            | Assets for reportable segments                  |                            | $      | 47,471 |        |   | $       | 91,874 |       
|                            | Assets not attributable to reportable segments: |                            |        |        |        |   |         |        |       
|                            |                                                 | Cash and cash equivalents  |        |        | 29,598 |   |         |        | 18,618 | 
|                            |                                                 | Restricted Cash            |        |        | 20     |   |         |        |       | 
|                            |                                                 | Short-term investments     |        |        | 514    |   |         |        |       | 
|                            |                                                 | Receivables                |        |        | 717    |   |         |        | 913    | 
|                            |                                                 | Deferred and prepaid taxes |        |        | 12,633 |   |         |        | 5,823  | 
|                            |                                                 | Property and equipment     |        |        | 1,467  |   |         |        | 971    | 
|                            |                                                 | Investments                |        |        |       |   |         |        | 1,026  | 
|                            |                                                 | Prepaid and Other          |        |        | 655    |   |         |        | 771    | 
|                            |                                                 |                            |        |        |        |   |         |       
|Total consolidated assets   |                                                 | $                          | 93,075 |        |        | $ | 119,996 |       
|                            |                                                 |                            |        |        |        |   |         |       

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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. The
Managements Discussion and Analysis of Financial Condition
and Results of Operations includes, without limitation,
forward-looking statements regarding our ability to pursue and
secure new business opportunities. A more complete discussion of
business risks is included in our Annual Report on
Form 10-K for the year ended December 31, 2003.

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, Central and South America. In
    the first quarter of 2004, Americas generated approximately 60%
    of our total revenue.                                                                                                                                                                                                              
| |  | EMEA:         |  | Based in London, the Europe, Middle East and
    Africa region is responsible for operations in the U.K., Italy,
    Netherlands, Algeria, Germany, Spain and Greece. EMEA also
    undertakes projects throughout its region and we have recently
    established a marketing office in Dubai. In the first quarter of
    2004, EMEA generated approximately 38% of our total revenue.                                                                                                                                                                             
| |  | Asia & other: |  | This includes our operations in Asia, the
    Wireless Institute and LCC Wireline. In the first 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 and
    Singapore. Our joint venture with BOCO is also based in Beijing.
    We provide training to our engineers and customers through our
    Wireless Institute, which covers the latest technologies
    developed and employed throughout the world.

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.

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. Anticipated contract losses
are recognized as they become known and estimable. We recognize
revenues on time and materials contracts as the services are
performed.

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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 March 31, 2004, comprised firm
backlog of $121 million and implied backlog of
$9 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 overall as this year progresses.

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. or 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 a total cash commitment of about $1 million.
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;                                      
|
| |  | the difficulties that our customers often face 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;                          
|
| |  | the management and the services composition of
    our fixed price contracts; 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

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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.


Some of our customers have faced difficulty in
obtaining the necessary financing to fund the development,
expansion and upgrade of their networks. The slowdown in the
world economies since 2000 and the volatility in the financial
markets have made it increasingly difficult for our customers to
predict both future demand for their services and future levels
of capital expenditure. This has resulted in the delay or
postponement of the development of new networks and expansion
and the upgrade of existing networks, all of which have had and
may continue to have a negative impact on our business.

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 34% and 49%
of our total revenues for the three months ended March 31,
2003 and 2004, respectively, and it is expected to continue 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 three
months ended March 31, 2004, approximately 32% of our
revenues were generated by work done by subcontractors,
principally for construction related activities, and
approximately 68% of our revenues were generated by work that we
perform through our own workforce, compared to 17% and 83% 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 preparation for number portability which
was implemented in November 2003; (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. For example, in early
2003, we commenced two new projects in Algeria, building upon
the presence that we established in that country in 2001. In
March 2004, we were selected by the Saudi Telecommunication
Company (STC) to provide approximately
$27 million worth of engineering consulting services for
the expansion of STCs GSM network in Saudi Arabia over
12 months, with the possibility of renewal for an
additional year at STCs discretion. The recent increase in
worldwide terrorism may affect our business in developing
countries. For example, the U.S. State Department has recently
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.

14



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##### Table of Contents



Three Months Ended March 31,
2004

Compared to


Three Months Ended March 31,
2003


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

Revenues, Cost of Revenues and Gross
Margins

|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |      |  
|----------------- | -------------- | ------------------ | ------ | -------------- |  | -------------- | ---- | ---- | - | - | ------ | ------ |  |  | ---- | ---- | -
|                  |                |                   
|                  |                | Three Months Ended
|                  |                |                   
|                  |                |                    |        |               
|                  |                | March 31, 2003     |        | March 31, 2004
|                  |                |                    |        |               
|                  |                | (in thousands)     |        |                |  | (in thousands) |      |     
|Revenues:         |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  | Americas       |                    | $      | 6,366          |  |                |      |      |   |   | $      | 26,990 |  |  |      |      |  
|                  | EMEA           |                    |        | 10,324         |  |                |      |      |   |   |        | 17,228 |  |  |      |      |  
|                  | Asia and other |                    |        | 450            |  |                |      |      |   |   |        | 831    |  |  |      |      |  
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  |                | $                  | 17,140 |                |  |                |      |      |   | $ | 45,049 |        |  |  |      |     
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  |                | (% of revenue)     |        | (% of revenue)
|Cost of revenues: |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  | Americas       |                    | $      | 5,733          |  |                |      | 90.1 | % |   | $      | 23,386 |  |  |      | 86.6 | %
|                  | EMEA           |                    |        | 8,426          |  |                |      | 81.6 |   |   |        | 14,145 |  |  |      | 82.1 |  
|                  | Asia and other |                    |        | 440            |  |                |      | 97.8 |   |   |        | 566    |  |  |      | 68.1 |  
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  |                | $                  | 14,599 |                |  |                | 85.2 | %    |   | $ | 38,097 |        |  |  | 84.6 | %   
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|Gross margins:    |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  | Americas       |                    | $      | 633            |  |                |      | 9.9  | % |   | $      | 3,604  |  |  |      | 13.4 | %
|                  | EMEA           |                    |        | 1,898          |  |                |      | 18.4 |   |   |        | 3,083  |  |  |      | 17.9 |  
|                  | Asia and other |                    |        | 10             |  |                |      | 2.2  |   |   |        | 265    |  |  |      | 31.9 |  
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     
|                  |                | $                  | 2,541  |                |  |                | 14.8 | %    |   | $ | 6,952  |        |  |  | 15.4 | %   
|                  |                |                    |        |                |  |                |      |      |   |   |        |        |  |  |      |     

Americas

Our activities in the region in the first quarter
of 2003 were at a relatively low level, reflecting the continued
depressed state of the wireless infrastructure market. Network
deployment projects were scarce and represented only
$2.0 million of the revenue for the quarter, while
RF/wireless design business represented about $4.0 million
of revenue. Cost of revenues and gross margins were affected by
contract losses on a major program and by delays in the start of
certain other programs.

In the first quarter of 2004, we had already
completed significant portions of the implementation plans
associated with the large network deployment programs that we
won in the second and third quarters of 2003, while our
RF/wireless design services exhibited strong growth. Network
deployment represented about $17.1 million of revenue in
2004, an increasing percentage of which included construction
activities, which we subcontracted to third parties. RF/wireless
design services represented about $9.9 million in 2004.
Revenues and cost of revenues included $0.3 million and
$0.8 million, respectively, for a new service offering
undertaken in the quarter and now curtailed. In addition, cost
of revenues and gross margins were affected by costs of
$0.4 million, which represented labor, recruiting and
overhead expenses for RF engineers hired in the quarter in
contemplation of specific future customer needs.

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EMEA

In the first quarter of 2003, our operations in
EMEA largely reflected the businesses that we had acquired in
late 2001 and 2002, and subsequently developed during the second
half of 2002. In the Netherlands, we began to execute a major
network support outsourcing program that we were awarded in late
2002, while we also experienced reduced volumes in network
deployment following a change in strategy of one of our major
customers. In addition, we began work on a technical consultancy
contract in Algeria. Gross margins for the quarter were 18.4%,
impacted by the lower than expected network deployment
activities in the Netherlands.

In 2004, our total revenues of $17.2 million
for the region represented a larger portfolio of activities,
including our projects in Algeria and our recently awarded
technical consulting contract in Saudi Arabia. During the
quarter we expensed approximately $0.2 million of start up
costs associated with our contract in Saudi Arabia; we may
experience additional start up costs in the second quarter as we
continue to mobilize our work force in country.

Asia and other

Asia and other generated revenues of
$0.5 million in the first quarter of 2003, and
approximately $0.8 million in 2004. In 2003, these revenues
were generated by our operations in Asia and our Wireless
Institute. In 2004, we experienced reduced volumes in Asia but
strong increases in our Wireline activities, an initiative which
we began in the second half of 2003. We expect our Wireline
business to continue to grow in 2004.

Operating Expenses

|                    |                                 |                                  |       |           |       |   |       |       |       | 
|------------------- | ------------------------------- | -------------------------------- | ----- | --------- | ----- | - | ----- | ----- | ----- | 
|                    |                                 |                                 
|                    |                                 | Three Months Ended              
|                    |                                 |                                 
|                    |                                 | March 31,                        |       | March 31,
|                    |                                 | 2003                             |       | 2004     
|                    |                                 |                                  |       |          
|                    |                                 |                                 
|                    |                                 | (in thousands)                  
|Operating expenses: |                                 |                                  |       |           |       |   |       |      
|                    | Net bad debt expense (recovery) |                                  | $     | (727      | )     |   | $     |      |      
|                    | General and administrative      |                                  |       | 5,465     |       |   |       | 6,233 |      
|                    |                                 |                                  |       |           |       |   |       |      
|                    |                                 | Total general and administrative |       |           | 4,738 |   |       |       | 6,233 | 
|                    |                                 |                                  |       |           |       |   |       |      
|                    | Sales and marketing             |                                  |       | 1,956     |       |   |       | 1,768 |      
|                    | Restructuring                   |                                  |       | (152      | )     |   |       |      |      
|                    | Depreciation                    |                                  |       | 796       |       |   |       | 756   |      
|                    |                                 |                                  |       |           |       |   |       |      
|                    |                                 | $                                | 7,338 |           |       | $ | 8,757 |      
|                    |                                 |                                  |       |           |       |   |       |      

In 2003, bad debt recoveries of $0.7 million
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 from $5.5 million in the first quarter of 2003 to
$6.2 million in 2004 is largely attributable to severance
costs in EMEA of approximately $0.3 million, and an
additional $0.4 million due to initiation of activities in
Germany and to an increase in personnel and occupancy expense,
neither of which are anticipated to continue in the second
quarter.

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Other Income and Expense

|                        |                  |                     |       |                |       |   |     |     |     | 
|----------------------- | ---------------- | ------------------- | ----- | -------------- | ----- | - | --- | --- | --- | 
|                        |                  |                    
|                        |                  | Three Months Ended 
|                        |                  |                    
|                        |                  | March 31, 2003      |       | March 31, 2004
|                        |                  |                     |       |               
|                        |                  |                    
|                        |                  | (in thousands)     
|Other income (expense): |                  |                     |       |                |       |   |     |    
|                        | Interest income  |                     | $     | 96             |       |   | $   | 59  |    
|                        | Interest expense |                     |       | (8             | )     |   |     | (51 | )  
|                        | Other:           |                     |       |                |       |   |     |     |    
|                        |                  | Gain on investments |       |                | 1,000 |   |     |     |    | 
|                        |                  | Other               |       |                | 249   |   |     |     | 152 | 
|                        |                  |                     |       |                |       |   |     |    
|                        |                  |                     | 1,249 |                |       |   | 152 |    
|                        |                  |                     |       |                |       |   |     |    
|                        |                  | $                   | 1,337 |                |       | $ | 160 |    
|                        |                  |                     |       |                |       |   |     |    

Gain on investments in 2003 related to the cash
received on the sale of Pre-Petition bankruptcy interest in
NextWave Telecom (see note 7 to the consolidated financial
statements).

Tax Benefit or (Expense)

The benefit for income taxes was recorded for the
three months ended March 31, 2004 using an effective income
tax rate of 5.5% for the quarter, compared to 37.5% for the
first quarter of 2003. The decrease in the annual effective
income tax rate in 2004 is the result of the increase in
unbenefited foreign losses relative to the total results from
worldwide operations.

Net Income or (Loss)

In the first quarter of 2003, revenues of
$17.1 million generated operating losses of
$4.8 million. We sold our pre-petition bankruptcy interest
in NextWave and recorded a gain on sale of investments for
$1.0 million, resulting in a loss before taxes of
$3.4 million. We recorded a tax benefit of $1.3 million,
equivalent to an effective tax rate of 37.5%, resulting in a
reported net loss of $2.2 million.

In the first quarter of 2004, revenues of
$45.0 million generated operating losses of
$1.8 million. We reported a loss before taxes of
$1.6 million and we recorded a tax benefit of
$0.1 million, equivalent to an effective tax rate of 5.5%,
resulting in a reported net loss of $1.6 million.

Liquidity and Capital Resources

The following discussion relates to our sources
and uses of cash and cash requirements during the three months
ended March 31, 2003 and 2004.



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

|                                                        |                                           |                    |        |                |   |   |        |        |  
|------------------------------------------------------- | ----------------------------------------- | ------------------ | ------ | -------------- | - | - | ------ | ------ | -
|                                                        |                                           |                   
|                                                        |                                           | Three Months Ended
|                                                        |                                           |                   
|                                                        |                                           | March 31, 2003     |        | March 31, 2004
|                                                        |                                           |                    |        |               
|                                                        |                                           |                   
|                                                        |                                           | (in thousands)    
|Net cash used in operating activities                   |                                           | $                  | (4,054 | )              |   | $ | (6,073 | )     
|Net cash used in investing activities                   |                                           |                    | (218   | )              |   |   | (820   | )     
|Net cash provided by (used in) financing
    activities |                                           |                    | (209   | )              |   |   | 1,101  |       
|                                                        |                                           |                    |        |                |   |   |        |       
|                                                        | Net decrease in cash and cash equivalents |                    | $      | (4,481         | ) |   | $      | (5,792 | )
|                                                        |                                           |                    |        |                |   |   |        |       

In the first quarter of 2003, the level of
operational activities was relatively low; we reported revenues
of $17.1 million and operating losses of $4.8 million.
Cash used in operating activities was $4.1 million while
cash used in both investing and financing activities was
relatively insignificant. Overall, cash decreased by
$4.5 million during the quarter.

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In the first quarter of 2004, operating
activities increased significantly compared to the prior year,
and we reported revenues of $45.0 million for the quarter
and operating losses of $1.8 million. Cash used in
operating activities increased to $6.1 million, mostly
reflecting the increase in receivables following the growth in
revenues compared to 2003 and an increase in amounts due from
certain key customers with whom extended credit terms were
negotiated. Cash used in investing activities was
$0.8 million, which was offset by cash provided by
financing activities of $1.1 million. Overall, cash
decreased by $5.8 million during the quarter.



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

|                          |                                       |                   |        |                |  |   |        |        | 
|------------------------- | ------------------------------------- | ----------------- | ------ | -------------- |  | - | ------ | ------ | 
|                          |                                       | December 31, 2003 |        | March 31, 2004
|                          |                                       |                   |        |               
|                          |                                       |                  
|                          |                                       | (thousands)      
|Cash and cash equivalents |                                       | $                 | 28,943 |                |  | $ | 23,151 |       
|Restricted cash           |                                       |                   | 1,568  |                |  |   | 1,409  |       
|Short-term investments    |                                       |                   | 520    |                |  |   |       |       
|                          |                                       |                   |        |                |  |   |        |       
|                          | Total cash and short-term investments |                   | $      | 31,031         |  |   | $      | 24,560 | 
|                          |                                       |                   |        |                |  |   |        |       
|Line of credit            |                                       | $                 | 1,840  |                |  | $ | 1,544  |       
|                          |                                       |                   |        |                |  |   |        |       
|Working capital           |                                       | $                 | 54,980 |                |  | $ | 52,652 |       
|                          |                                       |                   |        |                |  |   |        |       

During the first quarter of 2004, the principal
requirements for cash were to finance the increase in
receivables of $6.2 million. Billed receivables increased
during the quarter, reflecting the effect of extended credit
terms negotiated with certain key customers. Although working
capital reduced overall by $2.3 million during the quarter,
we anticipate that the future growth in unbilled receivables and
work in progress will increase our requirements for cash as we
continue to perform work ahead of contractual billing
milestones, primarily in the Americas region. Start up costs of
our contract with STC in Saudi Arabia may also increase our
requirements for cash in the short term.

In the second half of this year we expect our
cash requirements to reduce as we complete and make collections
associated with certain billing milestones associated with our
large network deployment contracts in the Americas. This
expectation may be affected by changes in the implementation
plans for those large projects. Overall, we expect our total
cash balances to further decline in the short term, primarily
due to the implementation of these major network deployment
contracts. Despite this decline, we believe that for at least
the next twelve months we have adequate cash and short-term
investments to fund our operations.

In China, we made the third and final payment of
approximately $0.4 million to complete our funding obligations
for our BOCO joint venture. We also finalized the negotiation of
a line of credit of $3 million for the issue of standby
letters of credit, which will be used to support the issue of
bid and performance bonds.

As of March 31, 2004, we had no material
cash commitments and we 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.           



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

Our principal sources of revenues consists 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

18



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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 80.9% and 74.8% for the three months ended
March 31, 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 March 31, 2004, respectively, we
had $35.0 million and $35.6 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
March 31, 2004, we derived 72.9% and 82.1%, 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 76.9% of our
net receivable balance as of December 31, 2003 and
March 31, 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 $5.8 million
as of December 31, 2003 and March 31, 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 phantom membership plan in effect prior to our initial
public offering. The net deferred tax assets as of
December 31, 2003 and March 31, 2004, were
$5.0 million and $5.2 million, respectively.

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##### Table of Contents





| |                     
| | --------------------
| | 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
March 31, 2004 that we will receive $11.1 million in
sublease income, of which $6.8 million is committed.

Related Party Transactions

For a description of related party transactions,
see note 5 to the consolidated financial statements.




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.

Customers outside of the United States accounted
for 63.7% and 38.8% of our revenues for the quarters ended
March 31, 2003 and 2004, respectively, 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 (loss) component of
shareholders equity increased $0.4 million and
decreased $0.1 million during the quarters ended
March 31, 2003 and 2004, respectively. As of March 31,
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 $11.2 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 operations at March 31, 2004 (denominated in Euros)
include Italy in the amount of $1.7 million and The
Netherlands in the amount of $0.4 million. These balances
generated a foreign exchange gain of $0.2 million included
in our consolidated results at March 31, 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.

Although currency fluctuations can have an impact
on our reported results and shareholders equity, such
fluctuations generally do not affect our cash flow or result in
actual economic gains or losses. We currently do

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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 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

The Chief Executive Officer and Chief Financial
Officer carried out an evaluation 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 March 31, 2004. Based on that
evaluation, these officers have concluded that as of
March 31, 2004, our disclosure controls and procedures were
adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made
known to them by others within those entities.

(b) Changes in internal controls

There were no significant changes in our internal
controls or other factors that could significantly affect our
disclosure controls and procedures subsequent to March 31,
2004.

21



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##### Table of Contents






PART II:     OTHER
INFORMATION



Item 1:     Legal
Proceedings


We are party to various non-material legal
proceedings and claims incidental to our business.



Item 2:     Changes
in Securities


Not Applicable



Item 3: Defaults Upon Senior
Securities


Not Applicable



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


Not Applicable



Item 5: Other Information


Not Applicable



Item 6:     Exhibits
and Reports on Form 8-K


(a) Exhibits



| |        |                                                                                                                                                                           
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                

(b) Reports on Form 8-K

On February 9, 2004, we filed a Current
Report on Form 8-K, which reported that on February 9,
2004, we issued a press release announcing our fourth quarter
and full year results for 2003.

22



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##### Table of Contents



Signature

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

|                   |  |                                                                                                                                                                                                                  
|------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  | LCC International, Inc. and Subsidiaries                                                                                                                                                                         
|                  
|Date: May   , 2004 |  | -----------------------------------------------
    Graham B. Perkins
    Senior Vice President, Chief Financial
    Officer and Treasurer
    (Principal Financial Officer and
    Principal Accounting Officer)

23