SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2007
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number: 0-21213

LCC International, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		54-1807038 (I.R.S. Employer Identification No.)
7900 Westpark Drive McLean, VA (Address of Principal Executive Offices)		22102 (Zip Code)

Registrant’s telephone number, including area code:

(703) 873-2000

Securities registered pursuant to Section 12(b) of the Act:

Class A Common Stock, par value $.01 per share

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant at June 29, 2007, based upon the last reported sale price of the registrant’s Class A Common Stock on the NASDAQ Global Market on that date, was $114,311,865.

As of April 21, 2008, the registrant had outstanding 26,459,323 shares of Class A Common Stock, par value $.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Definitive Proxy Statement for the 2008 Annual Meeting of Stockholders of the Registrant, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A no later than April 29, 2008, are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS



PART I
	Item 1.	Business	3
	Item 1A.	Risk Factors	13
	Item 1B.	Unresolved Staff Comments	21
	Item 2.	Properties	21
	Item 3.	Legal Proceedings	22
	Item 4.	Submission of Matters to a Vote of Security Holders	22

PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
	Item 6.	Selected Financial Data	25
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
	Item 8.	Financial Statements and Supplementary Data	46
	Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	90
	Item 9A.	Controls and Procedures	90
	Item 9B.	Other Information	95

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	96
	Item 11.	Executive Compensation	96
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	96
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	96
	Item 14.	Principal Accountant Fees and Services	96

PART IV
	Item 15.	Exhibits and Financial Statement Schedules	96
		Signatures	97

This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. These statements can be identified by the use of forward looking terminology, such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue” or the negative thereof or other variations thereon or comparable terminology. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Form 10-K. See Item 1A “Risk Factors” for cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from results referred to in forward-looking statements.

PART I


Item 1.	*Business*

Overview

LCC International, Inc., a Delaware corporation, was formed in 1983. Unless the context indicates otherwise, references in this Form 10-K to the “Company,” “our,” “we,” or “us” are to LCC International, Inc. and its subsidiaries.

We are an independent provider of integrated end-to-end solutions for wireless voice and data communications networks with offerings ranging from high level technical consulting, system design and optimization services, to benchmarking and performance services to ongoing operations and maintenance services. We have been successful in using initial opportunities to provide high level technical consulting services to secure later-stage system design and network optimization contracts. Engagements to provide design services also assist us in securing ongoing operations and maintenance projects, including advanced network optimization and benchmarking contracts. Our technical consulting, system design and network optimization practices position us well to capitalize on additional opportunities as new technologies are developed and wireless service providers upgrade their existing networks, deploy the latest available technologies, and respond to changes in how their customers use wireless services.

Since our inception, we have delivered wireless network solutions to more than 350 customers in over 50 countries. Customers outside of the United States accounted for 67.8% and 77.1% of our revenues from continuing operations for the years ended December 31, 2007 and 2006, respectively.

In recent periods we have completed a number of business acquisitions and dispositions. We completed the purchase of the equity interests in the Europe, Middle East and Africa wireless engineering services business of Wireless Facilities, Inc., (“WFI”) and also acquired certain assets and liabilities of the U.S. wireless engineering services business of WFI, which included customer contracts, tools, other assets and approximately 350 employees. The Company made the decision to sell the Company’s U.S. Network Deployment operations and completed that sale in the second quarter of 2006. The Company is also in the process of selling its Brazilian subsidiary. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 4, Business Combinations, and Note 5, Discontinued Operations, to our consolidated financial statements.

Industry Background

Wireless Telecommunications Networks

Wireless networks are telecommunications systems built using radio frequency-based systems that allow a mobile phone or data device to communicate without a metallic or optical cord or wire equipment. The number of mobile users world-wide has surpassed those using wireline services and the penetration rate of wireless broadband is increasing at an even faster rate. The life cycle of a wireless network continually evolves and consists of several phases including strategic planning, design, deployment, expansion, optimization as well as operations and maintenance. During the strategic planning phase, operators pursue the licenses necessary to build out a wireless system and make decisions about the type of technology and equipment to be used, where it will be located, how it will utilize radio frequency spectrum and how it will be configured. Technical planning and preliminary

engineering designs are often required to decide on a technology platform and deployment strategy to determine total cost of ownership as a baseline to identify the wireless operators ROI.

Following acceptance of a wireless network design, then deployment of the network can begin. During this phase, continual performance and pre-launch optimization testing verifies live network quality of service against the original design. Finally, professional technicians install and commission the new radio equipment, test it, integrate it with existing networks and tune the components to optimize performance and benchmark the performance to repeat the optimization process.

Once a wireless network becomes operational and the number of subscribers or demand for network resources increases, the system must be expanded to increase system coverage and capacity. In addition, the wireless system must be continually updated and optimized to address changes in traffic patterns, and interference from neighboring or competing networks or other radio sources. Operations and maintenance also involve tuning the network to enable operators to compete more effectively in areas where there are multiple system operators.

Finally, as new technologies continuously develop, wireless service providers must determine whether to upgrade their existing networks or deploy new networks utilizing the latest available technologies. Overlaying new technologies, such as third generation and fourth generation (or “3G” and “4G”, respectively), with an existing network or deploying a new network requires operators to reengage in the strategic planning, design, deployment, expansion, and operations and maintenance phases of a new cycle in the life of an existing or new network.

Growth and Evolution of the Wireless Telecommunications Industry

Worldwide use of wireless telecommunications has grown rapidly as cellular and other emerging wireless communications services have become more widely available and affordable for the mass business and consumer markets. The rapid growth in wireless telecommunications is driven by the dramatic increase in wireless telephone usage, as well as strong demand for wireless Internet and other data services.

Wireless access to the Internet is still in its relative infancy but growing rapidly as web-enabled devices become more widely accessible and affordable. Demand for wireless Internet access and other data services is accelerating the adoption of new technologies such as those embodied in 3G and 4G to enable wireless networks to deliver enhanced data capabilities. Examples of wireless data services include e-mail, text messaging services, music on-demand, streaming video, self-generated content, ring tones, online-banking, locations-based services and interactive games. In addition, the introduction of mobile multimedia services such as voice over internet protocol (“VoIP”) and mobile TV has resulted in the development of new wireless broadband and broadcast technologies to support high speed data and video.

Recently, there has been a move in the telecommunications industry towards fixed-mobile convergence (“FMC”), and as a result, enabling technologies such as IP Multimedia Subsystem (“IMS”) and Unlicensed Mobile Access (“UMA”) are being introduced into the wireless networks. The IMS architecture consolidates service delivery platforms for voice and data on a common IP foundation. UMA technology enables access to mobile voice, data and IMS services over IP broadband access and unlicensed spectrum technologies. By deploying UMA technology, service providers can enable subscribers to roam and handover between cellular networks and public and private unlicensed wireless networks using dual-mode mobile handsets.

Key Drivers of Change in Our Business

Historically, the key drivers of change in our business have been: (i) the issuance of new or additional licenses to wireless service providers; (ii) the introduction of new services or technologies; (iii) the increases in the number of subscribers served by wireless service providers, the increase in usage by those subscribers and the scarcity of wireless spectrum; and (iv) the increasing complexity of wireless systems in operation. Each of these key drivers is discussed below.


	•	The issuance of new or additional licenses to wireless service providers. In September 2006, the Federal Communications Commission (“FCC”) auctioned spectrum in the Advanced Wireless Services (“AWS”) band. The winning bidders included existing wireless carriers, as well as new entrants such as cable companies. A similar auction is taking place in 2008 as the FCC auctions licenses in 700 mhz band. Auctions


		in Canada are also expected in 2008. After receiving new or additional licenses necessary to build out their wireless systems, wireless service providers must make decisions about what type of technology and equipment will be used, where it will be located and how it will be configured. In addition, the incumbent users of the AWS spectrum must be relocated to clear the frequencies for use by the auction winners. The spectrum relocation process requires coordination, negotiation, and engineering for both the incumbents and the new license holders. The network build out requires preparation of detailed site location designs and radio frequency engineers must review interference to or from co-located antennae.


	•	The introduction of new services or technologies. Although wireless service providers traditionally have relied upon their internal engineering workforces to address a significant portion of their wireless network needs, the rapid introduction of new services or technologies in the wireless market and the need to reduce operating costs in many cases has resulted in wireless service providers and equipment vendors focusing on their core competencies and, as a result, outsourcing an increasing portion of their network services. Several wireless service providers have upgraded or have begun upgrading their networks to reduce the rate at which customers deactivate their wireless services and to accommodate new services including multimedia messaging, which allows wireless users to send and receive messages with a combination of media elements such as text, image, sound and video. The introduction of new services and technologies such as wireless broadband and broadcast has resulted in opportunities for new classes of wireless service providers to enter the market with a quadruple play offering of voice, internet, video, and mobility. Wireless broadband technologies are considered both complimentary and competitive to fixed service providers such as DSL, cable, and satellite operators. Proprietary and standard mobile TV broadcast technologies are currently being implemented by new entrants to the wireless service provider community. These new services are driving wireless carriers to focus on the quality of the experience (“QoE”) as perceived by the user. To monitor and optimize the quality experienced by the user, the wireless service providers require new tools and processes to test many different devices as well as applications and content.

	•	The increases in the number of wireless subscribers, the increase in usage by those subscribers, and the scarcity of wireless spectrum. The increases in the number of subscribers served by wireless service providers, the increase in usage by those subscribers, and the scarcity of wireless spectrum require wireless service providers to expand and optimize system coverage and capacity to maintain network quality. The wireless system also must be continually updated and optimized to address changes in traffic patterns and interference from neighboring or competing networks or other radio sources.

	•	The increasing complexity of wireless systems. As new technologies are developed, wireless service providers must determine whether to upgrade their existing networks or deploy new networks utilizing the latest available technologies in order to maintain their market share. For example, overlaying next generation technologies such as 3G and 4G with an existing network or deploying a new network requires wireless service providers to reengage in the strategic planning, design, deployment, expansion, and operations and maintenance phases of a new cycle in the life of an existing or new network. The consolidation of networks also drives a need for resources to plan, optimize and implement change in existing networks.

The Need for Outsourcing

As a result of the drivers of change in our business described above, we believe that wireless network operators and their third party service providers are seeking to outsource an increasing portion of their wireless network needs and are engaging professional service firms that:


	•	have expertise with all major wireless technologies;

	•	offer turnkey solutions through in-country presence in the markets to be served;

	•	offer speed to market and cost effective network implementation;

	•	have experience working with all major equipment vendors; and


	•	have sufficient numbers of highly skilled employees capable of handling large-scale domestic and international projects.

The LCC Solution

We help wireless service providers around the world address the issues they face in developing networks to meet subscriber demand, reduce their costs and add new services and functionality. We believe the services performed by LCC which address these issues and the need for wireless service providers, telecommunications equipment vendors and others to outsource an increasing portion of their wireless network services, distinguish us and result in competitive advantages:


	•	Expertise and experience with all major wireless technologies, system protocols and equipment vendors. We have experience working with all major wireless access technologies, including second generation, or 2G, 2.5G, 3G and 4G digital system protocols and their respective migration paths, including: (i) Global System for Mobile Communications (“GSM”) and its evolution path including Universal Mobile Telecommunications System (“UMTS”) and High Speed Packet Access (“HSPA”); (ii) Time Division Multiple Access (“TDMA”); (iii) Code Division Multiple Access (“CDMA”) and its evolution path including Single Carrier Radio Transmission Technology (“1xRTT”) and 1x Evolution-Data Optimized (“1xEV-DO Rev 0 and Rev A”); (iv) Integrated Dispatch Enhanced Network (“iDEN”); (v) broadband’s Local Multipoint Distribution System (“LMDS”), Multichannel Multipoint Distribution Service (“MMDS”), 802.11x (“Wi-Fi”) and 802.16 (“WiMAX”) technologies; (vi) Europe’s equivalent to iDEN referred to as Tetra; (vii) Satellite Digital Audio Radio Service (“S-DARS”); (viii) Digital Video Broadcasting for mobile TV (“DVB-H and MediaFLO”); and (ix) core network technologies. We are actively engaged in supporting the development of new and emerging technologies and standards in the wireless telecommunications industry through participation in industry panels and industry association forums and through independent research. We have worked with the equipment made by all major equipment manufacturers. Our Wireless Institute, which provides training and research services, is an integral part of our technical development activities.

	•	Ability to deliver turnkey solutions. Our ability to provide a broad combination of services which may include several or all of the services such as design, consulting and operations and maintenance services for wireless networks, which we refer to as end-to-end network engineering services, enables our wireless customers to engage us as a single responsible party accountable for designing, optimizing and managing their wireless networks under a single contract. In 2007, LCC acquired the engineering assets of WFI in the United States and Europe. Through these acquisitions, LCC increased its ability to provide services across all regions in RF Engineering, Broadband Wireless Engineering, Fixed Network and Backhaul, Spectrum Management and Land Mobile Radio. We coordinate our use of resources for each phase of the project from planning to design, benchmarking and optimization to operations and maintenance of the wireless network, enabling us to reduce the time and cost of our services. In order to supplement such services, we have established a presence in numerous countries, including Algeria, Belgium, Germany, Greece, Italy, Luxembourg, the Netherlands, Pakistan, Spain, Saudi Arabia, United Arab Emirates, Turkey, Sweden, Egypt, and the United Kingdom. We provide our customers with a primary point of accountability and reduce the inefficiencies associated with coordinating multiple subcontractors to enable projects to be transitioned from discipline to discipline in an efficient manner.

	•	Speed to market. Our expertise, global presence and processes enable us to respond quickly to support our customers’ objectives. Members of our technical and design teams often work together with the customer at the initial stage of a project in order to plan an effective and efficient solution for the customer’s needs.

	•	Worldwide depth of resources. Our professionals collectively have experience designing and deploying networks in the major markets in the United States, as well as many countries throughout the world. As of December 31, 2007, approximately 68.1% of our billable employees were employed outside the United States. During the past 25 years, our professionals have designed wireless networks employing all major technologies in North America, Europe, Asia, Latin America, the Middle East and Africa. Our professional staff is highly educated with many of our engineering professionals holding masters degrees or doctorates.

LCC Services

We offer to our wireless customers a complete range of wireless network services, including: (i) high level technical consulting (20.2% and 2.6% of revenues for 2007 and 2006, respectively); (ii) design and optimization services (47.0% and 54.1% of revenues for 2007 and 2006, respectively); (iii) deployment services (18.8% and 39.2% of revenues for 2007 and 2006, respectively); and (iv) ongoing operations and maintenance services (14.0% and 3.7% of revenues for 2007 and 2006, respectively). In 2007, we derived 21.1% of our revenues from projects involving 2G technology, 4.7% of our revenues from projects involving 2.5G technology, 43.8% of our revenues from projects involving 3G technology, and 30.4% of our revenues from projects involving other technologies. All percentages are based on revenues from continuing operations.

Technical Consulting Services

Applying our extensive technical and operational expertise and experience, we initially may be engaged by a wireless customer to analyze the engineering and technology issues related to emerging technologies and acquiring new spectrum. From assisting customers with evaluating their business plans, to licensing and application support, technology assessments and defining and refining implementation strategies, our team of senior wireless professionals focuses on providing our customers with key insights into all aspects of wireless communications and the impact that a new technology, device or application might have on the industry. We also provide training to our engineers and our customers through our Wireless Institute, which covers the latest technologies developed and employed throughout the world.

Design and Optimization Services

Radio frequency and fixed network engineering. We provide both radio frequency engineering and fixed network engineering services to design wireless networks for our customers. Our engineers design each wireless network based upon the customer’s transmission requirements, which are determined based upon the projected level of subscriber density, estimated traffic demand and the scope of the operator’s license coverage area and the most effective connection to the wireline backbone. Our engineers perform the calculations, measurements and tests necessary to optimize placement of wireless equipment, to optimize use of radio frequency and to deliver the highest possible signal quality for the greatest portion of subscriber usage within existing constraints. Typical constraints that must be addressed include cost parameters, terrain and license limitations, interference from other operators, site availability limitations and applicable zoning restrictions, as well as other factors.

In addition, because most wireless calls are ultimately routed through a wireline network, traffic from wireless networks must be connected with switching centers within wireline networks. Our fixed network engineers determine the most effective method to connect cell sites to the wireline backbone. We also provide services to cover the core network including interconnect, switching and microwave engineering for all access technologies, including connection into the telecommunications infrastructures of competitive local exchange carriers, or CLECs, and incumbent local exchange carriers, or ILECs. Our engineers will assist carriers in determining the most cost effective and technically efficient means to route traffic across their fixed networks as well as evaluate the implementation of new technologies, such as wireless backhaul, or capabilities to respond to demands for additional capacity as networks handle more traffic from data and media applications.

Once a wireless network becomes operational and the number of subscribers increases, our engineers assist carriers to expand system coverage, system capacity and optimize performance to address changing requirements. These activities include overlaying new technologies with existing networks and supporting requirements for strategic planning, design, deployment, expansion, and operations and maintenance phases of a new cycle in the life of an existing or new network. They also include solutions to address changing requirements in how quality of service and quality of end user experience is measured, monitored and optimized in networks providing greater degrees of data services including video, media and similar applications.

Competitive benchmarking. We provide system analyses to our wireless customers for the measurement of network performance, including “benchmarking” their performance versus competitors, based upon an extensive set of parameters such as call quality, drop call rates, signal strength and coverage.

Deployment Services

The Company, in reviewing its strategic objectives, decided to exit the U.S. Network Deployment business in 2006 due to the increasing amounts of working capital required to operate this business as a result of increasingly extended milestone payments under customer agreements and to lower profit margins in the U.S. market. As a result, the focus of the Company’s deployment services has shifted to limited geographies in our overseas operations and include:

Program management. We provide program management services as part of an overall design and deployment project to manage site acquisition, radio frequency engineering, fixed network engineering and construction management services.

Site acquisition and development. Our local experts in each geographic market evaluate the feasibility and desirability of base station locations in the proposed area according to the wireless customer’s requirements, including zoning ordinance requirements, leasing constraints and building access issues.

Architecture and engineering. We manage various activities associated with the design, layout and physical assessment of existing and proposed telecommunications facilities, including base stations and switching centers. This includes managing architecture and engineering firms with respect to site drawings, zoning exhibits, and structural analysis and making recommendations to confirm that the infrastructure has the structural capacity to accommodate the design of the wireless network. We also provide other materials and services as may be necessary to secure building permits and jurisdictional approvals.

Construction and procurement management. We manage various construction subcontractors to prepare the rooftop or tower site and secure the proper electrical and telecommunications connections. We also manage the procurement of materials and equipment for our wireless customers and the installation of radio frequency equipment, including base station electronics and antennae.

For financial information about the sale of the U.S. Network Deployment business, see Note 5 to our consolidated financial statements.

Operations and Maintenance Services

We provide operations and maintenance services to wireless service providers with ongoing outsourcing needs. Depending on customers’ needs, the scope of such arrangements varies greatly. We may assume responsibility for all or part of the day-to-day operation and maintenance of wireless networks.

Geographic Organization

We provide our services through a regional management organization that comprises two principal regions and several smaller divisions. Our primary operating regions are “Americas” and “EMEA” (Europe, Middle East and Africa). Our Americas region, which is headquartered in McLean, Virginia, provides a range of service offerings to wireless operators and equipment vendors in North America. In 2007 Americas generated approximately 32.2% of our total revenue. Our EMEA region, which is based in London, is responsible for operations in the United Kingdom and overseas, including Algeria, Austria, Belgium, Egypt, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Pakistan, Romania, Saudi Arabia, Scandinavia, Spain and Turkey. In 2007, we established a marketing office in Dubai, United Arab Emirates for our EMEA region. In 2007, EMEA generated approximately 67.8% of our total revenue.

The Company’s nonreportable segments in 2007 were comprised of our Asia-Pacific operations which were not significant in 2007, LCC Wireline, Inc. and corporate.

For financial information about our operating segments, see Note 19 to our consolidated financial statements.

Business Strategy

The principal elements of our business strategy are to: (i) benefit from adjacent market opportunities by leveraging our current knowledge and customer base, (ii) provide end-to-end services in markets that provide compelling opportunities; (iii) increase our presence in new geographic areas to capitalize on emerging opportunities; and (iv) attract and retain highly qualified personnel.


	•	Benefit from adjacent market opportunities by leveraging our current knowledge and customer base. We are actively pursuing a strategy to leverage our knowledge base and customer relationships towards expanding our offerings into adjacent markets through new products and services. For example, our Research and Innovation Services team, coupled with our worldwide practical field experience, finds opportunities to create and apply innovative methods to dimension, design, optimize and monitor wireless telecommunications networks around the world. This results in our ability to leverage unique and patented processes, combined with intellectual capital created by our internal technical and innovative culture, to provide services built around specific software tools based on market demand. As a result, we launched TotalView^tm as our software based tools and services delivery platform. Through TotalView^tm, we can offer performance and optimization services from the network towards the end-user and the end-user towards the network that combines traditional Quality of Service (QoS) measurements with Mobile Content and Quality of Experience (QoE) measurements to create a unique and valued end-to-end or “total view” solutions for our customers. Our TotalView^tm strategy includes services and tools created within our Research and Innovation Services area, but also includes software based tools developed by key external partners. Consistent with our history as a leader in facilitating the development and adoption of new wireless technologies, we have been active in the research, development and testing of fixed and mobile broadband 3G and 4G networks through consulting engagements with leading broadband carriers and equipment providers. The insight gained led to the creation of recent offerings that target wireless operators challenged by high-bandwidth and high-capacity service delivery based on EVDO, HSDPA and WiMAX technologies, as well as transport technologies such as CWDM, DWDM, SDH and ATM. Our recent offerings include core and transport technologies for wireline operators as well. We intend to expand our integrated offerings to create hosted and managed services where a customer may access QoS or QoE information that resides within our servers or centralized service delivery center. This unique service delivery strategy leverages natural synergies with our engineering businesses and provides a cost effective and faster means to reach new customers and markets. We believe these and other industry trends provide new opportunities to expand our portfolio beyond our current service offerings into areas that offer attractive recurring revenues as well as open the door to new sets of clients such as mobile content, media providers, tier 2 carriers and operators within emerging markets. We intend to pursue organic growth into adjacent markets as well as take advantage of opportunities that may arise to acquire or partner with high quality companies that can enhance our capabilities.

	•	Provide end-to-end services. We provide integrated end-to-end solutions ranging from high level technical consulting, to system design and deployment, to ongoing operations and maintenance services. Our ability to provide end-to-end, or turnkey, services enables our wireless customers to engage a single, responsible party who is accountable for delivering and managing projects under a single contract. Accordingly, we leverage initial consulting opportunities to secure later-stage system design, optimization and deployment contracts. Engagements to provide design, optimization and deployment services help us secure ongoing operations and maintenance projects, which is an emerging market segment. We intend to pursue these engagements, and will continue to focus our business on radio frequency engineering services and operations and maintenance contracts. Providing ongoing operations and maintenance services positions us well for additional opportunities as wireless service providers must either upgrade their existing networks or deploy new networks to benefit from the latest available technologies. Many clients initially engage us to perform specific services, such as engineering services. Once we secure a client relationship, we work to expand our relationship to provide additional services offered by the company. We do this by understanding the client’s needs and leveraging our reputation and demonstrated performance on client engagements. We typically self-perform network design, site acquisition and zoning services and hire subcontractors to perform civil engineering and construction services under our direct management. Self-performed work generally carries higher profit margins than subcontracted work. As described earlier, based on our assessment of the U.S. deployment market, we exited the U.S. Network Deployment business in 2006. While we have decided that the U.S. deployment market is not attractive for us, we intend to continue pursuing deployment projects in markets that provide compelling opportunities.

	•	Increase our presence in new geographic areas to capture additional growth opportunities. In order to realize the full benefit of wireless services worldwide, we target areas with strong potential growth by


		creating a localized presence. We pursue this effort through establishing a local presence, pursuing strategic acquisitions or entering into partnerships to reach new markets. We currently have a localized presence in Algeria, Austria, Belgium, Egypt, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Pakistan, Romania, Saudi Arabia, Spain, turkey, United Arab Emirates and the United Kingdom in addition to the United States, and are considering expansion into other international markets as well as new domestic markets. To increase our local presence in emerging areas we have completed strategic acquisitions and investments in Europe. For example, in December 2006 we acquired Detron Belgium, NV, a company engaged in providing wireless communications design and deployment services in Belgium and Luxemburg. In March 2007, we acquired the equity interests of Wireless Facilities, Inc.’s EMEA operations which expanded our operations into new markets in France, Turkey and Scandinavia and further enhanced our presence in the U.K. We intend to continue to pursue organic growth in new markets as well as take advantage of such opportunities as may occur to acquire or partner with high quality companies that accelerate our access to, and provide us with a local presence in new markets.


	•	Attract and retain highly qualified personnel. As a service business, our success depends on our ability to attract, train and retain highly skilled professionals. As a result, we seek to recruit highly skilled personnel, facilitate their professional development and create a business atmosphere that encourages their continued employment. As of December 31, 2007, we had 1,304 total employees, of which 842 were billable employees. As of that date, approximately 68.1% of our billable employees were employed outside of the United States. In May 2007, we significantly increased the number of skilled billable professionals in the U.S. as a result of the acquisition of the Wireless Facilities, Inc. U.S. radio frequency engineering business. Our professional staff is highly educated with many of our engineering professionals holding masters degrees or doctorates. Recognizing the critical importance of retaining highly qualified personnel for our business, we work closely with our employees to develop and enhance the technical, professional and management skills required to be successful at our Company. Our senior management believes it is critically important to create and maintain an open culture that encourages learning, responsibility and collaboration. For example, Dean J. Douglas, our Chief Executive Officer, hosts bi-monthly teleconference meetings with all employees to foster an open working environment. We also invest in all of our professionals by expanding their professional education through our Wireless Institute, which provides training for our engineers and our customers covering the latest technologies developed and deployed throughout the world.

Customers and Backlog

We provide consulting, design, deployment, and operations and maintenance services to wireless service providers, telecommunications equipment vendors, satellite service providers, systems integrators and tower companies. In 2007, revenues from our largest customer, Saudi Telecommunication Company, were 18.1% of our total revenues. Our other large customers include: Algeria Telecom, AT&T Wireless, Ericsson, Nokia, Orange Personal Communication Services Limited, Siemens, Sprint, T-Mobile and Vodaphone. Our top ten customers accounted for 63.3% of revenues for the year ended December 31, 2007.

Our firm backlog was $61.6 million at December 31, 2007. We define firm backlog as the value of work-in-hand to be done with customers as of a specific date where the following conditions are met: (i) the price of the work to be done is fixed; (ii) the scope of the work to be done is fixed, both in definition and amount (for example, the number of sites has been determined); and (iii) there is a written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the client to pay us for the work to be performed. We also had implied backlog of approximately $16.6 million as of December 31, 2007. We define implied backlog as the estimated revenues from master service agreements and similar arrangements, which have met the first two conditions set forth above but for which we have not received a firm contractual commitment. Our contracts typically include provisions that permit customers to terminate their contracts under various circumstances, including for customer convenience.

Sales and Marketing

We sell and market our consulting, design, performance optimization, benchmarking and operations and maintenance services through the collaborative efforts of our sales force, our senior management, our marketing

group and our Wireless Institute. Our sales representatives work in conjunction with our senior executives and delivery organizations to develop new client relationships, drive revenue growth and establish the Company as a primary solutions provider to our clients. Sales personnel and our senior management proactively establish contact with key decision makers at all levels within our clients to identify and capture opportunities and work to establish awareness and preference for our services. Because customers’ purchasing decisions often involve an extended decision making process requiring involvement of their technical personnel, our sales personnel work collaboratively with our technical consulting and network personnel to develop new sales leads and secure new contracts. Excluding our Wireless Institute staff, as of December 31, 2007, we employed 36 full-time sales and marketing staff, based in our offices in Algeria, Belgium, France, Italy, the Netherlands, Pakistan, Saudi Arabia, Scandinavia, Spain, the United Arab Emirates, the United Kingdom and the United States.

Marketing

In 2006 and 2007, we also invested in expanding and enhancing our marketing organization, which has direct responsibility to enhance brand equity. Our marketing staff supports our business strategy through the development of new products and services, articles, publications, analyst meetings and trade shows and key industry conferences. In 2006, the marketing team launched TotalView ^tm, a tools based services strategy that creates additional value for our existing services, as well as a platform to launch new services as the Company extends its service portfolio across other segments of the wireless industry. Our marketing group leads the positioning of our service offerings, creates company awareness, brand recognition and manages joint marketing efforts with strategic alliance partners. The Company’s service offerings center around the mobile content delivery that measures performance from an end-user perspective. The marketing group conducts market and competitive analyses, defines industry-specific business requirements and identifies potential sales opportunities, develops key business plans and go-to-market models, develops key marketing and sales materials, manages the website and company content, and manages as the day to day operations of our investor relations efforts.

Wireless Institute

The Wireless Institute delivers knowledge that powers the world’s networks in the carrier, manufacturer and content provider communities. As the wireless industry’s pioneer training and knowledge transfer organization, our Wireless Institute was the first in the industry to introduce a complete engineering curriculum and a comprehensive set of programs in wireless engineering and wireless network deployment. Today, the Wireless Institute continues to train the industry, as well as our own engineers, in cutting edge broadband network technologies such as UMTS, EVDO and WiMAX. Over the years, the Institute’s distinguished faculty has conducted international knowledge transfer projects and thousands of classes around the world.

Research and Innovation

We have 25 years of experience which has produced our team of leaders — executives and engineers, many with PhDs — who have worked alongside of and even trained members of the manufacturers and major carriers in the business. Our team has been involved in innovations in EDGE, UMTS, HSDPA, EVDO, WiMAX and the creation of world-class 3G networks.

The Company’s technical consulting services range from technology consulting to business planning with CapEx/OpEx modeling and individualized custom projects that address specific client needs. These services provide the technical expertise required to maximize business efficiencies through an in-depth understanding of wireless technology. Through our consulting services, customers gain critical insight into wireless communications, including the possible impact of new broadband technologies, devices or applications on the industry. Our Research and Innovation Services area also creates tools where none yet exist for unique greenfield networks, as well as special network needs.

Competition

The market for technical consulting, design, deployment, and operations and maintenance is highly competitive and fragmented and includes numerous service providers. In particular, we believe that the competition in

Europe is particularly fragmented with numerous small, regional independent service providers. Our competitors fall into three broad categories:


	•	internal staffs of wireless service providers,

	•	wireline service providers, and

	•	independent service companies, which provide a full range of wireless network services, and a large number of other companies that provide limited wireless services.

We believe that the principal competitive factors in our market include independence, expertise in new and evolving technologies, industry experience, ability to deliver end-to-end services, ability to provide hardware and technology-independent solutions, ability to deliver results within budget and on time, worldwide depth of resources, and reputation and competitive pricing. In particular, we believe that the breadth of our service offerings, the efficiencies of our processes, our ability to integrate new technologies and equipment from multiple vendors, our ability to provide training for our customers through our Wireless Institute and the high quality of our professional staff provide us with a competitive advantage.

We believe our ability to compete depends on a number of additional factors, which are outside of our control, including: (i) the ability and willingness of customers to rely on their internal staffs to perform services themselves; and (ii) the customers’ desire to bundle equipment and services.

Employees

As of December 31, 2007, we had 1,304 total employees worldwide. We believe that relations with our employees are good. None of our employees is represented by a labor union and we have not experienced any work stoppages.

International Operations

During the last three years, our international operations have become an increasingly significant source of our revenue. From the late 1990s until recently we entered into a number of strategic acquisitions and investments to enhance our international wireless capabilities and to establish a local presence in several countries. Our operations in the United Kingdom, France, Turkey, Italy, Belgium, the Netherlands and Scandinavia are a direct result of such investments. In addition, we established local capabilities by virtue of receiving the award of projects in countries such as Saudi Arabia, Pakistan and Algeria, which comprised 35.1% of our revenues in the EMEA region in 2007. We also have a localized presence in Austria, Egypt, Germany, Greece, Luxembourg, Romania, Spain and the United Arab Emirates.

The further development of our international operations requires us to research and comply with local laws and regulations, including employment, corporate and tax laws. For example, if we enter into a longer term contract overseas, we are often required to establish a local presence in country, either as a branch or subsidiary, and, if hiring locally, to comply with all local employment, recruiting, hiring and benefit requirements.

In addition, when not hiring locally, we face the task of obtaining visas and work permits for our assigned employees and must comply with local tax requirements for our expatriate employees.

For financial information about our international operations, see note 19 to our consolidated financial statements.

Government Regulation

Although we are not directly subject to any FCC or similar government regulations, the wireless networks that we design, deploy and manage are subject to various FCC regulations in the United States and other international regulations. These regulations require that these networks meet certain radio frequency emission standards, not cause unallowable interference to other services, and in some cases accept interference from other services. These networks are also subject to government regulations and requirements of local standards bodies outside the United States.

Additional Information

The Company’s internet address is www.lcc.com. A copy of this annual report on Form 10-K, as well as other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are accessible free of charge on our website or the Securities and Exchange Commission (“SEC”) website in the EDGAR database at www.sec.gov. as soon as reasonably possible after such report is filed with or furnished to the SEC.


Item 1A.	*Risk Factors*

Risk Factors

In any given year, we derive a significant portion of our revenues from a limited number of large projects, and, if we are unable to replace these large projects upon completion, we could have a significant decrease in our revenues which would negatively impact our ability to generate income.

We have derived, and believe that we will continue to derive, a significant portion of our revenues in any given year from a limited number of large projects. For example, for the year ended December 31, 2007, our largest project was for Saudi Telecommunication Company , (“STC”), which comprised 18.1% of our total revenues. As these projects wind down to completion, we face the task of replacing such revenues with new projects. Our inability to replace such revenues would cause a significant decrease in our revenues and negatively affect our operating results.

We generate a substantial portion of our revenues from a limited number of customers, and if our relationships with these customers were harmed our business would suffer.

For the years ended December 31, 2007 and 2006, we derived 63.3% and 82.7%, respectively, of our total revenues from our ten largest customers. We believe that a limited number of customers will continue to be the source of a substantial portion of our revenues for the foreseeable future. Key factors in maintaining our relationships with these customers include, for example, our performance on individual contracts and the strength of our professional reputation. To the extent that our performance does not meet client expectations, or our reputation or relationships with one or more key clients are impaired, our revenues and operating results could be materially harmed.

Recent and continuing consolidations among wireless service providers may result in a significant reduction in our existing and potential customer base, and, if we are unable to maintain our existing relationships with such providers or expand such relationships, we could have a significant decrease in our revenues, which would negatively impact our ability to generate income as well as result in lower profitability or possible losses.

The level of merger activity among telecommunications operators has increased markedly in the recent past and this trend is continuing. For example, one of our customers, Cingular, merged with AT&T Wireless and one of our largest customers, Sprint, merged with Nextel. These consolidations have reduced and may continue to reduce the number of companies comprising that portion of our customer base consisting of wireless service providers. To the extent that these combined companies decide to reduce the number of their service providers, our already highly competitive market environment will become more competitive, at least in the short term, as the same number of service providers will seek business from a reduced base of potential customers. We have historically derived a significant portion of our revenues in any given year from a limited number of large projects. Also, we may not be able to reduce costs in response to any decrease in our revenues. If we are unable to maintain our existing relations with these companies or expand such relationships, we could have a significant decrease in our revenues, which would negatively impact our ability to generate income as well as result in lower profitability.

We may experience significant fluctuations in our quarterly results as a result of uncertainties relating to our ability to generate additional revenues, manage our expenditures and other factors, certain of which are outside of our control.

Our quarterly and annual operating results have varied considerably in the past and are likely to vary considerably due to a number of factors, including those factors discussed in this “Risk Factors” section. Many of these factors are outside our control and include, among others:


	•	the timing of receipt of new licenses, use of existing spectrum for new services, or financing by potential customers;

	•	service and price competition;

	•	the commencement, progress, completion or termination of contracts during any particular quarter;

	•	the availability of equipment to deploy new technologies such as broadband;

	•	the growth rate of wireless subscribers, which has a direct impact on the rate at which new cell sites are developed and built; and

	•	telecommunications market conditions and economic conditions generally.

Due to these factors, our results for a particular quarter may not meet the expectations of securities analysts and investors, which could cause the price of our stock to decline significantly.

Our contracts typically contain provisions giving customers the ability to terminate their contracts under various circumstances and we may not be able to replace the revenues from such projects which may have an adverse effect on our operating results due to our decreased revenues.

Our contracts typically have provisions that permit customers to terminate their contracts under various circumstances, including termination for convenience. We also believe that intense competition and the current trend in industry contracting toward shorter-term contracts that provide increased grounds for customer termination may result in increased frequency of customer termination or renegotiation. If large projects, or a number of projects that in the aggregate account for a material amount of our revenues, are suspended for any significant length of time or terminated, we may encounter difficulty replacing such revenues and our operating results would decline as a result of our decreased revenues.

Our Amended and Restated Credit Agreement contains certain financial tests and requires certain mandatory prepayments, the achievement of which is dependent to a significant extent on the performance of our business as well as achieving certain benefits from our recent acquisition of the U.S. engineering business of Wireless Facilities, Inc.

Our Amended and Restated Credit Agreement requires us to meet certain periodic financial tests, including monthly cumulative EBITDA covenants, and requires us to make mandatory prepayments in 2008 and 2009. We have been in default under the Amended and Restated Credit Agreement, including defaults relating to financial covenants. These defaults have been waived by our lender and the Amended and Restated Credit Agreement has been amended, among other things, to revise certain of the periodic financial tests. Our ability to meet the periodic financial tests and fund the mandatory prepayments will depend on the performance of our business, as well as the realization of anticipated benefits from our recent acquisition of the U.S. engineering business of Wireless Facilities, Inc. (“Acquired WFI Business”), including the Acquired WFI Business’ revenue and gross margins for such periods remaining relatively consistent with past performance and the achievement of certain cost savings primarily related to general and administrative expenses. If our business fails to perform as expected or these benefits fall short of our estimates or are not realized on a timely basis, we may fail to comply with our financial covenants or be unable to make the required prepayments, which could result in an event of default under the credit agreement. An uncured or unwaived event of default could cause us to have to repay the credit facility at a time when we do not have the funds to make such repayment and are unable to raise them or can only raise them on terms that are unfavorable to us.

Our existing debt obligations may constrain our ability to grow.

Our Amended and Restated Credit Agreement and our outstanding note to SPCP Group L.L.C. (as assignee of Wireless Facilities, Inc.) require us to apply most of the proceeds of any equity and debt financings we undertake to the payment of those obligations. To the extent that market conditions are such that we are unable to raise funds beyond those required to satisfy these obligations, our ability to pursue our acquisition strategy may be adversely affected.

If the borrowing base under our credit facility decreases our business may be adversely impacted.

Our ability to borrow funds or to maintain outstanding borrowings under our Amended and Restated Credit Agreement is dependent upon having a sufficient borrowing base. Our borrowing base is calculated in accordance with a formula based upon various percentages of eligible billed and unbilled receivables, where eligibility may depend upon factors such as the age of the receivables and the geographic location of the account debtor. If our borrowing base declines we must repay any outstanding borrowings to the extent they exceed the borrowing base and, in addition, we may not be entitled to borrow additional funds under the credit facility. This could result in an adverse effect on our business due to a lack of availability of needed working capital for normal operations or a lack of availability of funds to pursue our acquisition strategy. If we are unable to make a required payment under the credit facility this would cause us to be in default and at risk of having the entire facility called due at a time when we are unable to raise the necessary funds to pay it off on terms that are unfavorable to us or at all.

We may not receive the full amount of our backlog, which could harm our business.

Our firm backlog was approximately $61.6 million at December 31, 2007. We define firm backlog as the value of work-in-hand to be done with customers as of a specific date where the following conditions are met:


	•	the price of the work to be done is fixed;

	•	the scope of the work to be done is fixed, both in definition and amount (for example, the number of sites has been determined); and

	•	there is a written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the client to pay us for the work to be performed.

We also had implied backlog of approximately $16.6 million as of December 31, 2007. We define implied backlog as the estimated revenues from master service agreements and similar arrangements which have met the first two conditions set forth above but for which we have not received a firm contractual commitment.

Our backlog includes orders under contracts that in some cases extend for several years. The amount of our backlog that we may recognize as revenues during any fiscal quarter may vary significantly because the receipt and timing of any revenues is subject to various contingencies, many of which are beyond our control. Further, the actual realization of revenues on engagements included in our backlog may never occur or may change because a project schedule could change or the project could be cancelled, or a contract could be reduced, modified, or terminated early. If we fail to realize revenues from engagements included in our backlog at December 31, 2007 our operating results for our 2008 fiscal year, as well as future reporting periods, may be materially harmed due to decreased revenues.

A large percentage of our revenues come from fixed price contracts, which require us to bear the risk of cost overruns.

A large percentage of our revenues are derived from fixed price contracts. The portion of our revenues from fixed price contracts for the years ended December 31, 2007, 2006 and 2005 was 54.7%, 52.8% and 71.0%, respectively. Under fixed price contracts, we provide specific tasks for a specific price and are typically paid on a milestone basis. Such contracts involve greater financial risks than time and materials and cost-plus type contracts because we bear the risk if actual project costs exceed the amounts we are paid under the contracts.

To the extent we recognize revenues on fixed price contracts using the percentage-of-completion method of accounting, increases in estimated project costs could cause fluctuations in our quarterly results and adversely affect our operating results.

We recognize revenues on fixed price contracts using the percentage-of-completion method of accounting, which requires considerable judgment since this technique relies upon estimates or budgets. With the percentage-of-completion method, in each period we recognize expenses as they are incurred and recognize revenues based on the ratio of the current costs incurred for the project to the then estimated total costs of the project. We compare costs incurred to date to progress achieved against project milestones to determine if the percentage of completion is reasonable. Accordingly, the revenues that we recognize in a given quarter depend on, among other things, costs we have incurred for individual projects and our then current estimates of the total costs of the individual projects. If in any period we significantly increase our estimate of the total costs to complete a given project, we may recognize very little or no additional revenues with respect to that project. If the total contract cost estimates indicate that there is a loss, such loss is recognized in the period such determination is made. To the extent that our cost estimates fluctuate over time or differ from actual costs, our operating results may be materially affected. As a result of these challenges associated with fixed price contracts, our gross profit on these contracts in future periods may be significantly reduced or eliminated.

If more of our customers require fixed price contracts with fewer milestones than in previous years, we may not have sufficient access to working capital to fund the operating expenses incurred in connection with such contracts, and we may not be able to perform under our existing contracts or accept new contracts with similar terms.

A number of our customers are requiring fixed price contracts with fewer milestones than in previous years. We may incur significant operating expenses in connection with such contracts and may not receive corresponding payments until the milestones have been completed. We may need to use our available cash to cover operating expenses incurred in connection with such contracts until we complete the milestones, invoice our customers and collect payments. This may result in increased needs for working capital, and if we do not have access to sufficient capital to fund our working capital needs, we may not be able to perform under our existing contracts or accept new contracts with similar terms.

The extent of our dependence on international operations may give rise to increased management challenges and could harm our results of operations.

Customers outside the United States accounted for 67.8% and 77.1% of our revenues from continuing operations for the years ended December 31, 2007 and 2006, respectively. The multi-jurisdictional nature of our revenues exposes us to additional risks. Such risks include:


	•	the effects of terrorism;

	•	the general economic and political conditions in each country;

	•	the effect of applicable foreign tax structures, including tax rates that may be higher than tax rates in the United States;

	•	tariff and trade regulations;

	•	management of a geographically diverse organization;

	•	difficulties and increased expenses in complying with a variety of foreign laws and regulations, including labor, employment and immigration laws;

	•	changes in the applicable industry regulatory environments in foreign countries, including delays in deregulation or privatization affecting the pace at which wireless licenses are awarded; and

	•	the inability to benefit from tax losses incurred in different foreign jurisdictions.

Expansion of our international operations may require significant expenditure of operating, financial and management resources and result in increased administrative and compliance costs that could increase related

general and administrative expenses and negatively impact our results of operations. In addition, the cost of attracting and retaining employees with the skill set to deal with non-U.S. regulatory compliance, as well as U.S. driven regulatory matters, such as compliance with the provisions of the Sarbanes-Oxley Act of 2002 and implementing regulations, may continue to increase general and administrative expenses, which might negatively impact our international operations and could further reduce our profitability.

Providing services outside the United States carries the additional risk of currency fluctuations and foreign exchange controls imposed by certain countries since many of our non-U.S. projects are undertaken in local currency.

Although we generally incur project expenses in the same currency in which payments are received under the contract, we do not currently engage in additional currency hedging activities to limit the risk of exchange rate fluctuations. Therefore, fluctuations in the currency exchange rate could have a negative impact on the profitability of our operations, particularly if: (i) we cannot incur project expenses in the same currency in which payments are received under the contract; and (ii) there is a negative impact when converting back to United States Dollars. In addition, foreign exchange controls may limit the timing and our ability to have funds transmitted out of a foreign country.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Quantitative and Qualitative Disclosures About Market Risk and Foreign Exchange Risk.”

Our development stage customers may face difficulties in obtaining financing to fund the expansion of their wireless networks, which may reduce demand for our services.

Many of our development stage customers depend on financial markets to finance the development of new technologies or networks. As an example, during the downturns in the financial markets in 2000, and specifically within the telecommunications financial markets, many of our customers experienced trouble obtaining financing to fund the expansion of their wireless networks. Most vulnerable are customers that are new licensees and wireless service providers who have limited sources of funds from operations or have business plans that are dependent on funding from the capital markets.

If we are unable to collect receivables from telecommunications companies and our development stage customers, our operating results may be materially harmed.

We frequently perform services for telecommunications companies and development stage customers that carry a higher degree of financial risk for us. Our customers, established and development stage, are subject to market risks and may be impacted by a tightening of available credit and/or a general economic slowdown. These conditions may render our customers unable to pay, or may delay payment, for services performed by us. If we are not able to collect amounts owed to us by our customers, we may be required to write off significant accounts receivable and recognize bad debt expense.

We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced profitability and loss of market share.

We face intense competition in the market for wireless network design and system deployment services. Wireless service providers themselves and system equipment vendors, some of whom are our customers, have developed and continue to develop capabilities competitive with those provided by us.

Many competitors, including equipment vendors and system integrators, have substantially greater financial and other resources than we do and may use such greater resources to more effectively deliver a full turnkey solution. For example, a competitor that is able to provide equipment as part of its solution or to quickly deploy a large number of personnel for a project poses a threat to our business.

As a result of intense competition, we continue to encounter and may be required to agree to less favorable contract terms, including provisions such as liquidated damages, performance guarantees and deferred payment terms.

If we are not able to compete effectively, our ability to attract and retain customers will be adversely affected, which will decrease our revenues and negatively affect our operating results.

If we fail to manage the size of our billable workforce to anticipate increases or decreases in market demand for our services, it could harm our competitive position and financial results.

If we maintain or increase billable staffing levels in anticipation of one or more projects and those projects are delayed, reduced or terminated, or otherwise do not materialize, we may underutilize these personnel, which would reduce our gross profit, harming our results of operations. It is extremely difficult to project accurately the demand for our services and, correspondingly, maintain an appropriately sized billable workforce. If we maintain a billable workforce sufficient to support a resurgence in demand and such demand does not materialize, then our expenses will be high relative to revenues. If we reduce the size of our billable workforce in response to any industry slowdown or decrease in the demand for services, then we may not maintain a sufficient number of skilled personnel to be able to effectively respond to any resurgence. As a result of these insufficient staffing levels, our competitive position in the industry could be negatively impacted and we could incur increased recruiting costs to replace our billable workforce. To the extent that we are unable to successfully anticipate increases or decreases in market demand for our services and manage the size of our billable workforce accordingly, we could lose customers to our competitors or underutilize our personnel. In either case, our financial results will suffer.

We may not be able to successfully achieve the expected benefits of our future acquisitions, investments or strategic partnering relationships.

We may make future acquisitions of, or investments in, other companies, capabilities or technologies or enter into strategic partnering relationships. Our strategy for acquisitions, investments and strategic partnering arrangements is designed to either: (i) allow us to expand our current service offerings into areas that offer attractive revenue opportunities; or (ii) accelerate our access to, and provide us with a local presence in, new markets. We have invested in building our global marketing and North American sales presence to capitalize on emerging opportunities and further enhance our sales capabilities in existing markets. Our new offerings in quality of service, quality of end user experience and spectrum clearing represent investments in new capabilities that may be supported by strategic partnerships with third parties. Despite these investments and efforts, we may not be able to successfully increase our service offerings or gain ground in new markets.

Future acquisitions of new companies or technologies and future strategic partnering relationships may result in disruption to our business and expose us to risks associated with acquisitions and such relationships.

Any future acquisitions, investments or strategic partnering relationships may require additional debt or equity financing, or the issuance of shares, which could be dilutive to our existing stockholders. In addition, our operating results may suffer as a result of any acquisition-related costs or impairment of goodwill and other intangible assets acquired in connection with an acquisition. In addition, such activities could expose us to a number of other risks and challenges, including:


	•	diversion of management’s attention and resources;

	•	potential loss of key employees and customers of acquired companies;

	•	difficult and costly integration of operations;

	•	lack of experience operating in the geographic market or industry sector of an acquired business;

	•	disputes with a strategic partner;

	•	an increase in our expenses and working capital requirements; and

	•	exposure to unanticipated contingent liabilities.

Any of these and other factors could disrupt our business and harm our ability to achieve the anticipated benefits of an acquisition, investment or strategic partnering relationship.

Our ability to reduce our general and administrative expenses is limited.

Because a significant portion of our general and administrative expenses are relatively fixed, our ability to reduce those expenses in proportion to any decrease in the revenues we generate is limited. The enactment of the Sarbanes-Oxley Act of 2002, and implementing regulations, has significantly increased the cost of being a public company. Such compliance is particularly challenging for us given the international scope of our operations and our overall cost of compliance relative to our size. Our international reach also brings a need for local general and administrative capabilities in both our employees and certain of our third party professionals, to accommodate local practices and comply with local legal requirements, including employment, tax and similar matters. We believe that our ability to reduce these expenses significantly without materially changing our strategy of localization and potentially jeopardizing our continued legal compliance is limited. As a result, we do not expect that we will always be able to reduce these expenses in proportion to significant decreases in our revenues, which could have a material adverse effect on our net margins.

Competitors that offer financing to wireless customers pose a threat to our ability to compete for business.

Wireless service providers, particularly new providers and new licensees, depend increasingly on wireless telecommunications equipment vendors to supply and to finance the deployment of entire wireless networks. Frequently, those vendors only make financing available for services or products if they are contracted to provide the services themselves. For services the vendors do not provide directly, financing is provided only if they have the right to select the providers of those services and products, including radio frequency engineering and network deployment services. To the extent that wireless companies continue to seek such financing, it would harm our ability to compete for such business.

Our inability to anticipate or adapt to changes in technology may harm our competitive position, reputation and opportunities for revenue growth.

We operate in a highly competitive environment that is subject to rapid technological changes and the emergence of new technologies. Our future revenues depend significantly upon the adoption and deployment by wireless customers of new technologies. Our success will depend on our ability to timely enhance our current service offerings to keep pace with new technologies and the changing needs of our customers. If we are not successful in responding to technological changes or industry or marketplace developments, we may not be able to compete effectively, which could harm our reputation and opportunities for future revenue growth.

We may not be able to hire or retain a sufficient number of qualified engineers and other employees to meet our contractual commitments or maintain the quality of our services.

As a service business our success depends significantly on our ability to attract, train and retain engineering, system deployment, managerial, marketing and sales personnel who have excellent technical skills, particularly as technology changes, as well as the interpersonal skills crucial to fostering client satisfaction. Competition within the wireless industry for employees with the required range of skills fluctuates, depending on customer needs, and can be intense, particularly for radio frequency engineers. At times we have had difficulty recruiting and retaining qualified technical personnel to properly and quickly staff large customer projects. In addition to recruitment difficulties, we must fully and properly train our employees according to our customers’ technology requirements and deploy and fully integrate each employee into our customers’ projects. Increased competition in the wireless industry is increasing the level of specific technical experience and training required to fulfill customer-staffing requirements. This process is costly and resource constraints may impede our ability to quickly and effectively train and deploy all of the personnel required to staff a large project.

Because we have experienced, and expect to continue to experience, long sales cycles, we expect to incur significant costs to generate new business and our customer base may not experience growth commensurate with such costs.

Purchases of our services by customers often entail a lengthy decision-making process for the customer. Selecting wireless network deployment services involves substantial costs and has strategic implications. Senior management of the customer is often involved in this process, given the importance of the decision, as well as the risks faced by the customer if the services do not meet the customer’s particular needs. We may expend substantial funds and effort to negotiate agreements for these services, but may ultimately be unable to consummate agreements for services and expand our customer base. In addition, we have increasingly been required to change both our personnel and the techniques we employ to respond to customer organizational changes and expanded geographic reach. Customer buying habits currently seem to favor a regionalized sales force, which can increase costs, and may prove to be ineffective. As a result of our lengthy sales cycles and these potential increased costs, we expect to continue to incur relatively high costs to generate new business.

If wireless service providers, network equipment vendors and enterprises perform more tasks themselves, our business will suffer.

Our success depends upon the continued trend by wireless service providers and network equipment vendors to outsource their network design, deployment and project management needs. If this trend does not continue or is reversed and wireless service providers and network equipment vendors elect to perform more tasks themselves, our operating results may be adversely affected due to the decline in the demand for our services.

Government regulations may adversely affect our business.

The wireless networks that we design, deploy and manage are subject to various FCC regulations in the United States and other international regulations. These regulations require that these networks meet certain radio frequency emission standards and not cause interference to other services, and in some cases accept interference from other services. Changes in the regulation of our activities, including changes in the allocation of available spectrum by the United States government and other governments or exclusion of our technology by a standards body, could harm our business, operating results, liquidity and financial position.

We may be unable to satisfy the accounting guidelines that govern the determination of the realizable value of a deferred tax asset in a given tax jurisdiction, thus eliminating our ability to recognize as an asset the tax benefit of operating losses in the same jurisdiction and causing a reduction in our overall consolidated profitability.

There are stringent rules that govern the realizable value of a deferred tax asset. For example, in the U.S. the Company has a deferred tax asset of approximately $24.1 million related primarily to the benefit of prior years’ operating losses, However, because of the Company’s history of losses in the U.S., the realization of this asset is not assured beyond a reasonable doubt. Accordingly, a valuation allowance has been recorded in the financial statements as of December 31, 2007.

If we fail to retain our key personnel and attract and retain additional qualified personnel, our ability to operate our business may be adversely affected.

Our future success and our ability to sustain our revenue growth depend upon the continued service of our executive officers and other key personnel. We cannot guarantee that we will be able to attract and retain key personnel or executive management in sufficient numbers, with the requisite skills or on acceptable terms necessary or advisable to support our continued growth. The loss of any of our key employees, in particular Dean J. Douglas our chief executive officer, could adversely affect our ability to generate revenues and operate our business.

Our stock price and trading volume are volatile and could decline, resulting in a substantial loss on your investment.

The stock market in general, and the market for technology-related stocks in particular, is highly volatile. As a result, the market price of our stock is likely to be similarly volatile, and investors in our stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects. In addition, for the period from January 1 to December 31, 2007, the average daily trading volume for our stock as reported by The NASDAQ Global Market was 91,829 shares. Accordingly, the price of our stock and the trading volume of our stock could be subject to wide fluctuations in response to a number of factors, including those listed in this “Risk Factors” section and others such as:


	•	our operating performance and the performance of other similar companies or companies deemed to be similar;

	•	final resolution of amounts due from the sale of the Network Deployment business;

	•	actual or anticipated differences in our quarterly operating results;

	•	changes in our revenues or earnings estimates or recommendations by securities analysts;

	•	publication of research reports about us or our industry by securities analysts;

	•	additions and departures of key personnel;

	•	strategic decisions by us or our competitors, such as acquisitions, consolidations, divestments, spin-offs, joint ventures, strategic investments, or changes in business strategy;

	•	the passage of legislation or other regulatory developments that adversely affect us or our industry;

	•	failure to file timely all reports required to be filed by the U.S Securities and Exchange Commission;

	•	speculation in the press or investment community;

	•	changes in accounting principles;

	•	terrorist acts;

	•	general market conditions, including economic factors unrelated to our performance; and

	•	political or military events related to international conflicts, wars, or otherwise.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.


Item 1B.	*Unresolved Staff Comments*

None.


Item 2.	*Properties*

We currently lease approximately 33,000 square feet at 7900 Westpark Drive, McLean, Virginia, which now serves as our corporate headquarters. We moved into this space in June 2007. We do not intend to sublease at the new location. Until June 30, 2007 we leased approximately 155,000 square feet of office space for our corporate headquarters in McLean, Virginia, under a ten-year lease that expired on June 30, 2007. Through June 30, 2007 we occupied approximately 59,000 square feet of the McLean facility and subleased approximately 96,000 square feet to subtenants.

We lease approximately 6,400 square feet of office space at our Europe, Middle East and Africa, or EMEA, regional headquarters in London, England, under a 13-year lease expiring in September 2014. We occupy approximately 2,300 square feet of the London facility. We currently sublease approximately 4,100 square feet to subtenants.

In addition, we lease approximately 131,000 square feet of office space in connection with our local operations in the United Kingdom (primarily in London and Cambridge), France (Paris), Belgium (Zaventem), Turkey (Istanbul) ), Italy (Rome and Milan), the Netherlands (Hertogenbosch) for our regional operations and/or sales and marketing efforts in Algeria, Spain, and the U.A.E. and project office space as required to perform contracts in various locations for our clients.

All of our facilities are used for current operations of all segments except for our discontinued operations in Brazil.


Item 3.	*Legal Proceedings*

From time to time we are party to legal proceedings. We do not believe that any of the pending proceedings would have a material adverse effect on our business, financial condition or results of operations. However, we have no assurance that an unfavorable decision in any such legal proceeding would not have a material adverse effect.


Item 4.	*Submission of Matters to a Vote of Security Holders*

Our 2007 Annual Meeting of Shareholders was held on December 26, 2007. The sole proposal submitted for shareholder consideration at the Annual Meeting was the election of directors. The following is a tabulation of the voting at the Annual Meeting.

Proposal 1 — Election of Directors


	Term				Votes		Broker
Elected Director	Expires		Votes For		Withheld		Non-Votes

Julie A. Dobson		2008		22,605,373		416,725		—
Dean Douglas		2008		22,984,681		37,417		—
Melvin J. Keating		2008		22,851,753		170,345		—
Richard Lombardi		2008		22,605,373		416,725		—
Susan Ness		2008		22,605,373		416,725		—
Rajendra Singh		2008		22,984,680		37,417		—
Mark A. Slaven		2008		22,984,868		37,230		—

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Since completion of our initial public offering in September 1996, our Class A common stock has been quoted on the NASDAQ Global Market under the trading symbol “LCCI.” Prior to December 31, 2007, all outstanding shares of our Class B common stock were converted into shares of Class A common stock. See Note 12, Shareholders’ Equity in the consolidated financial statements. As of February 29, 2008, there were approximately 100 stockholders of record of the Class A common stock. As of February 29, 2008, we estimate there were approximately 2,438 beneficial holders of the Class A common stock. The following table summarizes the high and low sales prices of the class A common stock by fiscal quarter for 2007 and 2006 as reported on the NASDAQ Global Market:


Quarter Ended:	2007

March 31	$	3.68 to $5.07
June 30	$	3.41 to $4.62
September 30	$	3.18 to $4.85
December 31	$	1.75 to $3.49


Quarter Ended:	2006

March 31	$	2.40 to $3.65
June 30	$	3.10 to $4.15
September 30	$	3.15 to $3.77
December 31	$	3.44 to $4.05

We have never paid any cash dividends on our common stock, and we do not anticipate paying dividends on our common stock, cash or otherwise, in the foreseeable future. Future dividends, if any, will be at the discretion of the Board of Directors and will depend upon, among other things, our operations, capital requirements and surplus, general financial condition, contractual restrictions, such as those under our credit facility, and such other factors as the Board of Directors may deem relevant.

Equity Compensation Plan Information

The table below provides information, as of December 31, 2007, concerning securities authorized for issuance under our equity compensation plans:

Number of securities

Weighted average

Number of securities remaining

to be issued upon

exercise price of

available for future issuance under

exercise of

outstanding

equity compensation plans

outstanding options,

options, warrants

(excluding securities reflected in

warrants and rights

and rights

column (a))

(a)

(b)

(c)

Equity compensation plans approved by securities holders:

Amended and Restated Equity Incentive Plan(1)(2)

3,387,145

2.81

436,809

Directors Stock Option Plan (Class A Common Stock)

112,400

6.63

—

Equity compensation plans not approved by securities holders(3)

500,000

2.49

—

Total

3,999,545

2.88

436,809


(1)		We have outstanding 840,025 unvested restricted stock units granted under the Amended and Restated Equity Incentive Plan not included in the above table.
(2)		For a description of our Equity Incentive Plan, see Note 14. Equity Incentive Plans, in the consolidated financial statements.
(3)		The options to purchase 500,000 shares of our common stock were granted pursuant to the Dean J. Douglas Employment Inducement Plan, which was not approved by our stockholders.

Stock Performance Graph

The following chart sets forth a five-year comparison of the cumulative stockholder total return on our class A common stock. Total stockholder return is measured by dividing total dividends (assuming dividend reinvestment) plus share price change for a particular period by the share price at the beginning of the measurement period. Our cumulative stockholder return based on an investment of $100 at December 31, 2002, when our class A common stock was traded on the NASDAQ Global Market at the closing price of $1.95, is compared to the cumulative total return of the NASDAQ Market Index and an index comprised of publicly traded companies, which are principally in the wireless network services business (the “Old Peer Group”) and (the “New Peer Group”) during that same period. In 2007, our Old Peer Group consisted of the following companies: Dycom Industries Inc., The Management Network Group Inc., Mastec Inc., Tetra Technologies Inc. and Kratos Defense Security Solutions, Inc.(formerly Wireless Facilities, Inc, “WFI”). During March 2007, we acquired the equity interests in the Europe, Middle East and Africa business of WFI and in June 2007 we acquired certain assets and liabilities of the U.S. wireless engineering services business of WFI. Therefore we have excluded Kratos Defense Security Solutions, Inc. (formerly Wireless Facilities, Inc.) from our New Peer Group. The total returns for both groupings are shown below.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among LCC International, Inc., The NASDAQ Composite Index,
A New Peer Group And An Old Peer Group


*	$100 invested on 12/31/02 in stock or index-including reinvestment of dividends.


Item 6.	*Selected Financial Data*

Set forth below are selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2007, which have been derived from our consolidated financial statements. The selected consolidated financial data set forth below should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes thereto included in this Form 10-K.


	2007			2006			2005			2004			2003
	(In thousands, except per share data)

Revenues	$	145,723		$	129,953		$	145,642		$	118,666		$	82,876
Cost of revenues (exclusive of depreciation shown separately below)		120,071			97,194			114,214			92,619			65,424
Gross profit		25,652			32,759			31,428			26,047			17,452
Operating expenses:
Sales and marketing		15,086			7,910			8,131			7,897			6,612
General and administrative		24,215			26,699			27,893			26,896			17,534
Restructuring charge (recovery)		1,107			108			404			(1,137	)		(2	)
Depreciation and amortization		4,224			2,378			2,793			2,573			3,761

Total operating expenses		44,632			37,095			39,221			36,229			27,905

Operating loss		(18,980	)		(4,336	)		(7,793	)		(10,182	)		(10,453	)

Other income (expense)
Interest income (expense), net		(3,507	)		(730	)		(201	)		(100	)		309
Other		(4,811	)		1,763			(883	)		1,533			1,234

Total other income (expense)		(8,318	)		1,033			(1,084	)		1,433			1,543

Loss from continuing operations before income taxes		(27,298	)		(3,303	)		(8,877	)		(8,749	)		(8,910	)
Provision (benefit) for income taxes		1,387			1,576			2,717			4,957			(2,022	)

Loss from continuing operations		(28,685	)		(4,879	)		(11,594	)		(13,706	)		(6,888	)

Income (loss) from discontinued operations		(2,070	)		(3,151	)		(933	)		7,395			365

Net loss		(30,755	)		(8,030	)		(12,527	)		(6,311	)		(6,523	)
Preferred stock dividend		12			—			—			—			—

Net loss applicable to common stock	$	(30,767	)	$	(8,030	)	$	(12,527	)	$	(6,311	)	$	(6,523	)

Net income (loss) per share:
Continuing operations
Basic and diluted	$	(0.97	)	$	(0.20	)	$	(0.47	)	$	(0.56	)	$	(0.32	)

Discontinued operations
Basic and diluted	$	(0.07	)	$	(0.13	)	$	(0.04	)	$	0.30		$	0.01

Net loss per share
Basic and diluted	$	(1.04	)	$	(0.33	)	$	(0.51	)	$	(0.26	)	$	(0.31	)

Weighted average shares:
Basic and diluted		29,657			24,893			24,524			24,381			21,292
Consolidated Balance Sheet Data (at year-end):
Cash, cash equivalents and restricted cash	$	9,850		$	7,328		$	15,337		$	23,092		$	31,031
Working capital		22,026			33,490			37,770			49,658			54,980
Goodwill and intangibles, net		59,955			14,282			11,326			12,848			11,958
Total assets		151,450			98,423			118,953			120,807			118,591
Total debt		54,339			4,226			2,975			147			1,840
Shareholders’ equity		44,687			52,096			53,751			67,705			69,768

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto and the other financial data appearing elsewhere in this Form 10-K.

Overview

We are an independent provider of integrated end-to-end solutions for wireless voice and data communications networks with offerings ranging from high level technical consulting, system design and optimization services, ongoing operations and maintenance services and, in some countries, deployment services. We have been successful in using initial opportunities to provide high level technical consulting services to secure later-stage system design and network optimization contracts. Engagements to provide design services also enable us to secure ongoing deployment, as well as operations and maintenance projects. Our technical consulting, system design and network optimization practices position us well to capitalize on additional opportunities as new technologies are developed and wireless service providers upgrade their existing networks, deploy the latest available technologies, and respond to changes in how customers use wireless services.

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.

Americas: Headquartered in McLean, Virginia, the Americas region provides a range of service offerings to wireless operators and equipment vendors in North America. In 2007, Americas generated approximately 32.2% of our revenues.

EMEA: Based in London, EMEA is responsible for operations in the U.K., Italy, the Netherlands, Algeria, Belgium, Luxembourg, Germany, Spain, Greece, Pakistan and Saudi Arabia. In 2007, EMEA generated approximately 67.8% of our revenues.

Nonreportable segments: This segment of our business includes the wind down of our operations in Asia-Pacific, LCC Wireline, Inc., corporate and the Wireless Institute. These combined operations generated minimal revenues.

Our primary sources of revenues are technical consulting, engineering design and optimization and, in certain countries in EMEA, network 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 based on the ratio of individual contract costs incurred to date on a project compared with total estimated costs on completion. Anticipated contract losses are recognized as they become known and estimable. We recognize revenues on time and materials contracts as the services are performed.

In EMEA, the Company generally receives purchase orders for individual cell sites based on agreed upon fixed prices for types of standard cell sites. Non-standard services related to a cell site are priced on a variable basis using either agreed upon rates per hour or a rate schedule for such non-standard services. Deployment of cell sites may take up to several months and revenues and costs are recognized on a percentage of completion basis based upon the Company’s engineering estimates.

Cost of revenues include direct compensation and benefits, living and travel expenses, payments to third-party subcontractors and consultants, equipment rentals, expendable computer software and equipment, 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 upon 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 foreign 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.

Another statistic that we monitor is our contract backlog, which at December 31, 2007 was comprised of firm backlog of $61.6 million and implied backlog of $16.6 million. We expect that our contract backlog will vary from time to time as we deliver contract revenues and win new awards. We define firm backlog as the value of work-in-hand to be done with customers as of a specific date where the following conditions are met: (i) the price of the work to be done is fixed; (ii) the scope of the work to be done is fixed, both in definition and amount (for example, the number of sites has been determined); and (iii) there is a written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the client to pay us for the work to be performed. We define implied backlog as the estimated revenues from master service agreements and similar arrangements, which have met the first two conditions set forth above but for which we have not received a firm contractual commitment.

We have completed 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. During the second quarter of 2006, we made the decision to sell our U.S. Network Deployment operations for a total consideration of $10.2 million. The consideration included approximately $1.0 million of cash proceeds. At December 31, 2007, $1.8 million was due from Nokia in connection with this transaction. In conjunction with the sale, we entered into a loan agreement with a maximum amount outstanding of $4.2 million. This loan was repaid in full during 2007. In the third quarter of 2006, we made the decision to sell our Brazilian Subsidiary. We agreed to assume the obligations for payroll related taxes in dispute and recorded in discontinued operations a charge of $0.4 million, representing the net present value of the obligation related to the severance related payroll taxes due to the Brazilian tax authority. On December 29, 2006, we completed the purchase of Detron Belgium NV (“Detron Belgium”), a provider of technical services to the telecommunications industry in Belgium and Luxembourg, for $1.9 million pursuant to a share purchase agreement. On March 9, 2007, we purchased the equity interests of WFI’s EMEA business for a purchase price of approximately $4.4 million including transaction related costs. On June 1, 2007, we acquired certain assets and liabilities of WFI’s U.S. wireless engineering services business for a purchase price of approximately $43.4 million (after adjustment for final agreement on the value of net assets transferred). We expect to continue to consider business dispositions, acquisitions and investments as a way of supporting our longer-term strategies.

On November 12, 2007 we received notice from the buyers that they had decided not to proceed with the acquisition of our Brazilian subsidiary, LCCI do Brasil Ltda (“LCC Brazil”). We are working on other alternatives, including an opportunity to sell to another interested party that has submitted a non-binding letter of intent to purchase LCCI Brazil. The Company continues to be in negotiation with this other party for the sale of LCCI Brazil.

RECENT DEVELOPMENTS

Bank Refinancing

On November 30, 2007, we further amended and restated our outstanding credit facility with Bank of America, N.A. (“Bank of America”) to among other things, provide for a bank waiver and amend certain covenants in the agreement for all events of default. The amended agreement provides for a total principal borrowing amount of up to $21.95 million which may be borrowed, repaid and reborrowed by us on a revolving basis until November 29, 2009. It also provides for a term loan of $6.5 million with scheduled principal payments of $3.5 million on June 1, 2008, $1.0 million on each of September 1 and December 1, 2008 and March 1, 2009 and any balance on November 29, 2009, an increase in the applicable interest rate on borrowings by 1.00% per annum, the amendment of the financial covenants set forth in the agreement and the payment to the bank of a fee of up to $0.6 million in connection with the amendment.

the Amended and Restated Credit Agreement, dated as of May 29, 2007 (the “Credit Agreement”), among the Company, as borrower, certain domestic subsidiaries of the Company, as guarantors and Bank of America, N.A. as lender and administrative agent (the “Bank”). The Amendment provides, among other things, (a) a waiver by the Bank of certain specified defaults under the Credit Agreement, and (b) a requirement that the financial statements described in Section 7.01(b) of the Credit Agreement with respect to the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007, in each case, along with any additional deliveries required under the Credit Agreement in connection therewith, be delivered to the Bank on or before February 22, 2008, the failure of which will constitute an immediate event of default irrespective of otherwise applicable grace or cure period.

The Amendment also provided that $1.35 million of the settlement proceeds of $1.8 million, as discussed in Note 5, shall be applied to the term loan payments in the reverse order of maturity, with the balance of the settlement proceeds to be used by the Company for general corporate and working capital needs. This provision thereby resulted in classifying $1.35 million of the term loan as current in the consolidated balance sheet.

SEC Filing Delinquencies and NASDAQ compliance

As discussed more fully in Note 22. Subsequent Events, to the consolidated financial statements, proceedings were pending before the NASDAQ Listing and Hearing Review Council with respect to a potential delisting of our Class A common stock as a result of the Company’s failure to file with the SEC its quarterly reports on Form 10-Q for each of the quarters ended March 31, June 30 and September 30, 2007 and Form 8-K/A with respect to a significant acquisition completed in 2007. On February 21, 2008, the Company completed all such filings. On March 3, 2008, the Company received a letter from NASDAQ that it is now compliant with Marketplace Rule 4310 (c)(14). As such, the Board of Directors of NASDAQ has withdrawn its February 14, 2008 call for review of the December 19, 2007 decisions of the Listing Council. On April 4, 2008, the Company filed a current report on Form 8-K disclosing that, in accordance with NASDAQ’s rules, the Company had received a NASDAQ staff determination letter stating that the Company was not in compliance with NASDAQ Marketplace Rule 4310(c)(14) because it had not timely filed its Annual Report on Form 10-K for the year ended December 31, 2007. The Company requested, and was granted, a hearing before the NASDAQ Listing Qualifications Panel that is scheduled for May 8, 2008.

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 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;

	•	spending levels by wireless service providers in the areas of network design, deployment and optimization;

	•	migration of networks to accommodate enhanced data offerings;

	•	consolidation in the carrier and OEM community;

	•	increased percentage of revenues derived from our international operations; and

	•	recent auctions of spectrum by governments in the U.S. and certain countries in Europe.

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.

Historically, the key drivers of change in our business have been: (i) the issuance of new or additional licenses to wireless service providers; (ii) the introduction of new services or technologies; (iii) increases in the number of subscribers served by wireless service providers, the increase in usage by those subscribers and the scarcity of wireless spectrum; and (iv) the increasing complexity of wireless systems in operation.

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 43.8%, 29.1% and 25.0% of our total revenues for the years ended December 31, 2007, 2006 and 2005, respectively, and it is expected to be an area of business growth in the future. A large proportion of the contracts awarded by our customers are fixed price, 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.

During the year ended December 31, 2007, approximately 13.6% of our revenues were generated by work done by subcontractors, for construction related activities, compared to 20.1% and 25.1% in 2006 and 2005, respectively.

We believe that the Americas may benefit from increased spending by certain United States wireless service providers. This increased spending can be attributed to several trends: (i) the implementation of new technologies such as 3G wireless and broadband wireless; (ii) activity generated by efforts to consolidate networks resulting from merger activity; (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. However, the increase in worldwide terrorism may affect our business in these countries. For example, the U.S. State Department has issued security advisories for U.S. nationals in Saudi Arabia, Algeria and certain other countries in the Middle East. While we tend to staff these projects largely with local or regional personnel, we do recognize that undertaking work in such areas at this time carries a higher level of operating and political risk than in other more developed areas.

Results of Operations

The discussion below provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and accompanying notes thereto included elsewhere herein.

Revenues, Cost of Revenues and Gross Margin


	Years Ended December 31,
	2007					2006					2005
	(In Thousands)

Revenues:
Americas	$	46,974				$	29,959				$	36,478
EMEA		98,749					99,944					107,844
Nonreportable segments		—					50					1,320

	$	145,723				$	129,953				$	145,642

				(% of revenue)					(% of revenue)				(% of revenue)
Cost of revenues:
Americas	$	39,471		84.0	%	$	24,629		82.2	%	$	32,042	87.8	%
EMEA		80,613		81.6	%		72,684		72.7	%		81,483	75.6	%
Nonreportable segments		(13	)	—			(119	)	—			689	52.2	%

	$	120,071		82.4	%	$	97,194		74.8	%	$	114,214	78.4	%

Gross margin:
Americas	$	7,503		16.0	%	$	5,330		17.8	%	$	4,436	12.2	%
EMEA		18,136		18.4	%		27,260		27.3	%		26,361	24.4	%
Nonreportable segments		13		—			169		—			631	47.8	%

	$	25,652		17.6	%	$	32,759		25.2	%	$	31,428	21.6	%

Americas

During 2007, we experienced an increase in our Americas segment revenues of $17.0 million to $47.0 million from $30.0 million in the prior year. This increase was primarily due to the acquisition of the WFI US engineering business on May 29, 2007. Gross margin for the Americas region for year ended December 31, 2007 was 16.0%, as compared to 17.8% in the prior year. This is primarily due to the low margins from the WFI US engineering business and the “bench costs” experienced during the integration of that business. During much of 2007, the WFI US Engineering businesses workforce was being integrated and rationalized into our existing workforce. This had the impact of having more of the revenue generating workforce being idle or underutilized during 2007 as compared to the comparable period in 2006. In addition, we incurred costs of maintaining that portion of the idle or underutilized workforce “bench costs” without generating sufficient revenues to offset such costs.

During 2006, we experienced a decrease in our Americas segment revenue of $6.5 million to $30.0 million from $36.5 million in 2005. The decrease is primarily the result of a decrease in revenues of approximately $6.9 million from customers who were customers in 2006 and 2005 and a decrease in revenue of $2.3 million from customers who were customers in 2005 but not 2006, offset by increases in revenue of $0.7 million of certain customers who were customers in 2006 and 2005 and $2.0 million of revenue from customers who were customers in 2006 but not 2005. We believe a portion of the decreases were the result of our decision to reduce our dependence on lower margin work in the U.S. While we can not estimate the exact impact on revenue of our decision to focus on higher margin work, we believe that decision resulted in the increase in the Americas segment gross margins as a percentage of revenue to 17.8% in 2006 from 12.2% in 2005 and an increase in the segment’s gross margin of $0.9 million to $5.3 million in 2006 from $4.4 million in 2005.

In 2005, total revenues for the region were $36.5 million, up $1.0 million from 2004. Cost of revenues increased $3.4 million over 2004 for a $2.4 million decline in gross margin and a decrease in gross margin as a percentage of revenue to 12.2% in 2005 from 19.3% in 2004. Among our top customers we experienced declines in gross margin as a percentage of revenue of between 6.8% and 8.9% reducing our margins for those customers by approximately $2.7 million. This decline in total gross margin and gross margin as a percentage of revenue was attributable to our taking on certain types of lower margin work which generated increased revenues but at generally

decreased margins. Margins were also affected negatively by not matching lower cost personnel to the lower margin work.

EMEA

In 2007, revenues for the year decreased by $1.2 million to $98.7 million as compared to $99.9 million for the prior year. The primary reason for this decrease was the continued slowdown in revenues from our deployment and consulting contracts in Algeria and the U.K., partially offset by increased revenues attributable to our engineering services contract in Saudi Arabia and increased revenues attributable to the entities doing business in Europe that we acquired from WFI in the first quarter of fiscal 2007. Gross margin was 18.4% in 2007 as compared to 27.3% in 2006. This decrease was due primarily to the reduction in higher margin services provided in Algeria and the continued occurrence of certain relatively fixed costs in Algeria and the U.K., without sufficient revenue to reach the level of gross margin achieved in the 2006 period.

In 2006, revenues for the year decreased $7.9 million to $99.9 million and cost of revenues decreased $8.8 million to $72.7 million, resulting in an increase in gross margin to 27.3% in 2006 compared to 24.4% in 2005. The majority of our gross margin was generated by services provided under our deployment and our consulting contracts in Algeria and our engineering services contract in Saudi Arabia which generated 65.6% of 2006 gross profits. In Algeria, decreases in revenue of $2.0 million and cost of revenue of $4.0 million generated an increase in gross margin and gross margin percentage of $2.0 million and 13.6%, respectively. Algeria provided 37.1% of our EMEA segment gross profits in 2006, up 6.3% from 30.8% in 2005. In Saudi Arabia decreases in revenue of $7.9 million and cost of revenue of $5.2 million reduced gross margin by $2.7 million with no change in the gross margin percentage. Saudi Arabia provided 28.5% of our EMEA segment gross profits in 2006, down 11.0% from 39.5% in 2005. In Italy, a decrease in cost of revenue of $0.9 million on comparable revenues increased gross margin and gross margin percentage $0.9 million and 13.5%, respectively. Revenue and cost of revenues in the U.K. increased by $5.2 million and $4.5 million, respectively, generating increases in gross margin and gross margin percentage of $0.7 million and 1%, respectively. Decreases in revenues and cost of revenues in the Netherlands of $3.7 million and $3.5 million, respectively, generated a slight increase in gross profit percentage.

In 2005, revenues for the year grew to $107.8 million, an increase of $29.7 million over the previous year. The entire growth in revenue was attributable to our operations in developing countries. Saudi Arabian revenue growth for 2005 was $15.6 million, with Algerian revenue growth of $16.8 million. Lesser developed countries generated 70% of 2005 gross profits. Overall gross margins improved in 2005 to 24.4% from the 22.6% in 2004, largely due to the higher margins produced in the lesser developed countries.

Nonreportable Segments

There were no revenues from the non-reportable segments during the year ended December 31, 2007.

In 2006 the nonreportable segments generated revenues of $0.1 million, down $1.2 million from 2005. This resulted from the changes in the LCC Wireline, Inc. division and the closure of our China office discussed below. During 2006, there was a loss from operations of $13.1 million for the nonreportable segments, which compares to a loss from operations of $10.6 million for 2005. The majority of this loss is attributable to corporate general and administrative costs, which are included in the nonreportable segment and are not allocated to the Americas or EMEA.

In 2005 the nonreportable segments generated revenues of $1.3 million, down $3.7 million from 2004. This decline is primarily attributable to the LCC Wireline, Inc. division, which ceased operations in the first quarter of 2005 and the closure of our Beijing, China office as part of the restructuring in the second quarter of 2005. During 2005, there was an operating loss of $10.6 million for the nonreportable segments, which compares to an operating loss from operations of $9.1 million for 2004. The majority of this loss is attributable to corporate general and administrative costs, which are included in the nonreportable segment and are not allocated to the Americas or EMEA.

Operating Expenses


	Year Ended December 31,
	2007			2006			2005
	(In thousands)

Sales and marketing:
Americas	$	3,774		$	2,832		$	2,228
EMEA		8,541			3,748			5,538
Nonreportable segments		2,771			1,330			365

	$	15,086		$	7,910		$	8,131

Bad debt expense (recovery):
Americas	$	(71	)	$	20		$	223
EMEA		182			(41	)		254
Nonreportable segments		—			—			251

		111			(21	)		728

Other general and administrative:
Americas		4,504			3,620			5,274
EMEA		9,850			11,085			11,604
Nonreportable segments		9,750			12,015			10,287

		24,104			26,720			27,165

Total general and administrative:
Americas		4,433			3,640			5,497
EMEA		10,032			11,044			11,858
Nonreportable segments		9,750			12,015			10,538

	$	24,215		$	26,699		$	27,893

Restructuring charge (recovery):
Americas	$	—		$	—		$	447
EMEA		1,600			31			—
Nonreportable segments		(493	)		77			(43	)

	$	1,107		$	108		$	404

Depreciation and amortization:
Americas	$	1,437		$	430		$	432
EMEA		2,508			1,609			2,016
Nonreportable segments		279			339			345

	$	4,224		$	2,378		$	2,793

Total Operating Expenses:
Americas		9,643			6,902			8,604
EMEA		22,681			16,432			19,412
Nonreportable segments		12,308			13,761			11,205

	$	44,632		$	37,095		$	39,221

Sales and marketing expenses

The increase in sales and marketing expense to $15.1 million during 2007 from $7.9 million in 2006 was primarily due to increased sales headcount and increased sales efforts as a result of the acquisition of the WFI US Engineering business on May 29, 2007, and the WFI EMEA business acquired on March 9, 2007, partially offset by reduced commission expense in the EMEA region as a result of lower revenues relating to our Algeria, UK and Saudi contracts.

In 2006, sales and marketing expenses decreased by $0.2 million, year over year. In the EMEA region a decrease of $1.8 million was primarily due to a reduction of commissions expense of approximately $1.3 million related to lower revenues in Saudi Arabia. The balance was due to modest declines in the other business units. This decrease was offset by an increase in the Americas region of $0.6 million due to increased sales and marketing efforts by operating personnel and signing bonuses for new sales staff. In our corporate division, increases of $1.0 million were due to the implementation of Investor Relations and Marketing functions.

In 2005, sales and marketing expenses increased by $0.2 million. Sales and marketing costs increased $1.8 million in EMEA due primarily to an increase in commission expense relating to the technical consulting contract in Saudi Arabia. Sales and marketing expenses declined $1.1 million in the Americas and $0.5 million in the nonreportable segments primarily as a result of the cost restructuring undertaken during the second quarter of 2005.

Net bad debt expense (recovery)

In 2007, the Company had bad debt expense of $0.1 million. In 2006 there were net recoveries of under $0.1 million. In 2005, we had bad debt expense of $0.7 million, of which $0.6 million was recorded in the fourth quarter. The 2005 bad debt expense was evenly divided amongst the segments and was not associated with any single customer nor with a single project.

Other general and administrative expenses

In 2007, other general and administrative expense decreased to $24.1 million from $26.7 million. The decrease is primarily due to our efforts to increase the efficiency of our administrative operations and support functions in the Americas and the ongoing consolidation of back office operations of certain of our smaller operations in EMEA, as well as the fact that we had sufficient resources and systems to absorb the acquisition of the WFI US and EMEA Engineering businesses in 2007, without a significant increase in our general and administrative organization.

In 2006, other general and administrative expenses were $26.7 million, a decrease of $0.4 million or 1.6% year over year. This reduction occurred in the Americas segment with a decrease in personnel and benefits expense of approximately $0.8 million, as well as reductions in recruiting, human resources, research and innovations, and information technology which accounted for additional reductions of $0.8 million. This reduction was partially offset by increases in corporate expenses, primarily of $0.9 million for audit fees and $0.4 million for stock based compensation expense.

In 2005, other general and administrative expenses were $27.2 million, an increase of $1.7 million or 6.5% year over year. Most of this increase occurred in the nonreportable segments, which includes corporate general and administrative expenses. Corporate general and administrative expenses were higher due to increased employee benefits costs, the costs of bringing onboard a new CEO, and costs associated with the restatement. Other general and administrative expenses for EMEA in 2005 include a management performance bonus.

Restructuring

During 2005, we recorded a net restructuring charge of $0.6 million, which included $0.2 million of charges related to discontinued operations. This charge included $0.8 million in severance termination benefits and costs associated with the involuntary employee separation of approximately 48 employees in North America and Asia-Pacific, $0.1 million associated with closing facilities and disposing of assets, and a reduction of $0.3 million due to reoccupied space in our McLean office and a recovery of sublease income.

During the second quarter of 2006, we had an additional $0.1 million restructuring charge. This charge was due mainly to a revised estimate of the operating costs for our facility in McLean, Virginia and to a lesser extent, a revised estimate on the sublease income assumptions for our facility in London.

Substantially all the activities related to these restructurings have been completed. However, we continue to be obligated under facility leases that expire from 2007 through 2014. The accrual of approximately $0.1 million remaining at December 31, 2007 relates to remaining obligations through the year 2014 associated with offices exited or downsized, offset by our estimates of future income from sublease agreements. The restructuring charge calculation assumes as of December 31, 2007 that we will receive $2.4 million in sublease income, all of which is committed.

During the second quarter of 2007, the Company took steps towards recognizing integration related and other cost synergies by implementing a workforce reduction that eliminated approximately 60 positions worldwide and consolidated certain facilities in the U.K., by adopting a restructuring plan (“2007 Restructuring”), and recorded restructuring charge of $1.6 million. Approximately $1.0 million of the charge was related to severance and headcount related costs and $0.6 million was related to non-headcount related expenses. During the second quarter, we also recorded a $0.5 million recovery of a prior restructuring charge. The Company recorded the severance charges related to these headcount reductions as an operating expense in the second and third quarters of 2007. The facilities and other non headcount related charges were recorded as operating expense in the second and third quarters of 2007. The Company paid the majority of severance and related costs in the third quarter with the remaining costs to be paid in the fourth quarter of 2007. During the fourth quarter, we also recorded a $0.2 million recovery of a prior restructuring charge. The cash payments related to the consolidation of facilities were made over the term of the related leases, the longest of which terminated in December 2007.

The Company also recorded a restructuring charge of $0.5 million related to personnel severance costs in connection with the acquisition of certain assets and liabilities of the US wireless engineering services business of WFI. The Company included these severance charges in goodwill. See Note 4, Business Combinations.

Other Income and Expense


	Years Ended December 31,
	2007			2006			2005
	(In thousands)

Components of other income (expense):
Interest income:
Americas	$	1		$	1		$	—
EMEA		49			35			16
Nonreportable segments		45			98			98

	$	95		$	134		$	114

Interest expense:
Americas	$	(1,705	)	$	—		$	(1	)
EMEA		(117	)		(29	)		(16	)
Nonreportable segments		(1,780	)		(835	)		(298	)

	$	(3,602	)	$	(864	)	$	(315	)

Gain (loss) on investments:
Americas	$	—		$	—		$	—
EMEA		5			—			19
Nonreportable segments		(42	)		—			(34	)

		(37	)		—			(15	)

Foreign currency gains and (losses):
Americas		(2	)		—			—
EMEA		(3,193	)		176			(154	)
Nonreportable segments		648			1,260			(1,552	)

		(2,547	)		1,436			(1,706	)


	Years Ended December 31,
	2007			2006			2005
	(In thousands)

Miscellaneous:
Americas		48			—			1
EMEA		(1,358	)		639			(5	)
Nonreportable segments		(917	)		(312	)		842

		(2,227	)		327			838

Total other:
Americas		46			—			1
EMEA		(4,544	)		815			(140	)
Nonreportable segments		(313	)		948			(744	)

	$	(4,811	)	$	1,763		$	(883	)

Total other income and expense:
Americas	$	(1,658	)	$	1		$	—
EMEA		(4,612	)		821			(140	)
Nonreportable segments		(2,048	)		211			(944	)

	$	(8,318	)	$	1,033		$	(1,084	)

Interest income

Interest income in 2007, 2006 and 2005 decreased year over year due to lower average balances of cash on deposit and decreases in available yields on short-term investments. Approximately $0.1 million of interest income related to a refund of U.S. taxes was recorded in 2006.

Interest Expense

Interest expense increased to $3.6 million from $0.9 million in the prior year, and was primarily due to increased borrowings as a result of our recent acquisitions.

In 2006 interest expense increased as a result of higher borrowings under our borrowing facility with Commerce Funding Corporation, (“CFC”), a Wells Fargo company, as well as the fees associated with advances from Nokia under the agreement to dispose of our U.S. Network Deployment business. We terminated our credit facility with CFC on March 9, 2007, and entered into a new revolving credit facility. See Sources and Uses of Cash below.

Total interest expense for 2006 and 2005 was approximately $0.9 million and $0.3 million, respectively. Of these amounts, approximately $0.6 million and $0.3 million in 2006 and 2005, respectively, were attributable to interest and fees arising from our financing arrangement with CFC. This agreement was terminated March 9, 2007.

Foreign currency gains and losses

In 2007, we recorded losses on foreign currencies of $2.5 million due to the appreciation of the Euro with respect to the U.S. Dollar and the British Pound throughout the year. In 2006 we recorded gains on foreign currencies of $1.4 million due to the appreciation of the British Pound and Euro with respect to the U.S. Dollar throughout the year. In 2005, we recorded losses on foreign currencies of $1.7 million due to the appreciation of the U.S. Dollar against the Euro and the British Pound throughout the year. All of our foreign currency transaction gains and losses are due to intercompany payables and receivables denominated in foreign currency.

Miscellaneous

In 2007, we recorded in our non-reportable segments liquidated damages of $2.1 million in conjunction with our inability to file a registration statement in connection with our sale of common stock. We also recorded transfer pricing allocations between the segments that are eliminated in consolidation.

In the second quarter of 2006 we recorded a gain of $0.2 million on the favorable settlement of a dispute relating to an earn out agreement that we had entered into in conjunction with the acquisition of our Netherlands subsidiary.

In the second quarter of 2005, the Company received a cash payment of approximately $0.6 million from NextWave for the exercise of all warrants held by the Company. The exercise was made in accordance with the terms of NextWave’s reorganization plan under bankruptcy proceedings. In the fourth quarter of 2005, we sold off the one remaining tower that we owned for $0.3 million.

Income (Loss) Before Taxes


	Years Ended December 31,
	2007			2006			2005
	(In thousands)

Segment Income (Loss) Before Taxes
Americas	$	(3,798	)	$	(1,571	)	$	(4,168	)
EMEA		(9,156	)		11,649			6,809
Nonreportable segments		(14,344	)		(13,381	)		(11,518	)

	$	(27,298	)	$	(3,303	)	$	(8,877	)

Tax Expense

In 2007, we recorded tax expense of $1.4 million. The tax expense arises from international operations that generate taxable income. The decrease in tax expense for 2007 as compared to the prior year was due primarily to the reduction of taxable income generated in our Algerian operations. A valuation allowance has been established for tax benefits associated with losses in the U.S. and certain foreign operations. No tax benefit is recognized for these losses because we do not have sufficient history of taxable income in these jurisdictions to conclude that it is more likely than not that tax benefits associated with net operating loss carryforwards will be realized.

In 2006, we recorded tax expense of $1.6 million. Of that amount, $1.9 million is for foreign taxes primarily associated with our profitable operations in Saudi Arabia and Algeria. This is partially offset by a tax benefit of $0.4 million in the United States attributable to the release of a federal tax reserve related to a tax return position for which the statute of limitations closed in 2006. The increase in the income tax provision and effective tax rate in 2006 is primarily attributable to additional valuation allowances and other adjustments against net operating losses. As a net result of these additional valuation allowances and adjustments, we incurred a charge to the income tax provision of approximately $6.3 million. In addition, the Company continued to have significant branch income that was subject to tax in the branch jurisdiction and only partially offset by foreign tax credits in the parent company jurisdiction.

In 2005, we recorded tax expense of $2.7 million. Of that amount, $3.2 million is for foreign taxes primarily associated with our profitable operations in Saudi Arabia and Algeria. This is partially offset by a tax benefit of $0.5 million in the United States attributable to an expected tax refund of income tax paid in prior years. The increase in the income tax provision and effective tax rate in 2005 is primarily attributable to additional valuation allowances and other adjustments against net operating losses. As a net result of these additional valuation allowances and adjustments, in 2005, we incurred a charge to the income tax provision of approximately $2.9 million. In addition, there were significant increases in branch income, primarily in Saudi Arabia, which was subject to tax in both the branch jurisdiction and in the parent company jurisdiction.

We believe that, as of December 31, 2007, our cumulative historical losses, along with other qualitative factors and uncertainties concerning our business and industry, outweigh the positive evidence supporting the realizability of the tax benefit of our net operating loss carryforwards. As a result a valuation allowance has been established. However, it is possible that an analysis of our financial results in future periods will provide sufficient positive evidence to indicate that the tax benefit of our cumulative loss carryforward can be realized, at which time we would expect a reversal of some or all of the remaining valuation allowance. During 2007, 2006 and 2005, we recorded additional valuation allowances of $7.3 million, $7.2 million and $3.3 million, respectively. The change in valuation

allowance includes changes due to stock compensation and certain discontinued operations, which are not included in the change in valuation allowance for the calculation of the income tax provision for continuing operations.

Net Loss

The components of the Net Loss for each of the years ended December 31, 2007, 2006 and 2005 are described below.

In 2007, revenues of $145.7 million generated a pretax loss from continuing operations of $27.3 million. In 2007 we recorded tax expense of $1.4 million, which resulted in a loss from continuing operations of $28.7 million. Losses from discontinued operations were $2.1 million in 2007.

In 2006, revenues of $130.0 million generated a pretax loss from continuing operations of $3.3 million. We recorded tax expense of $1.6 million for a loss from continuing operations of $4.9 million. Losses from discontinued operations were $3.2 million in 2006.

In 2005, revenues of $145.6 million generated a pretax loss from continuing operations of $8.9 million. We recorded tax expense of $2.7 million for a loss from continuing operations of $11.6 million. Losses from discontinued operations were $0.9 million in 2005.

Liquidity and Capital Resources

The following discussion relates to our sources and uses of cash and cash requirements during 2007, 2006, and 2005.

Sources and Uses of Cash


	Years Ended December 31,
	2007			2006			2005
	(In thousands)

Net cash used in operating activities	$	(16,878	)	$	(10,063	)	$	(8,079	)
Net cash used in investing activities		(26,094	)		(196	)		(2,574	)
Net cash provided by financing activities		45,401			1,570			3,533
Effect of exchange rates on cash and cash equivalents		756			546			(614	)

Net increase (decrease) in cash and cash equivalents	$	3,185		$	(7,751	)	$	(7,734	)

During 2007, the Company’s balance of cash and cash equivalents increased by $3.2 million. This increase in cash and cash equivalents was primarily the result of our financing activities which generated cash of $45.4 million, offset by cash used in investing activities of $26.1 million in respect of our acquisitions during the period and $16.9 million used in operating activities as a result of our operating losses. Financing activities included a net increase in debt of $29.2 million to fund our acquisitions and net proceeds from the sale of additional common stock during 2007 of $15.8 million. Cash and cash equivalents were also increased by $0.8 million from the effect of foreign exchange rate changes on cash and cash equivalents. During 2006, the Company’s balance of cash and cash equivalents decreased by $7.8 million. This decrease in cash and cash equivalents in 2006 was primarily the result of our use of cash of $10.0 million for operating activities and $0.2 million used in investing activities offset by $1.6 million net generated by financing activities and $0.5 million from the effect of foreign exchange rate changes on cash and cash equivalents.

Investing activities decreased cash and cash equivalents by $26.1 million during 2007. The principal investing activities were the acquisition in March 2007 of the equity interests in the Europe, Middle East and Africa business of WFI and the acquisition in June 2007 of certain assets and liabilities of the U.S. wireless engineering services business of WFI for an aggregate of $22.9 million in cash. During 2007, we used $4.8 million of cash for purchases of property, plant and equipment that is used primarily for revenue generating purposes.

Financing activities increased cash and cash equivalents by $45.4 million during 2007. On April 19, 2007, we raised $17.0 million through the sale of 5,100,000 newly issued Class A common shares at a price of $3.35 per share

in a private placement. We used the proceeds from the offering primarily for general corporate purposes. Cash and cash equivalents were also increased by borrowings of $38.9 million under our lines of credit offset by repayments of $9.7 million under the lines of credit. The effects of foreign exchange also resulted in a $0.8 million increase in cash and cash equivalents.

The principal requirements for cash during 2007 were as follows: (1) to finance our recent acquisitions; (2) to finance the operating losses of the EMEA and the Americas business and our corporate costs; (3) fund the working capital needs of the business; and (4) to provide for the general working capital needs of the non-network deployment services we provide. Customer payment cycles run up to 60 days and, in some cases, longer, but for which we incur cash outflows, primarily for payroll related costs, most of which are paid two times per month. Additionally, while we have made agreements with certain larger customers in EMEA, primarily in Algeria, to shorten customer payment terms to 120 days from 180 days, customer payment cycles continue to remain longer than the related cash outflow cycle in certain of our EMEA operations.

We have met our cash needs during the period by accelerating the collection of our receivables, primarily in our Americas segment, and from funds from external sources through the issuance of common stock and debt as described below. We accelerated the collection of our receivables from certain of our customers in the Americas by integrating with the customers’ automated payment processes and by retaining more experienced and better trained collection personnel, as well as reinstituting requirements for our sales personnel to be actively engaged assisting in customer collections.

On March 9, 2007, we entered into a revolving credit facility with Bank of America and terminated our then existing credit facility with CFC. Under the terms of this credit facility, the aggregate amount owed to Bank of America by us at any time could not exceed $6.5 million. The term of this credit facility was through September 15, 2007. On May 29, 2007, in connection with the agreement to purchase certain assets and liabilities of the U.S. wireless engineering services business of WFI we amended and restated our credit facility with Bank of America. The Amended and Restated Credit Agreement was further amended on November 30, 2007 to, among other things, provide for a bank waiver and amend certain covenants in the agreement for all events of default. The facility now provides revolving loans of up to $21.95 million all of which was outstanding at December 31, 2007, which amounts may be borrowed, repaid and re-borrowed by the Company on a revolving basis until November 29, 2009. It also provides for a term loan of $6.5 million with scheduled principal payments of $3.5 million on June 1, 2008, $1.0 million on each of September 1 and December 1, 2008 and March 1, 2009, with any remaining balance payable on November 29, 2009. The amendment increased the applicable interest rate on borrowings by 1.00% per annum, amended of the financial covenants and required the payment to the bank of a fee of up to $0.6 million. As of December 31, 2007, $-0- was available to be borrowed under this credit facility.

Interest under the credit facility is generally payable by the Company on a quarterly basis. Borrowings bear interest, at the Company’s option, at an annual rate equal to either: a specified “base rate,” plus an additional margin of 2.50% or 3.00%; or a specified London Inter-Bank Offered Rate, or LIBOR, plus an additional margin of 3.50% or 4.00%. The additional margin of a loan for each fiscal quarter will be based upon the Company’s consolidated leverage ratio for the previous fiscal quarter.

As amended, the credit facility contains customary affirmative and negative covenants that apply to the Company and all of its subsidiaries, including restrictions on indebtedness, liens, investments, dispositions and dividends. The Company and all of its subsidiaries also are required to maintain certain financial covenants, including a minimum consolidated EBITDA that increases over time, a consolidated leverage ratio that decreases over time and, commencing with calendar quarter ending September 30, 2008, a consolidated fixed charge coverage ratio of not less than 0.70 to 1.0.

The Amended and Restated Credit Agreement contains customary events of default, including for payment defaults, breaches of representations, breaches of affirmative or negative covenants, cross defaults to other material indebtedness, bankruptcy, and failure to discharge certain judgments. If an event of default occurs and is not cured within any applicable grace period or is not waived, the administrative agent, on behalf of the lenders, would have the right to accelerate the indebtedness under the agreement and exercise remedies against the collateral securing the credit facility.

In addition, the Company is required to maintain a so-called “lockbox arrangement” pursuant to which all monies payable to the Company in the U.S. plus certain unrestricted cash balances of the Company’s non-U.S. subsidiaries in excess of $6.0 million must be paid into a specially designated account and automatically applied to the payment of amounts outstanding under the revolving portion of the credit facility, as well as any other obligations under the credit facility that are due and owing. On June 1, 2007, we issued a promissory note to WFI in the amount of $21.6 million in connection with the purchase of WFI’s U.S. wireless engineering services business. The promissory note was subsequently increased to $23.9 million as a result of a purchase price adjustment agreed to by the Company and WFI. This promissory note is subordinated to our obligations under the amended and restated credit facility discussed above. On July 1, 2007, WFI entered into an assignment agreement with SPCP Group L.L.C. whereby the rights, title and interest in the promissory note were transferred to SPCP Group L.L.C. The Company does not believe its loan agreements contain any subjective acceleration clauses.

As a result of the sale of the U.S. Network Deployment Business in 2006, the restructuring activities implemented during the second quarter of 2007, our continuing focus on streamlining and consolidating in all areas of our operations, especially those related to general and administrative and corporate functions, and the increased revenue we expect in the Americas segment as a result of the WFI U.S. acquisition in May 2007, we expect our cash flow to improve during 2008.

Due to the more favorable payment terms we have negotiated with certain customers in EMEA, and the automation and integration of certain processes into those of certain of our larger customers, we expect to continue to speed up the receivables to cash cycle.

Cash Requirements


	December 31,
	2007		2006
	(in thousands)

Cash and cash equivalents	$	9,630	$	6,445
Restricted cash		220		883

Total cash and short-term investments	$	9,850	$	7,328

Borrowing facility and note payable	$	54,339	$	4,226

Working capital	$	22,026	$	33,490

Our future cash requirements are dependent on fluctuations in working capital, reducing our operating losses in order to achieve profitability and our need to purchase capital equipment.

We continue to perform deployment services in certain countries in the EMEA region. Historically, a significant number of deployment services contracts limit our ability to bill the customer until certain milestones are met. Additionally, some of the deployment services contracts contain provisions for the customer to withhold a portion of the payment of our billings (retainage) until the contract is complete. As a result of the milestone-based billings and retainages of amounts billed our working capital needs are increased as we incur costs in performing deployment services that require cash expenditures in advance of the billings and collections from our customers. Additionally, deployment services performed in certain countries (U.S., Italy and Spain) historically had very low profit margins. From time to time we have also entered into contracts for non-deployment services where milestone-based billings are used. While such contracts represent a lesser percentage of our business, they nonetheless result in working capital fluctuations.

We have significantly decreased our dependence on working capital intensive and lower margin deployment services as we exited that business in the U.S. and Brazil in the Americas region and wound down deployment service contracts in countries such as Italy and Spain. This has decreased working capital fluctuations and working capital needs. We will continue to focus our business on engineering services and Operations and Maintenance contracts. As a result of the decreased dependence on the deployment related services, we experienced less fluctuation in our working capital as non-deployment services are generally higher margin businesses and require less working capital. Additionally, such services are generally not milestone based or have shorter milestone periods

and in many cases do not have retainage provisions. We have also been able to lessen some of the working capital needs created by these contracts by negotiating payment terms with our contractors that more closely match our payments to the vendors to the payments we receive from our customers. To increase our liquidity we have entered into accounts receivable or other asset based financing arrangements in the U.S. and certain European countries. Finally the reduced activity of deployment related services in the UK and Algeria have positively impacted cash flow as we have been able to collect amounts owed to us for such past services with no requirement to increase the need for working capital as a result of the relatively low level of new deployment service activity in 2007.

On July 3, 2007, we filed a current report on Form 8-K disclosing that as a result of reduced operations in the UK and Algeria and as part of our recent WFI acquisitions, effective June 27, 2007, we have taken steps towards recognizing integration related and other cost synergies by implementing a workforce reduction that eliminated approximately 60 positions worldwide and consolidated certain facilities in the U.K. Total charges of approximately $1.6 million, were incurred primarily in the second and third quarters of 2007. Approximately $1.0 million of the charge is related to severance and headcount related costs and $0.6 million is related to consolidation of certain facilities and other non-headcount related expenses. During the second quarter of 2007, we recorded a $0.5 million recovery of a prior restructuring charge. We paid the majority of severance and related costs in the third quarter of 2007, with the remaining costs paid in the fourth quarter of 2007. The cash payments related to the consolidation of facilities will be made over the term of the related leases, the longest of which terminates in May 2012.

We believe that our cash balances, current financing agreements with a borrowing capacity of $0.4 million and funds from operations will provide us with sufficient cash to fund our operations for at least the next 12 months.

Existing contractual obligations are primarily limited to operating leases, primarily for office facilities, and to a lesser extent, test equipment computers and office furniture.

Those obligations are set out below. Fixed lease obligations are partly offset by income from sublease agreements.

Our future minimum payments under contractual obligations at December 31, 2007 are as follows (in thousands):


	Payment Due by Period
				Less than									More than
Contractual Obligations	Total			1 Year			1-3 Years			4-5 Years			5 Years

Lines of credit	$	24,586		$	2,561		$	22,025		$	—		$	—
Notes payable	$	29,753		$	5,788		$	23,965		$	—		$	—
Operating lease obligations	$	22,993		$	4,840		$	8,817		$	3,480		$	5,856
Sublease income	$	(2,442	)	$	(228	)	$	(949	)	$	(633	)	$	(633	)

We have 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 revenue consist of design and system deployment services. We provide design services on a contract basis, usually in a customized plan for each client, and generally charge for engineering services on a time and materials or fixed price basis. We generally offer deployment services overseas on a fixed price, time-certain basis. The portion of our revenues from continuing operations from fixed-price contracts was

54.7% in 2007 and 52.8% in 2006. 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. We compare costs incurred to date against project milestones to determine if the percentage of completion is reasonable. 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 costs at completion for 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, 2007 and 2006, we had $22.0 million and $24.8 million, respectively, of unbilled receivables.

Allowance for Doubtful Accounts

The preparation of the consolidated financial statements requires 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 years ended December 31, 2007 and 2006, we derived 63.3% and 82.7%, respectively, of total revenues from our ten largest customers, indicating significant customer concentration risk with our receivables. These ten largest customers constituted 62.9% and 80.3% of our net accounts receivable balance as of December 31, 2007 and 2006, 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 tightening of available credit or a 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 expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for financial reporting and 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 have a material 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 $31.8 million and $24.3 million as of December 31, 2007 and 2006, respectively, due to uncertainties related to our ability to utilize some of the deferred tax assets before they expire. The additional valuation allowances we recorded on the deferred tax assets for the year ended December 31, 2007 and 2006 were approximately $7.3 million and $7.0 million, respectively. These deferred tax assets primarily consist of net operating losses and tax credits carried forward. The net deferred tax assets as of December 31, 2007 and 2006 were $2.0 million and $1.4 million, respectively.

accounted for as an addition to the January 1, 2007 accumulated deficit balance. The total amount of recognized tax benefits as of the date of adoption was approximately $0.9 million and includes both taxes and penalties. Additionally, at January 1, 2007, the Company’s deferred tax asset and corresponding valuation allowance were reduced by $1.9 million for cumulative FIN 48 adjustments related to years prior to 2007 that were not recognized as a cumulative adjustment to the accumulated deficit at January 1, 2007. In years prior to 2007, interest and penalties related to adjustments to income taxes as filed has not been significant. The Company intends to include such interest and penalties in its tax provision. There has been no changes in the liability for unrecognized tax benefits during the year ended December 31, 2007.

Restructuring Charge

During 2002 we recorded restructuring charges of $13.5 million. Included in these restructuring charges was a charge for excess facilities aggregating $12.5 million and employee severance and associated expenses of approximately $1.0 million. This facility charge primarily related to leased office space, which we no longer occupied. During 2004, the Company reversed $1.2 million of the payable due to reoccupied office space in McLean, Virginia and a decrease in the estimated time period expected to sublease space in our former corporate office in McLean and our London offices. During 2005, we recorded a net restructuring charge of $0.6 million for employee severance costs related to the elimination of 48 positions in corporate, North America and Asia-Pacific and costs associated with closing affiliates and disposing of assets.

The facility charge equals the existing lease obligation less anticipated rental receipts to be received from existing and potential subleases. The estimation of the facility charge 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 the 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 December 31, 2007 that we will receive $2.4 million in sublease income, all of which is committed.

Substantially all the activities related to these restructurings have been completed. However, we continue to be obligated under facility leases that expire from 2008 through 2014. The accrual of approximately $0.4 million remaining at December 31, 2007 relates to remaining obligations through the year 2014 associated with offices exited or downsized, offset by our estimates of future income from sublease agreements.

During the second quarter of 2007, the Company took steps towards recognizing integration related and other cost synergies by implementing a workforce reduction that eliminated approximately 60 positions worldwide and consolidated certain facilities in the U.K., by adopting a restructuring plan (“2007 Restructuring”), and recorded a net restructuring charge of $1.6 million. Approximately $1.0 million of the charge was related to severance and headcount related costs and $0.6 million was related to other non-headcount related expenses. The Company recorded the severance charges related to these headcount reductions as an operating expense in the second and third quarters of 2007. The facilities and other non headcount related charges were recorded as operating expense in the second and third quarters of 2007. The Company paid the majority of severance and related costs in the third quarter with the remaining costs paid in the fourth quarter of 2007. The Company also recorded a restructuring charge of $0.5 million related to personnel severance costs in connection with the acquisition of certain assets and liabilities of the U.S. wireless engineering services business of WFI. The Company included these severance charges in goodwill.

Goodwill and Purchased and Other Intangibles

In accordance with SFAS No. 142 (“SFAS 142”), “Goodwill and Other Intangibles Assets,” we review our goodwill for impairment annually, or more frequently, if facts and circumstances warrant a review. We completed our annual impairment test in the fourth quarter of fiscal 2007 and determined that there was no impairment.

Upon acquisition, our intangible assets, which are subject to amortization, are recorded at fair value. SFAS 142 requires that intangible assets with finite lives be amortized over their estimated useful lives and reviewed for

impairment whenever an impairment indicator exists under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We continually monitor events and changes in circumstances that could indicate carrying amounts of our intangible assets may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of intangible assets by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of the intangible assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. We did not recognize intangible asset impairment charges in fiscal 2007, 2006 or 2005.

Our intangible assets are amortized over their estimated useful lives of 1 to 15 years. Generally, amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed.

Related Party Transactions

As is discussed more fully in Note 13, Shareholders’ Equity, on December 22, 2006, RF Investors, L.L.C. (“RF Investors”) transferred all but 425,577 shares of its Class B common stock to The Rajendra and Neera Singh Charitable Foundation, Inc. (“the Foundation”), and upon such transfer the transferred Class B common stock and the remaining shares held by RF Investors converted to Class A common stock. As a result, the Company has only Class A shares outstanding, all of which are voted on a one-to-one basis. The shares of Class A common stock held by the Foundation, and by RF Investors constituted approximately 15.8% and 1.7%, respectively, of the outstanding voting power of the common stock. The aggregate balance of the voting power of the Class A common stock, approximately 82.5% at the time of the transfer, was held by the Company’s other stockholders.

Telcom Ventures, L.L.C. (“Telcom Ventures”), is the parent company of RF Investors, an entity controlled by Company founders Dr. Rajendra and Neera Singh and members of their family. Dr. Singh is also a director of the Company. Prior to the Company’s initial public offering, both the Company’s employees and the employees of Telcom Ventures were eligible to participate in our life, medical, dental and 401(k) plans. In connection with the 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 the cash costs and expenses. We billed Telcom Ventures $77,000, $128,000 and $74,000 during the years ended December 31, 2007, 2006, and 2005, respectively, for payments made by us pursuant to this agreement. We received reimbursements from Telcom Ventures of $70,000, $135,000 and $67,000 during the years ended December 31, 2007, 2006, and 2005, respectively. At December 31, 2007 and 2006, outstanding amounts associated with payments made by us under this agreement were $7,000 and $1,000, respectively, and are included as due from related parties and affiliates within the consolidated balance sheets in the accompanying financial statements.

During the year ended December 31, 2007, we provided services to one customer where Telcom Ventures has a minority investment. Revenues earned from this customer during the year ended December 31, 2007 were approximately $101,000. Billed and unbilled receivables of approximately $35,000 from this customer were outstanding at December 31, 2007, and are included in trade accounts receivable and unbilled receivables in the accompanying consolidated balance sheet. During the year ended December 31, 2007, we provided no services to Telcom Ventures directly.

Subsequent Events

On April 4, 2008, the Company filed a current report on Form 8-K disclosing that, in accordance with NASDAQ’s rules, the Company had received a NASDAQ staff determination letter stating that the Company was not in compliance with NASDAQ Marketplace Rule 4310(c)(14) because it had not timely filed its Annual Report on Form 10-K for the year ended December 31, 2007. The Company requested, and was granted, a hearing before the NASDAQ Listing Qualifications Panel that is scheduled for May 8, 2008.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), “Business Combinations,” (“SFAS No. 141(R)”),which replaces SFAS No. 141 and issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” (“SFAS No. 160”), an amendment of Accounting Research Bulletin No. 51. These two new standards will change the accounting for and the reporting for business combination transactions and noncontrolling (minority) interests in the consolidated financial statements, respectively. SFAS No. 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as noncontrolling interests and classified as a component of equity. These two standards will be effective for the Company for financial statements issued for fiscal years beginning after December 31, 2008. Early adoption is prohibited. The Company is currently evaluating the impact of SFAS No. 141R and SFAS No. 160 on its consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of Statement of Financial Accounting Standards No. 115” (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure, on an instrument-by-instrument basis, financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option is elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for the Company as of January 1, 2008. The Company is in the process of determining the effect of the adoption of SFAS No. 159 on its consolidated financial position, results of operations and cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. FASB also issued FASB Staff Position (“FSP”) No. 157-2, “Effective Date of FASB Statement No. 157” which delayed for one year the effective date of SFAS No. 157 for certain non-financial assets and liabilities. The Company is in the process of determining the effect of the adoption of SFAS No. 157 and FSP No 157-2 on its consolidated financial position, results of operations and cash flows.


Item 7A.	*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 the U.K., Algeria, Saudi Arabia and Italy. For our foreign subsidiaries, exchange rates can have an impact on the U.S. Dollar value of their reported earnings and the intercompany transactions with the subsidiaries.

Customers outside of the United States accounted for 67.8%, 77.1% and 75.2% of our revenues for the years ended December 31, 2007, 2006 and 2005, respectively. 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 2008 and beyond. As a result, fluctuations in the value of foreign currencies against the U.S. Dollar may have a significant impact on our reported results. Revenues and expenses denominated in foreign currencies are translated monthly into U.S. Dollars at the weighted average exchange rate. Consequently, as the value of the U.S. 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 income or loss. The Euro and British Pound were stronger relative to other foreign currencies at December 31, 2007 compared to December 31, 2006. Consequently, the accumulated other comprehensive income component of shareholders’ equity increased $3.8 million during the year ended December 31, 2007. As of December 31, 2007, the net amount invested in non-U.S. subsidiaries subject to this equity adjustment, using the exchange rate as of the same date, was $24.9 million.

We are exposed to the impact of foreign currency fluctuations due to the operations of short-term intercompany transactions between the London office and its consolidated foreign subsidiaries and between the McLean office and its consolidated foreign subsidiaries. While these intercompany balances are eliminated in consolidation, exchange rate changes do affect consolidated earnings. Foreign subsidiaries with amounts owed to or from the London operations at December 31, 2007 (denominated in Euros or Saudi Arabia Riyals) include a receivable from Algeria in the amount of $9.8 million, a receivable from Saudi Arabia in the amount of $6.9 million, a receivable from Italy in the amount of $4.2 million, and a payable to United Arab Emirates of $4.6 million. Foreign subsidiaries with amounts owed to or from the McLean operations at December 31, 2007 (denominated in Euros or British Pounds) include a receivable from Italy in the amount of $4.8 million and a receivable from the United Kingdom in the amount of $14.0 million. These balances generated a foreign exchange gain of $2.5 million and is included in our consolidated results at December 31, 2007. A hypothetical appreciation of the Euro and British Pound of 10% would result in a $1.2 million decrease to our operating losses in 2007 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 our consolidated statements of operations.

Although currency fluctuations can have an impact on our reported results and shareholders’ equity, such fluctuations can affect our cash flow and could result in economic gains or losses. We currently do not hedge any of these risks in our foreign subsidiaries because: (i) our subsidiaries generally earn revenues and incur expenses within a single country and, consequently, do not incur currency 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.

We are also exposed to interest rate risk. On November 30, 2007, we amended and restated our outstanding credit facility with Bank of America. As a result of this amendment, an amount of up to $21.95 million may be borrowed, repaid and reborrowed on a revolving basis. In addition, the interest rate on this credit facility was increased by 1.0% per annum. The interest payable under our credit facility varies with fluctuations in the applicable lending rates. As a result, in the event these rates increase, the Company is subject to increases in its cash interest payments.


Item 8.	*Financial Statements and Supplementary Data*


	Page

Report of Independent Registered Public Accounting Firm		47
Report of Independent Registered Public Accounting Firm		48
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005		49
Consolidated Balance Sheets as of December 31, 2007 and 2006		50
Consolidated Statements of Shareholders’ Equity and Comprehensive Loss for the years ended December 31, 2007, 2006 and 2005		51
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006, and 2005		52
Notes to Consolidated Financial Statements		53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

LCC International, Inc. and subsidiaries

We have audited the accompanying consolidated balance sheet of LCC International, Inc. and its subsidiaries (the Company) as of December 31, 2007, and the related consolidated statements of operations, shareholders’ equity and comprehensive loss, and cash flows for the year ended December 31, 2007. Our audit of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15 (a)(2) for the year ended December 31, 2007. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LLC International, Inc. and its subsidiaries as of December 31, 2007, and the results of its operations and its cash flows for the year ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the Notes to Consolidated Financial Statements, the Company adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” effective January 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LCC International Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated April 28, 2008 expressed an adverse opinion on internal control effectiveness.

/s/ GRANT THORNTON LLP

McLean, Virginia

April 28, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

LCC International, Inc and subsidiaries:

We have audited the accompanying consolidated balance sheet of LCC International, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2006. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in Item 15(a)(2) for each of the years in the two-year period ended December 31, 2006. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LCC International, Inc. and subsidiaries as of December 31, 2006 and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2006 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

McLean, Virginia

December 11, 2007

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2007, 2006 and 2005

(In thousands, except per share data)


	2007			2006			2005

REVENUES	$	145,723		$	129,953		$	145,642
COST OF REVENUES (exclusive of depreciation shown separately below)		120,071			97,194			114,214

GROSS PROFIT		25,652			32,759			31,428

OPERATING EXPENSES:
Sales and marketing		15,086			7,910			8,131
General and administrative		24,215			26,699			27,893
Restructuring charge (Note 10)		1,107			108			404
Depreciation and amortization		4,224			2,378			2,793

Total operating expenses		44,632			37,095			39,221

OPERATING LOSS		(18,980	)		(4,336	)		(7,793	)

OTHER INCOME (EXPENSE):
Interest income		95			134			114
Interest expense		(3,602	)		(864	)		(315	)
Other		(4,811	)		1,763			(883	)

Total other income (expense)		(8,318	)		1,033			(1,084	)

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(27,298	)		(3,303	)		(8,877	)
PROVISION FOR INCOME TAXES (Note 11)		1,387			1,576			2,717

LOSS FROM CONTINUING OPERATIONS		(28,685	)		(4,879	)		(11,594	)

DISCONTINUED OPERATIONS (Note 5):
Income (loss) from discontinued operations (net of applicable taxes of zero)		(520	)		(3,529	)		(933	)
Gain (loss) on disposal of discontinued operations (net of applicable taxes of zero)		(1,550	)		378			—

INCOME (LOSS) FROM DISCONTINUED OPERATIONS		(2,070	)		(3,151	)		(933	)

NET LOSS		(30,755	)		(8,030	)		(12,527	)
Preferred stock dividend		12			—			—

NET LOSS APPLICABLE TO COMMON STOCK	$	(30,767	)	$	(8,030	)	$	(12,527	)

NET LOSS PER SHARE (Note 15):
Continuing operations
Basic and diluted	$	(0.97	)	$	(0.20	)	$	(0.47	)

Discontinued operations
Basic and diluted	$	(0.07	)	$	(0.13	)	$	(0.04	)

Net loss per share
Basic and diluted	$	(1.04	)	$	(0.33	)	$	(0.51	)

WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET LOSS PER SHARE:
Basic and diluted		29,657			24,893			24,524

See accompanying notes to consolidated financial statements.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	December 31,
	2007			2006

ASSETS:
Current assets:
Cash and cash equivalents	$	9,630		$	6,445
Restricted cash		220			883
Receivables, net of allowance for doubtful accounts of $279 and $200 at December 31, 2007 and 2006, respectively
Trade accounts receivable (Note 6)		43,943			34,755
Unbilled receivables (Note 6)		21,979			24,807
Due from related parties and affiliates (Note 17)		32			3
Due from disposal of business (Note 5)		1,800			7,610
Deferred income taxes (Note 11)		—			118
Prepaid expenses and other current assets		4,100			3,798
Prepaid tax receivable and prepaid taxes		13			356
Assets held for sale		269			587

Total current assets		81,986			79,362
Property and equipment, net (Note 7)		5,949			2,779
Deferred income taxes, net (Note 11)		1,952			1,453
Goodwill (Note 8)		44,080			13,989
Other intangibles, net		15,875			293
Other assets		1,608			547

Total Assets	$	151,450		$	98,423


LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Lines of credit (Note 9)	$	2,561		$	1,038
Note payable (Note 9)		5,788			3,188
Accounts payable		14,287			17,224
Accrued expenses		19,706			13,867
Accrued employee compensation and benefits		7,171			6,545
Deferred revenue		1,767			119
Income taxes payable (Note 11)		1,921			2,082
Accrued restructuring current (Note 10)		261			949
Other current liabilities (Note 12)		6,087			597
Liabilities held for sale		411			263

Total current liabilities		59,960			45,872
Lines of credit (Note 9)		22,025			—
Note payable (Note 9)		23,965			—
Accrued restructuring non-current (Note 10)		78			87
Other liabilities		735			368

Total liabilities		106,763			46,327

Commitments and contingencies (Note 18)
Shareholders’ equity (Note 13):
Preferred stock; $.01 par value:
10,000 shares authorized; 5,738 and -0- convertible shares issued and outstanding at December 31, 2007 and 2006, respectively		57			—
Class A common stock; $.01 par value:
70,000 shares authorized; 26,234 shares issued and 26,074 shares outstanding and 25,803 shares issued and 25,644 shares outstanding at December 31, 2007 and 2006, respectively		262			258
Class B common stock; $.01 par value:
20,000 shares authorized; -0- shares issued and outstanding		—			—
Paid-in capital		133,089			112,762
Accumulated deficit		(96,252	)		(63,470	)

Subtotal		37,156			49,550
Accumulated other comprehensive income — foreign currency translation adjustments		8,413			3,428
Treasury stock (159 shares)		(882	)		(882	)

Total shareholders’ equity		44,687			52,096

Total Liabilities and Shareholders’ Equity	$	151,450		$	98,423

See accompanying notes to consolidated financial statements.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

Years ended December 31, 2007, 2006 and 2005

(In thousands)


																		Accumulated
																		Other
	Preferred		Common Stock						Paid-in			Comprehensive			Accumulated			Comprehensive			Treasury
	Stock		Class A			Class B			Capital			Loss			Deficit			Income			Stock			Total

Balances at January 1, 2005	$	—	$	202		$	44		$	107,773					$	(42,913	)	$	3,481		$	(882	)	$	67,705
Exercise/issuance of stock options		—		3			—			561						—			—			—			564
Issuance of common stock		—		—			—			113						—			—			—			113
Stock-based compensation		—		—			—			455						—			—			—			455
Net loss		—		—			—			—		$	(12,527	)		(12,527	)		—			—			(12,527	)
Other comprehensive loss — foreign currency translation adjustments		—		—			—			—			(2,559	)		—			(2,559	)		—			(2,559	)

Comprehensive loss		—		—			—			—		$	(15,086	)		—			—			—			—

Balances at December 31, 2005		—		205			44			108,902						(55,440	)		922			(882	)		53,751
Exercise/issuance of stock options		—		3			—			600						—			—			—			603
Issuance of common stock		—		5			—			2,080						—			—			—			1,931
Release of restricted stock		—		1			—			(1	)					—			—			—			—
Stock-based compensation		—		—			—			1,335						—			—			—			1,335
Conversion of Class B Common Stock		—		44			(44	)		—						—			—			—			—
Net loss		—		—			—			—		$	(8,030	)		(8,030	)		—			—			(8,030	)
Other comprehensive income — foreign currency translation adjustments		—		—			—			—			2,506			—			2,506			—			2,506

Comprehensive loss		—		—			—			—		$	(5,524	)		—			—			—			—

Balances at December 31, 2006		—		258			—			112,762						(63,470	)		3,428			(882	)		52,096
Recognition of uncertain tax positions		—		—			—			—						(854	)		—			—			(854	)
Exercise/issuance of stock options		—		2			—			406						—			—			—			408
Issuance of common stock		—		51			—			16,049						—			—			—			16,100
Release of restricted stock		—		3			—			(3	)					—			—			—			—
Stock-based compensation		—		—			—			2,080						—			—			—			2,080
Exchange of Class A Common Stock for Preferred Stock		57		(51	)		—			2,070						—			—			—			2,076
Preferred stock dividend		—		—			—			(12	)					—			—			—			(12	)
Exchange of employee shares in lieu of income taxes		—		(1	)		—			(263	)					—			—			—			(264	)
Dissolution of dormant subsidiary		—		—			—			—						(1,173	)		1,173			—			—
Net loss		—		—			—			—		$	(30,755	)		(30,755	)		—			—			(30,755	)
Other comprehensive income — foreign currency translation adjustments		—		—			—			—			3,812			—			3,812			—			3,812

Comprehensive loss		—		—			—			—		$	(26,943	)		—			—			—			—

Balances at December 31, 2007	$	57	$	262		$	—		$	133,089					$	(96,252	)	$	8,413		$	(882	)	$	44,687

See accompanying notes to consolidated financial statements.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2007, 2006, and 2005

(In thousands)


	2007			2006			2005

Cash flows from operating activities:
Net loss	$	(30,755	)	$	(8,030	)	$	(12,527	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,139			2,567			2,921
Provision (recovery) for doubtful accounts		111			(25	)		744
Stock-based compensation		2,080			1,335			455
Loss from investments in joint ventures, net		—			—			15
Restructuring charge (reversal)		1,104			108			598
Loss (gain) on disposal of businesses		1,550			(378	)		—
Loss on disposal of fixed assets		37			—			—
Changes in operating assets and liabilities:
Trade, unbilled, and other receivables		9,659			20,222			(10,506	)
Accounts payable and accrued expenses		(7,196	)		(21,820	)		11,195
Other current assets and liabilities		1,105			(1,445	)		1,406
Other non-current assets and liabilities		1,288			(2,597	)		(2,380	)

Net cash used in operating activities		(16,878	)		(10,063	)		(8,079	)

Cash flows from investing activities:
Decrease (increase) in restricted cash		663			299			(112	)
Purchases of property and equipment		(4,762	)		(1,549	)		(2,398	)
Proceeds from sale of property and equipment		—			—			61
Proceeds from sale of businesses		911			985			—
Business acquisitions and investments, net of cash acquired		(22,906	)		461			(125	)

Net cash used in investing activities		(26,094	)		(196	)		(2,574	)

Cash flows from financing activities:
Proceeds from issuance of common stock, net		15,787			—			113
Proceeds from sale of short-term investments		—			—			—
Proceeds from exercise of options		406			603			564
Proceeds from line of credit		38,909			17,823			5,439
Payments on line of credit		(9,701	)		(19,894	)		(2,583	)
Proceeds from note payable		—			4,200			—
Payments on note payable		—			(1,162	)		—

Net cash provided by financing activities		45,401			1,570			3,533

Effect of exchange rate changes on cash and equivalents		756			546			(614	)
Net increase (decrease) in cash and cash equivalents		3,185			(7,751	)		(7,734	)
Cash and cash equivalents at beginning of period		6,445			14,196			21,930

Cash and cash equivalents at end of period	$	9,630		$	6,445		$	14,196

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	2,310		$	653		$	296
Income taxes	$	2,538		$	4,288		$	1,900
Supplemental disclosures of non-cash investing and financing activities:
Reduction in due from disposal of business and related note payable	$	3,188		$	—		$	—
Note payable issued in connection with business acquisition	$	23,965		$	—		$	—
Other current liability due in connection with business acquisition	$	700		$	—		$	—
Preferred shares issued in exchange for liquidated damages related to common shares not registered (includes legal costs)	$	2,187		$	—		$	—
Class A common stock issued in connection with business acquisition	$	—		$	1,931		$	—

See accompanying notes to consolidated financial statements.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2007, 2006 and 2005


Note 1.	Description of Operations and Basis of Presentation

LCC International, Inc., a Delaware corporation, was formed in 1983. Unless the context indicates otherwise, the terms the “Company”, “we”, “us”, and “our” refer herein to LCC International, Inc. and its subsidiaries.

The Company provides integrated end-to-end solutions for wireless voice and data communications networks with offerings ranging from high level technical consulting, to system design and optimization services, ongoing operations and maintenance services and, in certain countries, deployment services. The Company has been successful in using initial opportunities to provide high level technical consulting services to secure later-stage system design and network optimization contracts. Engagements to provide design services also assist in securing operations and maintenance projects including network optimization contracts. The Company’s technical consulting, system design and network optimization practices position it well to capitalize on additional opportunities as new technologies are developed and wireless service providers upgrade their existing networks, deploy the latest available technologies, and respond to changes in how customers use wireless services.

The accompanying consolidated financial statements include the results of LCC International, Inc. and its direct and indirect wholly-owned subsidiaries that provide services outside Europe, the Middle East and Africa (collectively the “Americas”) and the results of LCC United Kingdom Ltd., and its affiliated companies that provide services in Europe, the Middle East and Africa (collectively “EMEA”); and other non service related subsidiaries. LCC International, Inc. and its subsidiaries are collectively referred to as the “Company.” All material inter-company transactions and balances have been eliminated in the consolidated financial statements.

In the second quarter of 2006, the Company made the decision to sell the Company’s U.S. Network Deployment business, and in the fourth quarter of 2006, the Company made the decision to sell its Brazilian subsidiary. The results of the U.S. Network Deployment business and the Brazilian operations are presented as discontinued operations for all periods in the consolidated financial statements included herein. See Note 5, Discontinued Operations.


Note 2.	Summary of Significant Accounting Policies

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of Form 10-K. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things, long-term contracts, allowance for doubtful accounts, accrual of income taxes, recoverability of investments in affiliates and the accrual of restructuring charges. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the consolidated financial statements.

Significant accounting policies are as follows:

Cash Equivalents and Restricted Cash. Cash equivalents include all highly liquid investments purchased with original maturities of three months or less and include overnight repurchase agreements, short-term notes, and short-term money market funds. At December 31, 2007 and 2006, the Company had $4.6 million and $5.4 million of cash in foreign bank accounts, respectively. Restricted cash is composed primarily of performance and or bid bonds in our EMEA region.

Concentration of Credit Risk. Financial instruments that potentially expose us to concentration of credit risk consist primarily of trade receivables. The Company sells services globally. Generally, the Company does not require collateral or other security to support customer receivables. The Company performs ongoing credit

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

evaluations of its customers’ financial condition and maintains an allowance for doubtful accounts related to potential credit losses. The Company had the following significant concentrations of trade receivables from customers located outside the United States at December 31, 2007 and 2006:


	2007		2006
	(in thousands)

Europe	$	14,934	$	10,206
Middle East/Africa	$	16,085	$	19,990
Asia-Pacific	$	110	$	288

The Company’s existing and potential customer base is diverse and includes start-up companies and foreign enterprises. The Company derived approximately 63.3%, 82.7% and 83.6% of its revenues from its ten largest customers for the years ended December 31, 2007, 2006 and 2005, respectively. These ten largest customers constituted 62.9%, 80.3% and 59.2% of our net receivable balance as of December 31, 2007, 2006 and 2005, respectively. The Company may be exposed to a declining customer base in periods of market downturns, severe competition, exchange rate fluctuations or other international developments.

In 2007, revenues from one customer in the EMEA segment were approximately $26.4 million or 18.1% of total revenues. Revenues from one customer in the Americas segment were approximately $11.4 million or 7.8% of total revenues in 2007. In 2006, revenues from one customer in the EMEA segment were approximately $29.1 million or 22.4% of total revenues, and revenues from another customer in the EMEA segment were approximately $23.3 million or 17.9% of total revenues. Revenues from one customer in the Americas segment were approximately $11.0 million or 8.5% of total revenues in 2006. In 2005, revenues from one customer in the EMEA segment were approximately $31.2 million or 21.4% of total revenues, and revenues from another customer in the EMEA segment were approximately $31.1 million or 21.4% of total revenues. Revenues from one customer in the Americas segment were approximately $16.8 million or 11.5% of total revenues in 2005.

Fair Value of Financial Instruments. The carrying amounts of financial instruments, including cash and cash equivalents, receivables, restricted cash, accrued expenses, and accounts payable, approximated fair value as of December 31, 2007 and 2006 because of the relatively short duration of these instruments. The carrying value of the borrowing facilities approximated fair value as the instruments included a market rate of interest.

Inventory. Inventories are stated at the lower of cost or market, net of an allowance for excess, slow-moving and obsolete inventory, and are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. Cost typically includes materials and equipment supplies and is on a first-in, first-out basis.

Property and Equipment. Property and equipment are stated at cost, less an allowance for depreciation. Replacements and major improvements are capitalized; maintenance and repairs are charged to expense as incurred. Internally developed software costs are capitalized in accordance with the American Institute of Certified Public Accountants Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.”

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets per the table below:


Computer equipment		3 years
Software		3 years
Furniture and office equipment		3 to 7 years
Leasehold improvements		Shorter of the term of the lease or estimated useful life
Vehicles		5 years

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Impairment of Long-Lived Assets. The Company’s policy is to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards (“SFAS”), SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”, (“SFAS No. 144”). The Company recognizes an impairment loss when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. The measurement of the impairment losses to be recognized is based upon the difference between the fair value and the carrying amount of the assets.

Business Combinations. The Company is required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. This valuation requires management to make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain of the intangible assets and subsequently assessing the realizability of such assets include, but are not limited to, future expected cash flows from the revenues, customer contracts and discount rates. Management’s estimates of fair value are based on assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events and circumstances may occur.

Other estimates associated with the accounting for these acquisitions and subsequent assessment of impairment of the assets may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Goodwill and Other Intangible Assets. Goodwill represents the excess of costs over fair value of assets of businesses acquired. The Company adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”, (“SFAS No. 142”), as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144.

Allowance for Doubtful Accounts. The Company makes estimates of the probability of collection of accounts receivable by specifically analyzing customer balances concentrations, credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

Revenue Recognition. The Company’s principal sources of revenues are technical consulting, engineering design and optimization and, in certain countries in EMEA, network deployment services. The Company recognizes revenues from long-term fixed-price contracts using the percentage-of-completion method. Under the percentage-of-completion method, revenues are recognized based on the ratio of individual contract costs incurred to date on a project compared with total estimated contract costs. The Company compares costs incurred to date to progress achieved against project milestones to determine if the percentage of completion is reasonable. Anticipated contract losses are recognized as soon as they become known and estimable. The Company also recognizes revenues on time and materials contracts as the services are performed. Revenues earned but not yet billed are reflected as unbilled receivables in the accompanying consolidated balance sheets. The Company expects substantially all unbilled and billed receivables to be collected within one year.

Income Taxes. Income taxes are determined in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this statement, temporary differences arise as a result of the differences between the reported

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Certain of the Company’s international operations are subject to local income taxation. Currently, the Company is subject to taxation on income from certain operations in Europe, Latin America, the Far East, the Middle East and the non-U.S. portions of North America where the Company has subsidiaries, has established branch offices or has performed significant services that constitute a “permanent establishment” for tax reporting purposes. Certain foreign taxes paid or accrued by the Company may represent a potential credit for the Company against our U.K. or U.S. federal income taxes.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” , which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that the Company recognize the impact of a tax position in the Company’s financial statements if that position is more likely than not to be sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective as of the beginning of the Company’s 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. See Note 11, Income Taxes.

Foreign Currency Translation. The Company’s foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs. The majority of the Company’s foreign sales transactions are denominated in Euros and British Pounds.

The financial statements of the Company’s foreign subsidiaries have been translated into U.S. dollars in accordance with SFAS No. 52, “Foreign Currency Translation .” For foreign operations with the local currency as the functional currency, assets and liabilities denominated in non-U.S. dollar functional currencies are translated using the period-end spot exchange rates. Revenues and expenses are translated at monthly-average exchange rates. The effects of translating assets and liabilities with a functional currency other than the reporting currency are reported as a component of accumulated other comprehensive income included in consolidated shareholders’ equity. The determination of functional currency is based on the subsidiary’s relative financial and operational independence from the Company.

The Company is also subject to foreign currency transaction gains or losses due to inter-company payables and receivables denominated in foreign currency. Foreign subsidiaries with amounts owed to or from the London operations at December 31, 2007 (denominated in Euros or Saudi Arabia Riyals) include Italy, Algeria and Saudi Arabia. Foreign subsidiaries with amounts owed to or from the McLean operations at December 31, 2007 (denominated in Euros or British Pounds) include Italy and the United Kingdom. For the year ended December 31, 2007 and 2005, these balances generated a foreign exchange loss of $2.5 million and $1.7 million, respectively, and for the year ended December 31, 2006 a foreign exchange gain of $1.4 million and are included in other income (expense) in the consolidated results of operations.

Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Share-Based Compensation. On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) requires companies to measure all employee share-based compensation awards using a fair value method and record such expense in the consolidated results of operations. The statement eliminates the ability to account for share-based compensation using the intrinsic value

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

method as prescribed by the Accounting Principles Board, or APB, Opinion No. 25, “Accounting For Stock Issued to Employees.”

The Company adopted SFAS No. 123(R) using the modified prospective method, which requires the application of the accounting standard as of January 1, 2006. Under this application, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, prior period amounts have not been restated. Prior to the adoption of SFAS No. 123(R), the Company accounted for share-based transactions using the intrinsic value method as prescribed by APB No. 25, and provided the disclosures required under SFAS 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS No. 148”). Share-based compensation expense recognized since adoption is based on the value of the portion of the share-based payment awards that are ultimately expected to vest and reduced for estimated forfeitures. SFAS No. 123(R) requires the estimation of forfeitures when recognizing compensation expense. Estimated forfeitures should be adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and would have an impact on the amount of unamortized compensation expense to be recognized in future periods. In the pro forma information required under SFAS No. 148 for the periods prior to 2006, forfeitures were accounted for as they occurred.

Prior to the adoption of SFAS No. 123(R), the Company accounted for share-based compensation transactions, using the intrinsic value method as prescribed by APB No. 25 and provided the pro forma disclosures required under SFAS No. 123, as amended by SFAS No. 148. Employee share-based compensation expense recognized under SFAS No. 123R was not reflected in our consolidated results of operations for the period ended December 31, 2005 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. In the pro forma information, forfeitures of awards were recognized as they occurred. In accordance with the modified prospective method, previously reported amounts have not been restated to reflect, and do not include, the impact of SFAS No. 123(R).

Previously under SFAS No. 123, as amended by SFAS No. 148, the Company was required to disclose the pro forma effects of using the fair value method on consolidated loss and loss per share. If the computed fair values of the awards had been amortized to expense over the vesting period of the awards, the Company’s consolidated net

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

loss, basic net loss per share and diluted net loss per share would have been reduced to the pro forma amounts indicated below:


	2005

Loss from continuing operations as reported	$	(11,594	)
Deduct total stock-based employee compensation expense determined under fair value based method		(1,292	)

Pro forma net loss from continuing operations	$	(12,886	)

(Loss) income from discontinued operations as reported	$	(933	)
Deduct total stock-based employee compensation expense determined under fair value based method		(39	)

Pro forma net (loss) income from discontinued operations	$	(972	)

Loss from operations as reported	$	(12,527	)
Deduct total stock-based employee compensation expense determined under fair value based method		(1,331	)

Pro forma net loss	$	(13,858	)

Net loss per share as reported:
Continuing: basic and diluted	$	(0.47	)

Discontinued: basic and diluted	$	(0.04	)

Net loss per share: basic and diluted	$	(0.51	)

Pro forma:
Continuing: basic and diluted	$	(0.53	)

Discontinued: basic and diluted	$	(0.04	)

Pro forma net loss per share: basic and diluted	$	(0.57	)

See Note 14, Incentive Plans for further discussion of SFAS No. 123(R).

Other Comprehensive Income (Loss). Comprehensive income (loss) is defined as net income (loss) plus the changes 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 U.S GAAP are included in comprehensive income (loss), but excluded from net income (loss). Other comprehensive income (loss) consists solely of foreign currency translation adjustments. Changes in components of other comprehensive income (loss) are reported net of income tax.

Earnings (Loss) Per Common Share. The calculation of earnings (loss) per common share is based on the weighted average number of shares outstanding during the applicable period. The calculation for diluted earnings (loss) per common share recognizes the effect of all potential dilutive common shares that were outstanding during the respective periods, unless the impact would be anti-dilutive.


Note 3.	New Accounting Standards

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

both on the acquisition date and in subsequent periods. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as noncontrolling interests and classified as a component of equity. These two standards will be effective for the Company for financial statements issued for fiscal years beginning after December 31, 2008. Early adoption is prohibited. The Company is currently evaluating the impact of SFAS No. 141R and SFAS No. 160 on its consolidated financial position, results of operations and cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. FASB also issued FASB Staff Position (“FSP”) No. 157-2, “Effective Date of FASB Statement No. 157” which delayed for one year the effective date of SFAS No. 157 for certain non-financial assets and liabilities. The Company is in the process of determining the effect of the adoption of SFAS No. 157 and FSP No. 157-2 on its consolidated financial position, results of operations and cash flows.


Note 4.	Business Combinations

WFI — EMEA

On March 9, 2007, the Company completed the purchase of certain equity interests in the Europe, Middle East and Africa (“WFI-EMEA”) wireless engineering services business of Wireless Facilities, Inc., (“WFI”), for a purchase price of $4.0 million, $3.3 million in cash at closing and $0.7 million (included in other current liabilities in the consolidated balance sheet) due March 31, 2008, pending settlement of outstanding claims. Transaction and other related costs of approximately $0.4 million were incurred in connection with the transaction. On March 9, 2007, in connection with the acquisition, the Company entered into a revolving credit facility with Bank of America, N.A. (“Bank of America”). See also Note 9, Borrowings.

The acquisition was accounted for under the purchase method of accounting. Goodwill totaling $2.1 million was recorded on acquisition based on a purchase price allocation by management. Goodwill is recognized as the excess purchase price over the fair value of net assets acquired. The goodwill recorded is not deductible for U.S. tax purposes.

The following table represents the allocation of the purchase price for the equity interests of WFI-EMEA based on management estimates:

Fair value of net assets acquired:

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	(in thousands)

Cash and cash equivalents	$	250
Trade accounts receivable		1,681
Unbilled receivables		1,637
Fixed assets		854
Backlog		21
Customer relationships		1,309
Other assets		487
Liabilities assumed		(3,879	)
Excess cost of acquiring net assets over fair value of identified net assets acquired (goodwill)		2,064

	$	4,424

The Company paid a premium over the fair value of the net assets acquired for a number of reasons, primarily to expand its professional workforce and geographic markets not previously served.

The Company did not present pro forma information as this acquisition was immaterial to the Company’s consolidated results of operations and financial position. The results of operations of WFI-EMEA have been included in the results of operations since the acquisition date.

WFI — U.S.

On May 29, 2007, the Company acquired certain assets and liabilities of the U.S. wireless engineering services business of (“WFI-U.S.”), which included customer contracts, tools, other assets and approximately 350 employees. The purchase consideration was approximately $38.6 million, (calculated principally as the difference between $46.0 million and the amount of certain working capital to be retained by WFI, estimated to be approximately $7.4 million), $17.0 million of which was paid in cash and $21.6 million of which was paid by the issuance by the Company to WFI of a promissory note (the “Note”), which Note is subordinated to the Company’s obligations under the amended and restated credit facility discussed in Note 9, Borrowings. Such amount was subsequently increased to $23.9 million as result of a purchase price adjustment agreed to by the Company on January 22, 2008, related to the value of certain assets transferred. Transaction and other related costs of approximately $3.0 million (including $0.5 million of severance costs) were incurred in connection with the transaction. On July 5, 2007, WFI entered into an assignment agreement with SPCP Group L.L.C. (“SPCP”) whereby the rights, title and interest in the Note were transferred to SPCP. A portion of the cash consideration was funded by the Company’s borrowings under the revolving credit facility with Bank of America, N.A., which was amended on May 29, 2007, in connection with the Company’s purchase. See Note 9, Borrowings.

The acquisition was accounted for under the purchase method of accounting. Goodwill totaling $27.3 million was recorded on acquisition based on a purchase price allocation by management. Goodwill is recognized as the excess purchase price over the fair value of net assets acquired and is deductible for U.S. tax purposes.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table represents the allocation of the purchase price for the selected assets and liabilities of the U.S. wireless engineering services business of WFI acquired by the Company:


	(in thousands)
Fair value of net assets acquired;
Trade accounts receivable	$	1,169
Prepaid expenses and other current assets		1,140
Fixed assets		1,004
Backlog		244
Customer relationships		15,080
Liabilities assumed		(2,566	)
Excess cost of acquiring net assets over fair value of identified net assets acquired (goodwill)		27,326

	$	43,397

The Company paid a premium over the fair value of the net assets acquired for a number of reasons, primarily to expand its professional workforce and geographic markets not previously served.

The results of operations of WFI-U.S. have been included in the results of operations since the acquisition date. The following table summarizes unaudited pro forma financial information assuming the WFI U.S. acquisition had occurred on January 1, 2006. This unaudited pro forma financial information does not necessarily represent what would have occurred if the transaction had taken place on the dates presented and should not be taken as representative of our future consolidated results of operations or financial position:


	2007			2006

Revenue	$	166,638		$	196,593
Operating (loss) income	$	(20,469	)	$	(3,592	)
Loss from continuing operations	$	(33,203	)	$	(7,380	)
Loss per share (basic and diluted)	$	(1.12	)	$	(0.30	)

Detron Belgium

On December 29, 2006, the Company completed the purchase of Detron Belgium, a provider of technical services to the telecommunications industry in Belgium and Luxembourg, for $1.9 million pursuant to a share purchase agreement. The purchase consideration for all the outstanding shares of Detron Belgium was 505,313 shares of the Company’s common stock. The number of shares issued under the share purchase agreement was determined by dividing the purchase price by the average of the closing price of the Company’s common stock for the ten days prior to December 14, 2006. The acquisition was accounted for under the purchase method of accounting. Goodwill totaling $1.6 million was recorded on acquisition based on a preliminary purchase price allocation by management. Goodwill is recognized as the excess purchase price over the fair value of net assets acquired. The portions of the purchase price allocation that are not yet finalized relate to the valuation of intangible assets which may include trade names, customer lists and backlog. The preliminary purchase price allocation, including the allocation of goodwill, will be updated as additional information becomes available. The transaction closed on December 29, 2006, therefore, the effect of this preliminary allocation to goodwill was immaterial to the Company’s consolidated results of operations for the year ended December 31, 2006. The Company did not present pro forma information as this acquisition was immaterial to the Company’s consolidated results of operations and financial position. The goodwill recorded is not deductible for U.S. tax purposes.

In connection with the Detron Belgium purchase transaction, the Company entered into a Management Services Agreement with Exicom BVBA, one of the parties to the transaction, whereby Exicom BVBA would

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

continue to provide management transition services for a period of three months after completion of the purchase, at an estimated maximum cost of approximately $0.1 million.


Note 5.	Discontinued Operations

In 2006, the Company made the decision to sell a number of its business operations. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the operating results of these operations have been classified as discontinued operations in the accompanying consolidated statement of operations. All prior periods have been restated to reflect these operations as discontinued. In addition, assets and liabilities of these operations that were not sold as of December 31, 2007 and 2006, were reflected as assets and liabilities held for sale in the accompanying consolidated balance sheets.

The revenue, gross margin and pre tax operating loss relating to the Company’s discontinued operations for the years ended December 31, 2007, 2006 and 2005 are as follows:


	December 31,
	2007			2006			2005
	(in thousands)

Revenue	$	2,199		$	14,838		$	48,331

Gross margin (loss)	$	(162	)	$	(1,458	)	$	1,112

Loss from discontinued operations (net of applicable taxes of zero)	$	(520	)	$	(3,529	)	$	(933	)
Gain (loss) on disposal of discontinued operations (net of applicable taxes of zero)		(1,550	)		378			—

Total loss from discontinued operations	$	(2,070	)	$	(3,151	)	$	(933	)

The following businesses have been reflected as discontinued operations in the accompanying consolidated statements of operations for all periods presented:

Sale of U.S. Network Deployment Business

During the second quarter of 2006, the Company made the decision to sell the Company’s U.S. Network Deployment operations. The operations of the network deployment business in the U.S. consisted primarily of activities involved in the construction of cell sites and related preconstruction and post construction services (site acquisition, system design, etc.) that are directly related to and integral to the construction of cell sites for which the Company was contracted to construct. Where the Company performs certain preconstruction or post construction related activities that are not performed in connection with the Company’s construction of cell sites, revenues and expenses related thereto are included in the Company’s Radio Frequency (“RF”) engineering business in the Americas and are not considered network deployment services.

Prior to this decision, the results of these operations were reported in the Americas segment. Nokia Inc. (“Nokia”) acquired certain assets, including all unbilled accounts receivable and certain fixed assets and assumed certain liabilities, contracts, and personnel associated with the U.S. Network Deployment business, for a total consideration of $10.2 million. The consideration included $1.0 million of cash proceeds. At December 31, 2007, $1.8 million was due from Nokia in connection with this transaction.

During February 2008 the Company and Nokia reached a definitive agreement on the amount receivable (reported in the Company’s consolidated financial statements as due from disposal of business) for $1.8 million. As a result of this definitive agreement, the Company recognized a charge to discontinued operations of $1.5 million at March 31, 2007.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In conjunction with the sale, the Company entered into a loan agreement with Nokia whereby Nokia would advance up to a maximum of $4.2 million. In consideration for Nokia providing advances under the loan agreement, the Company accrued an initial fee of $0.2 million. Advances to the Company under the loan agreement will be repaid as Nokia collects, and remits to the Company, the unbilled accounts receivable transferred at closing. The Company received advances of approximately $4.2 million, which were used to repay amounts payable to vendors of the deployment business. The payments to these vendors were pre-approved by Nokia. The note payable was repaid in full as of June 30, 2007. See also Note 9, Borrowings.

The Company also entered into a transition services agreement whereby the Company provided Nokia with transitional services for a period of up to 12 months. For such transitional services, Nokia paid the Company a monthly fee which escalated after the first six months and escalated further after nine months. During the years ended December 31, 2006 and 2007, monthly fees billed under this agreement were not significant.

The revenue, gross margin and pre tax operating loss and gain on sale for the U.S. Network Deployment business for the years ended December 31, 2007, 2006 and 2005 are as follows:


	2007			2006			2005
	(in thousands)

Revenue	$	91		$	12,817		$	45,039

Gross margin (loss)	$	91		$	(1,094	)	$	396

Income (loss) from discontinued operations (net of applicable taxes of zero)	$	808		$	(1,988	)	$	(758	)
Gain (loss) on disposal of discontinued operations (net of applicable taxes of zero)		(1,550	)		378			—

Total loss from discontinued operations	$	(742	)	$	(1,610	)	$	(758	)

Additionally, certain assets and liabilities related to the discontinued operations of the U.S. Network Deployment business are included in the accompanying consolidated balance sheet as of December 31, 2007 and 2006 are as follows:


	2007		2006
	(in thousands)

Billed accounts receivable	$	—	$	183
Accounts payable	$	—	$	1,087
Accrued expenses	$	50	$	623

Sale of Brazilian Subsidiary

In July 2006 the Company made the decision to sell or liquidate its Brazilian subsidiary, LCC do Brasil Ltda. (“LCCI Brazil”). LCCI Brazil provided mainly network deployment services and to a lesser degree RF engineering. RF engineering services include the design, optimization and performance improvement of wireless networks. In August 2006, after evaluating both options, the Company committed to a plan to sell LCCI Brazil to the management of the operation.

On October 27, 2006, the Company entered into a definitive Sale and Purchase Agreement (“Agreement”) with management, subject to approval of the Board of Directors of the Company. The Board of Directors of the Company approved the transaction on November 2, 2006. Prior to this decision, the results of these operations were reported in the Americas segment.

On October 5, 2007, the Company with the consent of the management of LCCI Brazil also entered into a non-binding letter of intent for the sale of LCCI Brazil with another party. On November 12, 2007, the Company

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

received notice from the buyers that they have decided not to proceed with the acquisition of LCCI Brazil. The Company is working on other alternatives, including the opportunity to sell to another interested party that has submitted a non-binding letter of intent to purchase LCCI Brazil. The Company continues to be in negotiation with this other party for the sale of LCCI Brazil.

The revenue, gross margin and pre-tax operating loss for LCCI Brazil for the years ended December 31, 2007, 2006 and 2005 are as follows:


	2007			2006			2005
	(in thousands)

Revenue	$	2,108		$	2,021		$	3,292

Gross margin (loss)	$	(253	)	$	(364	)	$	716

Loss from discontinued operations (net of applicable taxes of zero)	$	(1,328	)	$	(1,541	)	$	(175	)

Additionally, certain assets and liabilities related to LCCI Brazil included in the accompanying consolidated balance sheet as of December 31, 2007 and 2006 are as follows:


	2007			2006
	(in thousands)

Cash and cash equivalents (cash overdraft)	$	(48	)	$	50
Other receivables		117			418
Other current assets		62			65
Fixed assets		138			54

Assets held for sale	$	269		$	587

Accounts payable	$	131		$	84
Accrued employee compensation and benefits		205			113
Other accrued expenses		75			66

Liabilities held for sale	$	411		$	263


Note 6.	Accounts Receivable

The Company is party to various long-term contracts for which revenues are recognized on the percentage-of-completion method. Certain of these contracts have large amounts of unbilled receivables associated with them and will be performed over a period of more than one year. As of December 31, 2007 and 2006, the Company had $4.0 million and $2.0 million, respectively, billed but not paid by customers under retainage provisions in contracts. As of December 31, 2007 and 2006, the Company had $14.8 million and $18.3 million billed, respectively, and $6.7 million and $9.3 million unbilled but anticipated to be billed within one year, respectively, under long-term contracts.

During May 2007, the Company entered into a factoring agreement (the “Agreement”) with Barclays Factoring, S.A., (“Barclays”) whereby the Company’s Spanish subsidiary may sell its eligible accounts receivable to Barclays on a revolving basis up to a maximum of 0.8 million Euros. Under the terms of the Agreement, accounts receivable are sold to Barclays without recourse at their face value less interest of EURIBOR at 90 days plus 0.9% and a commission of 0.15%. Accounts receivable sales were approximately 2.2 million Euros during the year ended December 31, 2007.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 7.	Property and Equipment

At December 31, 2007 and 2006, property and equipment consisted of the following:


	2007			2006
	(in thousands)

Computer equipment	$	4,613		$	15,417
Software		9,448			5,806
Furniture and office equipment		15,744			12,706
Leasehold improvements		1,836			1,667
Vehicles		163			136

Property and equipment		31,804			35,732
Less accumulated depreciation and amortization		(25,855	)		(32,953	)

Property and equipment, net	$	5,949		$	2,779

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2007, 2006 and 2005, was $3.3 million, $2.1 million and $2.6 million, respectively.


Note 8.	Goodwill and Intangibles

As of December 31, 2007 and 2006, goodwill and other acquired intangible assets consisted of the following:


	2007			2006
	(in thousands)

Goodwill	$	44,080		$	13,989

Other intangibles:
Customer relationships	$	17,531		$	1,098
Trade names		230			205
Patents		43			28
Other		265			223
Accumulated amortization		(2,194	)		(1,261	)

Other intangibles	$	15,875		$	293

Goodwill increased by $30.1 million in 2007. Goodwill totaling $2.1 million was recorded on the acquisition of the equity interests in the Europe, Middle East and Africa (“EMEA”) business of WFI and goodwill totaling $27.3 million was recorded on the acquisition of certain assets and liabilities of the U.S. wireless engineering services business of WFI. See Note 4, Business Combinations. The remaining increase of $0.7 million was due to the foreign currency translation effect on goodwill balances maintained in British Pounds and Euros. Goodwill by segment was $27.3 million for the U.S. and $16.8 million for EMEA at December 31, 2007. The Company performed its annual impairment review in the fourth quarter of 2007. No impairment in goodwill was noted. Other intangibles, principally customer relationships, increased by $15.6 million, as a result of the WFI acquisitions. Amortization expense of other intangibles was $0.9 million, $0.3 million and $0.2 million for the years ended December 31, 2007, 2006 and 2005, respectively. The estimated aggregate amortization expense for each of the five succeeding years is approximately $1.1 million. The weighted average amortization period for customer relationships is 15 years, 10 years for patents, 5 years for trade names, 1 year for other and 14.8 years in the aggregate.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 9.	Borrowings

As discussed in Note 5, Discontinued Operations, in connection with the sale of the U.S. Network Deployment business, the Company entered into a loan agreement with Nokia, whereby Nokia would advance up to a maximum of $4.2 million. Advances to the Company under the loan agreement will be repaid as Nokia collects, and remits to the Company, the unbilled accounts receivable transferred at closing. In consideration for Nokia providing advances under the loan agreement, the Company accrued an initial fee of $0.2 million as interest expense. The Company received advances of approximately $4.2 million. At December 31, 2006, $3.2 million was outstanding and is classified as a Note Payable in the accompanying consolidated financial statements. The loan is secured by the rights of LCC International, Inc. and LCC Wireless Design Services, LLC in certain unbilled accounts receivable which were sold to Nokia in the transaction, as well as by any amounts in the disbursement account established pursuant to the loan agreement. The note payable was repaid in full as of June 30, 2007.

On July 18, 2005, the Company, and Commerce Funding Corporation (“CFC”) entered into an Assignment and Transfer of Receivables Agreement (the “CFC Agreement”) pursuant to which the Company may elect to transfer certain of its accounts receivable to CFC in exchange for cash. At the same time, the Company, LCC Wireless Design Services, LLC, a subsidiary of the Company, and CFC entered into a Fee Agreement and each also entered into a General Continuing Guaranty Agreement (together with the CFC Agreement, the “Financing Documents”).

On September 14, 2005, the Financing Documents were amended to increase the maximum amount which the Company may owe to CFC by an additional $1.0 million, for a total of $4.0 million. The terms and conditions were the same as provided for in the original Fee Agreement except that the monthly administration fee increased from approximately $23,000 to $30,000. On February 13, 2006, the Financing Documents were amended to increase the maximum amount by which the Company may owe to CFC by an additional amount of $1.0 million for a total of $5.0 million. The Terms and Conditions were the same as provided for in the amended Fee Agreement except that the monthly administration fee increased from $30,000 to approximately $38,000. Advances made to the Company or LCC Wireless Design Services, LLC have been utilized for working capital purposes, including the payment of amounts owed to subcontractors under certain customer contracts where the payments from the customer have been delayed or are otherwise not yet due. On March 9, 2007, the Company terminated this Agreement. Total interest expense attributable to interest and fees arising from the Company’s financing arrangement with CFC for the years ended December 31, 2007, 2006 and 2005 was approximately $0.2 million, $0.6 million and $0.3 million, respectively.

In December 2006, Detron Belgium, which the Company acquired on December 29, 2006 and renamed LCC Belgium, entered into a credit agreement with ING Bank. Under this agreement, the Company may borrow annually up to approximately $66,000, which amount was advanced to the Company at an interest rate of 5.6% per year, repayable in twelve monthly payments, the final payment being due in December 2007. The loan was renewed in December 2007 and as of December 31, 2007, LCC Belgium had $0.1 million outstanding under the loan agreement.

In January 2007, LCC Netherlands, entered into a credit agreement with ABN AMRO Bank (“ABN AMRO”) whereby the Company was the beneficiary of an overdraft credit facility (“Facility A”), and a loan facility (“Facility B”). The maximum amount which LCC Netherlands may have outstanding under Facility A is $2.0 million such that this is not to exceed 70% of the accounts receivable that were pledged as security for the loan. Interest on amounts outstanding under this Facility A are calculated at a rate equal to ABN AMRO’s adjustable Euro basis interest rate plus 1.5%. This was 6.8% at December 31, 2007. At December 31, 2007, there was $2.0 million outstanding under Facility A. Under Facility B, ABN AMRO advanced to LCC Netherlands $0.5 million. Interest on the loan is calculated at a fixed interest rate of 5.5% per year. The loan is repayable over two years, with the first payment due on May 1, 2007. Both of these facilities are secured by a pledge on the accounts receivable and fixed assets of LCC Netherlands. At December 31, 2007, there was $0.4 million outstanding under Facility B.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 9, 2007, the Company entered into a revolving credit facility (“the new credit facility”) with Bank of America, N.A. (“Bank of America”) and terminated the Company’s existing credit facility with CFC. Under the terms of the new credit facility, the aggregate amount owed to Bank of America by the Company, at any time may not exceed $6.5 million. The term of the new credit facility was through September 15, 2007. LCC may from time to time borrow under this facility, and these loans may be base rate loans, Eurodollar base rate loans or Eurodollar daily floating rate loans. Interest on base rate loans is calculated using a fluctuating rate per annum equal to the higher of the Federal Funds Rate plus 0.50% or the prime rate as determined by Bank of America. Interest on Eurodollar base rate loans is calculated using a per annum rate equal to the British Bankers’ Association LIBOR rate. Interest on Eurodollar daily floating rate loans is calculated using a rate per annum equal to the quotient obtained by dividing the Eurodollar daily floating base rate, which is the British Bankers’ Association LIBOR rate, by one minus the Eurodollar reserve percentage. The reserve percentage is issued by the Federal Reserve to lenders from time to time.

The new credit facility was amended on May 29, 2007 (“the amended credit facility”), in connection with the Company’s purchase of certain assets and liabilities of WFI’s U.S. wireless engineering services business. Under the terms of the amended credit facility, the aggregate amount owed to Bank of America by the Company, at any time was not to exceed $30.0 million. On November 30, 2007, the Company further amended and restated its outstanding credit facility with Bank of America, to among other things, provide for a bank waiver and amend certain covenants in the agreement for all events of default. This amended and restated credit facility provides for a total principal borrowing amount of up to $21.95 million which may be borrowed, repaid and re-borrowed by the Company on a revolving basis until November 29, 2009. It also provides for a term loan of $6.5 million with scheduled principal repayments of $3.5 million on June 1, 2008 and $1.0 million on each of September 1 and December 1, 2008 and March 1, 2009. The loan is secured by 100% and 66% of the issued and outstanding equity interests of each of the Company’s domestic and foreign subsidiaries, respectively, and by all of the real and personal property of the Company’s domestic subsidiaries. The amended and restated credit facility provides for a number of financial and other covenants and the Company was in compliance with all of them at December 31, 2007. At December 31, 2007, there was $21.95 million outstanding under the revolving credit facility at an interest rate of 8.23% and $5.8 million outstanding under the term loan at an interest rate of 10.25%. Total interest expense attributable to interest and fees arising from the Company’s credit facility with Bank of America for the year ended December 31, 2007 was approximately $1.6 million. The average outstanding balance during the year ended December 31, 2007 was $17.7 million at an average interest rate of 7.8%.

On June 1, 2007, the Company issued a Subordinated Promissory Note (“Note”) to WFI in connection with the purchase of the WFI U.S. Engineering Business (see Note 4, Business Combinations). The original amount of the Note was $21.6 million. Such amount was subsequently increased to $23.9 million as result of a purchase price adjustment agreed to by the Company on January 22, 2008, related to the value of certain assets transferred. The note has interest payable at rates based on the British Bankers Associated Rate (“BBA LIBOR”) that escalate on various dates from BBA LIBOR plus 4% on June 1, 2007 to BBA LIBOR plus 13% on January 1, 2010 and which rate is increased by an additional 1% every six (6) months thereafter. This Note was subsequently sold by WFI to a third party. The Note is subordinated to the credit facility with Bank of America which among other things limits cash payments of interest or principle until certain conditions in the credit facility with Bank of America are met. The note is payable on June 1, 2010. Total interest expense attributable to the Company’s note payable to WFI for the year ended December 31, 2007 was approximately $1.7 million. The average outstanding balance during the year ended December 31, 2007 was $14.0 million at an average interest rate of 7.0%.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate maturities of borrowings as of December 31, 2007 is as follows (in thousands):


2008	$	8,349
2009		45,990
2010		—
2011		—
2012		—

	$	54,339


Note 10.	Restructuring Charge

During 2002, the Company adopted a restructuring plan (“2002 Restructuring”), and recorded a restructuring charge of $13.5 million for severance related costs and costs associated with closing facilities and disposing of assets in EMEA and our corporate offices. 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. During the second quarter of 2005, the Company adopted a restructuring plan (“2005 Restructuring”), and recorded a net restructuring charge of $0.8 million for severance related costs and costs associated with closing facilities and disposing of assets.

Substantially all the activities related to the 2002 Restructuring and the 2005 Restructuring have been completed. However, the Company continues to be obligated under facility leases that expire from 2007 through 2014. The accrual remaining at December 31, 2007 includes approximately $0.1 million in respect of the 2002 Restructuring and the 2005 Restructuring plans associated with costs attributable to remaining obligations through the year 2014 associated with offices exited or downsized, offset by the Company’s estimates of future income from sublease agreements. The remaining accrual assumes as of December 31, 2007 that the Company will receive $2.4 million in sublease income, all of which is committed. During the second quarter of 2007, the Company recorded a reduction in the restructuring payable of $0.5 million related to the over accrual of costs associated with tenant improvements.

During the second quarter of 2007, the Company took steps towards recognizing integration related and other cost synergies by implementing a workforce reduction that eliminated approximately 60 positions worldwide and consolidated certain facilities in the U.K., by adopting a restructuring plan (“2007 Restructuring”), and recorded a net restructuring charge of $1.1 million. Approximately $1.0 million of the charge was related to severance and headcount related costs and $0.1 million was related to other non-headcount related expenses. The Company recorded the severance charges related to these headcount reductions as an operating expense in the second and third quarters of 2007. The facilities and other non headcount related charges were recorded as operating expense in the second and third quarters of 2007. The Company paid the majority of severance and related costs in the third quarter with the remaining costs paid in the fourth quarter of 2007.

The Company also recorded a restructuring charge of $0.5 million related to personnel severance costs in connection with the acquisition of certain assets and liabilities of the U.S. wireless engineering services business of WFI. The Company included these severance charges in goodwill. See Note 4, Business Combinations.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the restructuring activities is as follows:


				Facilities and
				Other Non-
				Headcount
				Related
	Severance			Items			Total
				(in thousands)

Restructuring payable as of January 1, 2005	$	—		$	2,901		$	2,901

Restructuring charge		752			176			928
Reversal for reoccupied space		—			(330	)		(330	)

Restructuring charge (recovery)		752			(154	)		598
Charges against the provision:
Payments for excess office space, net of sublease income		—			(960	)		(960	)
Severance and associated costs paid		(730	)		—			(730	)
Leasehold improvements and other assets written-off		—			(37	)		(37	)
Other		—			(208	)		(208	)

Restructuring payable as of December 31, 2005		22			1,542			1,564

Restructuring charge		—			108			108
Reversal of excess severance		(19	)		—			(19	)
Charges against the provision:
Payments for excess office space, net of sublease income		—			(645	)		(645	)
Other		—			28			28

Restructuring payable as of December 31, 2006		3			1,033			1,036
Restructuring charge		991			609			1,600
Reversal of excess facilities provision		—			(493	)		(493	)
Restructuring charge on acquisition		545			—			545
Charges against the provision:
Payments for excess office space, net of sublease income		—			(824	)		(824	)
Payments for severance		(1,548	)		—			(1,548	)
Other		12			11			23

Restructuring payable as of December 31, 2007	$	3		$	336		$	339

At December 31, 2007 and 2006, the restructuring payable was classified as follows:


	2007		2006
	(in thousands)

Accrued restructuring current	$	261	$	949
Accrued restructuring		78		87

Accrued restructuring total	$	339	$	1,036


Note 11.	Income Taxes

The Company files a consolidated federal income tax return with all of its US subsidiaries. The Company has subsidiaries that file tax returns in several foreign jurisdictions. The Company and its foreign subsidiaries also file tax returns in local tax jurisdictions in many of the countries in which they do business. The Internal Revenue

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Service completed examinations of the Company’s U.S. income tax returns through 2003. Many of the Company’s subsidiaries’ tax returns have been examined through various dates. Generally, we are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2004 to 2006. In addition we are currently open to audit under the statute of limitations in various foreign jurisdictions for approximately six years.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $0.9 million increase in the liability for unrecognized tax benefits, which was accounted for as an addition to the January 1, 2007 accumulated deficit balance. The total amount of unrecognized tax benefits as of the date of the adoption was approximately $0.9 million and includes both income taxes and tax penalties. Additionally, at January 1, 2007, the Company’s deferred tax asset and corresponding valuation allowance were reduced by $1.9 million for cumulative FIN 48 adjustments related to years prior to 2007 that were not recognized as a cumulative adjustment to the accumulated deficit at January 1, 2007. In years prior to 2007, interest and penalties related to adjustments to income taxes as filed have not been significant. The Company intends to include such interest and penalties in its tax provision.

There have been no changes in the liability for unrecognized tax benefits during the year ended December 31, 2007.

The provision for income taxes for the years ended December 31, 2007, 2006 and 2005 consisted of the following:


	2007			2006			2005
	(in thousands)

Current:
Federal	$	80		$	(1,535	)	$	(631	)
State and local		23			75			160
Foreign		1,799			3,324			3,188

		1,902			1,864			2,717

Deferred:
Federal		414			1,148			—
State and local		—			—			—
Foreign		(929	)		(1,436	)		—

		(515	)		(288	)		—

Total	$	1,387		$	1,576		$	2,717

The 2007, 2006, and 2005 income tax provisions related to operations do not include tax benefits, related to exercising stock options which will be recorded directly to paid-in capital when the deduction reduces income tax payable.

Loss before income taxes includes the following components:


	2007			2006			2005
	(in thousands)

Domestic	$	(18,142	)	$	(14,161	)	$	(15,457	)
Foreign		(9,156	)		10,858			6,580

Total	$	(27,298	)	$	(3,303	)	$	(8,877	)

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the statutory federal income tax provision and the effective income tax provision for the years ended December 31, 2007, 2006 and 2005 follows:


	2007			2006			2005
	(in thousands)

Tax provision at statutory federal income tax rate	$	(9,513	)	$	(1,156	)	$	(3,107	)
Effect of:
State and local income taxes, net of federal tax benefit		(526	)		(507	)		(359	)
Foreign tax and tax credits		978			(2,285	)		300
Non deductible expenses and permanent items		1,990			744			106
Federal refund		—			—			(512	)
Change in valuation allowance		8,367			6,349			2,912
Expiration of foreign tax credits		—			—			2,568
Release of federal tax reserve		—			(1,565	)		—
Other		91			(4	)		809

Effective income tax provision	$	1,387		$	1,576		$	2,717

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 2007 and 2006 are presented below:


	2007			2006
	(in thousands)

Deferred tax assets:
Accrued compensation	$	890		$	392
Accrued expenses		69			669
Foreign tax credit carry-forward		2,778			1,749
Research tax credit carryover		340			340
Alternative minimum tax credit		276			276
Net operating loss carry-forward		30,212			22,618
Property and equipment		328			436
Stock options		818			—

Total gross deferred tax assets		35,711			26,480
Less valuation allowance		(31,807	)		(24,459	)

Deferred tax assets, net of valuation allowance		3,904			2,021

Deferred tax liabilities:
Deferred revenue		—			(144	)
Goodwill amortization		(414	)		—
Unrealized foreign exchange loss		(1,538	)		(440	)

Total gross deferred liabilities		(1,952	)		(584	)

Net deferred tax assets	$	1,952		$	1,437

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components giving rise to the net deferred tax assets described above have been included in the accompanying balance sheet as of December 31, 2007 and 2006 as follows (in thousands):


	2007		2006
	(in thousands)

Current liability	$	—	$	(16	)
Non-current asset		1,952		1,453

	$	1,952	$	1,437

At December 31, 2007, the Company had foreign tax credit carry-forwards for U.S. tax purposes of $1.0 million, which expire between 2009 and 2010; a research and development credit of $0.3 million; and an alternative minimum tax credit carryover of $0.3 million. The Company had U.S. operating loss carry-forwards of $60.7 million, which expire beginning in 2023. The Company also had $29.0 million of foreign net operating loss carry-forwards, some of which expire beginning in 2008 and some of which can be carried forward indefinitely, subject to certain restrictions. In addition, the Company had foreign tax credit carry-forwards of $1.8 million for foreign tax purposes that do not expire.

The net federal tax benefit of $0.4 million for the year ended December 31, 2006 primarily relates to the release of a tax reserve for interest and penalties on certain deductions claimed in connection with the sale of Microcell towers in a previous period. The Company reversed the prior year entry to tax expense because the statute of limitations for these deductions closed in 2006.

Foreign income tax expense is generated from business conducted in countries where the Company has subsidiaries or has established branch offices or has performed significant services that constitute a “permanent establishment” for tax reporting purposes. Foreign income tax also includes withholding tax on projects in countries where the Company does not have a registered presence.

In determining the tax valuation allowances, management considers whether it is likely that some portion of the deferred tax assets will be realized. Based on the Company’s financial results for the year ended December 31, 2007, projected future taxable income and tax planning strategies, the Company increased its valuation allowance on foreign and domestic net operating loss carry-forwards and other deferred tax assets by $7.3 million.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods when the benefit remains available and in those countries where the assets can be used. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

No provision was made in 2007 for income taxes or foreign withholding taxes on the undistributed earnings of the foreign subsidiaries, as it is the Company’s intention to utilize those earnings in the foreign operations for an indefinite period of time or to repatriate such earnings only when tax effective to do so. It is not practicable to determine the amount of income or withholding tax that would be payable upon the remittance of those earnings. The Company does not believe that repatriating the undistributed earnings of its foreign subsidiaries would have a material tax effect.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 12.	Other Current Liabilities

At December 31, 2007 and 2006, other current liabilities consisted of the following:


	2007		2006
	(in thousands)

Due to WFI (see Note 4)	$	1,837	$	—
Interest payable		1,685		—
Deferred rent		862		57
Other		1,703		540

Other current liabilities	$	6,087	$	597


Note 13.	Shareholders’ Equity

Preferred Stock — At December 31, 2007, preferred shares authorized consisted of 10,000,000 shares, $0.01 par value. On December 27, 2007 the Company announced that it had entered into an Exchange and Settlement Agreement with the investors that had invested approximately $17.0 million for shares of the Company’s common stock in a private offering completed on April 19, 2007 discussed below, under Common Stock. Under the settlement, the Company agreed to exchange each share of common stock held by the investors for 1.125 shares of a new series of preferred stock. This new preferred stock by its terms will convert back into common stock in connection with the Company’s next qualifying equity financing transaction of $10.0 million or more or, if the Company does not conduct such a financing, at the end of 18 months. The conversion will be at the sale price in the qualifying equity financing transaction (or the market price of the common stock, if conversion is after the 18 months) but not below a floor price of $2.00 per share. The new preferred stock will accrue dividends at the rate of 0% for the first twelve months, 6% for the next six months and 8% thereafter. The preferred stock was recorded at the fair value at the date of the exchange.

Common Stock — At December 31, 2007, common shares authorized consisted of 70,000,000 Class A common stock, $0.01 par value (Class A stock) and 20,000,000 Class B common stock, $0.01 par value (Class B stock).

On December 27, 2006 the Company announced that all the shares of the Company’s outstanding Class B common stock (all of which were held by RF Investors, an entity controlled by Company founders and directors Dr. Rajendra and Neera Singh and members of their family) were converted on a one-for-one basis into shares of Company Class A stock. The conversion occurred as to 4,000,000 shares of Class B common stock as a result of the transfer of those shares by RF Investors through a donation to the Foundation on December 22, 2006. According to the Company’s Restated Certificate of Incorporation, although controlled by Dr. Singh and his family, the Foundation is not an eligible holder of Class B common stock; thus, effective immediately upon the transfer, the shares were automatically converted to Class A common stock. The remaining 425,577 outstanding shares of Class B common stock retained by RF Investors were also automatically converted into shares of Class A common stock, effective immediately upon the transfer, as a result of a provision in the Company’s Restated Certificate of Incorporation that requires the shares of outstanding Class B common stock to be converted into shares of Class A common stock at such time as those shares constitute less than 10% of the outstanding common stock.

The Class B common stock was entitled to ten votes per share and the Class A common stock is entitled to one vote per share. Immediately prior to the transfer, the Class B common stock constituted approximately 68% of the outstanding voting power of the common stock. Immediately following the transfer, the shares of Class A common stock held by the Foundation and by RF Investors constituted approximately 15.8% and 1.7%, respectively, of the outstanding voting power of the common stock. The aggregate balance of the voting power of the Class A common stock, approximately 82.5% at the time of the transfer, was held by the Company’s other stockholders.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On April 19, 2007, the Company raised $17.0 million through the sale of 5,100,000 newly issued Class A common shares of the Company at a price of $3.35 per share in a private placement. As part of the transaction the Company was required to file a registration statement covering the common stock within 45 days of the closing. The Company was obligated to register the shares issued in the offering to the participating shareholders by defined dates or be subject to cash penalty payments. Due to the delay in filing its 2006 Form 10-K and subsequent 2007 Quarterly Form 10-Q’s, the Company was not in compliance with its filings and as a result, was not able to register the shares and meet these obligations. The agreement called for a cash penalty of 1% per month, up to 10%, beyond June 3, 2007 until a registration statement was filed for the investors’ shares and an additional cash penalty of 1% per month beyond August 20, 2007 until the registration statement is declared effective to a maximum of 10% penalty in each of these two areas.

In accordance with EITF 00-19-2 Accounting for Registration Payment Arrangements, the Company accrued for interest penalties under SFAS No. 5, Accounting for Contingencies, when they are probable and estimable. For the year ended December 31, 2007, the Company recorded approximately $2.1 million of liquidated damages which are included in other expenses in the accompanying consolidated financial statements. As described above under Preferred Stock, the investors have agreed to release the Company from its continuing non-compliance with the registration requirement and all accrued penalties, and have given the Company a general release from claims they may have against it arising out of the investment, including any failure to disclose that the Company would not be able to register their shares for a substantial period. The Company has agreed to take the necessary steps to register the investors’ shares once the Company becomes current in its SEC filings or in connection with registering shares issued in its next qualifying equity financing transaction. In accordance with EITF 00-19-2, the settlement of the liability in the Company’s own shares has been classified as equity.


Note 14.	Equity Incentive Plans

Description of Share-based Compensation Plans:

At December 31, 2007, the Company has one active employee share-based compensation plan, the Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”), and one inactive share-based compensation plan, the Directors Stock Option Plan (the “Directors Plan”), which are described below. In addition, the Company had established an Employee Stock Purchase Plan (“ESPP”) which was terminated effective December 31, 2005, and is also described below.

Equity Incentive Plans:

Equity Incentive Plan — The Company’s Equity Incentive Plan provides for awards of both incentive stock options and non-qualified stock options, as well as the grant of cash bonuses, restricted shares of stock, stock appreciation rights, restricted stock, stock units and dividend equivalent rights to the Company’s employees or employees of any of the Company’s subsidiaries and directors of the Company. There were 8.8 million shares authorized for issuance under the Equity Incentive Plan and, as of December 31, 2007, there were approximately 0.4 million shares of common stock available for issuance. Stock options are granted with an exercise price equal to the market value on the date prior to the grant (or 110% of the market value in the case of an incentive stock option granted to an optionee beneficially owning more than 10% of the outstanding common stock) and generally expire ten years from the grant date (or five years in the case of an incentive stock option granted to an optionee beneficially owning more than 10% of the outstanding common stock). Options may be exercised at any time after grant, except as otherwise provided in the particular option agreement. There is also a $100,000 limit on the value of common stock (determined at the time of grant) covered by incentive stock options that first became exercisable by an optionee in any year and a 500,000 share limit as to the maximum number of shares of common stock that can be awarded to an individual per calendar year pursuant to an option. Unless otherwise provided in the option agreement, options vest in full immediately prior to a change in control.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Directors Plan — The Directors Plan provided for the grant to directors of options to purchase shares of class A common stock. The Directors Plan also provided for annual grants of options to purchase up to 250,000 shares of class B common stock to directors who were eligible to hold such shares. However, pursuant to the terms of the Directors Plan, the final annual grant of such options occurred in 2000. Options granted to directors eligible to hold class B common stock expire no later than the fifth anniversary of the date of grant and options granted to directors who are not eligible to hold class B common stock expire no later than the tenth anniversary of the date of grant. The Company’s directors are also entitled to receive option grants under the Equity Incentive Plan in an amount determined at the discretion of the Board of Directors.

Employee Stock Purchase Plan — The Company established the ESPP in 1997 which authorized the issuance of up to 860,000 shares of class A common stock. The ESPP permitted eligible employees to purchase shares of class A common stock at a 15% discount to fair market value as determined by the plan. Rights to purchase shares were deemed granted to participating employees as of the beginning of each applicable period, as specified by the Compensation and Stock Option Committee of the Company’s Board of Directors. The purchase price for each share was not less than 85% of the fair market value of the share of class A common stock on the first or last trading day of such period, whichever is lower. In April 2005, the Company’s Board of Directors voted to terminate the ESPP effective December 31, 2005. Under the ESPP, during the year ended December 31, 2005, the Company issued 42,424 shares and compensation cost of approximately $23,000 would have been recognized under SFAS No. 123 for the fair value of the employees’ purchase rights, and is included in the pro forma net loss calculation. See Pro forma Information for Periods Prior to the Adoption of SFAS No. 123(R) below.

The Dean J. Douglas Employment Inducement Plan — The Dean J. Douglas Employment Inducement Plan established in 2006 provided for the grant of stock options to Dean J. Douglas to induce him to accept employment with the Company as President and Chief Executive Officer.

Impact of the Adoption of SFAS No. 123(R):

The Company adopted SFAS No. 123(R) using the modified prospective method beginning January 1, 2006. Under this application, the Company recorded compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remained outstanding at the date of adoption. Accordingly, during 2006, the Company recorded stock-based compensation expense for awards granted prior to, but not yet vested at January 1, 2006, as if the fair value method required for pro forma disclosure under SFAS No. 123 were in effect for expense recognition purposes, adjusted for estimated forfeitures.

The Company has recognized compensation expense for all awards granted, with the exception of market based awards, based on the estimated grant date fair value method using the Black-Scholes option pricing model. For market based awards, compensation expense was estimated under a lattice model using a Monte Carlo Simulation. The determination of the fair value of share-based payment awards on the date of grant using these models are affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends.

SFAS No. 123(R) requires that share-based compensation expense be based on awards that are ultimately expected to vest, therefore share-based compensation for the years ended December 31, 2007 and 2006 has been reduced for estimated forfeitures. SFAS No. 123(R) requires the estimation of forfeitures when recognizing compensation expense. Estimated forfeitures should be adjusted over the requisite service period in the event that actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which has an impact on the amount of unamortized compensation expense to be recognized in future periods. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Prior to adopting SFAS No. 123(R) tax benefits, if any, resulting from the exercise of stock options, were included in operating cash flows in the consolidated statement of cash flows. SFAS No. 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. This requirement reduces net operating cash flows and increases net financing cash flows in periods after adoption. Total cash flows will remain unchanged from what would have been reported under prior accounting rules. There are no tax benefits, excess or otherwise for the years ended December 31, 2007 and 2006, and therefore there is no impact on the accompanying Consolidated Statements of Cash Flows.

The adoption of SFAS No. 123(R) increased the losses from continuing and discontinued operations before income taxes for the year ended December 31, 2006 by $719,512 and $6,329, respectively, and increased the net loss for the year ended December 31, 2006 by $725,841. The adoption of this standard had no impact on the provision for income taxes due to the valuation allowance for U.S. deferred tax assets due to the history of operating losses of our U.S. operations. As a result of the adoption of SFAS No. 123(R), basic and diluted loss per share from continuing operations was increased by $0.03 per share for the year ended December 31, 2006. There was no change in loss per share from discontinued operations.

The amount of cash received from the exercise of share-based awards granted during the year ended December 31, 2007, 2006 and 2005 was $0.4 million, $0.6 million and $0.6 million, respectively.

The Company has recognized compensation expense for continuing operations for all options and restricted stock awards for the years ended December 31, 2007 and 2006 as follows:


						Non-
						Reportable
	Americas			EMEA		Segments		Total
	(in thousands)

Cost of revenues	$	9		$	25	$	—	$	34
Sales and marketing		16			23		58		97
General and administrative		11			69		523		603

Q1 2007		36			117		581		734

Cost of revenues		19			48		—		67
Sales and marketing		6			21		9		36
General and administrative		10			70		176		256

Q2 2007		35			139		185		359

Cost of revenues		12			6		—		18
Sales and marketing		(1	)		22		9		30
General and administrative		8			70		105		183

Q3 2007		19			98		114		231

Cost of revenues		34			52		—		86
Sales and marketing		33			40		16		89
General and administrative		(14	)		185		392		563

Q4 2007		53			277		408		738

Cost of revenues		74			131		—		205
Sales and marketing		54			106		92		252
General and administrative		15			394		1,196		1,605

Total 2007	$	143		$	631	$	1,288	$	2,062

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


						Non-
						Reportable
	Americas			EMEA		Segments		Total
	(in thousands)

Cost of revenues	$	33		$	12	$	—	$	45
Sales and marketing		13			14		—		27
General and administrative		18			76		124		218

Q1 2006		64			102		124		290

Cost of revenues		27			25		—		52
Sales and marketing		23			28		9		60
General and administrative		66			90		269		425

Q2 2006		116			143		278		537

Cost of revenues		30			28		—		58
Sales and marketing		7			30		17		54
General and administrative		(44	)		98		306		360

Q3 2006		(7	)		156		323		472

Cost of revenues		—			13		—		13
Sales and marketing		9			8		15		32
General and administrative		(34	)		1		8		(25	)

Q4 2006		(25	)		22		23		20

Cost of revenues		90			78		—		168
Sales and marketing		52			80		41		173
General and administrative		6			265		707		978

Total 2006	$	148		$	423	$	748	$	1,319

Valuation Assumptions:

The fair value of stock options granted to employees is estimated on the date of the grant using either the Black-Scholes option pricing model or a lattice model using a Monte Carlo Simulation. The Black-Scholes option pricing model was developed to estimate the fair value of freely tradable and fully transferable options without vesting restrictions, which differ from the Company’s stock option program. Both models require considerable judgment, including assumptions regarding future stock price volatility and expected time to exercise, which greatly affect the calculated value of stock option grants. Expected volatility is estimated using the historical volatility of the Company’s common stock over the expected term of the options. If new or different information that would be useful in estimating expected volatility becomes available, this may be incorporated into future estimates. The risk-free interest rates that are used in the option pricing models are based on the U.S. Treasury security rate with remaining terms similar to the expected terms on the options.

The fair value of share-based awards estimated on the date of the grant using the Black-Scholes option pricing model were calculated using the following weighted-average assumptions:


	2007	2006	2005

Expected dividend yield	0%	0%	0%
Risk-free interest rate	4.09%	5.65%	4.25% to 4.40%
Expected life	2-6 years	3-7 years	3-7 years
Volatility	60%	75%	40% to 60%

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of share-based awards estimated on the date of the grant using a lattice model with a Monte Carlo Simulation were calculated using the following weighted-average assumptions:


	2007	2006	2005

Expected dividend yield	0%	0%	0%
Risk-free interest rate	4.50%-5.05%	4.3%- 5.3%	4.5%
Expected life	1.0 to 5.5 years	2.0 to 6.0 years	2.5 to 5.5 years
Volatility	45%-60%	55%-75%	78%

Compensation cost attributable to the Company’s ESPP plan was estimated using the Black-Scholes model with the following weighted-average assumptions:


		2005

Expected dividend yield		0%
Risk-free interest rate		2.6% to 4.0%
Expected life		1 month
Volatility		40% to 100%

Share-Based Compensation Activity:

Service Based Awards

The following table summarizes service-based award activity for the years ended December 31, 2007 and 2006:


				Weighted		Weighted
	Number			Average		Average		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term in Years		Value
	(in thousands)							(in thousands)

Outstanding at January 1, 2005		2,966		$	5.11
Granted		67		$	3.45
Exercised		(274	)	$	2.37
Expired		(81	)	$	6.29
Forfeited		(951	)	$	5.31

Outstanding at December 31, 2006		1,727		$	5.24		6.2	$	955
Granted		72		$	1.95
Exercised		(169	)	$	2.36
Expired		(283	)	$	7.27
Forfeited		(26	)	$	7.67

Outstanding at December 31, 2007		1,321		$	4.86		5.1	$	1

Exercisable at December 31, 2007		1,181		$	5.08		4.6	$	1

The total value of the service based stock option awards is expensed ratably over the service period of the employees receiving the awards, generally from three to five years. The service based options generally have a term of ten years. The Company recorded expense of $0.1 million and $0.3 million related to these options during the years ended December 31,2007 and 2006, respectively. The fair value of each service based stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The weighted average grant date fair value of service based options granted during the years ended December 31, 2007, 2006 and 2005 was $0.94, $2.18, and $1.81, respectively. As of December 31, 2007, total unrecognized compensation cost related to service

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

based stock option awards was approximately $0.1 million and the related weighted-average period over which it is expected to be recognized is approximately 1.6 years. The total fair value of shares vested during the years ended December 31, 2007, 2006, and 2005, was approximately $0.4 million, $0.1 million, and $0.1 million, respectively. The total intrinsic value of service based options exercised during the years ended December 31, 2007, 2006, and 2005 was $0.3 million, $0.2 million and $0.4 million, respectively.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $1.80 at December 31, 2007, which would have been received by award holders had all award holders exercised their awards that were in-the-money as of that date. The total number of in-the-money service based awards exercisable at December 31, 2007 was 10,000.

Market Based Awards

A summary of market based stock option activity for the years ended December 31, 2007 and 2006 is as follows:


				Weighted		Weighted
	Number			Average		Average		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
	(in thousands)							(in thousands)

Outstanding at January 1, 2006		1,000		$	2.49
Granted		1,030		$	3.48

Outstanding at December 31, 2006		2,030		$	2.99		9.0	$	2,151
Granted		300		$	4.28
Forfeited		(135	)	$	3.58

Outstanding at December 31, 2007		2,195		$	3.12		8.1	$	—

Exercisable at December 31, 2007		500		$	2.99		8.0	$	—

The market based options vest in 25% increments based on the Company’s stock price achieving four specified price levels based on the 20 day average closing price per share. Only one-third of the total grant may vest in any single calendar year. To the extent additional options reach a vesting threshold in the same year, such options shall vest on January 1 of the immediately following calendar year. The Company recorded expense of $1.0 million and $0.5 million on these options during the years ended December 31, 2007 and 2006, respectively. As of December 31, 2007 total unrecognized compensation cost related to these market based stock option awards was approximately $0.6 million. The weighted-average period over which it is estimated to be recognized is approximately 1.9 years. The weighted average grant date fair value for market based options granted during the year ended December 31, 2007, 2006 and 2005 was $1.77, $1.94 and $1.50, respectively. The total fair value of market based options vested during the year ended December 31, 2007, 2006, and 2005 was $0.7 million, $-0-, and $-0-, respectively.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Awards

A summary of restricted stock activity for the years ended December 31, 2007 and 2006 is as follows:


				Weighted
	Number			Average
	of			Grant Date
	Shares			Fair Value
				(in thousands)

Non vested at January 1, 2006		1,068		$	3.00
Granted		1,065		$	3.74
Vested		(323	)	$	2.98
Forfeited		(443	)	$	3.63

Non vested at December 31, 2006		1,367		$	3.40
Granted		115		$	3.60
Vested		(535	)	$	3.06
Forfeited		(107	)	$	3.17

Non vested at December 31, 2007		840		$	3.44

The Company grants restricted stock awards to certain employees, with the total value of the award expensed ratably over the three-year service period of the employees receiving the grants. Share-based compensation expense related to restricted stock awards during the years ended December 31, 2007, 2006 and 2005 was $1.0 million, $0.6 million and $0.4 million, respectively. As of December 31, 2007, the total amount of remaining unrecognized compensation cost related to non vested restricted stock awards was approximately $1.1 million. This is expected to be recognized over a weighted-average period of approximately 1.2 years. The weighted average grant date fair value for restricted stock awards granted during the years ended December 31, 2007, 2006 and 2005, was $3.60, $3.74 and $3.05, respectively. The total fair value of restricted stock awards vested during the year ended December 31, 2007, 2006 and 2005 was $1.6 million, $1.0 million and $-0-, respectively.

The Company’s executive officers and others are restricted from trading company securities other than within specified trading windows, under the terms of the Company’s Amended and Restated Equity Incentive Plan. As a result, 410,003 restricted stock awards have vested but were not released as of December 31, 2007. The corresponding compensation expense has been recognized in the results of operations and the shares included in the outstanding shares for purposes of calculating earnings per share. These stock units had a weighted average grant date fair value of $1.68 and a fair value of $0.7 million.


Note 15.	Income (Loss) per Share

Income (loss) per share is presented on both a basic and diluted basis in accordance with the provisions of FASB Statement No. 128, “Earnings per Share” (“SFAS No. 128”). Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the issuance of common stock that shared in our earnings. The reconciliations of the basic and diluted earnings per share (“EPS”) computations for the years ended December 31, 2007, 2006 and 2005 are as follows:


	2007								2006								2005
						Per Share			Net					Per Share								Per Share
	Net Loss			Shares		Amount			Loss			Shares		Amount			Net Loss			Shares		Amount
	(In thousands, except per share data)

Basic and Dilutive EPS
Net loss available to common shareholders
Continuing operations	$	(28,697	)			$	(0.97	)	$	(4,879	)			$	(0.20	)	$	(11,594	)			$	(0.47	)
Discontinued operations	$	(2,070	)			$	(0.07	)	$	(3,151	)			$	(0.13	)	$	(933	)			$	(0.04	)
Total	$	(30,767	)		29,657	$	(1.04	)	$	(8,030	)		24,893	$	(0.33	)	$	(12,527	)		24,524	$	(0.51	)
Effect of Dilutive Securities
Stock option plans					—								—								—

For the year ended December 31, 2007, 2006 and 2005, weighted average convertible preferred stock shares, common stock options and restricted stock units of 4.9 million, 3.8 million and 4.1 million shares, respectively, were excluded from the calculation of EPS because they would have reduced the loss per share.


Note 16.	Health and Retirement Plans

The Company has a defined contribution profit sharing plan under Section 401(k) of the Internal Revenue Code that provides for voluntary employee contributions of 1.0% to 6.0% of compensation for the Company’s U.S. employees. After six months of employment the Company makes a matching contribution of 50.0% of an employee’s contribution up to 6.0% of each employee’s compensation. The Company’s contributions and other expenses associated with the plan were approximately $0.4 million, $0.3 million, and $0.3 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company’s subsidiary, LCC UK, has a defined contribution pension plan under Chapter 1 Part XIV of the Income and Corporation Taxes Act, 1988. The plan provides for voluntary employee contributions of 1.0% to 5.0% of an employee’s base salary. It is available to all full-time employees who have completed their three-month probation period. The Company contributes 5.0% of an employee’s base salary and matches the employee’s contribution up to 5.0%. Contributions and other expenses related to this plan were approximately $0.1 million, $0.1 million and $0.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.

LCC UK’s subsidiary, LCC Deployment Services UK Ltd., has a defined contribution pension plan under Chapter 1 Part XIV of the Income and Corporation Taxes Act, 1988. The plan provides for voluntary employee contributions of 4.0% of an employee’s base salary. It is available to all full-time employees who have completed their three-month probation period. The Company contributes 8.0% of an employee’s base salary. Contributions and other expenses related to the plan were approximately $0.2 million, $0.2 million and $0.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.

LCC UK’s subsidiary, LCC Italia S.R.L. (“LCC Italia”), has two statutory defined contribution pension plans and one voluntary plan for directors of LCC Italia. The contributions are in accordance with the National Contract Agreement. LCC Italia contributions and related expenses to these plans were approximately $1.3 million, $1.1 million and $1.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.

LCC Netherlands has pension plans in accordance with statutory labor agreements. Two of its subsidiaries were under the Kleinmetaal labor agreement. This agreement provides that all employees over the age of eighteen and the employer are obliged to contribute to an old-age scheme. Under the old-age scheme the employee and the employer must each contribute 13.0% of each employee’s gross salary after deduction of a fixed amount of 14,224 Euros. Employees of a third subsidiary participate in another pension plan where the contribution

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

percentage varies depending on the age of the participant. Contributions to these two plans in 2007, 2006 and 2005 were approximately $0.5 million, $0.5 million and $0.5 million, respectively.

LCC Belgium, which the Company acquired in December 2006, has a pension plan in accordance with statutory labor agreements with employer contributions ranging from 1.2% to 6% of salaries. LCC Belgium contributions for 2007 were $0.1 million.

LCC France and LCC Turkey, which the Company acquired in March 2007 (see Note 4, Business Combinations, WFI-EMEA), have pension plans in accordance with statutory labor agreements. Contributions to these two plans in 2007 were $0.1 million and $0.1 million, respectively.

The Company’s U.S. group health benefits are self-insured for claims up to $0.1 million, per participant per plan year. The Company carries stop-loss coverage for claims in excess of $0.1 million per participant, per plan year, and also aggregate stop loss for multiple claims in excess of this limit in a plan year.

Characteristics of the Company’s non-U.S health benefits vary by region.


Note 17.	Related Party Transactions

The Rajendra and Neera Singh Charitable Foundation (the “Foundation”) owns more than 10% of our equity shares and up to the third quarter of 2007 two members of the Singh family, Dr. Rajendra and Neera Singh, served as members of our Board of Directors. In connection with the Company’s initial public offering in 1996, the Company agreed to allow the employees of Telcom Ventures, a company controlled by the Singh family, to continue to participate in the Company’s employee benefit plans in exchange for full reimbursement of our cash costs and expenses. The Company billed Telcom Ventures approximately $77,000, $128,000 and $74,000 during the years ended December 31, 2007, 2006, and 2005, respectively, for payments made by the Company pursuant to this agreement. The Company received reimbursements from Telcom Ventures of approximately $70,000, $135,000 and $67,000 during the years ended December 31, 2007, 2006, and 2005, respectively. At December 31, 2007 and 2006, outstanding amounts associated with payments made by the Company under this agreement were $7,000 and $1,000, respectively, and are included as due from related parties and affiliates within the consolidated balance sheets in the accompanying financial statements. Also included in due from related parties and affiliates are employee advances of $25,000 and $2,000 at December 31, 2007 and 2006 respectively.

During the year ended December 31, 2007, the Company provided services to one customer where Telcom Ventures has a minority investment. Revenues earned from this customer during the year ended December 31, 2007 were $101,000. Billed and unbilled receivables of $35,000 from this customer were outstanding at December 31, 2007 and are included in trade accounts receivable and unbilled receivables in the accompanying consolidated balance sheet. During the year ended December 31, 2006, the Company provided services to Telcom Ventures directly, generating revenues of $33,000, all of which have been collected.


Note 18.	Commitments and Contingencies

Leases — The Company leases office facilities and certain equipment under operating leases expiring on various dates over the next twelve years. The lease agreements include renewal options and provisions for rental escalations based on the Consumer Price Index and require the Company to pay for executory costs such as taxes and insurance. Some of the lease agreements also allow the Company to elect an early out provision by giving notice and paying certain lease termination penalties.

Benefits associated with a rent abatement period and certain lease incentives or office facilities are reflected ratably over the period of the lease. For leases that have been terminated, the applicable portion of the benefit has been offset against the lease termination penalty.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future minimum rental payments and receivables under non-cancelable operating leases, excluding executory costs, are as follows:


			Rental
			Receivables
	Rental		Under
	Payable		Subleases
	(in thousands)

2008	$	4,840	$	228
2009		3,922		316
2010		2,565		316
2011		2,330		316
2012		1,795		316
Thereafter		7,541		950

	$	22,993	$	2,442

Rent expense under operating leases was approximately, $3.5 million, $3.4 million, and $3.8 million for the years ended December 31, 2007, 2006, and 2005, respectively.

Legal Proceedings — The Company is a party to various litigation matters and claims that are normal in the course of operations and while the results of such litigation matters and claims cannot be predicted with certainty, the Company believes that the final outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations or cash flows of the Company.


Note 19.	Segment Reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information established standards for reporting information about the operating segments in interim and annual financial reports issued to stockholders. It also established standards for related disclosures about products and services and geographic areas. 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. The Company’s chief operating decision-making group is the Executive Committee, which comprises the Chief Executive Officer and the Executive Vice President and our Senior Vice Presidents.

The Company’s operating segments are defined geographically by region, the Americas region and EMEA. EMEA provides design and deployment services, operations and maintenance services and technical consulting services. The Americas region provides similar services with the exception of deployment and field operations and maintenance services.

The Company evaluates performance based on stand alone operating segment profit or loss from operations before income taxes excluding nonrecurring gains and losses, and generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices. Interdivisional transactions are eliminated on consolidation. Revenues are attributed to geographic areas based on the location of the assignment.

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating Segments:


	For the Years Ended December 31,
	Americas			EMEA			Total
	(in thousands)

2007
Net revenue from external customers	$	46,974		$	98,749		$	145,723
Inter-segment revenues		—			—			—

Total revenues	$	46,974		$	98,749		$	145,723

Depreciation and amortization	$	1,437		$	2,508		$	3,945
Interest income		1			49			50
Interest expense		1,705			117			1,822
Income (loss) before taxes		(3,798	)		(9,156	)		(12,954	)
Segment assets		64,390			80,621			145,011
Expenditures for property		1,606			2,800			4,406
2006
Net revenue from external customers	$	29,959		$	99,944		$	129,903
Inter-segment revenues		—			—			—

Total revenues	$	29,959		$	99,944		$	129,903

Depreciation and amortization	$	430		$	1,609		$	2,039
Interest income		1			35			36
Interest expense		—			29			29
Income (loss) before taxes		(1,573	)		11,651			10,078
Segment assets		14,623			78,668			93,291
Expenditures for property		99			938			1,037
2005
Net revenue from external customers	$	36,478		$	107,844		$	144,322
Inter-segment revenues		—			—			—

Total revenues	$	36,478		$	107,844		$	144,322

Depreciation and amortization	$	432		$	2,016		$	2,448
Interest income		—			16			16
Interest expense		1			16			17
Income (loss) before taxes		(4,168	)		6,809			2,641
Segment assets		34,640			73,650			108,290
Expenditures for property		873			1,445			2,318

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


	For the Years Ended December 31,
	2007		2006		2005
	(in thousands)

Revenues:
Revenues for reportable segments	$	145,723	$	129,903	$	144,322
Revenues for non-reportable segments		—		50		1,320

Total consolidated revenues	$	145,723	$	129,953	$	145,642

Assets:
Assets for reportable segments	$	145,011	$	93,291	$	108,290
Assets not attributable to reportable segments:
Cash and cash equivalents		2,961		1,617		7,245
Restricted cash		—		9		37
Deferred and prepaid tax assets		1,832		1,809		2,365
Property and equipment		520		576		154
Receivables		110		578		635
Prepaid expenses		243		262		219
Other		773		281		8

Total consolidated assets	$	151,450	$	98,423	$	118,953


	2007			2006			2005
	(in thousands)

Income (loss) before income taxes for reportable segments	$	(12,954	)	$	10,078		$	2,641
General corporate expenses		(14,344	)		(13,381	)		(11,518	)

Loss from operations before income taxes	$	(27,298	)	$	(3,303	)	$	(8,877	)

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Years Ended December 31,
	Segment		Unallocated				Consolidated
Other Significant Items	Total		Expenditures		Eliminations		Total
	(in thousands)

2007
Depreciation and amortization	$	3,945	$	279	$	—	$	4,224
Interest income		50		45		—		95
Interest expense		1,822		1,780		—		3,602
Expenditures for property		4,406		336		—		4,742
2006
Depreciation and amortization		2,039		339		—		2,378
Interest income		36		98		—		134
Interest expense		29		835		—		864
Expenditures for property		1,037		463		—		1,500
2005
Depreciation and amortization		2,448		345		—		2,793
Interest income		16		98		—		114
Interest expense		17		298		—		315
Expenditures for property		2,318		28		—		2,346

Information concerning services revenue is as follows (in thousands):


	For the Years Ended December 31,
	2007		2006		2005
	(in thousands)

Design	$	68,459	$	70,357	$	76,676
Deployment		27,475		50,944		57,915
Operations and maintenance		20,343		5,298		7,144
Consulting		29,446		3,354		3,907

Total revenues	$	145,723	$	129,953	$	145,642

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Information concerning principal geographic areas was as follows (in thousands):


	2007				2006				2005
			Net				Net				Net
	Revenues		Property		Revenues		Property		Revenues		Property
	(in thousands)

Americas:
United States of America	$	46,974	$	2,755	$	29,808	$	881	$	36,092	$	1,277
Other		—		—		151		—		1,253		67

Total Americas		46,974		2,755		29,959		881		37,345		1,344

Europe, Middle East and Africa:
United Kingdom		13,741		811		18,286		190		13,331		318
Netherlands		19,820		248		17,228		233		21,206		268
Italy		7,579		365		6,110		604		6,010		968
Spain		6,120		1,446		—		—		—		—
Belgium		5,401		145		—		—		—		—
Algeria		6,004		110		29,065		—		31,105		—
Saudi Arabia		26,452		—		23,271		—		31,218		73
Other		13,632		69		5,984		840		4,974		614

Total Europe, Middle East and Africa		98,749		3,194		99,944		1,867		107,844		2,241

Asia-Pacific		—		—		50		31		453		57

Total	$	145,723	$	5,949	$	129,953	$	2,779	$	145,642	$	3,642


Note 20.	Quarterly Data (Unaudited)


	2007
	1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter
	(in thousands, except per share amounts)

Revenues	$	24,640		$	29,717		$	41,834		$	49,532
Operating income (loss)		(6,169	)		(6,337	)		(5,192	)		(1,282	)
Income (loss) from continuing operations before income taxes		(6,587	)		(6,741	)		(8,201	)		(5,769	)
Income (loss) from continuing operations		(7,234	)		(7,082	)		(7,568	)		(6,801	)
Income (loss) from discontinued operations		(2,052	)		(374	)		(329	)		685
Net income (loss)	$	(9,286	)	$	(7,456	)	$	(7,897	)	$	(6,116	)

Net income (loss) per share:
Continuing operations — basic and diluted	$	(0.28	)	$	(0.24	)	$	(0.24	)	$	(0.22	)

Discontinued operations — basic and diluted	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02

Net loss per share — basic and diluted	$	(0.36	)	$	(0.25	)	$	(0.25	)	$	(0.20	)

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	2006
	1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter
	(in thousands, except per share amounts)

Revenues	$	35,743		$	33,997		$	31,933		$	28,280
Operating loss		(222	)		216			872			(5,202	)
Loss from continuing operations before income taxes		(448	)		381			1,642			(4,878	)
Loss from continuing operations		(1,428	)		(507	)		131			(3,075	)
Income (loss) from discontinued operations		(732	)		585			(1,701	)		(1,303	)
Net income (loss)	$	(2,160	)	$	78		$	(1,570	)	$	(4,378	)

Net income (loss) per share:
Continuing operations — basic and diluted	$	(0.06	)	$	(0.02	)	$	0.01		$	(0.12	)

Discontinued operations — basic and diluted	$	(0.03	)	$	0.02		$	(0.07	)	$	(0.05	)

Net income (loss) per share — basic and diluted	$	(0.09	)	$	—		$	(0.06	)	$	(0.17	)

The sum of the quarterly per share data may not equal the per share data for the year due to the use of weighted average shares outstanding when calculating earnings per share.

During the second quarter of 2007, the Company recorded a net restructuring charge of $1.1 million as a result of steps taken by the Company towards integrating operations through a workforce reduction and consolidating certain facilities. Approximately $1.0 million was related to severance and headcount related expenses and approximately $0.1 million was related to consolidation of certain facilities and other non-headcount related expenses.

As of January 1, 2006, the Company adopted SFAS No. 123(R) which generated non-cash compensation of $0.3 million, $0.5 million, $0.5 million, and less than $0.1 million during the first, second, third and fourth quarter, respectively.

During the second quarter of 2006, the Company recorded a gain of $0.2 million on a favorable settlement of a dispute related to an earn-out agreement that we had entered into in conjunction with the acquisition of our Netherlands subsidiary.

During the fourth quarter of 2006, the Company recorded an additional accrual for audit fees of $0.5 million which were a consequence of additional work performed by the Company’s auditors to complete the audit of the Company’s financial statements and the required testing and review of the Company’s internal controls, in accordance with Section 404 of the Sarbanes Oxley Act of 2002.


Note 21.	Management’s Plans, Liquidity and Business Risks

As of December 31, 2007, the Company had an accumulated deficit of approximately $96.3 million and had incurred a net loss of $30.8 million and used $16.2 million in operating cash flows in the year ended December 31, 2007. The Company had approximately $9.6 million available in operating cash and approximately $0.4 million of borrowing availability under its debt facilities.

The Company believes that the combination of the availability under its bank lines, the as well as its $22.0 million of working capital will provide sufficient cash flow to carry out its operations for the next 12 months.

Accordingly, the carrying value of the assets and liabilities in the accompanying balance sheet do not reflect any adjustments should the Company be unable to meet its future operating cash needs in the ordinary course of business. The Company continues to take various actions to align its cost structure to appropriately match its

LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expected revenues, including limiting its operating expenditures and controlling its capital expenditures. Any future acquisitions, other significant unplanned costs or cash requirements may require the Company to raise additional funds through the issuance of debt and equity securities. There can be no assurance that such financing will be available on terms acceptable to the Company, or at all. If additional funds are raised by issuing equity securities, significant dilution to the existing stockholders may result.


Note 22.	Subsequent Events

On February 20, 2008, the Company filed a current report on Form 8-K disclosing that on February 19, 2008, it entered into a Second Amendment to Restated Credit Agreement and Waiver (the “Amendment”), which amends the Amended and Restated Credit Agreement, dated as of May 29, 2007 (the “Credit Agreement”), among the Company, as borrower, certain domestic subsidiaries of the Company, as guarantors and Bank of America, N.A. as lender and administrative agent (the “Bank”). The Amendment provides, among other things, (a) a waiver by the Bank of certain specified defaults under the Credit Agreement, and (b) a requirement that the financial statements described in Section 7.01(b) of the Credit Agreement with respect to the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007, in each case, along with any additional deliveries required under the Credit Agreement in connection therewith, be delivered to the Bank on or before February 22, 2008, the failure of which will constitute an immediate event of default irrespective of otherwise applicable grace or cure period. The Amendment also provided that $1.35 million of the settlement proceeds of $1.8 million, as discussed in Note 5, shall be applied to the term loan payments in the reverse order of maturity, with the balance of the settlement proceeds to be used by the Company for general corporate and working capital needs. This provision thereby resulted in classifying $1.35 million of the term loan as current in the consolidated balance sheet.

The Company also announced that on February 14, 2008, the Company received notice that the Board of Directors of the NASDAQ Stock Market LLC (the “NASDAQ Board”), pursuant to its discretionary authority under Marketplace Rule 4809, had called for review of the December 19, 2007 decision of the NASDAQ Listing and Hearing Review Council regarding the Company, which provided a filing deadline of February 19, 2008. The NASDAQ Board also determined to stay the decision to suspend the Company’s securities from trading, pending further consideration by the NASDAQ Board. This action effectively extended the previous February 19, 2008 filing deadline. The Company subsequently filed its quarterly reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007, and September 30, 2007, and pro forma financial information related to the acquisition of the U.S. wireless engineering services business of WFI on Form 8-K/A on February 21, 2008. On March 5, 2008, the Company announced that it had received notice from NASDAQ that it is now compliant with Marketplace Rule 4310 (c)(14). As such, the Board of Directors of NASDAQ has withdrawn its February 14, 2008 call for review of the December 19, 2007 decision of the Listing Council.


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

The audit report of Grant Thornton LLP on the Company’s consolidated financial statements as of and for the year ended December 31, 2007, did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except as follows: (i) Grant Thornton’s audit report on the consolidated financial statements of the Company as of and for the year ended December 31, 2007, contained a separate paragraph stating that “As discussed in Note 2 to the Notes to Consolidated Financial Statements, the Company adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” effective January 1, 2007.”


Item 9A.	*Controls and Procedures*


*(a)*	*Evaluation of Disclosure Controls and Procedures*

The Company’s management, with the participation of its Chief Executive Officer, who is its principal executive officer, and its Chief Financial Officer, who is its principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2007. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures were not effective as a result of the material weaknesses in internal control over financial reporting noted in item (b) below.


*(b)*	*Internal Control Over Financial Reporting*

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


	•	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. The Company’s management based the evaluation on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework.

Based on this evaluation, the Company’s management is reporting the following material weaknesses as of December 31, 2007:

The Company failed to maintain effective controls over the preparation of its consolidated income tax provision, including processes followed in the identification and measurement of uncertain tax positions.

The Company failed to effectively plan, monitor, and carry out timely review activities of individual accounts and classes of transactions that resulted in the Company’s inability to meet is financial reporting filing deadlines with the SEC.

Because of the material weaknesses described above, management concluded that the Company’s internal controls over financial reporting were not effective as of December 31, 2007.

Grant Thornton, LLP, the Company’s independent registered public accounting firm, has issued an auditors’ report on the Company’s assessment of its internal control over financial reporting. This report appears below in Item 9A (b).


*(c)*	*Changes in Internal Control over Financial Reporting*

The Company took several steps to improve its internal controls in 2007 that protect the integrity of LCC’s financial reporting. In the Company’s Annual Report for the year end December 31, 2006 on Form 10-K (the “2006 10-K”), LCC reported two material weaknesses that were self identified. In 2007 LCC took steps to remediate these two material weaknesses, one of which was completed in 2007. The overall changes are covered in item (d) below.


*(d)*	*Remediation Efforts*

In 2007, the Company remediated the two material weaknesses reported in the 2006 10-K, which were to ensure competent and timely monitoring of internal controls and to provide strict oversight to the accrual process in Algeria.

In regard to the deficiency related to monitoring, the Company utilized an experienced professional services firm and independent contractor to partner with management to execute its Internal Audit function and develop, plan, implement, and execute, testing of internal controls which occurred during 2007. This process allowed management to evaluate and assess the effectiveness of the controls. In addition the Company moved to enhance its internal control environment by creating a senior level management position overseeing Internal Audit that was filled by a qualified candidate effective January 2, 2008. These activities in respect to monitoring were not completed by December 31, 2007.

In respect to the accrual process in Algeria, in 2007, the Company took the following steps:


	•	Provided management training of operations and financial personnel as to the identification of all of the cost elements that should be included in the accrual of costs related to its deployment activities.

	•	Required a monthly review by the SVP of EMEA of all elements of the entity level financial statements including all accrual based entries.

The Company took an additional step to enhance the internal control environment by creating a Controller position in Algeria to oversee the financial operations and monitor the effectiveness of all the controls. The position was filled by a qualified candidate in December 2007

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
LCC International Inc. and subsidiaries

We have audited LCC International, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

The Company’s entity-level policies and procedures for monitoring the effectiveness of control activities that relate to individual accounts and classes of transactions were not effective. Specifically, there was not effective planning of the nature, timing or extent of monitoring activities or adequate resources to ensure monitoring is performed on a timely basis by personnel with sufficient expertise. As a result of this material weakness, deficiencies in the design or operation of internal control over financial reporting, including deficiencies that represent more than a remote likelihood of material misstatement in the Company’s annual or interim financial statements, may not be identified and remediated on a timely basis. Accordingly, management determined that this control deficiency constitutes a material weakness.

The Company did not maintain effective controls over the preparation of its consolidated income tax provision, including processes followed in the identification and measurement of uncertain tax positions. Specifically, the Company did not maintain effective controls to review and monitor the accuracy of the components of the income tax provision and uncertain tax positions. Accordingly, management determined that this control deficiency constitutes a material weakness.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of LCC International, Inc. as of December 31, 2007, and the related statements of operations, shareholders’ equity and comprehensive loss, and cash flows for the year ended December 31, 2007. The material weaknesses identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2007 financial statements, and this report does not affect our report dated April 28, 2008, which expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

McLean, Virginia

April 28, 2008


*(c)*	*Changes in Internal Control over Financial Reporting*

The company took several steps to improve the internal controls in 2007 that protect the integrity of LCC’s financial reporting. In the 2006 Form 10-K, LCC reported two material weaknesses that were self identified. During 2007 LCC took steps to remediate these two material weaknesses. The remediation of one material weakness was completed in 2007. The remediation steps taken relating to the Company’s internal controls over financial reporting are discussed in item (d) below.


*(d)*	*Remediation Efforts*

In 2007, the Company remediated the two material weaknesses reported in the 2006 Form 10-K, which were to ensure competent and timely monitoring of internal controls and to provide strict oversight to the accrual process in Algeria.

In regard to the deficiency related to monitoring, the Company utilized an experienced professional services firm and independent contractor to partner with management to execute its Internal Audit function and develop, plan, implement, and execute testing of internal controls, which occurred during 2007. This process allowed management to evaluate and assess the effectiveness of the controls. In addition the Company moved to enhance its internal control environment by creating a senior level management position overseeing Internal Audit that was filled effective January 2, 2008. These activities in respect to monitoring were not completed by December 31, 2007.

In respect to the accrual process in Algeria, in 2007, the Company took the following steps:


	•	Provided management training of operations and financial personnel as to the identification of all of the cost elements that should be included in the accrual of costs related to its deployment activities.

	•	Required a monthly review by the SVP of EMEA of all elements of the entity level financial statements including all accrual based entries.

Item 9B. Other information

Not applicable.

PART III


Item 10.	*Directors, Executive Officers and Corporate Governance*

Reference is made to the information set forth under the captions “Election of Directors” and “Management” appearing in the Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.


Item 11.	*Executive Compensation*

Reference is made to the information set forth under the caption “Management — Executive Compensation” appearing in the Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Reference is made to the information set forth under the caption “Beneficial Ownership of Common Stock” appearing in the Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.


Item 13.	*Certain Relationships and Related Transactions, and Director Independence*

Reference is made to the information set forth under the captions “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions” appearing in the Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.


Item 14.	*Principal Accountant Fees and Services*

Reference is made to the information set forth under the caption “Principal Accounting Fees and Services” appearing in the Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.

PART IV


Item 15.	*Exhibits and Financial Statement Schedules*

(a)(1) The following consolidated financial statements of LCC International, Inc. and its subsidiaries and report of independent registered public accounting firm are included in Item 8 hereof.

Reports of Independent Registered Public Accounting Firms.

Consolidated Statements of Operations — Years Ended December 31, 2007, 2006, and 2005.

Consolidated Balance Sheets as of December 31, 2007 and 2006.

Consolidated Statements of Shareholders’ Equity and Other Comprehensive Loss — Years Ended December 31, 2007, 2006, and 2005.

Consolidated Statements of Cash Flows — Years Ended December 31, 2007, 2006, and 2005.

Notes to Consolidated Financial Statements.

(a)(2) Except as listed below, all schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission either have been included in the Consolidated Financial Statements of LCC International, Inc. or are not required under the related instructions or are inapplicable, and therefore have been omitted.

Schedule II — Valuation and Qualifying Accounts

(a)(3) None.

(b) The exhibits listed in the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, as of April 29, 2008.

LCC INTERNATIONAL, INC.


	By:	/s/ Dean J. Douglas

Dean J. Douglas

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 29, 2008.


Signatures				Title


/s/ Dean J. Douglas Dean J. Douglas				President and Chief Executive Officer (Principal Executive Officer)

/s/ Louis Salamone, Jr. Louis Salamone, Jr.				Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

/s/ Julie A. Dobson Julie A. Dobson				Director, Chairman of the Board of Directors

/s/ Melvin L. Keating Melvin L. Keating				Director

/s/ Richard J. Lombardi Richard J. Lombardi				Director

/s/ Susan Ness Susan Ness				Director

/s/ Rajendra Singh Rajendra Singh				Director

/s/ Mark A. Slaven Mark A. Slaven				Director

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

Column C

Column B

Additions

Column D

Column E

Balance at

Charged to

Charges to

Deductions

Balance at

Column A

Beginning

Costs and

Other

and Other

End of

Description

of Period

Expenses

LCC INTERNATIONAL INC 10-K