The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the consolidated financial statements, related notes, and other detailed information included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (this "Form 10-Q"). This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition. We generally identify forward-looking statements by the use of terms such as "believe", "intend", "expect", "may", "should", "plan", "project", "contemplate", "anticipate", or other similar statements. Examples of forward looking statements in this Quarterly Report on Form 10-Q include, but are not limited to statements: (a) regarding our belief as to the sufficiency of our capital resources with cash generated from operations as well as cash on hand to meet our anticipated cash operating expenses, working capital, and capital expenditures and debt service needs for at least the next twelve months,
(b) about our backlog and that we expect to realize approximately $116.8 million of backlog in the next twelve months, (c) regarding our belief that insurance policies may cover some or all of the potential costs of certain litigation,
(d) that we believe that certain capitalized costs will be recoverable from future gross profits, (e) regarding our belief that we were in compliance with our loan covenants and that we believe that we will continue to comply with our restrictive covenants, (f) regarding our belief that our technology does not infringe on the patents cited in the lawsuit against our customer, and (g), regarding the impact of certain accounting pronouncements on the Company's financial statements.

These forward-looking statements relate to our plans, objectives and expectations for future operations. In light of the risks and uncertainties inherent in all such projected operational matters, the inclusion of forward-looking statements in this report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved or that any of our operating expectations will be realized. Our actual financial results realized could differ materially from the statements made herein, depending in particular upon the risks and uncertainties described in our filings with the Securities and Exchange Commission. These include without limitation risks and uncertainties relating to our financial results and our ability to (i) sustain profitability, (ii) continue to rely on our customers and other third parties to provide additional products and services that create a demand for our products and services, (iii) conduct our business in foreign countries, (iv) adapt and integrate new technologies into our products,
(v) expand our sales and business offerings in the wireless communications industry, (vi) develop software without any errors or defects, (vii) have sufficient capital resources to fund the Company's operations, (viii) protect our intellectual property rights, (ix) implement our sales and marketing strategy, and (x) successfully integrate the assets and personnel obtained in our acquisitions. These factors should not be considered exhaustive; we undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. We caution you not to put undue reliance on these forward-looking statements.

The information in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" discusses our unaudited consolidated financial statements, which have been prepared in accordance with GAAP for interim financial information.

Critical Accounting Policies

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Our most significant estimates relate to:

• accounting for our percentage-of-completion and proportional performance contracts involving multiple elements and software,

• accounts receivable realizability,

• inventory value,

• evaluating goodwill for impairment,

• the realizability and remaining useful lives of long-lived assets, and

• contingent liabilities.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have identified our most critical accounting policies to be those related to:

• revenue recognition for our software and other contracts with multiple elements,

• revenue recognition for our contracts accounted for using the percentage-of-completion and proportional performance methods,

• capitalized software development costs,

• acquired intangible assets, and

• income taxes.

We describe these accounting policies in relevant sections of this discussion and analysis. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2007 (the "2007 Form 10-K"), with the exception of the following disclosure regarding Fair Value Measures, the Company's accounting policies remain unchanged through the third quarter of 2008.

Fair Value Measures

The Company adopted Statement of Accounting Standards SFAS 157, "Fair Value Measurements" effective January 1, 2008. The adoption of SFAS 157 did not have a material impact on the Company's financials statements or results of operations. The statement identifies two kinds of inputs, observable and unobservable, that are used to determine the fair value of assets and liabilities. Observable inputs are based on market data or independent sources while unobservable inputs are based on the Company's own assumptions. The Company's major categories of financial assets and liabilities subject to fair value measurements include cash and cash equivalents and marketable securities that are held as available for sale. Both categories use observable inputs only and are measured using a market approach based on quoted prices.

Overview

Our business is reported across two market segments: (i) the Commercial Segment, which consists principally of enhanced communication services to and from wireless phones, location application software, our E9-1-1 application and other hosted services, and (ii) the Government Segment, which includes the design, development and deployment of information processing and communication systems and related services to government agencies.

This "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" provides information that our management believes to be necessary to achieve a clear understanding of our financial statements and results of operations. You should read this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" together with Item 1A "Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and

Results of Operations" in our 2007 Form 10-K as well as the unaudited interim consolidated financial statements and the notes thereto located elsewhere in this Form 10-Q.

Indicators of Our Financial and Operating Performance

Our management monitors and analyzes a number of key performance indicators in order to manage our business and evaluate our financial and operating performance. Those indicators include:

• Revenue and gross profit. We derive revenue from the sales of systems and services including recurring monthly service and subscriber fees, software licenses and related service fees for the design, development, and deployment of software and communication systems, and products and services derived from the delivery of information processing and communication systems to governmental agencies.

• Gross profit represents revenue minus direct cost of revenue, including certain non-cash expenses. The major items comprising our cost of revenue are compensation and benefits, third-party hardware and software, amortization of software development costs, non-cash stock-based compensation, and overhead expenses. The costs of hardware and third-party software are primarily associated with the delivery of systems, and fluctuate from period to period as a result of the relative volume, mix of projects, level of service support required and the complexity of customized products and services delivered. Amortization of software development costs, including acquired technology, is associated with the recognition of systems revenue from our Commercial Segment.

• Operating expenses. Our operating expenses are primarily compensation and benefits, professional fees, facility costs, marketing and sales-related expenses, and travel costs as well as certain non-cash expenses such as non-cash stock compensation expense, depreciation and amortization of property and equipment, and amortization of acquired intangible assets.

• Liquidity and cash flows. The primary driver of our cash flows is the results of our operations. Other important sources of our liquidity are our lease financings secured for the purchase of equipment and potential borrowings under our credit lines.

• Balance sheet. We view cash, working capital, and accounts receivable balances and days revenues outstanding as important indicators of our financial health.

Results of Operations

Revenue and Cost of Revenue

The following discussion addresses the revenue, direct cost of revenue, and gross profit for our two business segments.

Commercial Segment:


                                             Three Months                                           Nine Months
                                         Ended September 30,            2008 vs. 2007           Ended September 30,            2008 vs. 2007
($ in millions)                           2008           2007           $            %           2008           2007           $            %

Services revenue                       $     15.7       $  15.0      $   0.7           5 %    $     47.8       $  43.3      $    4.5         10 %
Systems revenue                               7.0           4.4          2.6          59 %          26.8          12.5          14.3        114 %

Commercial segment revenue                   22.7          19.4          3.3          17 %          74.6          55.8          18.8         34 %

Direct cost of services revenue               8.1           7.4          0.7           9 %          24.0          22.2           1.8          8 %
Direct cost of systems revenue                2.5           1.1          1.4         127 %           7.4           3.8           3.6         95 %

Commercial segment cost of revenue           10.6           8.5          2.1          25 %          31.4          26.0           5.4         21 %

Services gross profit                         7.6           7.6            -          NM            23.8          21.1           2.7         13 %
% of revenue                                   48 %          51 %                                     50 %          49 %
Systems gross profit                          4.5           3.3          1.2          36 %          19.4           8.7          10.7        123 %

% of revenue                                   64 %          75 %                                     72 %          70 %
Commercial segment gross profit1       $     12.1       $  10.9      $   1.2          11 %    $     43.2       $  29.8      $   13.4         45 %

% of revenue                                   53 %          56 %                                     58 %          53 %

1 See discussion of segment reporting in Note 5 to the accompanying unaudited consolidated financial statements

Commercial Services Revenue, Cost of Revenue, and Gross Profit:

Commercial services revenue increased 5% and 10%, respectively, for the three- and nine-months ended September 30, 2008 versus the comparable periods of 2007.

Our hosted services offerings include our E9-1-1 service for wireless and Voice over Internet Protocol (VoIP) E9-1-1 service providers, hosted Position Determining Entity (PDE) service, and hosted Location Based Service (LBS) applications. Revenue from these offerings primarily consists of monthly recurring service fees and is recognized in the month earned. E-911, PDE, VoIP and hosted LBS service fees are priced based on units served during the period, such as the number of customer cell sites served, the number of connections to Public Service Answering Points (PSAPs), or the number of customer subscribers served. Subscriber service revenue is generated by client software applications such as Rand McNally® Traffic. Maintenance fees on our systems and software licenses are collected in advance and recognized ratably over the maintenance period. Unrecognized maintenance fees are included in deferred revenue. Custom software development, implementation and maintenance services may be provided under time and materials or fixed-fee contracts. Commercial services revenue in the three- and nine-months ended September 30, 2008 was $0.7 million and $4.5 million, respectively, higher than the same periods for 2007 from increased service connection deployments of our E9-1-1 services for cellular and VoIP service providers, an increase in maintenance revenue, and an increase in the number of carriers and carrier billable units served.

The direct cost of commercial services revenue consists primarily of compensation and benefits, network access, data feed and circuit costs, and equipment and third party software maintenance. The

direct cost of maintenance revenue consists primarily of compensation and benefits expense. For the three months ended September 30, 2008, the direct cost of service revenue increased 9% as compared to the third quarter of 2007. Similarly, the direct cost of services revenue increased 8% for the nine months ended September 30, 2008 compared to the same period of 2007. We incurred an increase in labor and direct costs related to custom development efforts responding to customer requests and deployment requirements for VoIP. For both the three- and nine-months ended September 30, 2008, the cost of circuits and other data access costs accounted for approximately 13% of total direct costs of our commercial service revenues. Such costs comprised approximately 15% of the total direct costs of our commercial service revenues for both the three- and nine-months ended September 30, 2007.

Commercial services gross profit for the three months ended September 30, 2008 and 2007 were about the same at $7.6 million. Commercial services gross profit as a percentage of revenue was 50% for the nine months ended September 30, 2008 versus 49% for the nine months ended September 30, 2007. This increase is due to improved operating efficiencies enabling higher revenue with only nominal increases in labor, fringe and contractors costs.

Commercial Systems Revenue, Cost of Revenue, and Gross Profit:

We sell communications systems incorporating our licensed software for enhanced services, including text messaging and location-based services, to wireless carriers. These systems are designed to incorporate our licensed software. We design our software to ensure that it is compliant with all applicable standards.

Licensing fees for our carrier software are generally a function of its volume of usage in our customers' networks. As a carrier's subscriber base or usage increases, the carrier must purchase additional capacity under its license agreement and we receive additional system license revenue. Systems revenues typically contain multiple elements, which may include the product license, installation, integration, and hardware. The total arrangement fee is allocated among each element based on vendor-specific objective evidence of the relative fair value of each of the elements. Fair value is generally determined based on the price charged when the element is sold separately. In the absence of evidence of fair value of a delivered element, revenue is allocated first to the undelivered elements based on fair value and the residual revenue to the delivered elements. The software licenses are generally perpetual licenses for a specified volume of usage, along with the purchase of annual maintenance at a specified rate. We recognize license fee revenue when each of the following has occurred: (1) evidence of an arrangement is in place; (2) we have delivered the software; (3) the fee is fixed or determinable; and (4) collection of the fee is probable. Software projects that require significant customization are accounted for under the percentage-of-completion method. We measure progress to completion using costs incurred compared to estimated total costs or labor costs incurred compared to estimated total labor costs for contracts that have a significant component of third-party materials costs. We recognize estimated losses under long-term contracts in their entirety upon discovery. If we did not accurately estimate total costs to complete a contract or do not manage our contracts within the planned budget, then future margins may be negatively affected or losses on existing contracts may need to be recognized. Software license fees billed and not recognized as revenue are included in deferred revenue.

Commercial systems revenue for the three- and nine-months ended September 30, 2008 were 59% and 114% higher than in the same periods of 2007, due mainly to increased sales of licensed text messaging software and customer hardware upgrades.

The direct cost of our systems consists primarily of compensation and benefits, purchased equipment, third-party software, travel expenses, and consulting fees as well as the amortization of both acquired and capitalized software development costs for all reported periods. There is no significant direct cost associated with customer purchases of licensed capacity. During the three- and nine-months ended September 30, 2008, direct costs of systems included $0.6 million and $1.5 million, respectively, of amortization of software development costs. In the three- and nine-months ended September 30, 2007, the composition of the direct cost of our systems was about the same except for $0.4 million and

$1.1 million, respectively, of amortization of software development costs. The increase in the direct costs of systems of $1.4 million and $3.6 million in the three- and nine-months ended September 30, 2008 compared to the same periods in 2007 is due primarily to increases in hardware costs related to the development of new custom solutions.

Our commercial systems gross profit was 64% and 72%, respectively, in the three- and nine-months ended September 30, 2008 versus 75% and 70% for the three- and nine-months ended September 30, 2007. Gross profit for the three months ended September 30, 2008 versus the three months ended September 30, 2007 decreased as a percentage of revenue as a result of lower margins on hardware sales. Gross profit for the nine months ended September 30, 2008 versus the same period in 2007 increased by 123% as a result of higher sales of licensed software capacity slightly offset by the lower margins on hardware sales.

Government Segment:


                                              Three Months                                           Nine Months
                                          Ended September 30,            2008 vs. 2007           Ended September 30,            2008 vs. 2007
($ in millions)                            2008           2007           $            %           2008           2007            $           %

Services revenue                        $      9.2       $   7.0      $    2.2         31 %    $     24.2       $  22.2      $     2.0         9 %
Systems revenue                               24.6          11.2          13.4        120 %          42.1          29.0           13.1        45 %

Government segment revenue                    33.8          18.2          15.6         86 %          66.3          51.2           15.1        29 %

Direct cost of services revenue                7.3           5.4           1.9         35 %          19.3          17.2            2.1        12 %
Direct cost of systems revenue                21.1           9.5          11.6        122 %          34.0          24.7            9.3        38 %

Government segment cost of revenue            28.4          14.9          13.5         91 %          53.3          41.9           11.4        27 %

Services gross profit                          1.9           1.6           0.3         19 %           4.9           5.0           (0.1 )      (2 )%
% of revenue                                    21 %          23 %                                     20 %          23 %
Systems gross profit                           3.5           1.7           1.8        106 %           8.1           4.3            3.8        88 %

% of revenue                                    14 %          15 %                                     19 %          15 %
Government segment gross profit1        $      5.4       $   3.3      $    2.1         64 %    $     13.0       $   9.3      $     3.7        40 %

% of revenue                                    16 %          18 %                                     20 %          18 %

1 See discussion of segment reporting in Note 5 to the accompanying unaudited consolidated financial statements

We provide products and services to government customers under long-term contracts. We recognize contract revenue as billable costs are incurred and for fixed-price product delivery contracts using the percentage-of-completion method or proportional performance method, measured by either total labor costs or total costs incurred compared to total estimated labor costs or total estimated costs. We recognize estimated losses on contracts in their entirety upon discovery. If we have not accurately estimated total labor costs or total costs to complete a contract or do not manage our contracts within the planned budget, then future margins may be negatively affected or losses on existing contracts may need to be recognized, or contract terms must be renegotiated. Under our contracts with the U.S. Government, contract costs, including the allocated indirect expenses, are subject to audit and adjustment by the Defense Contract Audit Agency (DCAA). Since the Company's inception, no significant adjustment has resulted from a DCAA audit. We record revenue under government contracts at estimated net realizable amounts.

Government Services Revenue, Cost of Revenue, and Gross Profit:

Government services revenue primarily consists of communications engineering, program management, help desk outsource, satellite "space segment" and airtime, network design and management for government agencies. Our Government Segment also operates teleport facilities for data connectivity via satellite. Such services are delivered under time and materials or fixed price contracts. For fixed price delivery contracts we recognize revenue using the percentage-of-completion method or proportional performance method, measured by either total labor costs or total costs incurred compared to total estimated labor costs or total costs to be incurred.

Government services revenues increased by approximately $2.0 million for both the three- and nine-months ended September 30, 2008 versus the comparable period for 2007. The increases were a result of additional orders on existing services contracts.

Direct cost of government services revenue consists of compensation, benefits and travel incurred in delivering these services, as well as satellite space segment purchased for resale to government customers. The direct costs of government services increased by 35% and 12% in the three- and nine-months ended September 30, 2008, respectively, compared to the same period in 2007, as a result of increased labor costs to support the increase in volume of service requests.

Our gross profit from government services was $1.9 million in the three months ended September 30, 2008 compared to $1.6 million in the same period of 2007. Gross profit was $4.9 million in the nine months ended September 30, 2008 versus $5.0 million in the same period of 2007. Gross profit as a percentage of revenue in the three- and nine-months ended September 30, 2008 compared to the three- and nine-months ended September 30, 2007 decreased as a result of lower average pricing upon the renewal of several contracts.

Government Systems Revenue, Cost of Revenue, and Gross Profit:

We generate government systems revenue from the design, development, assembly and deployment of information processing and communication systems, primarily deployable communications systems, and integration of those systems into customer networks, which are largely variations on our SwiftLink® product line. These are lightweight, secure, deployable communications systems, sold to units of the U.S. Departments of State, Justice, and Defense, and other agencies. We recognize contract revenue as billable costs are incurred, and for fixed-price product delivery contracts using the percentage-of-completion method, measured by either total labor costs, total costs incurred, or units shipped compared to total estimated labor costs, total costs, or units as appropriate under the contract. We recognize estimated losses on contracts in their entirety upon discovery. If we do not accurately estimate total labor costs or total costs to complete a contract or do not manage our contracts within the planned budget, then future margins may be negatively affected or losses on existing contracts may need to be recognized, or contract terms must be renegotiated.

Systems sales in our Government Segment were $24.6 million and $42.1 million for the three- and nine-months ended September 30, 2008 compared to $11.2 million and $29.0 million for the three- and nine-months ended September 30, 2007. The increase in the three- and nine-months ending September 30, 2008 versus the same periods in 2007 represents a higher sales volume from the fulfillment of task orders under the Army Worldwide Satellite Systems (WWSS) 5-year contract vehicle. In July 2008, TCS was named the sole awardee of a delivery order contract with a potential value of $246 million over the next several years, under the WWSS procurement vehicle.

The cost of our government systems revenue consists of purchased system components, compensation, benefits, travel, satellite airtime, and the costs of third-party contractors that we engage. These costs for the three- and nine-months ended September 30, 2008 increased by 122% and 38%, respectively, . . .