UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  
 
 FORM
10-K
 
 x
              ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT
      OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30,
2009
 
  ̈
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE
      ACT OF 1934 FOR THE TRANSITION PERIOD __________ TO
    __________
 
 Commission
File Number 0-28579
 
 BERLINER
COMMUNICATIONS, INC.
 (Exact
Name of Registrant as Specified in Its Charter)
 
 DELAWARE
                
                75-2233445(State
      or Other Jurisdiction of
                
                (I.R.S.
      EmployerIncorporation
      or Organization)
                
                Identification
      No.)
 
 97
LINDEN AVE. ELMWOOD PARK, NEW JERSEY  07407
 (Address
of Principal Executive Offices)
 
 201-791-3200
 (Registrant’s
Telephone Number, Including Area Code)
 
 Securities Registered Pursuant to Section 12(b) of the Act:
                  
                  Name of Each Exchange on Which Registered:NONE
                  
                  NONE
 
 Securities
Registered Pursuant to Section 12(g) of the Act:
 COMMON
STOCK, PAR VALUE $0.00002 PER SHARE
 (Title of
Class)
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes ̈Nox
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section15(d) of the Act.
 Yes ̈Nox
 
 Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes ̈No ̈
 
 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. YesxNo ̈
  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 the 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.   ̈
  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
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
the Exchange Act.
 
 Large
accelerated filer  ̈  Accelerated
filer   ̈   Non-accelerated
filer   ̈  Smaller
reporting company x
 
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes  ̈  No  x
  The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant based on the last reported sale price on
December 31, 2008, was approximately $5,562,000.
  As of
September 23, 2009, 26,515,732 shares of the registrant’s common stock, par
value $0.00002, were outstanding.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 PART
      III —
                Incorporated
      by reference to the registrant’s proxy statement to be mailed or sent to
      securities holders on or about October 24, 2009.
 
 
 PAGEPART
      IITEM
      1.
                                                                                      Business
                                                                                      3ITEM
      1A.
                                                                                      Risk
      Factors
                                                                                      11ITEM
      2.
                                                                                      Properties
                                                                                      17ITEM
      3.
                                                                                      Legal
      Proceedings
                                                                                      18ITEM
      4.
                                                                                      Submission
      of Matters to a Vote of Security Holders
                                                                                      18PART
      IIITEM
      5.
                                                                                      Market
      for Registrant’s Common Equity, Related Stockholder Matters
      and  Issuer  Purchases of Equity
      Securities
                                                                                      19ITEM
      6.
                                                                                      Selected
      Financial Data
                                                                                      20ITEM
      7.
                                                                                      Management’s
      Discussion and Analysis of Financial Condition and Results  of
      Operations
                                                                                      21ITEM
      7A.
                                                                                      Quantitative
      and Qualitative Disclosures About Market Risk
                                                                                      31ITEM
      8.
                                                                                      Financial
      Statements and Supplementary Data
                                                                                      31ITEM
      9.
                                                                                      Changes in and
      Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                                                      31ITEM 9A(T).
                                                                                      Controls
      and Procedures
                                                                                      31ITEM
      9B
                                                                                      Other
      Information
                                                                                      32PART
      IIIITEM
      10.
                                                                                      Directors,
      Executive Officers and Corporate Governance of the
    Registrant
                                                                                      33ITEM
      11.
                                                                                      Executive
      Compensation
                                                                                      33ITEM
      12.
                                                                                      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                                                      33ITEM
      13.
                                                                                      Certain
      Relationships and Related Transactions and Director
      Independence
                                                                                      33ITEM
      14.
                                                                                      Principal
      Accountant Fees and Services
                                                                                      33PART
      IVITEM
      15.
                                                                                      Exhibits
      and Financial Statement Schedules
                                                                                      33SIGNATURES
                                                                                      34INDEX
      TO EXHIBITS
                                                                                      35
  2
  PART
I
  ITEM 1.
BUSINESS
  General
  Berliner
Communications, Inc. was originally incorporated in Delaware in 1987 as Adina,
Inc. (“Adina”). Adina’s corporate existence was permitted to lapse in February
of 1996 and in August of 1999 was reinstated as eVentures Group, Inc.
(“eVentures”).  In December of 2000, eVentures changed its name to
Novo Networks, Inc. (“Novo”).
 
 On
February 18, 2005, Novo entered into an asset purchase agreement with the former
Berliner Communications, Inc., which subsequently changed its name to Old
Berliner, Inc.  (“Old Berliner”) and BCI Communications, Inc. (“BCI”),
a Delaware corporation and Novo’s wholly-owned subsidiary.  As part of
this transaction, BCI acquired (the “Acquisition”) the operations and
substantially all of the assets and liabilities of Old Berliner. On September
16, 2005, Novo changed its name to Berliner Communications, Inc. (“Berliner”).
Berliner is now the public reporting entity, and all of our operations are run
out of Berliner’s wholly-owned subsidiary, BCI. Unless the context otherwise
requires, references to “we”, “us”, “our” and “the Company” refer to Berliner
and its consolidated subsidiary BCI.
 
 Prior to
the Acquisition, Old Berliner provided wireless carriers with comprehensive site
acquisition, construction and zoning services. Old Berliner was founded in 1995,
and over the course of the following years, its service offerings were expanded
to include radio frequency and network design and engineering, infrastructure
equipment construction and installation, radio transmission base station
modification and project management services. With the consummation of the
Acquisition, BCI carried on the operations of Old Berliner.
 
 On
February 19, 2007, we acquired substantially all of the assets of Comtech
Systems, Inc. (“Comtech”), which expanded the depth of our Specialty
Communications Services business, which is described in more detail below. On
February 28, 2007, BCI entered into an Asset Purchase Agreement with Digital
Communication Services, Inc. (“Digitcom”) and its affiliates for the purchase of
certain of its assets in Arlington, Texas. This acquisition has expanded and
strengthened our presence in Texas, Oklahoma and the Midwest region. On April
16, 2007, we entered into an Asset Purchase Agreement with Radian Communication
Services, Inc. (“Radian”) to purchase certain of the U.S. assets and operations
of Radian and assume certain liabilities of Radian.  This acquisition
expanded our presence in Los Angeles, California, Las Vegas, Nevada, Seattle,
Washington, Salem, Oregon and Tempe, Arizona.  These acquisitions have
allowed us to become a nationwide service provider for our customers, the most
significant of which have nationwide operations that require us to have a broad
scope of services and an ability to service many geographic regions at
once.  These acquisitions have also expanded our customer base and
added depth to growing lines of business.
 
 With the
consummation of these acquisitions, BCI is now a leading self-performing, full
service vendor to the wireless communications industry, providing a wide range
of services, on a nationwide basis. Our core activities include site acquisition
and zoning; infrastructure equipment construction and installation; network
services; radio frequency and network design and engineering; radio transmission
base station installation and modification; and in-building network design,
engineering and construction. We provide some combination of these services
primarily to companies in the wireless telecommunications and/or data
transmission industries, cable operators, original equipment manufacturers, or
OEMs, and, to a lesser extent, to utility companies and government
entities.
 
 An
Overview of Our Markets and Products
 
 We
currently report our financial results on the basis of two reportable segments:
(1) infrastructure construction and technical services and (2) site acquisition
and zoning. Our infrastructure construction and technical services segment
consists of the following service lines: infrastructure equipment construction
and installation, radio frequency and network design and engineering, radio
transmission base station modification, in-building network design, engineering
and construction, project management, specialty communication services,
configured solutions and power system solutions. Our site acquisition and zoning
segment stands as a separate service line. Each of these lines, as well as the
business of our site acquisition and zoning segment, is described
below.
  3
 
 Infrastructure Equipment
Construction and Installation.Infrastructure equipment construction and
installation services are important drivers of our business, and the majority of
our revenue comes from this service offering.  We construct and
install the communications equipment that is necessary to make wireless networks
work.  The quality of the installation work in a wireless
telecommunications system build-out is one of the most critical aspects of its
performance. Once the necessary site acquisition steps have been completed,
materials to construct a tower or install a system on a roof-top are ordered
from a fabricator. In some cases, equipment and materials are ordered to modify
an existing site. Depending on our customers’ needs, we could be involved in all
aspects of site acquisition, construction and installation. Installation
of  towers could involve clearing sites, laying foundations, bringing
in utility lines and installing shelters and towers. Installation of a rooftop
site could include installing shelters and antennae, bringing in power or
installing power systems, and related construction and electrical
work.  Once we finish this part of the process, we install any
remaining technical equipment and, if it is a tower build, landscape and perhaps
fence the site. The site is now ready to be put into service once the remainder
of the network is completed. Installation may start once the preliminary work
has been completed and the individual “cell site” or switch location is ready to
be built. Every site is then tested with a simulation to see what levels of line
loss exist and how the transmission systems perform. We manage everything from
“one-off” projects involving a single site to “long-range” installation projects
involving hundreds or possibly thousands of sites. These large projects involve
significant financial and operational resources and planning and project
management skills that we believe distinguish us from many of our competitors,
particularly our smaller competitors.
 
 Radio Frequency and Network Design
and Engineering.Wireless network designs are based on projected
subscriber density, traffic demand and desired coverage area. The initial system
design is intended to optimize available radio frequency and to result in the
highest possible signal quality for the greatest portion of projected subscriber
usage base within existing technical constraints. Based on such initial
guidelines, our customers can hire us to identify and rank potential sites. This
process is known as identifying “search rings.”
 
 Radio Transmission Base Station
Modification.We currently perform cellular base station upgrades and
modifications for wireless telecommunications carriers. This work involves
upgrades to existing hardware as well as adding new hardware such as radios,
duplexers, power systems and site controllers. This work is essential for
enhancing network capacity and paving the way to the deployment of new networks
using new technologies, including third generation, or 3G, and fourth
generation, or 4G, systems. In order to minimize the impact on existing wireless
customers, most of the upgrade or modification work must be performed at night
during a so-called “maintenance window” between the hours of 11:00 PM and 5:00
AM. Carriers generally entrust this kind of work only to trained, capable
vendors, such as BCI, who can reliably and successfully complete the work at
each site during such timeframes.
 
 In-Building Network Design,
Engineering and Construction.We offer complete in-building solutions
that involve distributed antennae for wireless coverage in malls, shopping
centers, casinos, office buildings and airports and may include voice services
(using cellular or personal communications services (“PCS”) and wireless private
branch exchange (“PBX”) technologies), data services (including 802.11 (2.4 and
5 GHz)), enhanced coverage for safety spectrum (police, fire and rescue) and
wireless primary and secondary broadband backbones, synchronous optical networks
(“SONETs”) and campus connections.
 
 Project Management.We also
supervise all of the efforts associated with a project, whether it involves one
or more of the foregoing services or a “turn-key” solution, so the carrier can
ultimately broadcast from the newly configured site. Project management includes
vendor management, project planning and preparation, budget tracking, and
engineering and construction coordination. A single project may involve
thousands of individual sites, and we believe our ability to manage projects of
this size and complexity distinguishes us from some of our competitors who do
not have  our experience or resources in this area.
  4
 
 Specialty Communication Services.Our specialty communication services provide enhancements to existing
wireless and wired telephone and computer networks designed to improve
productivity for a specified application.  We provide microwave
systems where voice or video over land lines is not feasible.  We also
provide “structured cabling services” to provide voice, data and video over
traditional copper and fiber networks. We believe this business presents a
significant growth opportunity for us, and we intend to grow this aspect of our
business during fiscal 2010.
 
 Configured Solutions. In
early fiscal 2008, we introduced a configured solutions service offering,
designed to supplement our other business lines by providing logistics services
to our customers and to other third parties that may not have the facilities,
resources or capabilities that we do. These services include transportation,
tracking, storing and delivering of equipment, and configuring and testing
equipment at our locations. Our diverse geographic locations provide an
excellent platform for these services, and we have the expertise in-house for
the testing and configuration work. We believe this will provide an additional
source of revenue, allow us to further utilize existing resources and facilities
and provide yet another service that our customers need and not all of our
competitors can offer.
 
 Power System
Solutions.  In late fiscal 2008, we created our Green Energy
Group.  This Division provides a complete portfolio of traditional
network power equipment integrated with “environmentally friendly” or “Green”
primary and backup power solutions.  These solutions are designed to
meet our customers’ growing network needs and help address the growing
environmental challenges BCI and our customers feel strongly
about.  We are positioned to provide a wide array of power options for
their consideration, including hydrogen fuel cells, micro turbines, solar and
wind power solutions.  These new product and service offerings will
seamlessly integrate with our existing network installation and technical
services business.   We have many years of experience with the
installation of back-up power systems, primarily generators and batteries, and
this makes the addition of the Green Energy Group a natural extension of what we
believe we already do very well.
 
 Site Acquisition and Zoning.We began our business providing primarily site acquisition services that
generally involve acting as an intermediary between telecommunications companies
and owners of real estate and other facilities. In order to build and expand
their networks, such companies require locations that have direct access to
highways and roads to mount their antennae and equipment. The telecommunications
companies are typically able and willing to pay fees for the rights to place
their equipment in such strategic locations. Facility owners are generally eager
to earn additional income from their properties. We generate fees by introducing
telecommunications companies and real estate managers. We identify appropriate
properties, negotiate the transactions and handle the administrative details. We
also use our accumulated knowledge and relationships to assist in the planning
and installation of the telecommunication facilities, and offer customers
assistance in acquiring the necessary permits, entitlements and approvals that
are required by various municipalities. We also prepare all zoning applications
that may be needed, attend any necessary hearings and obtain any required land
use permits to begin installation.
 
 Staffing Services.In fiscal
2009, we introduced a staffing service offering to provide staffing services in
all leading technologies to carriers, vendors and suppliers in the fixed line
and cellular communications markets.  We offer a comprehensive range
of skills—including engineering, installation and acceptance and testing and can
provide maintenance personnel for network rollouts, transmission technology,
network planning, optimization and operations.  We also specialize in
project and program management at all levels.
  5
 
 Industry
Background
 
 Wireless
Telecommunications Networks
 
 Wireless
telecommunications networks are built using radio-based systems that allow a
telephone or data terminal to communicate without a metallic or optical cord or
wire equipment. The life cycle of a wireless network continually evolves and
consists of several phases, including strategic planning, design, deployment,
expansion, 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 and how it will be configured. Technical planning and preliminary
engineering designs are often required to decide on a deployment strategy and
determine construction costs and the revenue generating ability of the wireless
system.
 
 Following
acceptance of a wireless network design, access to land or building rooftops
must be secured for towers or telecommunications equipment, including radio base
stations, antennae and supporting electronics. Each site must be qualified in a
number of areas, including zoning ordinance requirements, regulatory compliance
and suitability for construction. Detailed site location designs are prepared,
and radio frequency engineers review interference to or from co-located
antennae. Construction and equipment installation then must be performed, and
site performance is measured after completion of construction. Finally,
professional technicians install and commission the new radio equipment, test
it, integrate it with existing networks and tune the components to optimize
performance.
 
 Once a
wireless network becomes operational and the number of subscribers 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
involves tuning the network to enable operators to compete more effectively in
areas where there are multiple system operators.
 
 Finally,
as new technologies are continuously developed, 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 late second generation, third generation and fourth generation (“2.5G”, “3G”
and “4G,” respectively), onto an existing network or deploying a new network
requires operators to reengage in the strategic planning, design, deployment,
expansion, operations and maintenance phases of a new cycle in the life of an
existing or new network.  Today many carriers are considering or
implementing major network overlays, some of them based on 4G, or WiMax,
technologies, and others based on what is known as Long Term Evolution, or LTE,
technologies.  A significant portion of our business today is
modifying existing sites by overlaying new technologies, as well as developing
new sites for wireless carriers and others.
 
 Rapid
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.  According to the Cellular Telecommunications and Internet
Association, or CTIA, there were approximately 270.3 million wireless
subscribers in the United States in December 2008, up from
207.9  million in 2005.  These subscribers used 2.2 trillion
minutes, up from 1.5 trillion in 2005 and 431.9 million in 1995.  This
usage accounted for approximately $148.1 billion in wireless service revenue in
2008, an increase of 7% from the prior year.  Also according to the
CTIA, there were 242,130 cell sites in the U.S. in December 2008, up from
183,689 in 2005 and 22,633 in 1995.  Clearly the wireless industry
continues to be in a strong growth mode, and we expect that to continue for the
foreseeable future.
 
 Wireless
access to the Internet is also growing rapidly as web-enabled devices become
more accessible. 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, messaging services, Wi-Fi, WiMax,
music on-demand, mobile-banking, locations-based services and interactive
games.  Text-messaging alone has increased dramatically over the past
several years, with 110.4 billion text messages sent every month as of December
2008, up from 9.8 billion per month in December 2005. As new technologies are
introduced, network upgrades often become necessary, and we are well-positioned
to assist our customers with the required upgrade work as we have the technical
expertise, experience and capabilities to handle this work on a large scale,
nation-wide basis.  We believe that the industry’s commitment to adopt
LTE (long term evolution) or WiMax equipment, both of which will generate
significant capital expenditures by the major carriers, will provide the
potential for significant opportunities for us over the next several
years.  Our company is a significant beneficiary of cell site
modification work in the wireless business, particularly because we are
technology neutral.  Therefore, we are positioned and trained to
assist our customers regardless of the technology they adopt, for example, LTE
or WiMax.
  6
 
 Industry
Challenges
 
 During
the past several years, the major wireless carriers began evaluating their costs
for engineering and constructing wireless sites and, as a result, those expenses
became an important issue. At that time, several well-funded private and public
firms entered the industry as high-level general contractors.  These
larger companies, sometimes referred to as “consolidators”, include such
companies as Bechtel Corporation and General Dynamics Corporation. These and
other similarly situated companies put themselves between the larger wireless
service providers, like Sprint Nextel, AT&T Wireless Services, Inc., Verizon
Wireless, T-Mobile USA, Inc., and MetroPCS and their former contractors, such as
us, by negotiating flat rate pricing. Many contracting firms entered into
agreements with limited knowledge of the actual cost to complete the work,
resulting in many lower than market bids. As a result, many smaller
subcontractors could not compete at such reduced margins. During 2004, the
wireless carriers also significantly reduced the number of sites they were going
to build. These factors contributed to industry attrition in the equipment
construction and installation sector. They also had a severe negative effect on
the profitability of companies such as ours during that time. Today, we have the
size, scope and resources to establish direct-to-carrier
relationships.  In addition, carriers are contracting with original
equipment manufacturers, or OEMs, such as Ericsson, Huawei, Samsung, Nokia and
Motorola, to perform installation services, and we have been working directly
with these OEMs to assist with these installation projects.
 
 Position
in Industry
 
 We
believe that the large wireless carriers have not been entirely satisfied with
their experience with some of the large contracting or project management firms,
and that this dissatisfaction created an opportunity for full service,
“self-performing” firms, such as BCI, with the ability to handle significant
volume, to take over a portion of the work currently being performed by such
firms.  Now that we have become what is known as a “tier one” service
provider, we receive purchase orders directly from the end user customer, the
wireless carriers. This situation enhances our profitability by removing a layer
of costs from our projects.   We expect to continue to benefit
from new developments in wireless technology and additional consolidation in the
telecommunications industry.
 
 Key
Drivers of Change in Our Business
 
 The key
drivers of change in the wireless telecommunications industry have
been:
 
 •
                the
      introduction of new services or
technologies;
 •
              the
      increase in the number of wireless subscribers served by wireless
      providers;
 •
              the
      increasing complexity of wireless systems in
    operation;
 •
              continuing
      mergers, acquisitions and divestitures in the telecommunications
      sector;
 •
              the
      issuance of new or additional licenses to wireless service providers;
      and
 •
              the
      increase in spending to rebuild and improve other communications networks,
      such as Public Safety
Networks.
 
 Each of
these key drivers is discussed below:
 
 The introduction of new services or
technologies.The rapid introduction of new services or technologies in
the wireless market and the need to reduce operating costs in many cases have
resulted in wireless service providers and equipment vendors outsourcing an
increasing portion of their network services development work to companies such
as ours. For example, new technologies such as text messaging, Internet access
and video streaming to cellular telephones have driven wireless carriers to
continually expand and enhance their networks.  Such efforts involve
providing both additional network capacity and expanded geographic coverage to
address wireless customers’ expectation of network quality, speed and service.
Therefore, wireless service providers have retained firms such as ours that have
the technical expertise, experience and resources to assist with this network
development and enhancement.
  7
 
 The increase in the number of
wireless subscribers served by wireless providers.The number of
wireless subscribers in the United States continues to increase
rapidly.  This creates an increase in usage by those subscribers and a
scarcity of wireless spectrum, which requires carriers to expand and optimize
system coverage and capacity to maintain network quality.  The
wireless carriers have engaged companies such as ours to increase the coverage
and capacity of their networks.  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.  Our customers also need companies such as ours to supplement
their internal resources to address these developments.
 
 The increasing complexity of
wireless systems in operation.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 new technologies,
such as WiMAX or 4G, with an existing network or deploying a new network
requires wireless service providers to reengage in the strategic planning,
design, deployment, expansion, operations and maintenance phases of a new cycle
in the life of an existing or new network.  If the wireless carrier
elects to upgrade an existing network, we can provide the services necessary to
implement such an upgrade.  If the carrier elects to deploy a new
network, we can also provide the services necessary to implement this new
development.  For companies such as ours, the type of technology that
our customers deploy or their decisions on whether to build new or upgrade
existing networks is not critical. The driver for our business is the rapid
growth of technology and increasing complexity of the networks that requires
carriers to hire companies such as ours on an ongoing basis.
 
 Continuing mergers, acquisitions and
divestitures in the telecommunications sector.In light of recent
consolidation in the telecommunications sector, wireless service providers are
faced with issues regarding the integration of separate telecommunications
networks. This may provide us with the opportunity to provide services relating
to performing network compatibility testing and resolving integration issues. We
provide significant modification work to existing networks besides the
construction of new wireless sites. In addition, when companies divest
themselves of divisions or business units, this also provides opportunities and
potential new customers for us. For example, in May 2008, our then-largest
customer, Sprint Nextel Corporation, announced an agreement with Clearwire
Corporation to form a new wireless communications company called
Clearwire.  Clearwire is building the first nationwide mobile WiMAX
network, which, according to Clearwire, will offer enhanced speed and access to
the Internet, among other things, for Clearwire customers.  Clearwire
is being funded by various other strategic partners, including Intel
Corporation, Google Inc., Comcast Corporation, Time Warner Cable Inc. and
Brighthouse Networks.  This type of transaction, with the addition of
significant financial support from strategic partners, provides an excellent
opportunity for us to participate in the build-out of the WiMAX networks by
Clearwire, and we have begun to do this work in various markets across the
country.
 
 The issuance of new or additional
licenses to wireless service providers. The Federal Communications
Commission, or FCC, has issued, and we expect it will continue to issue, new
licenses to wireless service providers that we believe will present new
opportunities for us. For example, in the first few months of 2008, the FCC
auctioned a significant number of licenses in the 700 MHz
spectrum.  This introduction of new licenses allows new entrants into
the industry who will need to develop new networks.  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 deployed and how it will be configured.
In addition, detailed site location designs must be prepared and radio frequency
engineers must review interference to or from co-located antennae. Construction
and equipment installation must then be performed and professional technicians
must install and commission the new radio equipment, test and integrate it with
existing networks and tune the components to optimize performance.  We
believe we are well positioned to service these needs.
  8
 
 The increase in spending to rebuild
and improve other communications networks, such as Public Safety Networks.There has been and we believe there will continue to be increased
spending on rebuilding and improving other communications networks,
including wireless and wired data, video and
voice networks, particularly those dedicated to the expansion of
broadband access to rural regions of the United States, public safety, and
homeland security communications.  We currently service this growing
market, and we plan on developing further expertise and adding resources to this
area, specifically through the growth of our Specialty Communications
Services.  The FCC has recently announced that in February 2010 it
will once again attempt to sell certain “D-Block” licenses to support public
safety networks across the country.  We believe the D-Block licenses
will ultimately be purchased, additional networks will be developed to support
these frequencies, and this will lead to additional opportunities for network
development and installation companies such as ours.
 
 Plan
of Operation
 
 We
believe it will be necessary to take the following steps within the next 12
months in order to meet our revenue goals and to achieve increased
profitability:
 
 Increase Business Development
Activities.In fiscal 2009, we devoted a significant amount of
time and resources to growing and reorganizing our business development
team.  We hired a new Vice President level executive to lead this
effort, and he has worked directly with senior management as well as a Committee
of our Board of Directors to restructure the Business Development
group.  We have now organized our business development team on a
market basis, and have also assigned account management responsibilities to each
team member.  We recognize the need to increase our focus on business
development, customer retention and the diversification of our customer base. We
anticipate achieving this result though a variety of means, including, without
limitation, hiring additional business development staff, increasing our
exposure at trade shows and customer-sponsored events, and increasing our
marketing efforts in an organized and effective manner.
 
 Increase Subcontractor Base.As we experience increased demand for our services, we will have to be
flexible and utilize subcontractors in order to meet construction schedules to
the extent we are unable to staff such jobs with existing staff. We have a
robust qualification process for our subcontractors, and we believe our ability
to locate and retain high quality, reliable subcontractors that meet our
qualifications will be a significant part of our ability to achieve our growth
goals.  To that end, we have implemented an Internet based electronic
payables system that allows our subcontractors to invoice us electronically,
significantly easing the burden on our administrative staff, speeding up our
payments to our subcontractors and helping us maintain our goal to be a “green”
company by eliminating a significant amount of paper from the payment
process.  We have also implemented a Subcontractor Bill of Rights,
making it clear that we treat our subcontractors as important members of our
service team, and we believe our positive relationships with our subcontractors
is a significant asset for our customers, reduces project-related disputes and
distinguishes us from many of our competitors, specifically some of our larger
competitors.
 
 Increase Marketing
Activities. Although we have achieved recognition in the wireless area,
we believe that our typical customer may not be aware of our entire range of
services. For example, one set of our customers may recognize us for our site
acquisition and zoning or infrastructure equipment construction and installation
services without being aware that we also provide radio frequency and network
design and engineering services. Accordingly, we have recognized a need to
create and implement a marketing plan to market us as a provider of the full
range of wireless services. Our integrated service package might be of interest
not only to potential customers looking for complete “turn-key” solutions but
also clients who are more interested in an “a la carte” approach to their
wireless needs.  We have hired a Director of Marketing to assist with
these efforts and provide the appropriate amount of focus to achieve our desired
results in this area.
  9
 
 Seek Additional Strategic
Acquisitions and Integrate Recent Acquisitions.In fiscal 2010, we plan
to acquire compatible businesses that can be assimilated into our organization,
expand our geographic coverage and add accretive earnings to our business. Our
preferred acquisition candidates will have (i) service offerings that
supplement, and not necessarily overlap with, our existing service offerings,
(ii) an expansive customer base that will allow us to diversify our customer
concentration, and (iii) a favorable financial profile. In Fiscal 2007, we
acquired the assets and businesses of Digitcom and Radian, and these
acquisitions have expanded our customer base, geographic presence, and number of
employees.  We believe we have successfully managed the associated
growth and the integration of these companies into our business, and that this
was an important part of our success in fiscal 2008, and to a lesser extent,
fiscal 2009.  We will need to continue to see strong results from
these offices to achieve our fiscal 2010 goals, in addition to successfully
managing and integrating any new businesses we may acquire.
 
 Competition
 
 The
telecommunications industry is highly competitive. It is difficult to clearly
identify our competitors because we offer such a wide breadth of service
offerings and many companies provide services similar to
ours.  However, we currently believe that our most significant
competitors include WFI Deployment Services, NSORO LLC (now owned by MasTec),
Goodman Networks Inc., Bechtel Corporation, and General Dynamics
Corporation.  Some of these competitors have greater capital
resources, longer operating histories, larger customer bases, and more
established industry relationships than we do. We  distinguish
ourselves from these competitors by being large enough to provide the resources
our customers need on a nation-wide, self-performing basis, while still
maintaining our ability to be responsive, on a local level, to customer specific
tasks that arise during any given engagement for services. We also compete at a
local market level with a variety of smaller installation, construction and site
acquisition companies, particularly on small projects that do not require the
resources we bring to bear on larger scale or nation-wide projects.
 
 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 these
requirements. Those requirements dictate that the networks meet certain radio
frequency emission standards, not cause unallowable interference to other
services, and in some cases, accept interference from other services. Those
networks are also subject to certain state and local government regulations and
requirements. Other FCC regulations, such as the proposed requirement for
wireless carriers to maintain eight-hour back-up power supplies for their cell
sites, affect our business by driving our customers to pay for additional
services to meet these requirements, which we can provide.
 
 Major Suppliers and
Vendors
 
 Historically,
we have relied upon our own employees and subcontractors to perform services in
order to fulfill our contractual obligations. Currently, the costs attributable
to subcontractors represent approximately 52% of our cost of revenues.
Approximately 25% of our subcontractor costs relate to fees paid to electrical
and architectural and engineering (“A&E”) firms, as we do not hold
electrical or A&E licenses in any of the jurisdictions where we operate. We
do not rely on any one subcontractor, and we must utilize subcontractors that
meet our qualification standards, timeframes and the contractual requirements of
our customers.
 
 Major
Customers
 
 As of and
for the year ended June 30, 2009, we derived 43% of our total revenue from three
customers, and those customers represented 28% of our accounts receivable.
During the year ended June 30, 2009, Metro PCS, Inc. (and its subsidiaries)
represented 19%, T-Mobile (and its subsidiaries) represented 13%, Clearwire US
LLC represented 11%,of our total revenue.
 
 As of and
for the year ended June 30, 2008, we derived 84% of our total revenues from our
two largest customers, and those customers represented 62% of our accounts
receivable. During the year ended June 30, 2008, Sprint Nextel Corporation
represented 77% and Metro PCS represented 7% of our total revenues. Our work for
Sprint Nextel includes 4G, or WiMax (work for their Xohm Division), CDMA
(Code-Division Multiple Access) and IDEN (Integrated Digital Enhanced Network)
work.
  10
 
 Seasonality
 
 Incidents
of inclement weather, particularly in the winter months in the northern parts of
the country, hinder our ability to complete certain outdoor activities relating
to the provision of certain of our services. Demand for our services is
typically higher in the last few months of the calendar year, due primarily to
acceleration of most customers’ capital expenditures for completing year-end
projects, with a corresponding decrease in activity during the first few months
of the following calendar year, typically because customers are evaluating their
plans for such capital expenditures for the coming year during that
period.
 
 Backlog
 
 As of
June 30, 2009 and 2008, our backlog was approximately $24.8 million ($6.5
million in infrastructure construction and technical services and $18.3 million
in site acquisition and zoning) and $15.2 million ($11.1 million
in infrastructure construction and technical services and $4.1 million in site
acquisition and zoning), respectively. We believe substantially all of our
backlog at June 30, 2009 will be filled within the fiscal year ending June 30,
2010.
 
 Employees
 
 As of
June 30, 2009, we employed 425 full-time and 7 part-time
employees.  We anticipate the need to increase our work force as
additional contracts for projects are received. None of our employees are
represented by labor unions.
 
 ITEM
1A.  RISK FACTORS
 
 Although we have had net income
in prior periods, we
experienced losses in fiscal 2009 and we may never achieve sustained
profitability.
  Although
we had net income during the years ended June 30, 2008, 2007 and 2006, we were
not profitable during the year ended June 30, 2009 and we may not be profitable
in future periods, either on a short or long-term basis.  To the
extent that revenue declines or does not grow at anticipated rates, increases in
operating expenses precede or are not subsequently followed by commensurate
increases in revenue or we are unable to adjust operating expense levels
accordingly, your investment could be jeopardized.
  We generate a substantial portion of
our revenue from a limited number of customers, and if our relationships
with such customers were harmed, our business would
suffer.
  As of and
for the year ended June 30, 2009, we derived 43% of our total revenue from three
customers, and those customers represented 28% of our accounts receivable.
During the year ended June 30, 2009, Metro PCS, Inc. (and its subsidiaries)
represented 19%, T-Mobile (and its subsidiaries) represented 13%, Clearwire US
LLC represented 11% of our total revenue.
 
 As of and
for the year ended June 30, 2008, we derived 84% of our total revenue from our
two largest customers, and those customers represented 62% of our accounts
receivable. During the year ended June 30, 2008, Sprint Nextel Corporation
represented 77% and Metro PCS represented 7% of our total revenue.
 
 We
believe that a limited number of clients will continue to be the source of a
substantial portion of our revenue for the foreseeable future.  Key
factors in maintaining our relationships with such customers include, without
limitation, 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 customers are impaired, this could cause a significant decrease in our
revenue, which would negatively impact our ability to generate
income.  In addition, our key customers could slow or stop spending on
initiatives related to projects we are performing for them, which could be
impacted by the increased difficulty in the credit markets as a result of the
recent economic crisis, and this, while outside our control, could materially
impair our operating results.
  11
  For
example, during the fourth quarter of fiscal 2008, we were advised that our
largest customer at that time, Sprint Nextel, had slowed the implementation of
initiatives related to significant projects we were performing for
them.  This customer notified us of the cancellation of certain
purchase orders, and instructed us to delay the completion of other existing
purchase orders.  This loss of revenue had a material impact on our
financial results, including our revenue and operating income for fiscal
2009.
  If we experience material delays and
or defaults in customer payments, we could be unable to cover all
expenditures.
  Because
of the nature of our contracts, we commit resources to projects prior to
receiving payments from our customers in amounts sufficient to cover
expenditures on client projects as they are incurred.  Delays in
customer payments may require us to make a working capital investment, or obtain
advances from our line of credit, which may be adversely affected by the current
turmoil in the credit markets.  If a customer defaults in making its
payments on a project or projects in which we have devoted significant
resources, it could have a material negative effect on our results of operations
or negatively impact our financial covenants with our lenders.
  If the percentage of our revenue
derived from construction-related activities increases, our gross margins may
suffer.
  We have
historically earned lower relative gross margins on engineering and
construction-related activities.  We typically perform our own network
design-related, site acquisition-related services and hire subcontractors to
perform engineering and construction services under our direct management.
Subcontracted work generally carries lower profit margins than self-performed
work.  If the proportion of construction-related services we deliver
increases, then our gross margins and net income may suffer.
  We may need additional working
capital, the lack of which would likely have a significant negative impact on our
ability to grow our business.
  We may
require additional working capital in order to fund the growth of our
operations.  If adequate funds are not available on terms acceptable
to us, we may not be able to effectively grow our operations and expand our
business.  Our ability to fund our operations and corporate
infrastructure is directly related to the continued availability of these and
other funding sources, which may be adversely affected by the current condition
of the credit markets.
  We can
provide no assurances that we would be able to raise such financing when needed
or on acceptable terms.  As a result, we may be forced to reduce or
delay additional expenditures or otherwise delay, curtail or discontinue some or
all of our operations.
  Delays in the adoption and deployment
of next generation wireless networks could negatively affect the
demand for our services and our ability to grow our revenue.
  Wireless
service providers may delay their development of next generation technology if,
among other things, they expect slow growth in the adoption of such technology,
reduced profitability due to price competition for subscribers or regulatory
delays.  For example, even though wireless service providers have made
substantial investments worldwide in acquiring third generation, or 3G licenses,
some providers have delayed deployment of 3G networks. Others are investing
in fourth generation, or 4G, networks, and others in long term evolution, or
LTE, networks. Since we expect that a substantial portion of our growth
will be derived from our services related to new technologies, further delays in
the adoption and deployment of these technologies, such as 4G and LTE, would
negatively affect the demand for our services and our ability to grow our
revenue as quickly as expected.
  12
  We bear the risk of cost overruns in
some of our contracts.
  We
conduct our business under various types of contractual arrangements.Under such contracts,
prices are established, in part, on cost and scheduling estimates, which are
based on a number of assumptions, including, without limitation, assumptions
about future economic conditions, prices and availability of labor, equipment
and materials, and other exigencies.  These assessments are made more
difficult by the current uncertainty in the capital markets and the wide
fluctuation of prices for equipment, fuel and other costs associated with our
services.  If those estimates prove inaccurate, or circumstances
change, cost overruns may occur, and we could experience reduced profits or, in
some cases, a loss for that project.
  Our dependence on subcontractors and
equipment manufacturers could adversely affect us.
  We rely
on third-party subcontractors as well as third-party equipment manufacturers to
complete our projects.  To the extent that we cannot engage
subcontractors or acquire equipment or materials, our ability to complete a
project in a timely fashion or at a profit may be impaired.  If the
amount we are required to pay for these goods and services exceeds the amount we
have estimated in bidding for fixed-price contracts, we could experience losses
in the performance of these contracts.  In addition, if a
subcontractor or a manufacturer is unable to deliver its services, equipment or
materials according to the negotiated terms for any reason, including the
deterioration of its financial condition, we may be required to purchase the
services, equipment or materials from another source at a higher
price.  This may reduce the profit to be realized or result in a loss
on a project for which the services, equipment or materials were
needed.
  If we guarantee the timely completion
or performance standard of a project, we could incur significant, additional
costs.
  In some
instances, we guarantee to a customer that we will complete a project by a
scheduled date.  The contract sometimes provides that the project,
when completed, will also achieve certain performance standards.  If
we subsequently fail to complete the project as scheduled, or if the project
falls short of guaranteed performance standards, we may be held responsible for
cost impacts to the client resulting from any delay or the costs to cause the
project to achieve such performance standards.  In some cases, where
we fail to meet those performance standards, we may also be subject to
agreed-upon liquidated damages.  To the extent that these events
occur, the total costs of the project could exceed its original estimates and we
could experience reduced profits or, in some cases, a loss for that
project.
  The nature of our construction
business exposes us to potential liability claims and contract
disputes that may negatively affect our results of operations.
  We engage
in construction activities, including the oversight of engineering firms, for
wireless networks where design, construction or systems failures can result in
substantial injury or damage to third parties.  Any liability in
excess of insurance limits at locations constructed by us could result in
significant liability claims against us, which claims may negatively affect our
results of operations, perhaps materially.  In addition, if there is a
customer dispute regarding our performance of project services, the customer may
decide to delay or withhold payment to us.  If we were ultimately
unable to collect on these payments, our results of operations would be
negatively impacted, perhaps materially.
  We maintain a workforce based upon
current and anticipated workloads.  If we do not receive future contract awards or
if these awards are delayed, we may incur significant costs in meeting
workforce demands.
  Our
estimates of future performance depend on, among other matters, whether and when
we will receive certain new contract awards.  While our estimates are
based upon our good faith judgment, they can be unreliable and may frequently
change based on newly available information.  In the case of our
larger projects where timing is often uncertain, it is particularly difficult to
project whether and when we will receive a contract award.  The
uncertainty of contract award timing can present difficulties in matching our
workforce size with our contract needs.  If an expected contract award
is delayed or not received, we could incur costs resulting from reductions in
staff or redundancy of facilities that would have the effect of negatively
impacting our operating performance.
  13
  We may not be able to hire or retain
a sufficient number of qualified employees to meet our contractual obligations
or maintain the quality of our services.
  As a
service business, our ultimate success depends significantly on our ability to
attract, train and retain system deployment, managerial, marketing, sales and
marketing personnel who have excellent technical and interpersonal
skills.  Competition for employees with the required range of skills
fluctuates, depending on customer needs, and can be intense.  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.  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 projects.
  Intense competition in our industry
could reduce our market
share.
  We serve
markets that are highly competitive and in which a large number of multinational
companies compete.  In particular, the telecommunications services,
site acquisition and construction markets are highly competitive and require
substantial resources and capital investment in equipment, technology and
skilled personnel.  Competition also places downward pressure on our
contract prices and profit margins.  Intense competition is expected
to continue in these markets.  If we are unable to meet these
competitive challenges, we could lose market share to our competitors and
experience an overall reduction in our operating performance.
  We
are vulnerable to the cyclical nature of the market we serve.
  The
demand for our services and products is dependent upon the existence of projects
with engineering, procurement, construction and management needs.  The
wireless telecommunications market, where we principally compete, is
particularly cyclical in nature.  This industry has historically been,
and we expect it will continue to be, vulnerable to general economic downturns
and is cyclical in nature.  As a result, our past results have varied
considerably and our performance may continue to be volatile, depending upon the
demand for future projects in the industry.
  We may experience significant
fluctuations in our quarterly results as a result of uncertainties relating to our
ability to generate additional revenue, manage expenditures and other factors, some
of which are outside of our control.
  Our
quarterly operating results have varied considerably in the past, and may
continue to do so, due to a number of factors.  Many of these factors
are outside our control and include, without limitation, the
following:
  
              financing
      provided to customers and potential
customers;
  
              the
      commencement, progress, completion or termination of contracts during any
      particular quarter;
  
              the
      availability of equipment to deploy new technologies, such as 4G and
      LTE;
  
              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, and therefore, our combined
results for that same period, may not meet the expectations of investors, which
could cause the price of our common stock to decline
significantly.
  14
  Our stock price is volatile and
purchasers of our common stock could incur substantial
losses.
  Historically,
our stock price has been volatile.  The stock market in general,
particularly recently, and the market for telecommunications companies in
particular, has experienced extreme volatility that has often been unrelated to
the operating performance of particular companies.  As a result of
this volatility, investors may not be able to sell their common stock at or
above their respective purchase prices.  The market price for our
common stock may be influenced by many factors, including, but not limited to,
variations in our financial results or those of companies that are perceived to
be similar to us, investors’ perceptions of us, the number of our shares
available in the market, future sales of our common stock, and general economic,
industry and market conditions.
  There is a lack of a public market
for our shares, which limits our shareholders’ ability to sell their
shares.
  There is
currently a limited public market for our shares, and we cannot assure you that
a more active market for our common stock will develop.  Consequently,
investors may not be able to liquidate their shares at a suitable price, or at
all.
  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.
  Historically,
purchases of our services by customers often entailed 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.  As a result of
lengthy sales cycles, we expect to continue to incur relatively high costs to
generate new business.
  If
we are unable to identify and complete future acquisitions, we may be unable to
continue our growth.
  We may
not be able to identify additional, attractive acquisition
opportunities.  Even if we identify favorable acquisition targets,
there is no guarantee that we can acquire them on reasonable terms or at
all.  If we are unable to complete attractive acquisitions, we may not
experience growth.
  If we fail to accurately estimate
costs and other factors associated with contracts accounted for using the
percentage-of-completion method of accounting, this may reduce our
profitability.
  We
recognize revenue and profit on our contracts as the work progresses using the
percentage-of-completion method of accounting.  Under this method,
contracts in progress are valued at cost plus accrued profits less earned
revenue and progress payments on uncompleted projects.  This method
relies on estimates of total expected contract revenue and costs.
  Contract
revenue and total cost estimates are reviewed and revised monthly as the work
progresses, such that adjustments to profit resulting from revisions are made
cumulative to the date of revision.  Adjustments are reflected for the
fiscal period affected by those revised estimates.  If estimates of
costs to complete long-term projects indicate a loss, we immediately recognize
the full amount of the estimated loss.  Such adjustments and accrued
losses could result in reducing our profitability.
  We may incur goodwill and other
intangible impairment charges which could reduce our
profitability.
  In
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets”, we review the carrying values of our goodwill and
indefinite lived intangible assets at least annually.  We determine
the fair value of businesses acquired (reporting units) and compare it to the
carrying value, including goodwill, of such businesses.  If the
carrying value exceeds its fair value, the goodwill of the unit may be
impaired.  The amount, if any, of the impairment is then measured,
based on the excess, if any, of the reporting unit’s carrying value of goodwill
over its implied value.  Accordingly, an impairment charge would be
recognized for the period identified which would reduce our
profitability.
  15
 
 A
default on our debt obligations could result in foreclosure on all of our
assets.
 
 In April
2008, we replaced our credit facility with Presidential Financial Corporation of
Delaware Valley with a new credit facility of up to $15 million with PNC Bank,
National Association.  The PNC facility is secured by a blanket
security interest in collateral that covers certain of BCI’s receivables,
equipment, general intangibles, inventory, investment property, certain real
property, certain leasehold interests, all subsidiary stock, records and other
property and proceeds of all of the collateral.  An event of default
with respect to the PNC facility could result in, among other things, the
acceleration and demand for payment of all principal and interest due and the
foreclosure on the collateral.  The sale of such collateral at
foreclosure would result in a substantial disruption in our ability to operate
our business and could significantly lower our revenue and
profitability.  We may not be able to refinance or obtain extensions
of the maturities of all or some of such debt only on terms that significantly
restrict our ability to operate, including terms that place limitations on our
ability to incur other indebtedness, to pay dividends, to use our assets as
collateral for other financings, to sell assets or to make acquisitions or enter
into other transactions.  Such restrictions may adversely affect our
ability to finance our future operations or to engage in other business
activities.  If we finance the repayment of our outstanding
indebtedness by issuing additional equity or convertible debt securities, such
issuances could result in substantial dilution to our
stockholders.
  16


ITEM
      2.
            PROPERTIES




As of
June 30, 2009, we had leases or contractual arrangements to utilize
approximately 211,818 square feet for our operations, as set forth
below:




Size
      in
              
              
              
              End
      ofLocation
              
              Square Feet
              
              Description
              
              Lease Term1210
      West Alameda Drive
                Tempe,
      AZ
              
              2,460
              
              Office
      space
              
              Month-to-month14270
      Albers Way
                Chino,
      CA
              
              10,607
              
              Office
      and warehouse space
              
              December
      20104885
      Fulton Drive
                Fairfield,
      CA
              
              5,200
              
              Office
      and warehouse space
              
              September
      20102801
      Camino Del Rio South
                San
      Diego, CA
              
              -
              
              Office
      space
              
              November
      20092580
      N. Powerline Road
                Pompano
      Beach, FL
              
              7,600
              
              Office
      and warehouse space
              
              February
      20101765
      L Cortland Court
                Addison,
      IL
              
              3,800
              
              Office
      and warehouse space
              
              January
      20108300
      Stayton Drive
                Jessup,
      MD
              
              19,853
              
              Office
      and warehouse space
              
              November
      201095
      Ryan Drive
                Raynham,
      MA
              
              6,500
              
              Office
      and warehouse space
              
              March
      2012148
      Rangeway Road
                Billerica,
      MA
              
              3,500
              
              Office
      and warehouse space
              
              June
      201049B
      Old Elan Avenue
                Valley
      Park, MO
              
              5,100
              
              Office
      and warehouse space
              
              November
      20094550
      Copper Sage Street
                Las
      Vegas, NV
              
              3,750
              
              Office
      and warehouse space
              
              Month-to-month97
      Linden Ave *
                Elmwood
      Park, NJ
              
              13,000
              
              Office
      and warehouse space
              
              Month-to-month270
      Market Street **
                Saddle
      Brook, NJ
              
              9,780
              
              Office
      and warehouse space
              
              July
      201045
      Stouts Lane
                Monmouth
      Junction, NJ
              
              5,000
              
              Office
      and warehouse space
              
              November
      20111100
      Taylor's Lane
                Cinnaminson,
      NJ
              
              10,209
              
              Office
      and warehouse space
              
              November
      200918-01
      Pollitt Drive
                Fairlawn,
      NJ
              
              76,926
              
              Office
      and warehouse space
              
              September
      2017 ***7701
      N. Broadway Extension
                Oklahoma
      City, OK
              
              3,000
              
              Office
      and warehouse space
              
              January
      20107720
      N. Robinson Avenue
                Oklahoma
      City, OK
              
              6,000
              
              Office
      and warehouse space
              
              January
      20104280
      25th Street NE
                Salem,
      OR
              
              6,000
              
              Office
      and warehouse space
              
              Month-to-month1846
      Lockhill Selma
                San
      Antonio, TX
              
              725
              
              Office
      space
              
              August
      2009Alexander
      Business Center
                Corpus
      Christie, TX
              
              200
              
              Office
      space
              
              Month-to-month15030
      Highway 99
                Lynwood,
      WA
              
              12,608
              
              Office
      and warehouse space
              
              March
      2010


17


* One
third of the office space is sub-leased


**
Warehouse space is sub-leased


*** Based
upon a commencement date of October 1, 2009, See Note 11





We also
own 0.9 acres of property, including office and warehouse facilities, in
Arlington, Texas.





ITEM
      3.
            LEGAL
      PROCEEDINGS




None.




ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.




18


PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




Our
common stock is currently quoted on the National Association of Securities
Dealers-Over the Counter Bulletin Board (“OTCBB”).  On September 16,
2005, our trading symbol was changed to “BERL.OB” to reflect, in part, our name
change.  Prior to that date, our stock was traded under the symbol
“NVNW.OB.”




From
                
                To
                
                Ticker
                
                MarketSeptember
      17, 2005
                
                Present
                
                BERL
                
                OTCBB




The
following table sets forth the high and low bid prices of our common stock on
the applicable market for the quarterly periods indicated.  Such
prices reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions:




Quarter Ended
                            
                            Low
                            
                            
                            HighJune
      30, 2009
                            
                            $
                            0.60
                            
                            
                            $
                            1.00March
      31, 2009
                            
                            
                            0.70
                            
                            
                            
                            1.31December
      31, 2008
                            
                            
                            0.65
                            
                            
                            
                            1.60September
      30, 2008
                            
                            
                            1.10
                            
                            
                            
                            1.60June
      30, 2008
                            
                            
                            1.10
                            
                            
                            
                            1.60March
      31, 2008
                            
                            
                            1.15
                            
                            
                            
                            2.00December
      31, 2007
                            
                            
                            1.02
                            
                            
                            
                            1.20September
      30, 2007
                            
                            
                            1.01
                            
                            
                            
                            1.20





Our stock
has experienced periods, including, without limitation, certain extended
periods, of limited or sporadic quotations.




As of
June 30, 2009, there were 439 holders of record of our common
stock.




Recent
Sales of Unregistered Securities





Not
applicable.





Securities
Authorized for Issuance under Equity Compensation Plans




The
following table provides information, as of June 30, 2009, with respect to all
compensation plans and individual compensation arrangements under which equity
securities are authorized for issuance to employees or
non-employees:




19





Number of securitiesremaining available forNumber of securities to
                                    
                                    
                                    
                                    Weighted average
                                    
                                    
                                    future issuance underbe issued upon exercise
                                    
                                    
                                    
                                    exercise price of
                                    
                                    
                                    equity compensation plansof outstanding options,
                                    
                                    
                                    
                                    outstanding options,
                                    
                                    
                                    (excluding securitiesPlan Category
                                    
                                    warrants and rights
                                    
                                    
                                    
                                    warrants and rights
                                    
                                    
                                    reflected in column (A))Equity
      compensation on plans approvedby
      security holders
                                    
                                    
                                    2,185,273
                                    
                                    (a)
                                    
                                    $
                                    13.42
                                    
                                    
                                    
                                    883,723Equity
      compensation on plans notapproved
      by security holders
                                    
                                    
                                    18,704
                                    
                                    (b)
                                    
                                    $
                                    6,786.00
                                    
                                    
                                    None2,203,977
                                    
                                    
                                    
                                    $
                                    70.90
                                    
                                    
                                    
                                    883,723





(a)
            Represents
      options granted under our 1999 Omnibus Securities Plan and our 2001 Equity
      Incentive Plan, each of which was approved by our stockholders (the
      “Option Plans”).


(b)
            Represents
      options granted under stand-alone option agreements, which were not
      associated with the Option Plans, and which vested over three or four year
      periods.





Dividend
Policy




We have
not paid cash dividends on our common stock nor do we anticipate doing so in the
foreseeable future.




ITEM
      6.
            SELECTED
      FINANCIAL DATA




Not
applicable.




20


ITEM
7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




This
discussion should be read together with our consolidated financial statements
and their notes included elsewhere in this Annual Report. See “Forward-Looking
Statements” and Item 1A – Risk Factors for a discussion of factors that could
cause our future financial condition and results of operations to be different
from those discussed below.





Business





We are a
leading contractor to the wireless communications industry, providing a wide
range of services primarily to wireless and traditional telecommunications
carriers. Our core activities include communications infrastructure equipment
construction and installation; site acquisition and zoning to support
communication network build-outs; radio frequency and network design and
engineering; radio transmission base station installation and modification; and
in-building network design, engineering and construction. We also provide
specialty communication services, configured solutions, staffing services and
power system solutions. We provide some or all of these services to our
customers, most of which are companies in the wireless telecommunications and/or
data transmission industries, as well as to utility companies and government
agencies and municipalities. Our customers rely on us to assist them in
planning, site location and leasing. For a more complete discussion of our
business, see Item 1 of this Annual Report entitled “Business”.





On
February 28, 2007, we entered into an Asset Purchase Agreement with Digital
Communication Services, Inc. and its affiliates for the purchase of certain of
its assets in Arlington, Texas. This acquisition expanded and strengthened our
presence in Texas and the Midwest region. On April 16, 2007, we entered into an
Asset Purchase Agreement with Radian Communication Services, Inc. (“Radian”) to
purchase certain of the U.S. assets and operations of Radian and assume certain
liabilities of Radian.  This acquisition expanded our presence in Los
Angeles, California, Las Vegas, Nevada, and Seattle, Washington, and added
offices in Salem, Oregon and Tempe, Arizona.  These acquisitions have
allowed us to become a nation-wide service provider for our customers, the most
significant of which have nationwide operations that require the types of
services we provide.  These acquisitions have also expanded our
customer bases.





Basis
of Presentation





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Major assets and liabilities that are subject to estimates include allowance for
doubtful accounts, goodwill and other acquired intangible assets, deferred tax
assets and certain accrued and contingent liabilities. One of the more
significant processes requiring estimates is
percentage-of-completion.





We
recognize revenue and profit on our contracts as the work progresses using the
percentage-of-completion method of accounting. Under this method, contracts in
progress are valued at cost plus accrued profits less earned revenue and
progress payments on uncompleted projects. This method relies on estimates of
total expected contract revenue and costs.





We
currently report our financial results on the basis of two reportable segments:
(1) infrastructure construction and technical services and (2) site acquisition
and zoning.


21


YEAR
ENDED JUNE 30, 2009 COMPARED TO YEAR ENDED JUNE 30, 2008


(amounts
in thousands unless otherwise stated)





Revenue




Years Ended June 30,2009
                      
                      2008
                      
                      (Decrease)Infrastructure
      construction and technical services
                      
                      $
                      44,897
                      
                      
                      $
                      98,563
                      
                      
                      $
                      (53,666
                      )Site
      acquisition and zoning
                      
                      
                      9,594
                      
                      
                      
                      29,809
                      
                      
                      
                      (20,215
                      )Total
                      
                      $
                      54,491
                      
                      
                      $
                      128,372
                      
                      
                      $
                      (73,881
                      )





We had
revenues of $54.5 million for the year ended June 30, 2009, versus $128.4
million for the year ended June 30, 2008. This represents a decrease of $73.9
million, or 58%.





Revenue
from infrastructure construction and technical services decreased $53.7 million,
or 54% for the year ended June 30, 2009 as compared to the year ended June 30,
2008 and represented 82% and 77% of total revenue for these years,
respectively.





Site
acquisition and zoning decreased $20.2 million, or 68% for the year ended June
30, 2009 as compared to the year ended June 30, 2008, and accounted for
approximately 18% and 23% of total revenues for these years,
respectively.




These
decreases in revenue are related to several factors:




·
            Our
      largest customer during fiscal 2008, Sprint Nextel, cancelled purchase
      orders beginning in the fourth quarter of fiscal 2008 for work previously
      awarded to us, and asked us to delay the completion of other purchase
      orders.  These cancellations and delays were related to Sprint’s
      sale of its fourth generation, or 4G, WiMax networks business to Clearwire
      Communications (“Clearwire”), and were unrelated to our performance on
      these projects. This significantly impacted our financial results
      throughout fiscal 2009 as Sprint was previously our largest
      customer.  We have actively sought to replace this work, and
      have received a number of purchase orders related to the continuation of
      this 4G work, primarily in the site acquisition and zoning segment of our
      business as this needs to be completed prior to the beginning of
      construction work.  As of June 30, 2009, our backlog was
      approximately $24.8 million as compared to $15.2 million as of June
      30, 2008 and $22.7 million as of March 31, 2009.  We believe
      substantially all of our backlog at June 30, 2009 will be filled before
      the end of our fiscal year ending June 30, 2010. We believe our prospects
      for continuing to support the 4G network build-out are good so long as we
      continue to provide outstanding customer service, and this will present an
      important opportunity for new business for us in fiscal year
      2010.





·
            Our
      fiscal 2009 was a period of transition for us.  In fiscal 2008,
      almost 80% of our business was from one customer.  We made a
      significant effort to diversify our customer base to remove the risks
      associated with reliance on one customer.  We hired a national
      business development team to lead this effort, with a new Vice President
      level executive to lead this team.  We also diversified into new
      lines of business, including our cable services and green energy
      groups.  Perhaps most importantly, we began to emphasize seeking
      business from companies outside of the wireless industry, including
      wire-line, cable, and fiber companies, and enterprise and government
      clients.  With the convergence of communications networks and
      technologies, we saw the need to service more than the wireless carriers
      that have historically been our top customers.  This effort took
      time and resources, and we believe this planning will result in long-term
      financial rewards.  We also believe that establishing these
      initiatives had a negative impact on our financial results in 2009 as we
      hired and trained new people with the appropriate skills sets to support
      these projects, and began long sales cycles with these new
      customers.




22


·
            Our
      fiscal second half was also a period of transition for some of our
      customers and their projects, and this had a negative impact on our
      revenue for that time period.  Several of our customers are just
      beginning large-scale build-outs for new networks, including Clearwire and
      the development of its 4G network, and other customers, such as Verizon,
      that are beginning work on new LTE (or Long-Term Evolution)
      networks.  While we are involved with these initiatives, and we
      have devoted significant time and resources to position ourselves to
      support these projects, they have only recently begun in
      earnest.  In addition, some of our other customers completed
      projects during the third and fourth quarters of fiscal 2009 in some
      markets, and while we continue to work for these customers, we saw a
      decline in business from them immediately after the completion of these
      market launches.




·
            The
      general downturn in national and global economic conditions during fiscal
      2009 also impacted us and we believe many of our customers,
      subcontractors, vendors and suppliers as well. Many of our customers
      delayed decision-making on capital spending budgets during this period,
      particularly during the beginning of calendar 2009, because of the
      uncertainty associated with general economic conditions. This in turn led
      to delays in initiating network development projects that were awarded to
      us. This required us to maintain staffing levels to support these
      projects, but in some cases being unable to fully utilize this staff until
      receiving authorization from our customers. In addition, we have seen and
      continue to see pricing pressure in some of our service lines, and we
      believe this is attributable in part to a shift in our customer base and
      to a lesser extent general economic
conditions.




Historically
we win and begin projects on an irregular basis, and, therefore, we have seen in
normal economic conditions considerable variability in our historic quarterly
results.  In light of this, and the broad-based uncertainty
surrounding general economic conditions, we expect to continue to see
significant quarterly variability.  We believe our overall financial
position is strong, our customer base is diverse and has growth potential, and
our backlog of business has grown significantly since December 31, 2008. We also
see growth in the wireless industry, and we see our customers focused on
expanding their networks to support growing subscriber needs. We also see the
convergence of communications networks bringing new opportunities for us as
wire-line, cable and fiber companies seek installation companies such as ours to
support their network development and integration efforts. Our objective is to
use the national platform and broad range of expertise we have developed so that
we can take advantage of these growth opportunities as they present themselves.
We expect our revenue to increase over the course of fiscal 2010 primarily
during the third and fourth quarters, with an overall revenue increase in fiscal
2010 over fiscal 2009.




We
recognize revenue using the percentage-of-completion method of
accounting.




Cost
of Revenue




Years Ended June 30,2009
                  
                  2008
                  
                  (Decrease)Infrastructure
      construction and technical services
                  
                  $
                  33,960
                  
                  
                  $
                  64,643
                  
                  
                  $
                  (30,683
                  )Site
      acquisition and zoning
                  
                  
                  4,826
                  
                  
                  
                  18,809
                  
                  
                  
                  (13,983
                  )Total
                  
                  $
                  38,786
                  
                  
                  $
                  83,452
                  
                  
                  $
                  (44,666
                  )




Our cost
of revenue was $38.8 million and $83.5 million for the years ended June 30, 2009
and 2008, respectively. This represents a decrease of $44.7 million, or 54%,
during a period when sales decreased 58%. These amounts represent 71% and 65% of
total revenues for the years ended June 30, 2009 and 2008,
respectively.


23





Cost of
revenue for infrastructure construction and technical services decreased $30.7
million for the year ended June 30, 2009 as compared with the year ended June
30, 2008. This represents a decrease of approximately 47% during a period when
sales for this segment decreased 54%.





Cost of
revenue for site acquisition and zoning services decreased $14.0 million for the
year ended June 30, 2009 from the similar period ended June 30, 2008. This
represents a decrease of approximately 74% during a period when sales for this
segment decreased 68%.





Gross
Profit




Years Ended June 30,2009
                
                2008
                
                (Decrease)Infrastructure
      construction and technical services
                
                $
                10,937
                
                
                $
                33,920
                
                
                $
                (22,983
                )Site
      acquisition and zoning
                
                
                4,768
                
                
                
                11,000
                
                
                
                (6,232
                )$
                15,705
                
                
                $
                44,920
                
                
                $
                (29,215
                )




Our gross
profit for the years ended June 30, 2009 and 2008 was $15.7 million and $44.9
million, or 29% and 35% of revenues, respectively. This decrease in gross margin
was in part caused by an increase in infrastructure construction and technical
services revenue from 77% of total revenue to 82%. Margins from infrastructure
construction and technical services are typically lower than those associated
with site acquisition and zoning.





In light
of the current telecommunications market and economic conditions in general, we
have decided to bid our services more aggressively than we have in the past.
Competition has increased and many of our customers are exploring ways to reduce
costs, which could impact pricing for some services. In addition, we have been
awarded a significant amount of work from OEMs and other project management
companies that do work for the carriers, which is at a lower profit margin than
the work we do directly for our carrier customers. This has led to a decrease in
our gross profit margins.




Selling,
General and Administrative Expenses




Years Ended June 30,2009
                
                2008
                
                (Decrease)Infrastructure
      construction and technical services
                
                $
                17,409
                
                
                $
                20,885
                
                
                $
                (3,476
                )Site
      acquisition and zoning
                
                
                3,064
                
                
                
                4,818
                
                
                
                (1,754
                )$
                20,473
                
                
                $
                25,703
                
                
                $
                (5,230
                )





Selling,
general and administrative expenses for the year ended June 30, 2009 was $20.5
million as compared to $25.7 million for the year ended June 30, 2008. This
represents a decrease of approximately $5.2 million, or 20% during a period when
revenues decreased 58%.  $2.2 million represents a decrease in payroll
expenses. Additionally, as we aggressively managed our cost, we recognized
decreased spending of approximately $0.7 million in insurance premiums, $0.6
million in accounting and legal fees, $0.5 million in occupancy expenses. The
year ended June 30, 2008 included a charge of $0.2 million to increase our
estimated reserve for an assessment by a state department of revenue. Selling,
general and administrative expenses did not decrease at the same rate as revenue
in part because the Company maintained its nation-wide platform required to
support anticipated growth and increased revenue.





Depreciation
and Amortization





Depreciation
expense for the year ended June 30, 2009 was $0.9 million as compared to $0.8
million for the year ended June 30, 2008. This represents an increase of $0.1
million.





Amortization
expense for the year ended June 30, 2009 was $0.4 million as compared to $0.4
million for the year ended June 30, 2008.


24


Interest
Income and Expense





Interest
income for the year ended June 30, 2009 was $59 thousand, a decrease of $12
thousand from $71 thousand for the year ended June 30, 2008. This decrease was
caused by the decrease in cash and cash equivalents during the year ended June
30, 2009.





Interest
expense for the year ended June 30, 2009 was $0.2 million. This represents a
decrease of $1.2 million from $1.4 million for the year ended June 30, 2008.
This decrease was primarily caused by the conversion in June 2008 of our 7%
Subordinated Convertible Note with Sigma and the other participating noteholders
and the reduced usage of our lines of credit with Presidential and
PNC.




Amortization
of deferred financing fees and accretion of debt discount was $60 thousand for
the year ended June 30, 2009 as compared to $2.0 million for the year ended June
30, 2008. This decrease was caused by the issuance of warrants related to our
financing transactions with Sigma and the other participating noteholders during
the fiscal year ended June 30, 2008.





Other
Income





Other
income increased to $0.4 million during the year ended June 30, 2009 as compared
to $0.2 million for the year ended June 30, 2008. These amounts primarily relate
to subrental income recognized on office and warehouse space formerly occupied
by the Company and royalty income from mineral rights recognized from land owned
by the Company, as well as the settlement of a litigation claim which resulted
in an increase of approximately $0.3 million to our income before income taxes
for the year ended June 30, 2009.





Income
Tax Expense (Benefit)




Income
tax benefit was $2.5 million for the year ended June 30, 2009 as compared to a
tax expense of $6.4 million for the year ended June 30, 2008. The effective tax
rate for the years ended June 30, 2009 and 2008 was 42% and 43%,
respectively.




At June
30, 2009, we had total income taxes receivable of approximately $2.7 million,
consisting of $2.2 million federal and $0.5 million state income taxes
receivable which we expect to receive during the third quarter of fiscal
2010.


LIQUIDITY
AND CAPITAL RESOURCES





At June
30, 2009, we had consolidated current assets of approximately $26.5 million,
including cash and cash equivalents of approximately $1.4 million and net
working capital of approximately $14.3 million. Historically, we have funded our
operations primarily through operating cash flow, the proceeds of private
placements of our common and preferred stock and borrowings under loan
arrangements. The principal uses of cash during the year ended June 30, 2009
have been working capital, and purchases of property and
equipment.


25


On April
17, 2008, we entered into a revolving line of credit with PNC Bank, National
Association as lead lender, which provides for revolving loan advances from time
to time in an amount up to the lesser of: (i) 85% of the value of certain of our
receivables approved by the lenders as collateral; or (ii)  $15.0
million.  Outstanding borrowings are secured by a blanket security
interest in favor of the lender that covers all of our receivables, equipment,
general intangibles, inventory, investment property, certain real property,
certain leasehold interests, all subsidiary stock, records and other
property.  The loan terms have covenants and conditions which include
financial tests for minimum undrawn loan availability, minimum Fixed Charge
Coverage Ratios (as that term is defined in the PNC Facility), and minimum
EBITDA levels, all generally measured on quarterly basis.





BCI was
not in compliance with its Fixed Charge Coverage Ratio for its second fiscal
quarter.  BCI entered into an Amendment with PNC which waived
compliance with the ratio, increased the interest rates and provided that during
the term of the PNC Facility as amended, BCI would observe the following
financial covenants:





1.
            Minimum
      Undrawn Availability:  BCI cannot cause, suffer or permit
      Undrawn Availability plus cash on deposit at PNC to be less than (1) Two
      Million Two Hundred Fifty Thousand ($2,250,000) Dollars as of March 31,
      2009, or (2) Three Million Five Hundred Thousand ($3,500,000) Dollars as
      of June 30, 2009;





2.
            Fixed
      Charge Coverage Ratio:  BCI must cause to be maintained at all
      times a Fixed Charge Coverage Ratio of not less than (1) 1.00 to 1.00 from
      July 1, 2009 through September 30, 2009,  (2) 1.10 to 1.00 from
      October 1, 2009 through June 30, 2010, tested quarterly on a building four
      (4) quarter basis, and (3) 1.10 to 1.00 thereafter, tested quarterly on a
      rolling four (4) quarter basis;





3.
            Minimum
      EBITDA:  BCI cannot cause, suffer or permit EBITDA to be less
      than (1) Two Million Six Hundred Twenty-Two Thousand ($2,622,000) Dollars
      for the trailing twelve months ending March 31, 2009, or (2) One Million
      Five Hundred Thousand ($1,500,000) Dollars for the fiscal quarter ending
      June 30, 2009.





As a
result of our operating results, we breached the minimum EBITDA covenants noted
above. To correct this issue, on September 25, 2009 the Company and
PNC  entered into a Second Amendment to Revolving Credit and Security
Agreement (the “Second Amendment”) to amend the PNC Facility. Pursuant to the
terms of the Second Amendment, PNC waived compliance by BCI with the minimum
EBITDA covenants, and therefore BCI is in complete compliance with all terms and
conditions of the PNC Facility as of the date of this Annual
Report.  Going forward, there is no longer a minimum undrawn
availability covenant or a minimum EBITDA covenant, but BCI must maintain
compliance with the Fixed Charge Coverage Ratio noted above.





The
balance outstanding at June 30, 2009 was $3.0 million and the amount
additionally available on the line of credit was $7.7 million.





Our
ability to satisfy our current obligations is dependent upon our cash on hand,
borrowings under our credit facility with PNC, and the operations of BCI. Our
current obligations consist of capital expenditures, debt service and funding
working capital. In the event we are not able to generate positive cash flow in
the future, or if we incur unanticipated expenses for operations and are unable
to acquire additional capital or financing, we will likely have to reassess our
strategic direction, make significant changes to our business operations and
substantially reduce our expenses until such time as we achieve positive cash
flow. The cancellation and/or deferral of a number of projects from our largest
customer may have a material impact on our ability to generate sufficient cash
flow in future periods. We anticipate that certain cost savings strategies will
be necessary unless and until our largest customer elects to proceed with these
cancelled or deferred projects or we have obtained orders from other customers
sufficient to replace these projects.


26


The net
cash flows for the years ended June 30, 2009 and 2008 are as
follows:





For
      the Years EndedJune 30,2009
                  
                  2008Net
      cash (used in) provided by operating activities
                  
                  $
                  (2,527
                  )
                  
                  $
                  7,944Net
      cash used in investing activities
                  
                  
                  (599
                  )
                  
                  
                  (947
                  )Net
      cash (used in) provided by financing activities
                  
                  
                  1,343
                  
                  
                  
                  (6,307
                  )





Cash
Provided by / Used in Operating Activities





Net cash
used in operating activities for the year ended June 30, 2009 totaled
approximately $2.5 million. Net cash provided by operating activities for the
year ended June 30, 2008 was approximately $7.9 million.





During
the year ended June 30, 2009, cash used in operating activities primarily
resulted from an operating loss of $1.0 million, net of non-cash charges. Cash
provided by operating activities primarily resulted from a decrease in accounts
receivable of $10.9 million and a decrease in other assets of $0.5 million which
were partly offset by decreases in accrued liabilities of $8.4 million and
accrued income taxes of $1.8 million.





During
the year ended June 30, 2008, cash provided by operating activities primarily
resulted from operating income of $12.6 million, net of non-cash charges. Cash
used in operating activities primarily resulted from an increase in accounts
receivable of $8.3 million due to increased revenue during the period and
decreases in accounts payable of $2.6 million. These amounts were partly offset
by increases in accrued liabilities of $4.8 million and accrued income taxes of
$1.5 million.





Cash
Used in Investing Activities





Cash used
in investing activities for the years ended June 30, 2009 and 2008 totaled
approximately $0.6 million and $0.9 million, respectively.





During
the year ended June 30, 2009, cash used in investing activities primarily
resulted from purchases of property and equipment of $0.4 million.





During
the year ended June 30, 2008, cash used in investing activities primarily
resulted from purchases of property and equipment of $1.0 million.





Cash
Provided by / Used In Financing Activities





Cash
provided by financing activities for the year ended June 30, 2009 totaled
approximately $1.3 million as compared to cash used in financing activities for
the year ended June 30, 2008 of approximately $6.3 million.





During
the year ended June 30, 2009, cash provided by financing activities resulted
primarily from net borrowings under our credit line of $2.8 million which was
partly offset by the repayment of other debt of $1.3 million.





During
the year ended June 30, 2008, cash used in financing activities primarily
resulted from a net pay down under our credit line of $5.3 million and repayment
of other debt of $1.0 million.


27





We
believe our existing cash, cash equivalents and line of credit will be
sufficient to meet our cash requirements in the near term. Our future capital
requirements will depend on many factors, including our rate of revenue growth,
the timing and extent of capital expenditures to support our contracts and
expansion of sales and marketing. We cannot assure that additional equity or
debt financing will be available on acceptable terms, or at all. We expect our
sources of liquidity beyond twelve months will be our then current cash
balances, funds from operations, if any, our current PNC credit facility and any
additional equity or credit facilities we can arrange.





Forward-Looking
Statements





“Forward-looking”
statements appear throughout this Report. We have based these forward-looking
statements on our current expectations and projections about future events. It
is important to note that the occurrence of the events described in these
statements and elsewhere in this Report, including, without limitation, those
risks identified in Item 1A – Risk Factors set forth elsewhere in this Report,
could have an adverse effect on the business, results of operations or financial
condition of the Company.





Forward-looking
statements in this Annual Report include, without limitation, the following
statements concerning:


·
            our
      financial condition and strategic
direction;


·
            our
      future capital requirements and our ability to satisfy our capital
      needs;


·
            the
      potential generation of future revenues and/or
  earnings;


·
            our
      ability to adequately staff our service
  offerings;


·
            opportunities
      for us from new and emerging wireless
  technologies;


·
            our
      ability to obtain additional
financing;


·
            our
      growth strategy;


·
            trends
      in the wireless telecommunications
industry;


·
            key
      drivers of change in our business;


·
            our
      competitive position; and


·
            other
      statements that contain words like “believe”, “anticipate”, “expect” and
      similar expressions that are also used to identify forward-looking
      statements.





It is
important to note that all of our forward-looking statements are subject to a
number of risks, assumptions and uncertainties, such as:


·
            risks
      related to a concentration in revenues from a small number of
      customers;


·
            risks
      associated with competition in the wireless telecommunications
      industry;


·
            risks
      that we will not be able to generate positive cash
  flow;


·
            risks
      that we may not be able to obtain additional
  financing;


·
            risks
      that we will not be able to take advantage of new and emerging wireless
      technologies; and


·
            risks
      that we will be unable to adequately staff our service
      offerings.





This list
is only an example of the risks that may affect the forward-looking statements.
If any of these risks or uncertainties materialize or fail to materialize, or if
the underlying assumptions are incorrect, then actual results may differ
materially from those projected in the forward-looking statements.





Additional
factors that could cause actual results to differ materially from those
reflected in the forward-looking statements include, without limitation, those
discussed elsewhere in this Report. It is important not to place undue reliance
on these forward-looking statements, which reflect our analysis, judgment,
belief or expectation only as of the date of this Report. We undertake no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date of this Report.





Critical
Accounting Policies





Revenue
Recognition


28


Site
acquisition and zoning services revenue is based upon output measures using
contract milestones as the basis. Revenue from infrastructure equipment
construction and installation contracts, which are generally completed within 90
days, is recorded under the percentage-of-completion method based on the
percentage that total direct costs incurred to date bear to estimated total
costs at completion. Losses are recognized when such losses become known. All
other revenue is recognized as work is performed.





Unbilled
receivables represent revenue on uncompleted contracts that are not yet billed
or billable, pursuant to contract terms. Deferred revenues principally represent
the value of services to customers that have been billed as of the balance sheet
date but for which the requisite services have not yet been
rendered.





Risks
and Uncertainties





Financial
instruments that potentially subject us to concentrations of credit risk consist
primarily of accounts receivable. We routinely assess the financial strength of
our customers and do not require collateral or other security to support
customer receivables. Credit losses are provided for in our consolidated
financial statements in the form of an allowance for doubtful accounts. Our
allowance for doubtful accounts is based upon the expected collectability of all
our accounts receivable. We determine our allowance by considering a number of
factors, including the length of time it is past due, our previous loss history
and the customer’s current ability to pay its obligations. Accounts receivable
are written off when they are considered to be uncollectible and any payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.





Effects
of Inflation





We do not
believe that the businesses of our subsidiaries are impacted by inflation to a
significantly different extent than the general economy. However, there can be
no assurance that inflation will not have a material effect on operations in the
future.





Recently
Issued Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
157 which is intended to increase consistency and comparability in fair value
measurements by defining fair value, establishing a framework for measuring fair
value and expanding disclosures about fair value measurements. The provisions of
SFAS No. 157, which are effective for financial statements issued for the fiscal
years beginning after November 15, 2008, and interim periods within those fiscal
years except as it relates to financial assets and liabilities, which we adopted
effective July 1, 2008. The Company will adopt the remaining provisions of SFAS
157 beginning July 1, 2009. The Company has determined that the impact of SFAS
157 will not have a material effect to the financial statements taken as a
whole.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for
Financial Assets and Financial Liabilities("SFAS 159"). This statement
permits companies to choose to measure many financial assets and liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. We adopted SFAS 159 on July 1, 2008.
The adoption was not material to the financial statements taken as a
whole.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS
160”). This statement amends ARB No. 51 to establish accounting and reporting
standards for the noncontrolling interest (minority interest) in a subsidiary
and for the deconsolidation of a subsidiary. Upon its adoption, noncontrolling
interests will be classified as equity in our consolidated balance sheets.
Income and comprehensive income attributed to noncontrolling interests will be
included in our consolidated statements of operations and our consolidated
statements of equity. SFAS 160 is effective for fiscal years beginning after
December 15, 2008, therefore the Company will adopt SFAS 160 starting July 1,
2009. This statement shall be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements which must be applied retrospectively
for all periods presented.


29


In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (Revised), Business
Combinations (“SFAS 141R”). This statement provides companies with
principles and requirements on how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, liabilities assumed, and
any noncontrolling interest in the acquiree as well as the recognition and
measurement of goodwill acquired in a business combination. The statement also
requires certain disclosures to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS 141R is effective for business combinations occurring
in fiscal years beginning after December 15, 2008. Early adoption of this
statement is not permitted. We will adopt SFAS 141R effective July 1,
2009.





In
February 2008, the FASB issued FASB Staff Position FAS No. 142-3, Determination of the Useful Life of
Intangible Assets(“FSP FAS 142-3”). This pronouncement amends FASB
Statement No. 142, Goodwill
and Other Intangible Assets, regarding the factors that should be
considered in developing the useful lives for intangible assets with renewal or
extension provisions. FSP FAS 142-3 requires an entity to consider its own
historical experience in renewing or extending similar arrangements, regardless
of whether those arrangements have explicit renewal or extension provisions,
when determining the useful life of an intangible asset. In the absence of such
experience, an entity shall consider the assumptions that market participants
would use about renewal or extension, adjusted for entity-specific factors. FSP
FAS 142-3 also requires an entity to disclose information regarding the extent
to which the expected future cash flows associated with an intangible asset are
affected by the entity’s intent and/or ability to renew or extend the
arrangement. FSP FAS 142-3 will be effective for qualifying intangible assets
acquired by the Company on or after July 1, 2009. The application of FSP FAS
142-3 is not expected to have a material impact on the Company’s results of
operations, cash flows or financial positions; however, it could impact future
transactions entered into by the Company.





In May
2008, the FASB issued FASB Staff Position APB No. 14-1, Accounting for Convertible Debt
Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)(“FSP APB 14-1”), which applies to convertible debt that
includes a cash conversion feature. Under FSP APB 14-1, the liability and equity
components of convertible debt instruments within the scope of this
pronouncement shall be separately accounted for in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008. The Company will adopt FSP APB 14-1 effective July 1,
2009. This adoption is not expected to have a material impact on the Company’s
consolidated financial position and results of operations.





In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock(“EITF
07-5”). EITF 07-5 provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company will adopt EITF 07-5 effective
July 1, 2009. The Company is currently evaluating the impact of the adoption of
this pronouncement.





In
November 2008, the FASB ratified EITF Issue No. 08-6 “Equity Method Investment Accounting
Considerations” (“EITF 08-6”). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for fiscal years ended on or after December
15, 2008. The Company adopted EITF 08-6 for its fiscal year ended June 30, 2009.
This adoption did not have a material impact on the Company’s consolidated
financial position and results of operations.


30


In May
2009, the FASB issued Statement of Financial Accounting Standards No. 165,
“Subsequent Events”
(“SFAS 165”), to be effective for the interim or annual periods ending after
June 15, 2009. The objective of this Statement is to establish general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
In particular, this Statement sets forth a) the period after the balance sheet
date during which management of a reporting entity  should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements; b) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and c) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. The effect of
the adoption of SFAS 165 was not material on the Company’s consolidated
financial position and results of operations. The Company evaluated subsequent
events through September 28, 2009, which is the date the financial statements
were issued.





In June
2009, the FASB issued Statement of Financial Accounting Standards No. 168,
“The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”). The objective of
SFAS 168 is to replace Statement 162 and to establish the FASB Accounting
Standards Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. This statement
shall be effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company will adopt SFAS 168
effective July 1, 2009.





ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
applicable.





ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Please
refer to pages F-1 through F-27.





ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





None.





ITEM
9A(T). CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures




We
maintain disclosure controls and procedures that are designed to ensure that the
information we are required to disclose in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Our disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
is accumulated and communicated to management, including our chief executive
officer and our chief financial officer, to allow timely decisions regarding
required disclosure.





In
designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible disclosure controls and procedures. Our chief
executive officer and our chief financial officer evaluated the effectiveness of
the design and operation of the Company’s disclosure controls as of the end of
the period covered by this Annual Report on Form 10-K for the year ended June
30, 2009. As a result of that evaluation they have concluded that our system of
disclosure controls and procedures was effective at a reasonable level of
assurance, and that all of the information required to be disclosed in this
Annual Report on Form 10-K has been recorded, processed, summarized and reported
in a timely manner.


31


Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our
system of internal control over financial reporting is designed to provide
reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements and the
reliability of financial reporting. Because of their inherent limitations,
internal controls over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.





Our
management assessed the effectiveness of our internal control over financial
reporting as of June 30, 2009. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control - Integrated Framework. Based on that
assessment, we believe that as of June 30, 2009, our internal control over
financial reporting is effective.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary SEC rules that permit us to provide only
management’s report in this annual report on Form 10-K.





Beginning
with our Annual Report on Form 10-K for the year ending June 30, 2010,
management’s report on internal control over financial reporting must contain a
statement that our independent registered public accountants have issued an
attestation report on management’s assessment of such internal controls and
conclusion on the operating effectiveness of those controls, unless the SEC
extends the compliance date for such auditor attestation.





Changes
in Internal Control Over Financial Reporting





There was
no change in our internal control over financial reporting that occurred during
our last fiscal quarter that materially affected, or is likely to materially
affect, our internal control over financial reporting.





ITEM
9B. OTHER INFORMATION





Not
applicable.


32


PART
III
 
 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE
REGISTRANT
 
 Information
called for by Item 10 will be set forth under the caption “Election of
Directors” in our 2009 Proxy Statement, which will be filed not later than 120
days after the end of our fiscal year ended June 30, 2009, and which is
incorporated herein by this reference.
 
 ITEM
11. EXECUTIVE COMPENSATION
 
 Information
called for by Item 11 will be set forth under the caption “Executive
Compensation and Other Matters” in our 2009 Proxy Statement, which will be filed
not later than 120 days after the end of our fiscal year ended June 30, 2009,
and which is incorporated herein by this reference.
 
 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  Information
called for by Item 12 will be set forth under the caption “Security Ownership of
Directors, Management and Principal Stockholders” in our 2009 Proxy Statement,
which will be filed not later than 120 days after the end of our fiscal year
ended June 30, 2009, and which is incorporated herein by this
reference.
 
 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 
 Information
called for by Item 13 will be set forth under the caption “Certain Relationships
and Related Transactions” in our 2009 Proxy Statement, which will be filed not
later than 120 days after the end of our fiscal year ended June 30, 2009, and
which is incorporated herein by this reference.
 
 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Information
called for by Item 14 will be set forth under the caption “Principal Accountant
Fees and Services” in our 2009 Proxy Statement, which will be filed not later
than 120 days after the end of our fiscal year ended June 30, 2009, and which is
incorporated herein by this reference.
 
 PART
IV
 
 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
 The
following documents are filed as part of this report:
 
 Financial
Statements:
 
 Our
Consolidated Balance Sheets as of June 30, 2009 and 2008
 Our
Consolidated Statements of Operations for the years ended June 30, 2009 and
2008
 Our
Consolidated Statements of Stockholders’ Equity for the years ended June 30,
2009 and 2008
 Our
Consolidated Statements of Cash Flows for the years ended June 30, 2009 and
2008
  33
  SIGNATURES
 
 Pursuant
to the requirements of the 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.
  Berliner
      Communications, Inc.By:
                /s/ Rich B.
  BerlinerName:
                Rich B.
      BerlinerTitle:
                Chief
      Executive Officer
 
 Pursuant
to the requirement of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities indicated on September 28, 2008.
  SIGNATURE
              
              TITLE/s/ Rich B. Berliner
              
              Chief
      Executive OfficerRich B.
      Berliner
              
              (Principal
      Executive Officer)/s/ Raymond A. Cardonne,
Jr.
              
              Chief
      Financial Officer and TreasurerRaymond
      A. Cardonne, Jr.
              
              (Principal
      Financial Officer)/s/ Mark S. Dailey
              
              DirectorMark
      S. Dailey/s/ Peter J. Mixter
              
              DirectorPeter
      J. Mixter/s/ Mehran Nazari
              
              DirectorMehran
      Nazari/s/ John Stevens Robling,
    Jr.
              
              DirectorJohn
      Stevens Robling, Jr./s/ Thom Waye
              
              DirectorThom
      Waye
  34
  INDEX
TO EXHIBITS
 
 Exhibit Number
                                                              
                                                              Description
                                                              
                                                              Filed Herewith10.1
                                                              
                                                              Amendment
      and Waiver Agreement, dated September 27, 2007, among Berliner
      Communications, Inc., Sigma Opportunity Fund, LLC, Pacific Asset Partners,
      LP, Operis Partners I LLC, and Sigma Berliner, LLC
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 10-K filed on October 2,
      200710.2
                                                              
                                                              Employment
      Agreement, dated as of November 15, 2007, by and between Berliner
      Communications, Inc. and Raymond A. Cardonne, Jr.
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on November 15,
      200710.3
                                                              
                                                              Employment
      Agreement, dated as of June 30, 2009, by and between Berliner
      Communications, Inc. and Richard B. Berliner
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on July 2,
      200910.4
                                                              
                                                              Employment
      Agreement, dated as of June 30, 2009, by and between Berliner
      Communications, Inc. and Nicholas Day
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on July 2,
      200910.5
                                                              
                                                              Employment
      Agreement, dated as of June 30, 2009, by and between Berliner
      Communications, Inc. and Michael S. Guerriero
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on July 2,
      200910.6
                                                              
                                                              Employment
      Agreement, dated as of June 30, 2009, by and between Berliner
      Communications, Inc. and Robert Bradley
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on July 2,
      200910.7
                                                              
                                                              Asset
      Purchase Agreement, dated as of April 16, 2007, by and among Radian
      Communication Services, Inc. and BCI Communications, Inc.
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 20,
      200710.8
                                                              
                                                              Revolving
      Credit and Security Agreement, dated April 17, 2008, between BCI
      Communications, Inc. as borrower and PNC Bank National Association as
      lender and agent
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 23,
      200810.9
                                                              
                                                              First
      Amendment to Revolving Credit and Security Agreement, dated March 31,
      2009, by and between BCI Communications, Inc. and PNC Bank, National
      Association
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 3,
      200910.10
                                                              
                                                              Second
      Amendment to Revolving Credit and Security Agreement, dated September 25,
      2009, by and between BCI Communications, Inc. and PNC Bank, National
      Association
                                                              
                                                              X10.11
                                                              
                                                              $15,000,000
      Revolving Credit Note, dated April 17, 2008, between BCI Communications,
      Inc. as borrower and PNC Bank, National Association as lender and
      agent
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 23,
      200810.12
                                                              
                                                              Guaranty
      & Suretyship Agreement, dated April 17, 2008, made by Berliner
      Communications, Inc. as guarantor on behalf of BCI Communications, Inc.
      and in favor of PNC Bank, National Association
                                                              
                                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 23,
      200810.13
                                                              
                                                              Guarantor’s
      Ratification of that certain Guaranty & Suretyship Agreement dated
      April 17, 2008, made by Berliner Communications, Inc. as guarantor on
      behalf of BCI Communications, Inc. and in favor of PNC Bank, National
      Association
                                                              
                                                              X
 
  35
  
 10.14
                                              
                                              Subordination
      & Inter-creditor Agreement, dated April 17, 2008, by and among PNC
      Bank, National Association as agent for the lenders and Sigma Opportunity
      Fund, LLC, Sigma Berliner, LLC, Operis Partners I LLC, and Pacific Asset
      Partners as the subordinated investors
                                              
                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 23,
      200810.15
                                              
                                              Amendment
      to Note Purchase Agreement and Notes and Security Agreement Thereunder,
      dated April 17, 2008, by and among Berliner Communications, Inc., Sigma
      Opportunity Fund, LLC, Sigma Berliner, LLC, Operis Partners I LLC, and
      Pacific Asset Partners
                                              
                                              Incorporated
      herein by reference from Company’s Form 8-K filed on April 23,
      200810.16
                                              
                                              Agreement
      and Plan of Reorganization, dated September 15, 2008, between Berliner
      Communications, Inc, and Old Berliner, Inc.
                                              
                                              Incorporated
      herein by reference from Company’s Form 8-K filed on September 15,
      200821.1
                                              
                                              Subsidiaries
      of Berliner Communications, Inc.
                                              
                                              X23.1
                                              
                                              Consent
      of BDO Seidman, LLP
                                              
                                              X31.1
                                              
                                              Certification
      of Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                                              
                                              X31.2
                                              
                                              Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                                              
                                              X32.1
                                              
                                              Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                                              
                                              X
  36
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Report
      of Independent Registered Public Accounting Firm
                        F-2Consolidated
      Balance Sheets as of June 30, 2009 and 2008
                        F-3Consolidated
      Statements of Operations for the years ended June 30, 2009 and
      2008
                        F-4Consolidated
      Statements of Stockholders' Equity for the years ended June 30, 2009 and
      2008
                        F-5Consolidated
      Statements of Cash Flows for the years ended June 30, 2009 and
      2008
                        F-6Notes
      to Consolidated Financial Statements
                        F-8
  F-1
  Report
of Independent Registered Public Accounting Firm
 
 Board of
Directors and Stockholders
 Berliner
Communications, Inc.
 Elmwood
Park, New Jersey
 
 We have
audited the accompanying consolidated balance sheets of Berliner Communications,
Inc. and Subsidiaries as of June 30, 2009 and 2008 and the related consolidated
statements of operations, stockholders’ equity, and cash flows for the years
ended June 30, 2009 and 2008. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these financial statements 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 from material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Berliner Communications,
Inc. and Subsidiaries at June 30, 2009 and 2008, and the results of their
operations and cash flows for the years ended June 30, 2009 and 2008 in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/ BDO Seidman,
  LLP
 Woodbridge,
New Jersey
 September
28, 2009
  F-2
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (Amounts
in thousands)
 June
      30,2009
                                                
                                                
                                                2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                                
                                                $
                                                1,390
                                                
                                                
                                                $
                                                3,173Accounts
      receivable, net of allowance for doubtful accountsof
      $200 and $830 at June 30, 2009 and 2008, respectively
                                                
                                                
                                                20,116
                                                
                                                
                                                
                                                31,189Income
      tax receivable
                                                
                                                
                                                2,659
                                                
                                                
                                                
                                                -Inventories
                                                
                                                
                                                1,005
                                                
                                                
                                                
                                                1,012Deferred
      tax assets - current
                                                
                                                
                                                429
                                                
                                                
                                                
                                                536Prepaid
      expenses and other current assets
                                                
                                                
                                                891
                                                
                                                
                                                
                                                76226,490
                                                
                                                
                                                
                                                36,672Property
      and equipment, net
                                                
                                                
                                                2,239
                                                
                                                
                                                
                                                2,924Amortizable
      intangible assets, net
                                                
                                                
                                                479
                                                
                                                
                                                
                                                816Goodwill
                                                
                                                
                                                2,284
                                                
                                                
                                                
                                                2,084Deferred
      tax assets - long-term
                                                
                                                
                                                2,789
                                                
                                                
                                                
                                                505Other
      assets
                                                
                                                
                                                276
                                                
                                                
                                                
                                                268Total
      Assets
                                                
                                                $
                                                34,557
                                                
                                                
                                                $
                                                43,269LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                                
                                                $
                                                4,644
                                                
                                                
                                                $
                                                4,820Accrued
      liabilities
                                                
                                                
                                                3,685
                                                
                                                
                                                
                                                11,919Accrued
      income taxes
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,849Line
      of credit
                                                
                                                
                                                2,967
                                                
                                                
                                                
                                                217Current
      portion of long-term debt
                                                
                                                
                                                777
                                                
                                                
                                                
                                                1,133Current
      portion of capital lease obligations
                                                
                                                
                                                118
                                                
                                                
                                                
                                                11812,191
                                                
                                                
                                                
                                                20,056Long-term
      debt, net of current portion
                                                
                                                
                                                18
                                                
                                                
                                                
                                                467Long-term
      capital lease obligations, net of current portion
                                                
                                                
                                                194
                                                
                                                
                                                
                                                305Other
      long-term liabilities
                                                
                                                
                                                105
                                                
                                                
                                                
                                                104Total
      liabilities
                                                
                                                
                                                12,508
                                                
                                                
                                                
                                                20,932COMMITMENTSSTOCKHOLDERS'
      EQUITYCommon
      stock
                                                
                                                
                                                1
                                                
                                                
                                                
                                                1Additional
      paid-in capital
                                                
                                                
                                                25,766
                                                
                                                
                                                
                                                22,630Accumulated
      deficit
                                                
                                                
                                                (3,718
                                                )
                                                
                                                
                                                (294
                                                )Total
      stockholders' equity
                                                
                                                
                                                22,049
                                                
                                                
                                                
                                                22,337Total
      liabilities and stockholders' equity
                                                
                                                $
                                                34,557
                                                
                                                
                                                $
                                                43,269
 
 The accompanying notes are an integral
part of these financial statements.
  F-3
 
 BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Amounts
in thousands, except per share data)
 
 Year
      Ended June 30,2009
                          
                          
                          2008Revenue
                          
                          $
                          54,491
                          
                          
                          $
                          128,372Costs
      of revenue
                          
                          
                          38,786
                          
                          
                          
                          83,452Gross
      profit
                          
                          
                          15,705
                          
                          
                          
                          44,920Selling,
      general and administrative expenses
                          
                          
                          20,473
                          
                          
                          
                          25,703Depreciation
      and amortization
                          
                          
                          1,285
                          
                          
                          
                          1,190Gain
      on sale of fixed assets
                          
                          
                          (8
                          )
                          
                          
                          (11
                          )Income
      (loss) from operations
                          
                          
                          (6,045
                          )
                          
                          
                          18,038Other
      (income) expenseInterest
      expense
                          
                          
                          208
                          
                          
                          
                          1,359Amortization
      of deferred financing fees andaccretion
      of debt discount
                          
                          
                          60
                          
                          
                          
                          2,031Interest
      income
                          
                          
                          (59
                          )
                          
                          
                          (71
                          )Other
      income
                          
                          
                          (373
                          )
                          
                          
                          (162
                          )Income
      (loss) before income taxes
                          
                          
                          (5,881
                          )
                          
                          
                          14,881Income
      tax (benefit) expense
                          
                          
                          (2,457
                          )
                          
                          
                          6,427Net
      income (loss) allocable to common shareholders
                          
                          $
                          (3,424
                          )
                          
                          $
                          8,454Net
      income (loss) per share:Basic
                          
                          $
                          (0.13
                          )
                          
                          $
                          0.47Diluted
                          
                          $
                          (0.13
                          )
                          
                          $
                          0.31Weighted
      average number of shares outstanding:Basic
                          
                          
                          26,439
                          
                          
                          
                          17,918Diluted
                          
                          
                          26,439
                          
                          
                          
                          27,166
 
 The accompanying notes are an integral
part of these financial statements.
  F-4
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 (Amounts
in thousands except share and per share data)
  Common
      Stock100,000,000
      shares
                            authorized
                          
                          
                          Additional
                          
                          
                          
                          
                          
                          Total$0.00002
      par value
                          
                          
                          Paid-in
                          
                          
                          Accumulated
                          
                          
                          Stockholders'Shares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          Deficit
                          
                          
                          EquityBalance
      at June 30, 2007
                          
                          
                          17,080,906
                          
                          
                          $
                          -
                          
                          
                          $
                          15,655
                          
                          
                          
                          (8,748
                          )
                          
                          $
                          6,907Stock-based
      compensation expense
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          181
                          
                          
                          
                          -
                          
                          
                          
                          181Exercise
      of warrants
                          
                          
                          2,982,951
                          
                          
                          
                          -
                          
                          
                          
                          5
                          
                          
                          
                          -
                          
                          
                          
                          5Exercise
      of stock options
                          
                          
                          126,875
                          
                          
                          
                          -
                          
                          
                          
                          69
                          
                          
                          
                          -
                          
                          
                          
                          69Change
      in conversion price on convertiblenotes
      payable
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          720
                          
                          
                          
                          -
                          
                          
                          
                          720Conversion
      of convertible debt
                          
                          
                          6,000,000
                          
                          
                          
                          1
                          
                          
                          
                          6,000
                          
                          
                          
                          -
                          
                          
                          
                          6,001Net
      income
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          8,454
                          
                          
                          
                          8,454Balance
      at June 30, 2008
                          
                          
                          26,190,732
                          
                          
                          
                          1
                          
                          
                          
                          22,630
                          
                          
                          
                          (294
                          )
                          
                          
                          22,337Stock-based
      compensation
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          580
                          
                          
                          
                          -
                          
                          
                          
                          580Tax
      benefit on exercise of stock options
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          18
                          
                          
                          
                          -
                          
                          
                          
                          18Exercise
      of Warrants
                          
                          
                          200,000
                          
                          
                          
                          -
                          
                          
                          
                          146
                          
                          
                          
                          -
                          
                          
                          
                          146Issuance
      of Director Shares
                          
                          
                          125,000
                          
                          
                          
                          -
                          
                          
                          
                          137
                          
                          
                          
                          -
                          
                          
                          
                          137Reorganization
      expenses
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          (106
                          )
                          
                          
                          -
                          
                          
                          
                          (106
                          )Effect
      of Reorganization
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          2,361
                          
                          
                          
                          -
                          
                          
                          
                          2,361Net
      loss
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3,424
                          )
                          
                          
                          (3,424
                          )Balance
      at June 30, 2009
                          
                          
                          26,515,732
                          
                          
                          $
                          1
                          
                          
                          $
                          25,766
                          
                          
                          $
                          (3,718
                          )
                          
                          $
                          22,049
 
 The accompanying notes are an integral
part of these financial statements.
  F-5
 
 BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
  Year
      Ended June 30,2009
                                  
                                  
                                  2008Cash
      flows from operating activities:Net
      income (loss)
                                  
                                  $
                                  (3,424
                                  )
                                  
                                  $
                                  8,454Adjustments
      to reconcile net income (loss) to netcash
      (used in) provided by operating activities:Depreciation
      and amortization
                                  
                                  
                                  1,285
                                  
                                  
                                  
                                  1,190Amortization
      of deferred financing fees
                                  
                                  
                                  60
                                  
                                  
                                  
                                  591Bad
      debt expense
                                  
                                  
                                  342
                                  
                                  
                                  
                                  569Stock-based
      compensation
                                  
                                  
                                  734
                                  
                                  
                                  
                                  181Gain
      on sale of fixed assets
                                  
                                  
                                  (8
                                  )
                                  
                                  
                                  (14
                                  )Accretion
      of debt discount associated with warrants
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,372Financing
      fees
                                  
                                  
                                  -
                                  
                                  
                                  
                                  26Deferred
      tax assets, net
                                  
                                  
                                  184
                                  
                                  
                                  
                                  204Changes
      in operating assets and liabilities:Accounts
      receivable
                                  
                                  
                                  10,925
                                  
                                  
                                  
                                  (8,262
                                  )Income
      tax receivable
                                  
                                  
                                  (2,659
                                  )
                                  
                                  
                                  -Inventories
                                  
                                  
                                  7
                                  
                                  
                                  
                                  (308
                                  )Prepaid
      expenses and other current assets
                                  
                                  
                                  460
                                  
                                  
                                  
                                  41Other
      assets
                                  
                                  
                                  (9
                                  )
                                  
                                  
                                  119Accounts
      payable
                                  
                                  
                                  (174
                                  )
                                  
                                  
                                  (2,578
                                  )Accrued
      liabilities
                                  
                                  
                                  (8,401
                                  )
                                  
                                  
                                  4,837Accrued
      income taxes
                                  
                                  
                                  (1,849
                                  )
                                  
                                  
                                  1,522Net
      cash (used in) provided by operating activities
                                  
                                  
                                  (2,527
                                  )
                                  
                                  
                                  7,944Cash
      flows from investing activities:Purchases
      of property and equipment
                                  
                                  
                                  (413
                                  )
                                  
                                  
                                  (956
                                  )Proceeds
      from the sale of property and equipment
                                  
                                  
                                  14
                                  
                                  
                                  
                                  48Cash
      paid for acquisitions and transaction costs
                                  
                                  
                                  (200
                                  )
                                  
                                  
                                  (39
                                  )Net
      cash used in investing activities
                                  
                                  
                                  (599
                                  )
                                  
                                  
                                  (947
                                  )Cash
      flows from financing activities:Proceeds
      from line of credit
                                  
                                  
                                  70,904
                                  
                                  
                                  
                                  120,453Repayment
      of line of credit
                                  
                                  
                                  (68,154
                                  )
                                  
                                  
                                  (125,773
                                  )Repayment
      of long-term debt
                                  
                                  
                                  (1,276
                                  )
                                  
                                  
                                  (972
                                  )Repayment
      of capital leases
                                  
                                  
                                  (171
                                  )
                                  
                                  
                                  (90
                                  )Proceeds
      from exercise of stock options and warrants
                                  
                                  
                                  146
                                  
                                  
                                  
                                  75Reorganization
      expenses
                                  
                                  
                                  (106
                                  )
                                  
                                  
                                  -Net
      cash (used in) provided by financing activities
                                  
                                  
                                  1,343
                                  
                                  
                                  
                                  (6,307
                                  )Net
      increase (decrease) in cash and cash equivalents
                                  
                                  
                                  (1,783
                                  )
                                  
                                  
                                  690Cash
      and cash equivalents at beginning of period
                                  
                                  
                                  3,173
                                  
                                  
                                  
                                  2,483Cash
      and cash equivalents at end of period
                                  
                                  $
                                  1,390
                                  
                                  
                                  $
                                  3,173
 
 The accompanying notes are an integral
part of these financial statements.
  F-6
 
 BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
 
 Year
      Ended June 30,2009
                      
                      
                      2008Supplemental
      cash flow information:Interest
      paid
                      
                      $
                      134
                      
                      
                      $
                      1,310Income
      taxes paid
                      
                      $
                      1,972
                      
                      
                      $
                      5,492Non-cash
      investing and financing activities:Assets
      purchased under capital leases
                      
                      $
                      13
                      
                      
                      $
                      262Federal
      net operating loss carryforwards acquiredin
      Old Berliner Reorganization
                      
                      $
                      2,361
                      
                      
                      $
                      -Purchase
      of vehicles financed with notes payable
                      
                      $
                      -
                      
                      
                      $
                      14Conversion
      of 7% Convertible Notes Payable
                      
                      $
                      -
                      
                      
                      $
                      6,000
 
 The
accompanying notes are an integral part of these financial
statements.
  F-7
 
 BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED JUNE 30, 2009
 ($
amount in thousands except per share and share amounts)
 
 1.
                Business
 
 Berliner
Communications, Inc. was originally incorporated in Delaware in 1987 as Adina,
Inc. (“Adina”). Adina’s corporate existence was permitted to lapse in February
of 1996 and in August of 1999 was reinstated as eVentures Group, Inc.
(“eVentures”). In December of 2000, eVentures changed its name to Novo Networks,
Inc. (“Novo”).
 
 On
February 18, 2005, Novo entered into an asset purchase agreement with the former
Berliner Communications, Inc., currently named Old Berliner, Inc. (“Old
Berliner”) and BCI Communications, Inc. (“BCI”), a Delaware corporation and
Novo’s wholly-owned subsidiary. As part of this transaction, BCI acquired (the
“Acquisition”) the operations and substantially all of the assets and
liabilities of Old Berliner. On September 16, 2005, Novo changed its name to
Berliner Communications, Inc. (“Berliner”). Berliner is now the public reporting
entity, and all of our operations are run out of Berliner’s wholly-owned
subsidiary, BCI. Unless the context otherwise requires, references to “we”,
“us”, “our” and “the Company” refer to Berliner and its consolidated subsidiary
BCI.
 
 Prior to
the Acquisition, Old Berliner provided wireless carriers with comprehensive site
acquisition, construction and zoning services. Old Berliner was founded in 1995,
and over the course of the following years, its service offerings were expanded
to include radio frequency and network design and engineering, infrastructure
equipment construction and installation, radio transmission base station
modification and project management services. With the consummation of the
Acquisition, BCI carried on the operations of Old Berliner.
 
 During
fiscal 2007, we entered into several asset purchase agreements which expanded
our presence primarily in the West and
Southwest portions of the United States.
 
 On
November 1, 2008, we entered into an Agreement with T3 Communications, Inc. to
purchase certain of its assets and operations. This acquisition provided our
Specialty Communications services with additional resources and a regional
presence in the Southeast.
 
 The
results of these acquired businesses have been incorporated into our
consolidated financial statements since the dates of acquisition.
 
 The
Company operates in two business segments: (1) infrastructure construction and
technical services; and (2) site acquisition and zoning.
 
 2.
              Summary
      of Significant Accounting Policies
 
 Basis
of Presentation, Use of Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Major assets and liabilities that are subject to estimates include allowance for
doubtful accounts, goodwill and other acquired intangible assets, deferred tax
assets and certain accrued and contingent liabilities. One of the more
significant processes requiring estimates is
percentage-of-completion.
  We
recognize revenue and profit on our contracts as the work progresses using the
percentage-of-completion method of accounting. Under this method, contracts in
progress are valued at cost plus accrued profits less earned revenue and
progress payments on uncompleted projects. This method relies on estimates of
total expected contract revenue and costs.
  F-8
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED JUNE 30, 2009
 ($
amount in thousands except per share and share amounts)
 
 Principles
of Consolidation
 
 The
consolidated financial statements include our accounts and the accounts of our
wholly-owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
 
 Cash
and Cash Equivalents
 
 We
consider all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
stated at cost, which approximates fair value. The Company’s cash and cash
equivalents are invested in investment-grade, short-term investment instruments
with high quality financial institutions.
 
 Accounts
Receivable, Allowance for Doubtful Accounts
 
 Accounts
receivable are customer obligations for services sold to such customers under
normal trade terms. The Company’s customers are primarily communications
carriers, corporate and government customers, located primarily in the U.S. The
Company performs periodic credit evaluations of its customers’ financial
condition. The Company provides allowances for doubtful accounts. Provisions for
doubtful accounts are recorded in selling, general and administrative expenses.
The adequacy of the reserve is evaluated using several factors including length
of time a receivable is past due, changes in the customer’s credit worthiness,
customer’s payment history, the length of the customer’s relationship with the
Company, current industry trends and the current economic climate.
 
 Inventories
 
 Inventories,
which consist mainly of parts and raw materials, are stated at the lower of cost
or market. Cost is determined using the average cost method.
 
 Prepaid
Expenses and Other Assets
 
 Prepaid
expenses are recorded as assets and expensed in the period in which the related
services are received. At June 30, 2009 and 2008, current prepaid expenses and
other current assets totaled approximately $0.7 million and $0.8 million,
respectively, and consisted mainly of insurance and deferred financing fees.
Other non-current assets of approximately $0.3 million at June 30, 2009 and 2008
are mainly deposits for our office and warehouse locations.
 
 Property
and Equipment
 
 Property
and equipment consist of automobiles and trucks, equipment, computer equipment
and software, furniture and fixtures, buildings, land and leasehold
improvements. Each class of asset is recorded at cost and depreciated using the
straight-line method over the estimated useful lives which range from a period
of three to five years. Leasehold improvements are amortized over the term of
the lease or the estimated useful life, whichever is shorter. Buildings are
amortized over 27.5 years. Maintenance and repairs are charged to expense as
incurred. Significant renewals and betterments are capitalized. At the time of
retirement or other disposition of property and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in our Statements of Operations.
 
 Goodwill
and Other Intangible Assets
  In
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (“SFAS 142”), goodwill and indefinite lived intangible assets are
no longer amortized but are assessed for impairment on at least an annual basis.
SFAS 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment.
  F-9
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED JUNE 30, 2009
 ($
amount in thousands except per share and share amounts)
 
 SFAS 142
requires that goodwill be tested at least annually, utilizing a two-step
methodology. The initial step requires the Company to determine the fair value
of the business acquired (reporting unit) and compare it to the carrying value,
including goodwill, of such business. If the fair value exceeds its carrying
value, no impairment loss is recognized. However, if the carrying value of the
reporting unit exceeds its fair value, the goodwill of the unit may be impaired.
The amount, if any, of the impairment is then measured in the second step, based
on the excess, if any, of the reporting unit’s carrying value of goodwill over
its implied value.
 
 The
Company determines the fair value of the business acquired (reporting units) for
purposes of this test primarily using indications of value determined by the use
of Guideline Public Company and Precedent Transactions Analyses. The fair value
of the Company’s reporting units derived using the aforementioned analyses
exceeded the carrying values of the reporting units at January 31, 2009.
Accordingly, step two was unnecessary and no impairment charge was recognized in
the consolidated statements of income for the year ended June 30, 2009. On an
ongoing basis, the Company expects to perform its annual impairment test at
January 31 absent any interim impairment indicators.
 
 Goodwill
through the years ended June 30, 2009 and 2008 consisted of the
following:
 
 Beginning
      balance, July 1, 2007
                          
                          $
                          2,270Digitcom
      acquisition - purchase price adjustment
                          
                          
                          (225
                          )Comtech
      acquisition - additional payment
                          
                          
                          39Ending
      balance June 30, 2008
                          
                          
                          2,084T3
      acquisition
                          
                          
                          200Ending
      balance June 30, 2009
                          
                          $
                          2,284
 
 Revenue
Recognition
 
 Site
acquisition and zoning services revenue is based upon output measures using
contract milestones as the basis. Revenue from infrastructure equipment
construction and installation contracts, which are generally completed within 90
days, is recorded under the percentage-of-completion method based on the
percentage that total direct costs incurred to date bear to estimated total
costs at completion. Losses are recognized when such losses become known. All
other revenue is recognized as work is performed.
 
 Unbilled
receivables represent revenue on uncompleted infrastructure equipment
construction and installation contracts that are not yet billed or billable,
pursuant to contract terms. Deferred revenues principally represent the value of
services to customers that have been billed as of the balance sheet date but for
which the requisite services have not yet been rendered.
 
 Income
Taxes
 
 We
account for income taxes under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the carrying amounts of existing assets and
liabilities in the financial statements and their respective tax bases. Deferred
tax assets and liabilities are measured using applicable tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on the deferred tax assets and
liabilities of a change in tax rates is recognized in the Statement of
Operations in the period that includes the enactment date. A valuation allowance
is provided for significant deferred tax assets when it is more likely than not
that such assets will not be recovered.
 
  F-10
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED JUNE 30, 2009
 ($
amount in thousands except per share and share amounts)
 
 Stock-based
Compensation
 
 We
elected to adopt Statement of Financial Accounting Standard No. 123 (revised
2004), Share Based Payment(“SFAS 123R”) using a modified prospective application, whereby the
provisions of the statement are applied going forward only from the date of
adoption to new (issued subsequent to July 1, 2005) stock option awards, and for
the portion of any previously issued and outstanding stock option awards for
which the requisite service is rendered after the date of adoption. All of our
previously issued options had fully vested prior to July 1, 2005.
 
 Compensation
expense must be recognized for any awards modified, repurchased, or cancelled
after the date of adoption. Under the modified prospective application, no
restatement of previously issued results is required.
 
 The fair
value of each option award is estimated on the date of the grant using the
Black-Scholes Merton option pricing model. Expected volatilities are based on
the historical volatility of WPCS International, which is another company in our
industry sector with similar revenue streams. We use historical data to estimate
an option’s expected life. The risk free interest rate input is based on the
market yield on United States Treasury securities at 5-year constant maturity in
effect at the time of the grant. Compensation costs, net of forfeitures, are
recognized on a straight-line basis over the period between the grant and
vesting dates. The expected term represents the period that the Company’s
stock-based awards are expected to be outstanding using the simplified method
since the Company does not have sufficient historical exercise activity pursuant
to Staff Accounting Bulletin (“SAB”) 107 and SAB 110.
 
 The
following weighted average assumptions used for purposes of determining the fair
value were as follows:
 
 2009
                      
                      
                      2008Expected
      Volatility
                      
                      
                      64%
      - 68%
                      
                      
                      
                      66%
      - 71%Expected
      dividend yield
                      
                      
                      0%
                      
                      
                      
                      0%Risk-free
      interest rate
                      
                      
                      1.50%
      - 3.06%
                      
                      
                      
                      2.58%
      - 4.97%Expected
      life
                      
                      6.25
      Years
                      
                      
                      5 -
      7.5 Years
 
 Earnings
(Loss) per Share
 
 Basic
earnings (loss) per share are computed by dividing income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share are computed by dividing income
available to common shareholders by the weighted-average number of common shares
that would have been outstanding if the dilutive potential common shares had
been issued. The dilutive effect of the outstanding options and warrants are
reflected in diluted earnings per share by application of the treasury stock
method. Diluted loss per share only includes the weighted-average number of
common shares outstanding during the period because the addition of options and
warrants would be anti-dilutive.
 
 The
following table sets forth the computations of basic earnings (loss) per share
and diluted earnings (loss) per share:
  F-11
  BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEAR ENDED JUNE 30, 2009
 ($
amount in thousands except per share and share amounts)
 
 Year
      Ended June 30,2009
                  
                  
                  2008Basic
      earnings (loss) per share:Numerator:Net
      income (loss) allocable to common shareholders
                  
                  $
                  (3,424
                  )
                  
                  $
                  8,454Denominator:Weighted
      average common shares outstanding
                  
                  
                  26,439
                  
                  
                  
                  17,918Net
      income (loss) per share - basic
                  
                  $
                  (0.13
                  )
                  
                  $
                  0.47
 
 Year
      Ended June 30,2009
                      
                      
                      2008Diluted
      earnings (loss) per share:Numerator:Net
      income (loss) allocable to common shareholders
                      
                      $
                      (3,424
                      )
                      
                      $
                      8,454Denominator:Weighted
      average common shares outstanding
                      
                      
                      26,439
                      
                      
                      
                      17,918Effect
      of dilutive securities:Stock
      options
                      
                      
                      -
                      
                      
                      
                      563Warrants
                      
                      
                      -
                      
                      
                      
                      8,685Weighted
      average common shares outstandingassuming
      dilution
                      
                      
                      26,439
                      
                      
                      
                      27,166Net
      income (loss) per share - diluted
                      
                      $
                      (0.13
                      )
                      
                      $
                      0.31
 
 Common
share equivalents consist of stock options and warrants using the treasury stock
method. For the year ended June 30, 2008, 320,690 stock options were excluded
from the computation of diluted net income per share because the exercise price
of these were greater than the average market price of the Company’s common
stock during the period, and therefore the effect is antidilutive.
 
 Fair
Value of Financial Instruments
 
 The
Company adopted SFAS No. 157, "Fair Value Measurements"
(“SFAS 157”) as it relates to financial assets and liabilities effective July 1,
2008. This pronouncement defines fair value, establishes a framework for
measuring fair value, and requires expanded disclosures about fair value
measurements. SFAS 157 emphasizes that fair value is a market-based measurement,
not an entity-specific measurement, and defines fair value as the price that
would be received to sell an asset or transfer a liability in an orderly
transaction between market participants at the measurement date. In June 2009,
the Company also adopted FASB Staff Position FAS No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions that are Not Orderly(“FSP FAS
157-4”).
  F-12


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





SFAS 157
discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flow) and
the cost approach (cost to replace the service capacity of an asset or
replacement cost), which are each based upon observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company’s market assumptions. SFAS 157 utilizes
a fair value hierarchy that prioritizes inputs to fair value measurement
techniques into three broad levels:





Level
      1:
            Observable
      inputs such as quoted prices for identical assets or liabilities in active
      markets.Level
      2:
            Observable
      inputs other than quoted prices that are directly or indirectly observable
      for the asset or liability, including quoted prices for similar assets or
      liabilities in active markets; quoted prices for similar or identical
      assets or liabilities in markets that are not active; and model-derived
      valuations whose inputs are observable or whose significant value drivers
      are observable.Level
      3:
            Unobservable
      inputs that reflect the reporting entity’s own
  assumptions.




The
Company’s investment in overnight money market institutional funds, which
amounted to $1.2 million at June 30, 2009 and 2008, is included in cash and cash
equivalents on the accompanying balance sheets and is classified as a Level 1
asset.





The
Company’s consolidated balance sheets include the following financial
instruments: short-term cash investments, trade accounts receivable, trade
accounts payable, long-term debt and the PNC line of credit. The Company
believes the carrying amounts in the financial statements approximates the fair
value of these financial instruments due to the relatively short period of time
between the origination of the instruments and their expected realization or the
interest rates which approximate current market rates.





Concentration
of Credit Risk





Financial
instruments which potentially subject the Company to concentration of credit
risk consist principally of temporary cash investments and accounts receivable.
The Company does not enter into financial instruments for trading or speculative
purposes.





Recently
Issued Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
157 which is intended to increase consistency and comparability in fair value
measurements by defining fair value, establishing a framework for measuring fair
value and expanding disclosures about fair value measurements. The provisions of
SFAS No. 157, which are effective for financial statements issued for the fiscal
years beginning after November 15, 2008, and interim periods within those fiscal
years except as it relates to financial assets and liabilities, which we adopted
effective July 1, 2008. The Company will adopt the remaining provisions of SFAS
157 beginning July 1, 2009. The Company has determined that the impact of SFAS
157 will not have a material effect to the financial statements taken as a
whole.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for
Financial Assets and Financial Liabilities("SFAS 159"). This statement
permits companies to choose to measure many financial assets and liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. We adopted SFAS 159 on July 1, 2008.
The adoption was not material to the financial statements taken as a
whole.


F-13


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS
160”). This statement amends ARB No. 51 to establish accounting and reporting
standards for the noncontrolling interest (minority interest) in a subsidiary
and for the deconsolidation of a subsidiary. Upon its adoption, noncontrolling
interests will be classified as equity in our consolidated balance sheets.
Income and comprehensive income attributed to noncontrolling interests will be
included in our consolidated statements of operations and our consolidated
statements of equity. SFAS 160 is effective for fiscal years beginning after
December 15, 2008; therefore the Company will adopt SFAS 160 starting July 1,
2009. This statement shall be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements which must be applied retrospectively
for all periods presented.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (Revised), Business
Combinations (“SFAS 141R”). This statement provides companies with
principles and requirements on how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, liabilities assumed, and
any noncontrolling interest in the acquiree as well as the recognition and
measurement of goodwill acquired in a business combination. The statement also
requires certain disclosures to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS 141R is effective for business combinations occurring
in fiscal years beginning after December 15, 2008. Early adoption of this
statement is not permitted. We will adopt SFAS 141R effective July 1,
2009.





In
February 2008, the FASB issued FASB Staff Position FAS No. 142-3, Determination of the Useful Life of
Intangible Assets(“FSP FAS 142-3”). This pronouncement amends FASB
Statement No. 142, Goodwill
and Other Intangible Assets, regarding the factors that should be
considered in developing the useful lives for intangible assets with renewal or
extension provisions. FSP FAS 142-3 requires an entity to consider its own
historical experience in renewing or extending similar arrangements, regardless
of whether those arrangements have explicit renewal or extension provisions,
when determining the useful life of an intangible asset. In the absence of such
experience, an entity shall consider the assumptions that market participants
would use about renewal or extension, adjusted for entity-specific factors. FSP
FAS 142-3 also requires an entity to disclose information regarding the extent
to which the expected future cash flows associated with an intangible asset are
affected by the entity’s intent and/or ability to renew or extend the
arrangement. FSP FAS 142-3 will be effective for qualifying intangible assets
acquired by the Company on or after July 1, 2009. The application of FSP FAS
142-3 is not expected to have a material impact on the Company’s results of
operations, cash flows or financial positions; however, it could impact future
transactions entered into by the Company.





In May
2008, the FASB issued FASB Staff Position APB No. 14-1, Accounting for Convertible Debt
Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)(“FSP APB 14-1”), which applies to convertible debt that
includes a cash conversion feature. Under FSP APB 14-1, the liability and equity
components of convertible debt instruments within the scope of this
pronouncement shall be separately accounted for in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008. The Company will adopt FSP APB 14-1 effective July 1,
2009. This adoption is not expected to have a material impact on the Company’s
consolidated financial position and results of operations.





In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock(“EITF
07-5”). EITF 07-5 provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. It also clarifies the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company is currently evaluating the
impact of the adoption of this pronouncement.


F-14


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





In
November 2008, the FASB ratified EITF Issue No. 08-6 “Equity Method Investment Accounting
Considerations” (“EITF 08-6”). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for fiscal years ended on or after December
15, 2008. The Company adopted EITF 08-6 for its fiscal year ended June 30, 2009.
This adoption did not have a material impact on the Company’s consolidated
financial position and results of operations.





In May
2009, the FASB issued Statement of Financial Accounting Standards No. 165,
“Subsequent Events”
(“SFAS 165”), to be effective for the interim or annual periods ending after
June 15, 2009. The objective of this Statement is to establish general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
In particular, this Statement sets forth a) the period after the balance sheet
date during which management of a reporting entity  should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements; b) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and c) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. The effect of
the adoption of SFAS 165 was not material on the Company’s consolidated
financial position and results of operations. The Company evaluated subsequent
events through September 28, 2009, which is the date the financial statements
were issued.





In June
2009, the FASB issued Statement of Financial Accounting Standards No. 168,
“The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”). The objective of
SFAS 168 is to replace Statement 162 and to establish the FASB Accounting
Standards Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. This statement
shall be effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company will adopt SFAS 168
effective July 1, 2009.





3.
            Accounts
      Receivable and Concentration of Credit
Risk





Accounts
receivable at June 30, 2009 and 2008 consist of the following:





June 30,2009
                      
                      
                      2008Accounts
      receivable
                      
                      $
                      16,204
                      
                      
                      $
                      23,870Unbilled
      receivables
                      
                      
                      4,112
                      
                      
                      
                      8,14920,316
                      
                      
                      
                      32,019Allowance
      for doubtful accounts
                      
                      
                      (200
                      )
                      
                      
                      (830
                      )Total
                      
                      $
                      20,116
                      
                      
                      $
                      31,189





Unbilled
receivables represent revenue on uncompleted infrastructure construction and
site acquisition contracts that are not yet billed or billable, pursuant to
contract terms. Unbilled receivables are generally billed within three months
subsequent to the provision of services. Deferred revenue principally represents
the value of services to customers that have been billed as of the balance sheet
date but for which the requisite services have not yet been rendered. Unbilled
receivables and deferred revenue are reported net in accounts receivable. The
total value of deferred revenue was $0.6 million and $0.8 million at June 30,
2009 and 2008, respectively.


F-15


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





The
allowance for doubtful accounts for the years ended June 30, 2009 and 2008
consisted of the following:





Balance at
                    
                    
                    
                    Recoveries/
                    
                    Balance atBeginning
                    
                    Charged to
                    
                    Deductions/
                    
                    End ofof Period
                    
                    Expense
                    
                    Write-offs
                    
                    PeriodAllowance
      for doubtful accounts:Year
      ended June 30, 2008
                    $
                    
                    261
                    
                    
                    
                    569
                    
                    
                    
                    -
                    
                    $
                    
                    830Year
      ended June 30, 2009
                    $
                    
                    830
                    
                    
                    
                    342
                    
                    
                    
                    (972
                    )
                    $
                    
                    200





As of and
for the year ended June 30, 2009, we derived 43% of our total revenue from three
customers, and those customers represented 28% of our accounts receivable.
During the year ended June 30, 2009, Metro PCS, Inc. (and its subsidiaries)
represented 19%, T-Mobile (and its subsidiaries) represented 13%, and Clearwire
US LLC represented 11% of our total revenue.





As of and
for the year ended June 30, 2008, we derived 84% of our total revenue from our
two largest customers, and those customers represented 62% of our accounts
receivable. During the year ended June 30, 2008, Sprint Nextel Corporation
represented 77% and Metro PCS represented 7% of our total revenue.





4.
            Property
      and Equipment





Property
and equipment at June 30, 2009 and 2008 consisted of the following:


Year Ended June 30,2009
                    
                    
                    2008Automobiles
      and trucks
                    
                    $
                    1,691
                    
                    
                    $
                    1,701Furniture
      and fixtures
                    
                    
                    469
                    
                    
                    
                    454Equipment
                    
                    
                    3,312
                    
                    
                    
                    3,179Computer
      equipment and software
                    
                    
                    454
                    
                    
                    
                    392Buildings
                    
                    
                    313
                    
                    
                    
                    313Leasehold
      improvements
                    
                    
                    256
                    
                    
                    
                    2446,495
                    
                    
                    
                    6,283Less:
      accumulated depreciation
                    
                    
                    (4,346
                    )
                    
                    
                    (3,449
                    )2,149
                    
                    
                    
                    2,834Land
                    
                    
                    90
                    
                    
                    
                    90$
                    2,239
                    
                    
                    $
                    2,924





Depreciation
on property and equipment for the years ended June 30, 2009 and 2008 was
approximately $0.9 million and $0.8 million, respectively.





5.
            Non-Current
      Assets





Non-current
assets include amortizable intangible assets consisting of customer
relationships and covenants not to compete. These assets, together with
goodwill, were the result of the allocation of the purchase price for
acquisitions. Amortization expense related to amortizable intangible assets was
$0.3 million and $0.4 million for the year ended June 30, 2009 and 2008,
respectively.





Intangible
assets subject to amortization are amortized based upon the assets’ estimated
useful lives. Customer relationships have estimated useful lives of 70 months
and covenants not to compete have estimated useful lives of approximately 45
months. We will continue to evaluate the estimated useful lives on an ongoing
basis.


F-16


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Scheduled
amortization charges for the intangible assets, as of June 30, 2009 are as
follows:




2010
                          
                          
                          2532011
                          
                          
                          1282012
                          
                          
                          772013
                          
                          
                          21Total
                          
                          $
                          479





6.
            Accrued
      Liabilities





Accrued
liabilities at June 30, 2009 and 2008 consisted of the following:


June 30,2009
                    
                    
                    2008Employee
      compensation
                    
                    $
                    1,230
                    
                    
                    $
                    2,998Construction
      costs
                    
                    
                    2,027
                    
                    
                    
                    8,107Other
                    
                    
                    428
                    
                    
                    
                    814$
                    3,685
                    
                    
                    $
                    11,919





Accrued
construction costs are reported net of amounts deferred in the calculation of
percentage of completion for our construction and site acquisition projects. The
amount of deferred expense included in accrued construction costs was $1.3
million and $0.8 million at June 30, 2009 and 2008, respectively.





7.
            Income
      Taxes





Income
tax expense differed from amounts computed by applying the U.S. federal tax rate
of 34% to pre-tax income as a result of the following:





Year ended June 30,2009
                    
                    
                    2008Tax
      expense at statutory rate of 34%
                    
                    $
                    (1,999
                    )
                    
                    $
                    5,109Increase
      (decrease) in valuation allowance against deferred tax
    assets
                    
                    
                    54
                    
                    
                    
                    (2
                    )State
      and local income tax expense, net of income tax
    benefit
                    
                    
                    (335
                    )
                    
                    
                    1,092Meals
      and entertainment
                    
                    
                    63
                    
                    
                    
                    64Financing
      fees
                    
                    
                    -
                    
                    
                    
                    8Other
      (net)
                    
                    
                    (240
                    )
                    
                    
                    156(Benefit)
      provision for income taxes
                    
                    $
                    (2,457
                    )
                    
                    $
                    6,427





The
following summarizes the (benefit) provision for income taxes:


Year ended June 30,2009
                        
                        
                        2008Current:Federal
                        
                        $
                        (2,208
                        )
                        
                        $
                        4,825State
      and local
                        
                        
                        (285
                        )
                        
                        
                        1,744Total
      Current
                        
                        
                        (2,493
                        )
                        
                        
                        6,569Deferred:Federal
                        
                        
                        178
                        
                        
                        
                        (105
                        )State
      and local
                        
                        
                        (142
                        )
                        
                        
                        (37
                        )Total
      Deferred
                        
                        
                        36
                        
                        
                        
                        (142
                        )(Benefit)
      provision for income taxes
                        
                        $
                        (2,457
                        )
                        
                        $
                        6,427




F-17


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





The tax
effects of temporary differences that give rise to deferred tax assets and
liabilities at June 30, 2009 and 2008 are as follows:





2009
                          
                          
                          2008Federal
                          
                          
                          State
                          
                          
                          TotalDeferred Tax AssetsCurrent:Allowance
      for doubtful accounts
                          
                          $
                          60
                          
                          
                          $
                          17
                          
                          
                          $
                          77
                          
                          
                          $
                          328Allowance
      for obsolete inventory
                          
                          
                          8
                          
                          
                          
                          2
                          
                          
                          
                          10
                          
                          
                          
                          -Accrued
      bonus
                          
                          
                          2
                          
                          
                          
                          1
                          
                          
                          
                          3
                          
                          
                          
                          126Accrued
      vacation
                          
                          
                          15
                          
                          
                          
                          4
                          
                          
                          
                          19
                          
                          
                          
                          82NOL
      Carryforward
                          
                          
                          320
                          
                          
                          
                          -
                          
                          
                          
                          320
                          
                          
                          
                          -405
                          
                          
                          
                          24
                          
                          
                          
                          429
                          
                          
                          
                          536Non-Current:Stock-based
      compensation
                          
                          
                          320
                          
                          
                          
                          94
                          
                          
                          
                          414
                          
                          
                          
                          181NOL
      carryforward
                          
                          
                          2,961
                          
                          
                          
                          691
                          
                          
                          
                          3,652
                          
                          
                          
                          1,520Customer
      list amortization
                          
                          
                          156
                          
                          
                          
                          45
                          
                          
                          
                          201
                          
                          
                          
                          128Covenant
      amortization
                          
                          
                          34
                          
                          
                          
                          10
                          
                          
                          
                          44
                          
                          
                          
                          18Amortization
      of warrants in deferred financing fees
                          
                          
                          73
                          
                          
                          
                          22
                          
                          
                          
                          95
                          
                          
                          
                          993,544
                          
                          
                          
                          862
                          
                          
                          
                          4,406
                          
                          
                          
                          1,946Total
      Deferred Tax Assets
                          
                          
                          3,949
                          
                          
                          
                          886
                          
                          
                          
                          4,835
                          
                          
                          
                          2,482Deferred Tax LiabilitiesLong-TermGoodwill
      amortization
                          
                          
                          96
                          
                          
                          
                          23
                          
                          
                          
                          119
                          
                          
                          
                          65Depreciation
      expense
                          
                          
                          189
                          
                          
                          
                          55
                          
                          
                          
                          244
                          
                          
                          
                          176Total
      Deferred Tax Liabilities
                          
                          
                          285
                          
                          
                          
                          78
                          
                          
                          
                          363
                          
                          
                          
                          2413,664
                          
                          
                          
                          808
                          
                          
                          
                          4,472
                          
                          
                          
                          2,241Less:
      Valuation allowance
                          
                          
                          (550
                          )
                          
                          
                          (704
                          )
                          
                          
                          (1,254
                          )
                          
                          
                          (1,200
                          )Net
      deferred tax assets
                          
                          $
                          3,114
                          
                          
                          $
                          104
                          
                          
                          $
                          3,218
                          
                          
                          $
                          1,041





Deferred
income taxes result from temporary differences in the financial reporting basis
and tax basis of assets and liabilities.





In
assessing the realizability of deferred tax assets, we consider whether it is
more likely than not for some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible.


F-18


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Based on
management’s assessment of certain state tax attributes, we have determined that
it was more likely than not that certain deferred tax assets totaling
approximately $1.3 million will not be realized. These assets relate to net
operating loss carryforwards. Accordingly, valuation allowances have been
established for these assets.





On
February 4, 2009, the Company closed its reorganization transaction with Old
Berliner (see Note 16).  On April 6, 2009, Old Berliner, Inc.
transferred all of its assets to the Old Berliner Liquidating Trust, completing
the final phase of the distribution for tax purposes.  As part of the
transaction, the Company received approximately $6.9 million of Old Berliner’s
unused federal net operating loss carryforwards. We have recorded a $ 2.4
million deferred tax asset related to these carryforwards.





We have
net operating loss carryforwards for federal and state income tax purposes of
approximately $1.2 million expiring in 2026 and approximately $6.1 million
expiring between 2012 and 2014, respectively, which may be applied against
future taxable income. We can only utilize approximately $1.0 million per year
of the federal carryforward due to limitations as a result of the Acquisition
and Old Berliner reorganization.




At June
30, 2009, we had total income taxes receivable of approximately $2.7 million,
consisting of $2.2 million federal and $0.5 million state income taxes
receivable which we expect to receive during the third quarter of fiscal
2010.




8.
            Revolving
      Credit Facility





PNC
Bank, National Association Facility





On April
17, 2008, our wholly owned subsidiary BCI, as borrower, became obligated under a
Revolving Credit and Security Agreement (the “PNC Facility”) with PNC Bank,
National Association (“PNC”) and such other lenders as may thereafter become a
party to the PNC Facility (collectively, the “Lenders”).  Under the
terms of the PNC Facility, BCI is entitled to request that the Lenders make
revolving advances to BCI from time to time in an amount up to the lesser of (i)
85% of the value of certain receivables owned by BCI and approved by the Lenders
as collateral or (ii) a total of $15.0 million.  Such revolving
advances were used by BCI to repay existing indebtedness owed to Presidential,
pay fees and expenses relating to entering into the PNC Facility and provide for
BCI’s working capital needs and shall be used to assist in the acquisition of
companies engaged in the same line of business as BCI.




Interest
on the revolving advances shall accrue (a) for domestic rate loans, at a rate
per annum equal to 2.25% plus the higher of (i) the base commercial lending rate
of PNC as publicly announced to be in effect from time to time, or (ii) the
federal funds open rate plus 1/2 of 1%, and (b) for Eurodollar rate loans, at a
rate per annum equal to 3% plus (i) the rate at which U.S. dollar deposits are
offered by leading banks in the London interbank deposit market (as displayed by
Bloomberg), divided by (ii) one minus the reserve percentage requirement as
determined by the Board of Governors of the Federal Reserve
System.  Such amounts are secured by a blanket security interest in
favor of the Lenders that covers all of BCI’s receivables, equipment, general
intangibles, inventory, investment property, certain real property, certain
leasehold interests, all subsidiary stock, records and other property and
proceeds of all of the foregoing.




The term
of the PNC Facility is three years and shall terminate on April 17,
2011.  BCI may terminate the PNC Facility at any time upon sixty (60)
days’ prior written notice and upon payment in full of the obligations owing
under the PNC Facility or any related documents.  Upon such early
termination by BCI, BCI shall pay the Lenders an early termination fee in an
amount equal to three eighths of one percent (0.375%) of $15.0 million if the
early termination occurs on or before April 16, 2010.




In
connection with the closing of the PNC Facility, Berliner Communications, Inc.
became obligated under that certain Guaranty and Suretyship Agreement (the
“Guaranty”), dated April 17, 2008, in favor of the Lenders, pursuant to which we
unconditionally guaranteed and became surety for the prompt payment and
performance of all loans, advances, debts, liabilities, obligations, covenants
and duties owing by BCI to PNC as agent for the benefit of the Lenders, of any
kind or nature, present or future, whether direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, to the Lenders by BCI.  In the event BCI is unable to pay any
amounts owed to the Lenders, we would be liable, pursuant to the Guaranty, for
such amounts upon the same terms and conditions as BCI would be
liable.


F-19


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Along with the PNC Facility, BCI
entered into a Revolving Credit Note (the “PNC Note”) with the Lenders, pursuant
to which, BCI agreed to repay the Lenders the principal amount of $15.0 million
or, if different from such amount, the unpaid balance of advances due and owing
to PNC under the PNC Facility, plus interest on the principal amount from time
to time outstanding until such principal amount is paid in full, at the
applicable interest rates in accordance with the provisions of the PNC
Facility.  The PNC Note is subject to mandatory prepayment upon
default under the terms of the agreement and may be voluntarily prepaid, in
whole or in part, on the terms and conditions set forth in the PNC
Facility.  Upon the occurrence of an event of default due to
bankruptcy or BCI’s inability to pay, the PNC Note shall immediately become due
and payable, without notice.  Other uncured defaults under the PNC
Facility or any related document shall cause the PNC Note to be declared
immediately due and payable, without notice, in accordance with the terms of the
PNC Facility.  Notwithstanding the foregoing, all outstanding
principal and interest are due and payable on April 17, 2011.  The
balance outstanding at June 30, 2009 was $3.0 million and the amount
additionally available on the line of credit was $7.7
million.




BCI was
not in compliance with its Fixed Charge Coverage Ratio for its second fiscal
quarter.  BCI entered into an Amendment with PNC which waived
compliance with the ratio, increased the interest rates and provided that during
the term of the PNC Facility as amended, BCI would observe the following
financial covenants:





1.
            Minimum
      Undrawn Availability:  BCI cannot cause, suffer or permit
      Undrawn Availability plus cash on deposit at PNC to be less than (1) Two
      Million Two Hundred Fifty Thousand ($2,250,000) Dollars as of March 31,
      2009, or (2) Three Million Five Hundred Thousand ($3,500,000) Dollars as
      of June 30, 2009;





2.
            Fixed
      Charge Coverage Ratio:  BCI must cause to be maintained at all
      times a Fixed Charge Coverage Ratio of not less than (1) 1.00 to 1.00 from
      July 1, 2009 through September 30, 2009,  (2) 1.10 to 1.00 from
      October 1, 2009 through June 30, 2010, tested quarterly on a building four
      (4) quarter basis, and (3) 1.10 to 1.00 thereafter, tested quarterly on a
      rolling four (4) quarter basis;





3.
            Minimum
      EBITDA:  BCI cannot cause, suffer or permit EBITDA to be less
      than (1) Two Million Six Hundred Twenty- Two Thousand ($2,622,000) Dollars
      for the trailing twelve months ending March 31, 2009, or (2) One Million
      Five Hundred Thousand ($1,500,000) Dollars for the fiscal quarter ending
      June 30, 2009.





As a
result of our operating results, we breached the minimum EBITDA covenants noted
above. To correct this issue, on September 25, 2009 the Company and
PNC  entered into a Second Amendment to Revolving Credit and Security
Agreement (the “Second Amendment”) to amend the PNC Facility. Pursuant to the
terms of the Second Amendment, PNC waived compliance by BCI with the minimum
EBITDA covenants, and therefore BCI is in complete compliance with all terms and
conditions of the PNC Facility as of the date of this Annual
Report.  Going forward, there is no longer a minimum undrawn
availability covenant or a minimum EBITDA covenant, but BCI must maintain
compliance with the Fixed Charge Coverage Ratio noted above.




9.
            Long-Term
      Debt





Long-term
debt at June 30, 2009 and 2008 consisted of the following:


June 30,2009
                              
                              
                              2008Note
      payable to J&J Leasing due February 2010, at Prime
Rate
                              
                              $
                              438
                              
                              
                              $
                              1,021Notes
      payable to finance companies related to insurancepremiums,
      payable in monthly installments of $70 thousand,interest
      ranging from 3.19% to 5.02% annually, dueNovember
      2009 through April 2010
                              
                              
                              287
                              
                              
                              
                              316Notes
      payable to finance companies, payable in monthlyinstallments
      of $5 thousand, interest ranging from 4.99%to
      12.79%, due December 2009 through June 2010.
                              
                              
                              70
                              
                              
                              
                              263Capital
      Leases (Note 10)
                              
                              
                              312
                              
                              
                              
                              4231,107
                              
                              
                              
                              2,023Less
      current portion
                              
                              
                              (895
                              )
                              
                              
                              (1,251
                              )$
                              212
                              
                              
                              $
                              772




F-20


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Note
Purchase Agreement





On
December 29, 2006, we entered into a Note Purchase Agreement (the “Note Purchase
Agreement”) with Sigma Opportunity Fund, LLC (“Sigma”) for the issuance and sale
of a 7% Senior Subordinated Secured Convertible Note due on December 29, 2008,
in the original principal amount of $3.0 million (the “Note”) convertible at
$1.10 per share (subject to adjustment) and a warrant to purchase up to 1.5
million shares of our common stock with a strike price of $0.01 (the
“Warrant”).





On
February 2, 2007, we entered into a Joinder Agreement to the Note Purchase
Agreement with Pacific Asset Partners, LLC (“Pacific”) and Operis Partners I,
LLC (“Operis”) and issued a second 7% Senior Subordinated Secured Convertible
Note due on December 29, 2008 in the original principal amount of $1.0 million
and a warrant to purchase up to 500,000 shares of our common stock (with a fair
value of $0.4 million) to Pacific, and a third 7% Senior Subordinated Secured
Convertible Note due on December 29, 2008 in the original principal amount of
$0.5 million and a warrant to purchase up to 250,000 shares of our common stock
(with a fair value of $0.2 million) to Operis, all on substantially the same
terms as the Note and Warrant issued to Sigma.





On
February 15, 2007, we entered into a Joinder Agreement to the Note Purchase
Agreement with Sigma Berliner, LLC (“Sigma Berliner”) to issue a fourth 7%
Senior Subordinated Secured Convertible Note due on December 29, 2008 in the
original principal amount of $1.5 million (the “Sigma Berliner Note”) and a
warrant to purchase up to 750,000 shares of our common stock (with a fair value
of $0.6 million) to Sigma Berliner, also on substantially the same terms as the
Note and Warrant issued to Sigma.





Pursuant
to the Note Purchase Agreement, we agreed to register the shares of common stock
issuable upon conversion of the Note and upon exercise of the Warrant and the
Additional Warrants (collectively, the “Registrable Shares”) for resale under
the Securities Act. We agreed to file with the SEC a Registration Statement with
respect to the Registrable Shares, which was filed with the SEC on March 19,
2007, and to cause the Registration Statement to become effective on or before
June 15, 2007.





We were
unable to have the Registration Statement declared effective by the Securities
and Exchange Commission prior to June 15, 2007.  Therefore, pursuant
to the Note Purchase Agreement, we became subject to liquidated damages equal to
2% of the aggregate purchase price paid by each purchaser for each of the first
six months that we failed to meet the requirement.  On September 27,
2007, we signed a Waiver and Amendment to Note Purchase Agreement (the “Waiver”)
with the noteholders to lower the conversion price of the Notes from $1.10 to
$1.00 per share.  The reduction in the conversion price resulted in
finance charges of $0.7 million, which was reflected in our balance sheet as
other long-term liabilities and was subsequently reclassified as Additional
paid-in capital. Pursuant to the Waiver, we have agreed to continue to use our
best efforts to register the shares underlying the Notes and the associated
warrants, and to maintain the effectiveness of any registration statement we
file with respect to these shares. Effective December 4, 2008, we registered
with the SEC 896,756 of these shares of common stock for resale by the security
holders on a delayed or continuous basis, which does not completely fulfill our
obligations.





In
connection with the Note Purchase Agreement, on February 8, 2007 we amended our
certificate of incorporation to increase the number of shares of our authorized
common stock from 20,000,000 shares to 100,000,000 shares.





In
connection with the Sigma note, the Pacific note, the Operis note and the Sigma
Berliner note, we recorded debt discounts equal to the fair value of the
warrants associated with such notes as follows:





LoanFace
                      
                      Warrants
                      
                      DebtAmount
                      
                      Issued
                      
                      DiscountSigma
      note
                      
                      $
                      3,000
                      
                      
                      
                      1,500,000
                      
                      
                      $
                      753Pacific
      note
                      
                      
                      1,000
                      
                      
                      
                      500,000
                      
                      
                      
                      376Operis
      note
                      
                      
                      500
                      
                      
                      
                      250,000
                      
                      
                      
                      188Sigma
      Berliner note
                      
                      
                      1,500
                      
                      
                      
                      750,000
                      
                      
                      
                      564$
                      6,000
                      
                      
                      
                      3,000,000
                      
                      
                      $
                      1,881




F-21


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





We
reduced the carrying value of these notes on the books accordingly with the
corresponding entries to paid-in capital. We have accreted these amounts over
the lives of the notes, charging interest expense whereby the notes’ balances
will equal the face amounts at December 29, 2008.





On June
25, 2008, the Noteholders converted the full principal amounts of the Notes into
common stock of the Company at a conversion price of $1.00 per share. The
Company paid each Noteholder cash payments representing interest payments the
Noteholders would have received had they converted on the Notes’ maturity date,
December 29, 2008. Upon conversion, (a) Sigma received 3,000,000 shares of
common stock and a cash payment of $0.2 million, (b) Operis received 500,000
shares of common stock and a cash payment of $0.1 million, (c) Pacific received
1,000,000 shares of common stock and a cash payment of $0.1 million, and (d)
Sigma Berliner received 1,500,000 shares of common stock and a cash payment of
$0.1 million.





In
connection with the conversion of the Notes, we charged the unamortized balance
of deferred finance fees in the amount of $0.2 million and the unaccreted
balance of the warrants issued in connection with the Notes in the amount of
$0.5 million to amortization of deferred financing fees and accretion of debt
discount.





10.
            Capitalized
      Leases





We have
entered into capital leases for certain automobiles and trucks. As of June 30,
2009 and 2008, the total cost of the vehicles was approximately $0.7 million,
and the related accumulated depreciation was approximately $0.3 million and $0.2
million, respectively.





The
following is a schedule of future minimum lease payments under capital leases as
of June 30, 2009:





2010
                    
                    $
                    1442011
                    
                    
                    1272012
                    
                    
                    882013
                    
                    
                    3Thereafter
                    
                    
                    -362Amounts
      representing interest
                    
                    
                    50Future
      minimum lease payments
                    
                    $
                    312





11.
            Commitments
      and Contingencies





Operating
Leases





We lease
office and warehouse space under various operating leases. Rent expense for the
years ended June 30, 2009 and 2008 was approximately $1.2 million and $0.8
million, respectively.





Minimum
future amounts due under operating leases are as follows:


2010
                    
                    $
                    1,2422011
                    
                    
                    1,2352012
                    
                    
                    1,0292013
                    
                    
                    8352014
                    
                    
                    801Thereafter
                    
                    
                    1,966$
                    7,108




F-22


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





We have
entered into a six year Lease Agreement for approximately 70,000 square feet of
office and warehouse space in Fairlawn, New Jersey, which will commence upon the
landlord meeting certain contingencies, including construction of new office
facilities to our satisfaction. We expect that the lease will commence on
October 1, 2009, and the above table includes rental payments for this location
from that date going forward.





12.
            Legal
      Proceedings





We are
involved in legal proceedings from time to time, none of which we believe, if
decided adversely to us, would have a material adverse effect on our business,
financial condition or results of operations.





13.
            Employee
      Benefit Plan





Berliner
maintains a defined contribution plan under Section 401(k) of the Internal
Revenue Code. Under the plans, employees may elect to defer a percentage of
their salary, subject to defined limitations. Berliner retains the right to
provide for a discretionary matching contribution in addition to discretionary
contributions based upon participants’ salaries. We accrued for voluntary
matching or discretionary contributions totaling $92 thousand and $0.2 million
for the years ended June 30, 2009 and 2008, respectively.





14.
            Related
      Party Transactions





Pursuant
to the provisions of the Note Purchase Agreement described in Note 9, so long as
the Note remains outstanding or Sigma beneficially owns at least 5% of our
outstanding common stock, Sigma has the right to nominate one director to our
Board of Directors. On December 29, 2006, Sigma nominated, and our Board of
Directors appointed, Thom Waye to serve as a member of our Board of Directors as
a Class III director, with his term expiring at the 2008 annual meeting. Mr.
Waye was re-elected at the 2008 annual meeting with a term expiring at the 2011
annual meeting. We are obligated to use our best efforts to cause Mr. Waye, as
well as all reasonably suited future designees, to continue to serve on our
Board of Directors.  During the year ended June 30, 2008, we paid
Sigma $0.4 million in interest on the Note. We paid Mr. Waye $23 thousand and
$17 thousand during the years ended June 30, 2009 and 2008, respectively, for
his service as a director pursuant to our standard non-employee director
compensation program. In addition, during fiscal 2008 we issued 25,000 shares of
our common stock to each of Mr. Waye and all of our outside independent
directors. The value of the stock issued to each director was $28 thousand at
the time of issuance.





On
February 15, 2007, we entered into a Joinder Agreement to the Note Purchase
Agreement with Sigma Berliner, an affiliate of Sigma and Thom Waye, and issued a
fourth 7% Senior Subordinated Secured Convertible Note due on December 29, 2008
in the original principal amount of $1.5 million and a warrant to purchase up to
750,000 shares of our common stock to Sigma Berliner, on substantially the same
terms as the Note and Warrant issued to Sigma. This transaction was the result
of Sigma exercising a right that Sigma negotiated as part of the December 29,
2006 transaction, at a time at which it was not an affiliate of Berliner. During
the year ended June 30, 2008, we paid Sigma Berliner $0.2 million in interest on
the Note.





15.
            Stockholders’
      Equity





Common
and Preferred Stock





As of
June 30, 2009, pursuant to the Amendment to our Amended and Restated Certificate
of Incorporation dated February 8, 2007, we are authorized to issue 102,000,000
shares, consisting of (i) 100,000,000 shares of common stock, par value $0.00002
per share, and (ii) 2,000,000 shares of preferred stock, par value $0.00002 per
share.




F-23




BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Stock
Options





At June
30, 2009, we sponsored two stock option plans, the 1999 Omnibus Securities Plan
(the “1999 Plan”) and the 2001 Equity Incentive Plan (the “2001 Plan”),
collectively (the “Plans”). We have elected to account for those Plans under
SFAS 123R.





The Plans
provide for the grant of incentive stock options and non-qualified stock
options. The terms of the options are set by our Board of Directors. The options
expire no later than ten years after the date the stock option is granted. The
number of shares authorized for grants under the Plans is 15% of the total
outstanding common stock as computed by the Company as fully diluted, provided
that no more than 4 million options can be “incentive” stock options. The 2001
Plan provides for the grant of a maximum of 40,000 incentive stock options that
expire no later than ten years after the date the stock option is
granted.





The
following table represents stock options under our Plans as of June 30,
2009:


F-24


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





2001 Plan
                                                                                                            
                                                                                                            1999 Plan
                                                                                                            
                                                                                                            Non-PlanWeighted
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            Weighted
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            WeightedAverage
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            Average
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            AverageNumber
                                                                                                            
                                                                                                            Exercise
                                                                                                            
                                                                                                            Number
                                                                                                            
                                                                                                            Exercise
                                                                                                            
                                                                                                            Number
                                                                                                            
                                                                                                            Exerciseof Shares
                                                                                                            
                                                                                                            Price
                                                                                                            
                                                                                                            of Shares
                                                                                                            
                                                                                                            Price
                                                                                                            
                                                                                                            of Shares
                                                                                                            
                                                                                                            PriceBalance
      at June 30, 2007
                                                                                                            
                                                                                                            16,891
                                                                                                            
                                                                                                            $
                                                                                                            1,387.50
                                                                                                            
                                                                                                            1,408,051
                                                                                                            
                                                                                                            $
                                                                                                            3.26
                                                                                                            
                                                                                                            18,704
                                                                                                            
                                                                                                            $
                                                                                                            6,786.00Options
      granted at fair value
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            354,230
                                                                                                            
                                                                                                            
                                                                                                            1.06
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -Options
      exercised
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            (126,875
                                                                                                            )
                                                                                                            
                                                                                                            0.55
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -Options
      cancelled
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            (221,721
                                                                                                            )
                                                                                                            
                                                                                                            0.59
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -Outstanding
      at June 30, 2008
                                                                                                            
                                                                                                            16,891
                                                                                                            
                                                                                                            $
                                                                                                            1,387.50
                                                                                                            
                                                                                                            1,413,685
                                                                                                            
                                                                                                            $
                                                                                                            3.37
                                                                                                            
                                                                                                            18,704
                                                                                                            
                                                                                                            $
                                                                                                            6,786.00Exercisable
      at June 30, 2008
                                                                                                            
                                                                                                            16,891
                                                                                                            
                                                                                                            $
                                                                                                            1,387.50
                                                                                                            
                                                                                                            782,072
                                                                                                            
                                                                                                            $
                                                                                                            5.17
                                                                                                            
                                                                                                            18,704
                                                                                                            
                                                                                                            $
                                                                                                            6,786.00Options
      granted at fair value
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            958,326
                                                                                                            
                                                                                                            
                                                                                                            1.42
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -Options
      cancelled
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            (203,629
                                                                                                            )
                                                                                                            
                                                                                                            1.09
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            -Outstanding
      at June 30, 2009
                                                                                                            
                                                                                                            16,891
                                                                                                            
                                                                                                            $
                                                                                                            1,387.50
                                                                                                            
                                                                                                            2,168,382
                                                                                                            
                                                                                                            $
                                                                                                            2.72
                                                                                                            
                                                                                                            18,704
                                                                                                            
                                                                                                            $
                                                                                                            6,786.00Exercisable
      at June 30, 2009
                                                                                                            
                                                                                                            16,891
                                                                                                            
                                                                                                            $
                                                                                                            1,387.50
                                                                                                            
                                                                                                            1,141,451
                                                                                                            
                                                                                                            $
                                                                                                            3.96
                                                                                                            
                                                                                                            18,704
                                                                                                            
                                                                                                            $
                                                                                                            6,786.00








The
intrinsic values of options exercised, outstanding and exercisable as of and for
the year ending June 30, 2009 were as follows:





Options
      exercised
                      
                      $
                      0Options
      outstanding
                      
                      $
                      285,890Options
      exercisable
                      
                      $
                      282,628





Stock-based
compensation expense included in the consolidated statement of operations for
the years ended June 30, 2009 and 2008 was approximately $0.6 million and $0.2
million, respectively. As of June 30, 2009, there was approximately $0.5 million
of total unrecognized stock-based compensation cost related to options granted
under our Plans that will be recognized over four years.





At June
30, 2009, the range of exercise prices, weighted average exercise price and
weighted average remaining contractual life for options outstanding were as
follows:


F-25


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)




Options Outstanding and ExercisableWeightedWeighted
                                                                          
                                                                          AverageNumber
                                                                          
                                                                          
                                                                          
                                                                          Average
                                                                          
                                                                          Remainingof
                                                                          
                                                                          
                                                                          
                                                                          Exercise
                                                                          
                                                                          ContractualOption Price Range
                                                                          
                                                                          Shares
                                                                          
                                                                          Exercisable
                                                                          
                                                                          Price
                                                                          
                                                                          Life2001
      Plan
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          1,387.50
                                                                          
                                                                          
                                                                          16,891
                                                                          
                                                                          
                                                                          16,891
                                                                          
                                                                          $
                                                                          1,387.50
                                                                          
                                                                          1.53
      Years1999
      Plan
                                                                          
                                                                          $
                                                                          0.30
                                                                          
                                                                          to
                                                                          
                                                                          $
                                                                          0.81
                                                                          
                                                                          
                                                                          633,600
                                                                          
                                                                          
                                                                          621,725
                                                                          
                                                                          $
                                                                          0.49
                                                                          
                                                                          6.90
      Years$
                                                                          0.90
                                                                          
                                                                          to
                                                                          
                                                                          $
                                                                          1.48
                                                                          
                                                                          
                                                                          1,531,198
                                                                          
                                                                          
                                                                          516,142
                                                                          
                                                                          $
                                                                          1.32
                                                                          
                                                                          8.46
      Years$
                                                                          7.05
                                                                          
                                                                          
                                                                          167
                                                                          
                                                                          
                                                                          167
                                                                          
                                                                          $
                                                                          7.05
                                                                          
                                                                          5.05
      Years$
                                                                          8.01
                                                                          
                                                                          
                                                                          250
                                                                          
                                                                          
                                                                          250
                                                                          
                                                                          $
                                                                          8.01
                                                                          
                                                                          4.67
      Years$
                                                                          16.50
                                                                          
                                                                          
                                                                          2,000
                                                                          
                                                                          
                                                                          2,000
                                                                          
                                                                          $
                                                                          16.50
                                                                          
                                                                          1.43
      Years$
                                                                          3,000.00
                                                                          
                                                                          
                                                                          1,167
                                                                          
                                                                          
                                                                          1,167
                                                                          
                                                                          $
                                                                          3,000.00
                                                                          
                                                                          0.27
      YearsNon-Plan
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          3,600.00
                                                                          
                                                                          
                                                                          637
                                                                          
                                                                          
                                                                          637
                                                                          
                                                                          $
                                                                          3,600.00
                                                                          
                                                                          0.69
      Years$
                                                                          6,900.00
                                                                          
                                                                          
                                                                          18,067
                                                                          
                                                                          
                                                                          18,067
                                                                          
                                                                          $
                                                                          6,900.00
                                                                          
                                                                          0.76
      Years




During
the year ended June 30, 2009, we issued 958,326 options to 80 individuals with
vesting as follows:





WeightedNumber
                    
                    
                    AverageVesting Period
                    
                    of Shares
                    
                    
                    Fair Value25%
      per year after one year
                    
                    
                    82,000
                    
                    
                    $
                    0.6725%
      Immediate and 25% per year thereafter
                    
                    
                    876,326
                    
                    
                    
                    0.89958,326
                    
                    
                    
                    0.87





The value
of this stock based on quoted market values at the time of grant was $1.4
million.





The
following table summarizes information about unvested stock option
transactions:


2001 Plan
                    
                    
                    1999 Plan
                    
                    
                    Non-PlanWeighted
                    
                    
                    WeightedAverage
                    
                    
                    AverageNumber
                    
                    
                    Number
                    
                    
                    Exercise
                    
                    
                    Fair
                    
                    
                    Numberof Shares
                    
                    
                    of Shares
                    
                    
                    Price
                    
                    
                    Value
                    
                    
                    of SharesBalance
      at June 30, 2007
                    
                    
                    -
                    
                    
                    
                    906,625
                    
                    
                    $
                    0.86
                    
                    
                    $
                    0.59
                    
                    
                    
                    -Options
      granted at fair value
                    
                    
                    -
                    
                    
                    
                    354,230
                    
                    
                    
                    1.06
                    
                    
                    
                    0.81
                    
                    
                    
                    -Options
      vested
                    
                    
                    -
                    
                    
                    
                    (432,257
                    )
                    
                    
                    0.76
                    
                    
                    
                    0.55
                    
                    
                    
                    -Options
      cancelled
                    
                    
                    -
                    
                    
                    
                    (196,985
                    )
                    
                    
                    0.57
                    
                    
                    
                    0.37
                    
                    
                    
                    -Outstanding
      at June 30, 2008
                    
                    
                    -
                    
                    
                    
                    631,613
                    
                    
                    
                    1.14
                    
                    
                    
                    0.81
                    
                    
                    
                    -Options
      granted at fair value
                    
                    
                    -
                    
                    
                    
                    958,326
                    
                    
                    
                    1.42
                    
                    
                    
                    0.87
                    
                    
                    
                    -Options
      vested
                    
                    
                    -
                    
                    
                    
                    (419,739
                    )
                    
                    
                    1.26
                    
                    
                    
                    0.81
                    
                    
                    
                    -Options
      cancelled
                    
                    
                    -
                    
                    
                    
                    (143,269
                    )
                    
                    
                    1.16
                    
                    
                    
                    0.95
                    
                    
                    
                    -Outstanding
      at June 30, 2009
                    
                    
                    -
                    
                    
                    
                    1,026,931
                    
                    
                    $
                    1.34
                    
                    
                    $
                    0.85
                    
                    
                    
                    -




F-26


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Stock
Warrants





At June
30, 2009, we had issued warrants to purchase up to 1,003,572 shares of our
common stock. The following table summarizes those warrant grants:





Number of
                
                Grant
                
                StrikeIssued to
                
                Shares
                
                Date
                
                Price
                
                
                NotePunk,
      Ziegel & Company, L.P.
                
                
                100,000
                
                June
      21, 2006
                
                $
                1.00
                
                
                
                APunk,
      Ziegel & Company, L.P.
                
                
                214,286
                
                December
      29, 2006
                
                
                0.70
                
                
                
                ASigma
      Capital Advisors, LLC
                
                
                150,000
                
                December
      29, 2006
                
                
                0.55
                
                
                
                BSigma
      Capital Advisors, LLC
                
                
                25,000
                
                February
      15, 2007
                
                
                0.55
                
                
                
                BPunk,
      Ziegel & Company, L.P.
                
                
                214,286
                
                February
      15, 2007
                
                
                0.70
                
                
                
                ADigital
      Communication Services, Inc.
                
                
                300,000
                
                February
      28, 2007
                
                
                0.73
                
                
                
                C1,003,572





A
-  Part of advisory services fee.


B –
Warrants issued relating to the issuance of 7% Senior Subordinated Secured
Convertible Notes. See Note 9.


C –
Warrants issued related to the acquisition of Digitcom.





During
the year ended June 30, 2009, warrants to purchase 200,000 shares were
exercised. These warrants were issued relating to the acquisition of Digitcom.
During the year ended June 30, 2008, warrants to purchase 3,000,000 shares were
exercised. These warrants were issued relating to the issuance of 7% Senior
Subordinated Secured Convertible Notes which were converted on June 25, 2008.
See Note 9.





16.
            Selected
      Segment Financial Data





Statement
of Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information established standards for reporting
information about operating segments in annual financial statements of public
business enterprises and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. Operating segments are components of an enterprise about which
separate financial information is available and regularly evaluated by the chief
operating decision maker(s) of an enterprise. We do not assign assets to our
segments.





We have
organized our company into two operating segments based upon the types of
customers served, services provided and the economic characteristics of each
segment. Our operating segments are:





Infrastructure equipment
construction and technical service: This segment includes radio frequency
and network design and engineering, radio transmission base station
modification, in-building network design, engineering and construction, project
management, specialty communication services, configured solutions as well as
design, installation and construction of wireless telecommunications system
towers.





Site acquisition and zoning:
Generally we act as an intermediary between telecommunications companies and
owners of real estate and other facilities. We identify appropriate properties,
negotiate the transactions and handle the administrative details.





We
evaluate the performance of our operating segments based on several factors, of
which the primary financial measure is segment operating income. Segment
operating income is presented herein because our chief operating decision makers
evaluate and measure each business unit’s performance based on its segment
operating income.


F-27


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEAR ENDED JUNE 30, 2009


($
amount in thousands except per share and share amounts)





Years ended June 30,2009
                    
                    
                    2008Infrastructure
                    
                    
                    Site
                    
                    
                    
                    
                    
                    Infrastructure
                    
                    
                    SiteConstruction
                    
                    
                    Acquisition
                    
                    
                    Total
                    
                    
                    Construction
                    
                    
                    Acquisition
                    
                    
                    TotalRevenue
                    
                    $
                    44,897
                    
                    
                    $
                    9,594
                    
                    
                    $
                    54,491
                    
                    
                    $
                    98,563
                    
                    
                    $
                    29,809
                    
                    
                    $
                    128,372Cost
      of revenue
                    
                    
                    33,960
                    
                    
                    
                    4,826
                    
                    
                    
                    38,786
                    
                    
                    
                    64,643
                    
                    
                    
                    18,809
                    
                    
                    
                    83,452Gross
      margin
                    
                    
                    10,937
                    
                    
                    
                    4,768
                    
                    
                    
                    15,705
                    
                    
                    
                    33,920
                    
                    
                    
                    11,000
                    
                    
                    
                    44,920Selling,
      general and administrative expenses
                    
                    
                    17,409
                    
                    
                    
                    3,064
                    
                    
                    
                    20,473
                    
                    
                    
                    20,885
                    
                    
                    
                    4,818
                    
                    
                    
                    25,703Depreciation
      and amortization
                    
                    
                    1,229
                    
                    
                    
                    56
                    
                    
                    
                    1,285
                    
                    
                    
                    914
                    
                    
                    
                    276
                    
                    
                    
                    1,190Gain
      on sale of fixed assets
                    
                    
                    (8
                    )
                    
                    
                    -
                    
                    
                    
                    (8
                    )
                    
                    
                    (8
                    )
                    
                    
                    (3
                    )
                    
                    
                    (11
                    )Operating
      (loss) income
                    
                    $
                    (7,693
                    )
                    
                    $
                    1,648
                    
                    
                    $
                    (6,045
                    )
                    
                    $
                    12,129
                    
                    
                    $
                    5,909
                    
                    
                    $
                    18,038





17.
              Reorganization
      of Old Berliner, Inc.





On
February 4, 2009 (the “Closing Date”), pursuant to the Agreement and Plan of
Reorganization, dated September 9, 2008 (the “Agreement”), between the Company
and Old Berliner, the Company completed its exchange of 13,104,644 newly issued
shares of the Company’s common stock (the “Issued Shares”) for substantially all
the assets of Old Berliner, which consist of 13,104,644 shares of common stock
of the Company.  From and after the Closing Date, Old Berliner did not
engage in any business, and promptly liquidated and dissolved as a corporation
on March 26, 2009 and distributed all of its assets and liabilities to the Old
Berliner Liquidating Trust (the “Trust”).  The beneficiaries of the
Trust are the former shareholders of Old Berliner. Each beneficiary’s percentage
interest in the Trust is identical to the percentage interest that such
beneficiary had in Old Berliner prior to its dissolution.
Rich  Berliner, the Company’s Chief Executive Officer, owns 57.4% of
the beneficial interests in the Trust, which represents beneficial ownership of
approximately 28.5% of the outstanding common stock of the
Company.    Mr. Nicholas Day,  General Counsel
of  the Company and  the former Secretary of Old Berliner,
is the trustee of the Trust (the “Trustee”), and in his capacity as Trustee he
has the sole power to vote and to sell or dispose of the shares of our common
stock owned by the Trust. The Trust will distribute the assets to the
beneficiaries of the Trust, the former shareholders of Old Berliner, as soon as
practicable.





Pursuant
to the Agreement, the Company did not assume any liabilities or obligations of
Old Berliner, but each of the Company and Old Berliner (each, in such capacity,
the “Indemnifying Party”) has agreed to indemnify the other party and its
successors and assigns (collectively, the “Indemnified Party”) against losses
and damages incurred by any such Indemnified Party for any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in the Agreement.





The
transactions contemplated by the Agreement are intended to qualify as a
“reorganization” within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended, and all of the Issued Shares are intended to
constitute consideration issued in connection with a
reorganization.


F-28