**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, 2007**o
                **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
                  Incorporation
                    or Organization)
                (I.R.S.
                    Employer
                  Identification
                    No.)
  **20
        BUSHES LANE**
 **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:
                **NONE**
              
              Name
                  of Each Exchange on Which Registered:
                **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 o
        No x
 
 Indicate
        by check mark if the registrant is not required to file reports pursuant
        to
        Section 13 or Section15(d) of the Act. Yes o No x
 
 Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange
 Act
        of
        1934 during the preceding 12 months (or for such shorter period that the
        registrant was required to file such reports) and (2) has been subject to
        such
        filing requirements for the past 90 days. Yes x No o
 
 Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not be contained, to the
        best
        of 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. o
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 Large
                  accelerated filer o
              Accelerated
                  filer o
              Non-accelerated
                  filer x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Act). Yes o 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, 2006, was approximately $1,784,000.
 
 As
        of
        September 27, 2007, 17,081,786 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 29, 2007.
  
 
 TABLE
        OF
        CONTENTS
 PAGEPART
                    IITEM
                    1.
                Business
                3ITEM
                    1A.
                Risk
                    Factors
                10ITEM
                    2.
                Properties
                17ITEM
                    3.
                Legal
                    Proceedings
                17ITEM
                    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
                21ITEM
                    7.
                Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operation
                22ITEM
                    7A.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                32ITEM
                    8.
                Financial
                    Statements and Supplementary Data
                32ITEM
                    9.
                Changes
                    in and Disagreements with Accountants on Accounting and Financial
                    Disclosure
                32ITEM
                    9A.
                Controls
                    and Procedures
                32PART
                    IIIITEM
                    10.
                Directors
                    and Executive Officers 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
                33ITEM
                    14.
                Principal
                    Accountant Fees and Services
                33PART
                    IVITEM
                    15.
                Exhibits
                    and Financial Statement Schedules
                33SIGNATURES
                34EXHIBIT
                    INDEX
                35
  2
  PART
        I
 
 ITEM
                1.
              BUSINESS
 
 **Cautionary
        Statement for the Purposes of the “Safe Harbor” Provisions of the Private
        Securities Litigation Reform Act of 1995**
 
 Certain
        information included in this Report on Form 10-K and in other reports, SEC
        filings, statements and presentations is forward-looking within the meaning
        of
        the Private Securities Litigation Reform Act of 1995, including, but not
        limited
        to, statements concerning our anticipated operating results, financial
        resources, growth and expansion and the ability to retain key customers and
        obtain new contracts. Such forward-looking information involves important
        risks
        and uncertainties that could significantly affect actual results and cause
        them
        to differ materially from expectations expressed herein and in other reports,
        SEC filings, statements and presentations. Therefore, this Report should
        only be
        read in context with the disclosures under “Forward-Looking Statements” and
“Risk Factors” on Page 30, and 10, respectively.
 
 **General**
 
 Berliner
        Communications, Inc. was originally incorporated in Delaware in 1987 as Adina,
        Inc. Adina’s corporate existence was permitted to lapse in February of 1996 and
        was subsequently reinstated as eVentures Group, Inc., in August of 1999.
        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, whereby 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
        real
        estate 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 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 and the Southeast 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 has expanded our
        presence in Los Angeles, California, Las Vegas, Nevada, and Seattle, Washington,
        and adds offices in Salem, Oregon, Tempe, Arizona and Salt Lake City, Utah.
        We
        have been pleased with the success of the integration of both Digitcom and
        Radian into our existing organization, and with the high quality of the
        employees that came over to us through these transactions. These acquisitions
        have expanded our customer base and we believe these acquisitions will improve
        our overall financial profile going forward.
 
 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 real estate
        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 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 entities. Our customers rely on us to assist them
        in
        planning, site location and leasing of space for wireless communication
        transmission systems.
  3
  **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) real estate
        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 and specialty
        communication services. Our real estate acquisition and zoning segment stands
        as
        a separate service line. Each of these lines, as well as the business of
        our
        real estate acquisition and zoning segment, is described below.
 
 *Infrastructure
        Equipment Construction and Installation* .
        Infrastructure equipment construction and installation services are the key
        drivers of our business, and the majority of our revenue comes from this
        service
        offering. 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 are ordered from a fabricator, or 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 could involve clearing sites, laying foundations,
        bringing in utility lines and installing shelters and towers. Once we finish
        this part of the process, we install equipment and landscape 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, possibly
        involving several hundred sites. These large projects involve significant
        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.* Toward
        the end of the 1990’s, we saw that our industry was undergoing additional
        changes and took the opportunity to enter yet another service area.
        Specifically, we noticed that companies in the wireless industry were reducing
        their engineering services staff in order to cut internal costs, but were
        still
        in need of such services. In response, we added radio frequency and network
        design and engineering services to our portfolio. 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, we 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, and is essential for enhancing network capacity and paving the
        way
        to the deployment of 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 the experience or resources that we do in this area.
  4
  *Specialty
        Communication Services.* Our
        newly
        acquired specialty communication services division provides enhancements
        to
        existing wireless and wired telephone and computer networks designed to improve
        productivity for a specified application by transmitting data, voice or video
        information in situations where land line networks are non-existent, more
        difficult to deploy or too expensive. We believe this business presents a
        significant growth opportunity for us, and we intend to grow this aspect
        of our
        business during fiscal 2008.
 
 *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 will 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.
 
 *Real
        Estate Site Acquisition and Zoning.* We
        began
        our business providing primarily real estate 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 antennas 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. Project management includes vendor
        management, project preparation and engineering and construction coordination.
 
 **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.
  5
  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. Our primary business today is modifying existing
        sites
        by overlaying new technologies, as well as developing new sites for wireless
        carriers and others.
 
 *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,
        there were approximately 233 million wireless subscribers in the United States
        in 2006, an increase of 2% over the prior year that accounted for approximately
        $127 billion wireless service revenue, an increase of 10% from the prior
        year.
 
 Wireless
        access to the Internet is in an early stage of development and 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, m-banking, locations-based
        services and interactive games. Recently, one of our major customers, Sprint,
        has announced its commitment to developing a WiMax network. We believe that
        as
        new technologies are introduced, network upgrades will become necessary,
        and we
        will be 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, on a nation-wide basis.
 
 *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., Cingular Wireless
        Services, Inc., and T-Mobile USA, Inc., 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. 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, 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 now 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.
  6
  *Key
        Drivers of Change in Our Business*
 
 The
        key
        drivers of change in the wireless telecommunications industry have
        been:
 
 **•** the
        issuance of new or additional licenses to wireless service
        providers;
 **•** the
        introduction of new services or technologies;
 **•** the
        increase in the number of subscribers served by wireless service
        providers;
 **•** the
        increasing complexity of wireless systems in operation;
 **•** the
        current consolidation in the telecommunications sector; 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
        issuance of new or additional licenses to wireless service
        providers.* The
        Federal Communications Commission, or FCC, has, 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, the FCC is set to auction
        a
        significant number of licenses in the 700 MHz spectrum in January 2008. 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.
 
 *The
        introduction of new services or technologies.* Although
        wireless service providers traditionally have relied upon their internal
        engineering workforces to address a significant portion of their wireless
        network needs, the rapid introduction of new services or technologies in
        the
        wireless market and the need to reduce operating costs in many cases have
        resulted in wireless service providers and equipment vendors focusing on
        their
        core competencies. As a result, wireless service providers are outsourcing
        an
        increasing portion of their network services development work to companies
        such
        as ours. For example, the FCC, in November of 2003, began requiring wireless
        service providers to provide local number portability, or LNP, to customers,
        which makes it easier for consumers to switch wireless service providers
        by
        giving consumers the ability to do so without changing their phone numbers.
        LNP
        increases the complexity of call processing, number administration, service
        assurance and network operations. We believe that nearly every United
        States-based wireless service provider has been and will continue upgrading
        its
        network in order to mitigate the potential for customer termination, or churn,
        as a result of the implementation of LNP. Such efforts involve providing
        both
        additional network capacity and expanded geographic coverage to address wireless
        customers’ perceptions of network quality, and therefore, wireless service
        providers have retained firms such as ours that can supplement or replace
        their
        internal resources and assist with this network development and
        enhancement.
 
 *The
        increase in the number of wireless subscribers served by
        wireless*  *providers.* The
        increase in the number of subscribers served by wireless service providers,
        with
        the concomitant increase in usage by those subscribers and scarcity of wireless
        spectrum, require such carriers to expand and optimize system coverage and
        capacity to maintain network quality. The wireless system also must be
        continually updated and optimized to address changes in traffic patterns
        and
        interference from neighboring or competing networks or other radio
        sources.
 
 *The
        increasing complexity of wireless systems 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 3G and 4G, with an existing network
        or
        deploying a new network requires wireless service providers to reengage in
        the
        strategic planning, design, deployment, expansion, operations and maintenance
        phases of a new cycle in the life of an existing or new network.
  7
  *The
        current consolidation 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 solutions. We provide significant modification work to existing
        networks besides the construction of new wireless sites.
 
 *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 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 division.
  **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
        Staffing* .
        As a
        service provider, our potential for growth will be limited, notwithstanding
        an
        increased demand for our services, to the extent that we do not have the
        ability
        to hire and retain individuals with the requisite technical and field knowledge
        to provide such services. Because the services we offer are diverse and our
        geographic footprint has grown significantly during fiscal 2007, particularly
        in
        light of our acquisition of Radian, we may experience difficulty obtaining
        the
        appropriate level of staffing support at our various locations in a timely
        and
        cost-effective manner. In addition, we will need to attract new and retain
        our
        existing management teams to continue to effectively and efficiently run
        our
        operations as we grow internally and through acquisitions across the
        country.
 
 *Increase
        Business Development Activities* .
        We
        recognize the need to increase our focus on business development and customer
        retention. We anticipate achieving this result though a variety of means,
        including, without limitation, increased exposure at trade shows and
        customer-sponsored events. We will also seek to assemble a business development
        team dedicated entirely to our efforts in this area, which we expect will
        include diversification of our customer base.
 
 *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.
 
 *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, quite possibly with the assistance of a professional marketing
        firm, with specific industry experience, 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.
 
 *Continue
        to Seek Strategic Acquisitions and Integrate Recent
        Acquisitions* .
        We will
        continue to look for acquisitions of 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 our number of employees. Our ability to continue to successfully
        manage this growth and the integration of these companies will be material
        to
        our success in fiscal 2008. We fully expect these acquisitions to improve
        our
        overall financial profile.
  8
  **Competition**
 
 The
        telecommunications industry is highly competitive. Because we offer such
        a wide
        breadth of service offerings, it is difficult to identify our competitors,
        because there are many companies providing services similar to some aspect
        of
        what we do. However, we currently believe that our most significant competitors
        include Site Acquisition Consultants, SBA Communications, Inc., Broken Arrow,
        Inc., Wireless Facilities Inc., NSORO LLC, 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 attempt to
        distinguish ourselves from our competitors by being large enough to provide
        the
        resources our customers need on a nationwide, 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.
 
 **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.
 
 **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 65% of our cost of revenues. Over
        40%
        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 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, 2007, we derived 87% of our total revenues from
        our
        two largest customers, and those customers represented 77% of our accounts
        receivable. Of those customers, both of them individually represented greater
        than 5% of net revenues, and one of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2007, Sprint Nextel
        Corporation represented 80% and T-Mobile USA, Inc. represented 7%.
 
 As
        of and
        for the year ended June 30, 2006, we had four customers that collectively
        represented approximately 83% of our net revenues and 83% of our accounts
        receivable. Of those customers, all of them individually represented greater
        than 5% of net revenues, and three of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2006, Sprint Nextel
        Corporation represented 43%, T-Mobile USA, Inc. represented 20%, General
        Dynamics Corporation represented 12% and Metro PCS Communications, Inc.
        represented 8% of net revenues.
 
 **Seasonality**
 
 Incidents
        of inclement weather, particularly in the winter months, hinder our ability
        to
        complete certain outdoor activities relating to the provision 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.
 
 9
  **Backlog**
 
 As
        of
        June 30, 2007 and 2006, our backlog was approximately **$** 30.9
        million ($16.9 million in infrastructure construction and technical services
        and
        $14.0 million in real estate acquisition and zoning) and $9.5 million,
        respectively. We currently anticipate completing those backlog orders by
        December 31, 2007 **.**
 
 **Employees**
 
 As
        of
        June 30, 2007, we employed 330 full-time and 3 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 have experienced losses in the past and we may never achieve
        sustained profitability.**
 
 Although
        we had net income during the years ended June 30, 2007 and 2006, we may not
        be
        profitable in future periods, either on a short or long-term basis. Prior
        to the
        year ended June 30, 2006, Old Berliner had historically incurred net losses.
        Old
        Berliner incurred a net loss of approximately $1.2 million for the six months
        ended June 30, 2005 and $836 thousand for the year ended December 31, 2004.
        We
        can provide no assurances that losses will not recur in the future or that
        we
        will ever sustain profitability on a quarterly or annual 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, 2007, we derived 87% of our total revenues from
        our
        two largest customers, and those customers represented 77% of our accounts
        receivable. Of those customers, both of them individually represented greater
        than 5% of net revenues, and one of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2007, Sprint Nextel
        Corporation represented 80% and T-Mobile USA, Inc. represented 7%.
 
 As
        of and
        for the year ended June 30, 2006, we had four customers that collectively
        represented approximately 83% of our net revenues and 83% of our accounts
        receivable. Of those customers, all of them individually represented greater
        than 5% of net revenues, and three of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2006, Sprint Nextel
        Corporation represented 43%, T-Mobile USA, Inc. represented 20%, General
        Dynamics Corporation represented 12% and Metro PCS Communications, Inc.
        represented 8% of net revenues.
  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, and this, while outside our control, could materially
        impair our operating results.
  10
  **Our
        recent rapid growth has created challenges for our management, systems and
        resources, and this may impact our ability to effectively manage future growth,
        if any, as a result.**
 
 We
        have
        grown rapidly during fiscal 2007. In early calendar 2007, we acquired three
        new
        businesses which have significantly expanded our operations, increased our
        number of employees, and extended our geographic footprint, and we are in
        the
        process of integrating these businesses into our existing operations. This
        rapid
        growth has placed a strain on our systems, processes, resources, management
        and
        other infrastructure and support mechanisms. We expect that any future growth
        may create additional challenges until such time as the integration of these
        acquisitions is more substantially complete. To manage the anticipated growth
        of
        our operations, we will be required to:
 
 ·
              improve
                  existing and implement new operational, financial and management
                  information controls, reporting systems and
                  procedures;
 ·
              establish
                  relationships with additional vendors, suppliers and strategic
                  partners
                  and maintain and expand our existing relationships;
                  and
 ·
              hire,
                  train, manage and retain additional personnel, especially qualified
                  sales
                  and marketing, business development and financial reporting
                  personnel.
 
 To
        the
        extent we are unable to assemble the personnel, controls, systems, procedures
        and relationships necessary to manage our future growth, if any, management
        resources may be diverted and our opportunity for success limited.
 
 **If
        we experience delays and or defaults in customer payments, we could
        be**  **unable
        to cover all expenditures.**
 
 Because
        of the nature of our contracts, at times 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. 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.
 
 **Recent
        and continuing consolidations among wireless service providers
        may**  **result
        in a significant reduction in our existing and potential customer
        base,**  **and,
        if we are unable to maintain our existing relations with such providers
        or**  **expand
        such relationships, we could have a significant decrease in our
        revenue,**  **which
        would negatively impact our ability to generate income as well as
        result**  **in
        lower profitability.**
 
 The
        level
        of merger activity among telecommunications operators has increased markedly
        in
        the past three years and this trend is continuing. One of our customers,
        Sprint,
        has merged with Nextel. These consolidations have and will reduce the number
        of
        companies composing that portion of our customer base consisting of wireless
        service providers. To the extent that these combined companies decide to
        reduce
        the number of their service providers, our already highly competitive market
        environment will become more competitive, at least in the short term, as
        the
        same number of service providers will seek business from a reduced number
        of
        potential customers. Because we have historically derived a significant portion
        of our revenue in any given year from a limited number of customers, we may
        not
        be able to reduce costs in response to any decrease in our revenue. If we
        are
        unable to maintain our existing relations with these companies or expand
        such
        relationships, we could have a significant decrease in our revenue, which
        would
        negatively impact our ability to generate income.
  11
  **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.
 
 In
        order
        to grow our business, we may incur significant operating, borrowing and other
        costs. Should our operations require additional funding or our capital
        requirements exceed current estimates, we could be required to seek additional
        financing in the future. 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. Further, if we are able to access
        additional capital through borrowings, such debt would increase our debt
        obligations, which could have a material adverse effect on our financial
        condition, results of operations or cash flows.
 
 **Our
        business is dependent upon our ability to keep pace with the
        latest**  **technological
        changes.**
 
 The
        market for our services is characterized by rapid change and technological
        improvements. Failure to respond in a timely and cost-effective way to these
        technological developments will result in serious harm to our business and
        operating results. We have derived, and we expect to continue to derive,
        a
        substantial portion of our revenue from creating wireless networks that are
        based upon today’s leading technologies and that are capable of adapting to
        future technologies. As a result, our success will depend, in part, on our
        ability to develop and market service offerings that respond in a timely
        manner
        to the technological advances of our customers, evolving industry standards
        and
        changing client preferences.
 
 **Our
        success is dependent on growth in the deployment of wireless networks
        and**  **new
        technology upgrades, and to the extent that such growth slows, our
        business**  **may
        be harmed.**
 
 Telecommunications
        carriers are constantly re-evaluating their network deployment plans in response
        to trends in the capital markets, changing perceptions regarding industry
        growth, the adoption of new wireless technologies, increasing pricing
        competition for subscribers and general economic conditions in the United
        States
        and internationally. If the rate of network deployment slows and carriers
        reduce
        their capital investments in wireless infrastructure or fail to expand into
        new
        geographic areas, our business may be significantly harmed.
 
 The
        uncertainty associated with rapidly changing telecommunications technologies
        may
        also negatively impact the rate of deployment of wireless networks and the
        demand for our services. Telecommunications service providers face significant
        challenges in assessing consumer demand and in acceptance of rapidly changing
        enhanced telecommunications capabilities. If telecommunications service
        providers perceive that the rate of acceptance of next generation
        telecommunications products will grow more slowly than previously expected,
        they
        may, as a result, slow their development of next generation technologies.
        Moreover, increasing price competition for subscribers could adversely affect
        the profitability of carriers and limit their resources for network deployment.
        Any significant sustained slowdown will further reduce the demand for our
        services and adversely affect our financial results.
 
 **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. 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 3G and fourth generation, or 4G, would negatively affect
        the demand for our services and our ability to grow our revenue.
 
 **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. 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.
  12
  **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 engineering and construction business exposes us to
        potential**  **liability
        claims and contract disputes that may negatively affect our
        results**  **of
        operations.**
 
 We
        engage
        in engineering and construction activities 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
        engineered or 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.
 
 **We
        may not be able to hire or retain a sufficient number of qualified
        engineers**  **and
        other 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 engineering, system deployment, managerial, marketing
        and sales 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, particularly for radio
        frequency engineers. At times, we have had difficulty recruiting and retaining
        qualified technical personnel to properly and quickly staff large customer
        projects. In addition to recruitment difficulties, we must fully and properly
        train our employees according to our customers’ technology requirements and
        deploy and fully integrate each employee into our customers’ projects. Increased
        competition in the wireless industry is increasing the level of specific
        technical experience and training required to fulfill customer-staffing
        requirements. This process is costly and resource constraints may impede
        our
        ability to quickly and effectively train and deploy all of the personnel
        required to staff a large project.
  13
  **Intense
        competition in the engineering and construction 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 engineering 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
        telecommunications market, where we principally compete, is particularly
        cyclical in nature. Such industries have historically been and will continue
        to
        be vulnerable to general downturns and are 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, certain of which are outside of our
        control.**
 
 Our
        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 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
                  broadband;
 
 §
              the
                  growth rate of wireless subscribers, which has a direct impact
                  on the rate
                  at which new cell sites are developed and built;
                  and
 
 §
              telecommunications
                  market conditions and economic conditions generally.
 
 Due
        to
        these factors, our results for a particular quarter, 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.
 
 **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, 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.
  14
  **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 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, the growth that we have experienced over the last
        three
        fiscal years may decline.
 
 **We
        may be subject to additional liability for state sales tax.**
 
 In
        January 2007, we received an informal notice of assessment in the amount
        of $1.8
        million from a state tax authority, including unpaid sales taxes, penalties
        and
        interest for the years 1998 through 2004. We had previously recorded $175
        thousand in the year ended June 30, 2006 related to these potential taxes,
        and
        have increased our estimated reserve for the year ended June 30, 2007 to
        $0.6
        million based on the notice from the taxing authority and our revised best
        estimate of the potential liability. Our best estimate may not be correct,
        and
        we could be required to pay the entire $1.8 million, with the possibility
        of
        additional penalties and interest, and also additional amounts for tax periods
        dating after 2004. If we owe any amounts over and above our estimate of $0.6
        million, we will revise our accrued liabilities, and increase our selling,
        general and administrative expenses in the period when we become aware of
        these
        additional amounts, and this could materially impact our results of operations
        for that period.
 
 **We
        may not be able to register the shares of common stock issuable
        upon**  **conversion
        of our 7% Senior Subordinated Secured Convertible Notes Due 2008
        and**  **exercise
        of certain of our outstanding warrants, which may subject us
        to**  **financial
        penalties.**
 
 The
        Note
        Purchase Agreement we entered into in connection with our financings with
        Sigma
        Opportunity Fund, LLC (“Sigma”), Pacific Asset Partners, LP (“Pacific”), Operis
        Partners I, LLC (“Operis”) and Sigma Berliner, LLC (collectively the
“Noteholders”) requires that we file and make effective a registration statement
        with the SEC covering the shares of common stock issuable upon conversion
        of
        each of the 7% Senior Subordinated Secured Convertible Notes Due 2008 (the
        “Notes”) and exercise of the accompanying warrants. We were required to use our
        best efforts to have the SEC declare this registration statement effective
        prior to June 15, 2007, and we were unable to meet this deadline. Therefore,
        pursuant to the Note Purchase Agreement, we became subject to damages equal
        to
        2% of the aggregate purchase price paid by each Noteholder 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 with the Noteholders
        whereby the Noteholders agreed to waive this damages clause in exchange for
        our
        agreement to lower the conversion price of the Notes from $1.10 to $1.00
        per
        share. Pursuant to this Waiver and Amendment to Note Purchase Agreement,
        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. We cannot guarantee
        that we will be able to cause a registration statement covering the shares
        to be
        declared effective, or that we will be able to keep any such registration
        statement effective. If we are unable to meet the registration requirements
        set
        forth in the Waiver and Amended Note Purchase Agreement, we may be subject
        to
        additional damages.
  15
  **Our
        7% Senior Subordinated Secured Convertible Notes Due 2008 and the
        related**  **Note
        Purchase Agreement contain restrictions that may limit our flexibility
        to**  **take
        certain actions in the future, including raising additional
        capital.**
 
 Our
        7%
        Senior Subordinated Secured Convertible Notes Due 2008 contain provisions
        that,
        among other things, limit our ability to:
 
 **•** incur
        additional indebtedness;
 
 **•** transfer
        or sell substantially all of our assets;
 
 **•** incur
        liens;
 
 **•** issue
        certain securities; and
 
 **•** enter
        into transactions with affiliates.
 
 In
        addition, if we issue any securities at prices below their fair market value
        on
        the date of issue (as defined in the Notes), the conversion price of the
        Notes
        and the exercise price of our outstanding warrants will be reduced
        proportionately, causing further dilution to our common shareholders. The
        Note
        Purchase Agreement also gives the purchasers preemptive rights to participate
        in
        any subsequent issuances of our securities. These and other restrictions
        in the
        Notes and the Note Purchase Agreement may prevent us from raising capital
        in the
        future on advantageous terms, or at all, and may restrict some of our operating
        flexibility.
 
 **A
        default on our debt obligations could result in foreclosure on all of
        our**  **assets.**
 
 We
        have
        issued an aggregate of $6.0 million of our 7% Senior Subordinated Secured
        Convertible Notes Due December 29, 2008, which are secured by substantially
        all
        of our accounts, inventory, furniture, fixtures, equipment, general intangibles,
        patents, licenses, investment property, promissory notes, instruments, documents
        and tangible and electronic chattel paper (collectively, the “Collateral”), and
        all proceeds, products, rents and profits from the Collateral. In addition,
        we
        have secured additional financing through an $8.0 million credit facility
        with
        Presidential Financial Corp. An Event of Default with respect to either of
        these
        obligations 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 revenues 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, 2007, we had leases or contractual arrangements to utilize
        approximately 109,000 square feet for our operations, as set forth below:
 
 **Size
                  in**
              
              
              
              
              **Monthly**
              
              **End
                  of****Location**
              
              **Square
                  Feet**
              
              **Description**
              
              
              **Cost**
              
              **Lease
                  Term**20
                  Bushes Lane
              
              15,800
              
              Office
                  and warehouse space
              
              $
              8,637
              
              December
                  2008Elmwood
                  Park, NJ97
                  Linden Avenue *
              
              13,000
              
              Office
                  and warehouse space
              
              $
              15,220
              
              June
                  2008Elmwood
                  Park, NJ263
                  Molnar
              
              1,800
              
              Office
                  space
              
              $
              3,000
              
              October
                  2007Elmwood
                  Park, NJ1100
                  Taylors Land
              
              10,209
              
              Office
                  and warehouse space
              
              $
              3,615
              
              November
                  2008Cinnaminson,
                  NJ353
                  Georges Road
              
              1,161
              
              Office
                  space
              
              $
              1,600
              
              October
                  2007Dayton,
                  NJ7402
                  Virginia Manor Road
              
              9,580
              
              Office
                  and warehouse space
              
              $
              8,513
              
              June
                  2008Beltsville,
                  MD215
                  Pineda
              
              4,500
              
              Office
                  and warehouse space
              
              $
              1,968
              
              September
                  2007Longwood,
                  FL2580
                  N. Powerline Road
              
              7,600
              
              Office
                  and warehouse space
              
              $
              7,176
              
              February
                  2010Pompano
                  Beach, FL1210
                  West Alameda Drive
              
              2,460
              
              Office
                  space
              
              $
              1,883
              
              Month-to-monthTempe,
                  AZ95
                  Ryan Drive
              
              6,500
              
              Office
                  space
              
              $
              4,063
              
              March
                  2010Raynham,
                  MA810
                  West Collins Avenue
              
              10,000
              
              Office
                  and warehouse space
              
              $
              7,920
              
              December
                  2007Orange,
                  CA4550
                  Cooper Sage Street
              
              3,750
              
              Office
                  space
              
              $
              4,257
              
              May
                  2008N.
                  Las Vegas, NV4280
                  25th Street NE
              
              6,000
              
              Office
                  and warehouse space
              
              $
              1,830
              
              Month-to-monthSalem,
                  ORDiamond
                  Business Park
              
              4,000
              
              Office
                  space
              
              $
              1,800
              
              Month-to-month47
                  South Orange StreetSalt
                  Lake City, UT15030
                  Highway 99
              
              12,608
              
              Office
                  and warehouse space
              
              $
              6,934
              
              March
                  2010Lynwood,
                  WA
  *
                  One third of the office space is
                  sub-leased
 
 We
        also
        own 0.9 acres of property, including office and warehouse facilities, in
        Arlington, Texas.
 
 **ITEM
                3.**
              **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.
  17
 
 **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.” The common
        stock, with the symbol NVNW was previously listed on the National Association
        of
        Securities Dealers Automated Quotation System (“NASDAQ”) and the OTCBB as
        follows:
  From
              
              To
              
              Ticker
              
              MarketSeptember
                  17, 2005
              
              Present
              
              BERL
              
              OTCBBJanuary
                  1, 2002
              
              September
                  16, 2005
              
              NVNW
              
              OTCBBDecember
                  12, 2000
              
              December
                  31, 2001 *
              
              NVNW
              
              NASDAQNovember
                  22, 2000
              
              December
                  11, 2000
              
              EVNT
              
              NASDAQAugust
                  25, 1999
              
              November
                  21, 2000
              
              EVNT
              
              OTCBBPrior
                  to August 25, 1999
              
              ADII
              
              OTCBB*
                  Trading was halted by NASDAQ from July 30, 2001, until December
                  31,
                  2001.
 
 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**
              
              **High**June
                  30, 2007
              
              $
              1.01
              
              $
              1.35March
                  31, 2007
              
              
              0.51
              
              
              2.00December
                  31, 2006
              
              
              0.31
              
              
              1.46September
                  30, 2006
              
              
              0.55
              
              
              1.46June
                  30, 2006
              
              
              0.55
              
              
              2.25March
                  31, 2006
              
              
              0.30
              
              
              2.00December
                  31, 2005
              
              
              0.25
              
              
              1.01September
                  30, 2005
              
              
              0.0091
              
              
              0.25
 
 Our
        stock
        has experienced periods, including, without limitation, certain extended
        periods, of limited or sporadic quotations.
 
 As
        of
        June 30, 2007, there were 1,185 holders of record of our common
        stock.
 
 **Recent
        Sales of Unregistered Securities**
 
 None.
 
 **Securities
        Authorized for Issuance under Equity Compensation Plans**
 
 The
        following table provides information, as of June 30, 2007, with respect to
        all
        compensation plans and individual compensation arrangements under which equity
        securities are authorized for issuance to employees or
        non-employees:
 
 19
  (A)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 approved by security holders
              
              1,424,942
              (a)
              $
              19.67
              
              1,425,712Equity
                  compensation on plans notapproved
                  by security holders
              
              18,704
              (b)
              $
              6,786.00
              
              None1,443,646
              
              $
              107.33
              
              1,425,712
 
 (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. Under the terms of our 7% Senior Subordinated Secured
        Convertible Notes due 2008, we are not permitted to pay any dividend or make
        any
        distribution on shares of our common stock held in treasury other than dividends
        or distributions payable only in shares of our common stock.
  **Comparative
          Stock Performance**
 The
            graph
            below compares the cumulative total stockholder return on the Company's
            common
            stock for the five years ended June 30, 2007, with the cumulative total
            return
            on the NASDAQ Composite Index and the Nasdaq Telecommunications Index
            over the
            same period (assuming an investment of $100 in the Company's Common Stock,
            the
            NASDAQ Composite Index and the NASDAQ Telecommunications Index on July
            1, 2002,
            and reinvestment of all dividends).
 **BERL
                        Closing Bid Price**
                    
                    **Berliner
                        Stockholder Return**
                    
                    **NASDAQ
                        Composite**
                    
                    **NASDAQ
                        Telecom**6/30/2002
                    
                    $
                    15.015
                    
                    $
                    100.00
                    
                    $
                    100.00
                    
                    $
                    100.006/30/2003
                    
                    
                    13.514
                    
                    
                    90.00
                    
                    
                    108.54
                    
                    
                    122.746/30/2004
                    
                    
                    6.607
                    
                    
                    44.00
                    
                    
                    139.90
                    
                    
                    195.786/30/2005
                    
                    
                    2.402
                    
                    
                    16.00
                    
                    
                    140.79
                    
                    
                    175.596/30/2006
                    
                    
                    0.55
                    
                    
                    3.66
                    
                    
                    151.46
                    
                    
                    187.096/30/2007
                    
                    
                    1.05
                    
                    
                    6.99
                    
                    
                    182.66
                    
                    
                    251.29
  BERL
          Stock Price
          Performance
 ****
 20
  **ITEM
                  6.**
              **SELECTED
                  FINANCIAL DATA**
 
 The
        following table presents consolidated selected financial information. The
        statement of operations data for the years ended June 30, 2007 and 2006,
        the six
        months ended June 30, 2005 and the year ended December 31, 2004 have
        been derived from our audited consolidated financial statements included
        elsewhere herein. The statement of operations data for the six months ended
        June
        30, 2004, has been derived from unaudited consolidated financial statements
        that, in the opinion of management, include all adjustments, consisting only
        of
        normal recurring adjustments, necessary to state fairly the data for such
        period. The results of operations for the interim periods are not necessarily
        indicative of the operating results for the entire year or any future
        period.
  On
        February 19, 2005, we entered into an asset purchase agreement with the former
        Berliner Communications, Inc. (“Old Berliner”) and BCI Communications, Inc., our
        wholly-owned subsidiary, whereby BCI acquired (the “Acquisition”) the operations
        and substantially all of the assets and liabilities of Old Berliner. The
        Acquisition of the assets of Old Berliner was settled through the issuance
        of a
        controlling interest in our common stock. Therefore, Old Berliner is deemed
        to
        be the acquirer for accounting purposes. Since Old Berliner’s accounting
        year-end was December 31 prior to the transaction, we are reporting year
        end
        numbers as of December 31, 2004 and 2005 and the interim six-month period
        ended
        June 30, 2005. After the Acquisition, we adopted the accounting year-end
        of
        June 30.
 
 The
        information included in this table should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” and the audited and unaudited consolidated financial statements and
        accompanying notes thereto included elsewhere herein. We operate in two business
        segments: providing (1) infrastructure equipment construction and technical
        services and (2) real estate acquisition and zoning services, primarily to
        wireless communications carriers.
 (Amounts
        in thousands except per share data)
  **Year
                      Ended****Year
                      Ended June 30,**
                  
                  **Six
                      Months Ended June 30,**
                  
                  **December
                      31,****2007**
                  
                  **2006**
                  
                  **2005**
                  
                  **2004**
                  
                  **2004****Statement
                      of Operations data:**
                  
                  
                  
                  
                  
                  
                  
                  **(Unaudited)**Revenues
                  
                  $
                  55,135
                  
                  $
                  39,325
                  
                  $
                  10,196
                  
                  $
                  7,422
                  
                  $
                  15,286Gross
                      margin
                  
                  
                  17,860
                  
                  
                  11,123
                  
                  
                  2,857
                  
                  
                  2,495
                  
                  
                  5,681Operating
                      income (loss)
                  
                  
                  2,767
                  
                  
                  1,435
                  
                  
                  (1,090
                  )
                  
                  (612
                  )
                  
                  (775
                  )Net
                          income (loss) allocable to common shareholders
                  
                  
                  1,112
                  
                  
                  (18,681
                  )(1)
                  $
                  (1,190
                  )
                  
                  (628
                  )
                  
                  (836
                  )Net
                      income (loss) allocable to common shareholders per share:Basic
                  
                  $
                  0.07
                  
                  $
                  (1.38
                  )
                  $
                  (2.36
                  )
                  $
                  (9.31
                  )
                  $
                  (12.41
                  )Diluted
                  
                  $
                  0.06
                  
                  $
                  (1.38
                  )
                  $
                  (2.36
                  )
                  $
                  (9.31
                  )
                  $
                  (12.41
                  )Weighted
                      average number of shares outstanding:Basic
                  
                  
                  17,035
                  
                  
                  13,582
                  
                  
                  504
                  
                  
                  67
                  
                  
                  67Diluted
                  
                  
                  19,062
                  
                  
                  13,582
                  
                  
                  504
                  
                  
                  67
                  
                  
                  67**Balance
                      Sheet data:**Current
                      assets
                  
                  $
                  27,167
                  
                  $
                  13,522
                  
                  $
                  6,687
                  
                  $
                  4,271
                  
                  $
                  4,567Total
                      assets
                  
                  
                  34,303
                  
                  
                  14,256
                  
                  
                  7,516
                  
                  
                  5,036
                  
                  
                  5,193Current
                      liabilities
                  
                  
                  20,699
                  
                  
                  10,911
                  
                  
                  5,455
                  
                  
                  3,175
                  
                  
                  3,887Long-term
                        debt, net of debt discount and current portion
                  
                  
                  5,964
                  
                  
                  187
                  
                  
                  254
                  
                  
                  720
                  
                  
                  431Stockholders'
                      equity
                  
                  
                  6,907
                  
                  
                  3,158
                  
                  
                  1,807
                  
                  
                  1,083
                  
                  
                  874
 
 (1)
              On
                  September 16, 2005, we recorded a deemed dividend of approximately
                  $19.9
                  million due to the reduction in the conversion price of our then
                  outstanding convertible preferred stock in computing net loss applicable
                  to common stockholders. The deemed dividend on preferred stock
                  was
                  recorded as the excess of the fair value of the consideration transferred
                  to the preferred holders over the carrying value of the preferred
                  stock on
                  our balance sheet prior to the conversion. This amount is deemed
                  to
                  represent a return to the preferred holders and, therefore, is
                  treated in
                  a manner similar to dividends paid to holders of preferred stock
                  in the
                  calculation of earnings per share.
  21
  **ITEM
        7.**  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS**
 
 *The
        following discussion and analysis of our historical consolidated financial
        statements covers period before and after consummation of the Acquisition
        (as
        previously defined). This discussion should be read together with Item 6
        -
        Selected Financial Data and 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. Our core activities include real estate site acquisition
        and
        zoning; infrastructure equipment construction and installation; 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 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 Report entitled “Business”.
 
 On
        February 28, 2007, we 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 and the Southeast 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 has expanded our
        presence in Los Angeles, California, Las Vegas, Nevada, and Seattle, Washington,
        and added offices in Salem, Oregon, Tempe, Arizona and Salt Lake City, Utah.
        We
        have been pleased with the success of the integration of both Digitcom and
        Radian into our existing organization, and with the high quality of the
        employees that came over to us through these transactions. These acquisitions
        have expanded our customer base and have had a positive impact on our fiscal
        2007 financial results. We believe they will improve our overall financial
        profile going forward.
  **Basis
        of Presentation**
 
 We
        currently report our financial results on the basis of two reportable segments:
        (1) infrastructure construction and technical services and (2) real estate
        acquisition and zoning.
 
 The
        consolidated statement of operations for the six months ended June 30, 2005
        gives effect to the recapitalization of Old Berliner as if it occurred on
        January 1, 2005 and includes the accounts of Berliner Communications, Inc.
        and
        BCI Communications, Inc., its wholly owned subsidiary, since the date of
        the
        Acquisition. The unaudited consolidated statement of operations for the six
        months ended June 30, 2004, and the audited consolidated statement of operations
        for the year ended December 31, 2004 are the accounts of Old
        Berliner.
  **YEAR
        ENDED JUNE 30, 2007 COMPARED TO YEAR ENDED JUNE 30, 2006**
 **(Amounts
        in thousands unless otherwise stated)**
 
 ***Revenues***
  **Fiscal
                  Years Ended****June
                  30,**
              
              **Increase****2007**
              
              **2006**
              
              ****Infrastructure
                  construction and technical services
              
              $
              43,501
              
              $
              35,506
              
              $
              7,995Real
                  estate acquisition and zoning
              
              
              11,634
              
              
              3,819
              
              
              7,815Total
                  Revenues
              
              $
              55,135
              
              $
              39,325
              
              $
              15,810
 
 22
 
 We
        had
        revenues of $55.1 million for the year ended June 30, 2007, versus $39.3
        million
        for the year ended June 30, 2006. This represents an increase of $15.8 million,
        or 40%. This increase is primarily due to significant growth in our
        infrastructure construction and technical services segment and to significant
        awards of new business from our top customers. In addition, approximately
        $6.5
        million of this increase is attributable to the Digitcom and Radian acquisitions
        in the third and fourth quarters of the fiscal year. For these same reasons,
        we
        expect our revenues to continue to increase during the fiscal year ending
        June
        30, 2008.
 
 Revenues
        from infrastructure construction and technical services increased $8.0 million,
        or 23% for the year ended June 30, 2007 as compared to the year ended June
        30,
        2006, and accounted for approximately 79% and 90% of total revenues for these
        years, respectively. Newly acquired regional markets resulting from the Digitcom
        and Radian acquisitions accounted for approximately $5.9 million, or 73%
        of the
        increase.
 
 Real
        estate acquisition and zoning increased $7.8 million, or 205% for the year
        ended
        June 30, 2007 as compared to the year ended June 30, 2006, and accounted
        for
        approximately 21% and 10% of total revenues for these years, respectively.
        Newly
        acquired regional markets resulting from the Digitcom and Radian acquisitions
        accounted for approximately $0.6 million, or 8% of the increase. We expect
        this
        mix of segment revenue to remain substantially the same during the fiscal
        year
        ending June 30, 2008.
 
 We
        recognize revenues from infrastructure construction and technical services
        on
        the percentage of completion method of accounting and real estate acquisition
        and zoning services on the completed contract method of accounting.
 
 ***Cost
        of Revenues***
  **Fiscal
                  Years Ended****June
                  30,**
              
              **Increase****2007**
              
              **2006**
              
              ****Infrastructure
                  construction and technical services
              
              $
              29,674
              
              $
              25,538
              
              $
              4,136Real
                  estate acquisition and zoning
              
              
              7,601
              
              
              2,664
              
              
              4,937Total
                  Cost of Revenues
              
              $
              37,275
              
              $
              28,202
              
              $
              9,073
 
 Our
        cost
        of revenues was $37.3 million and $28.2 million for the years ended June
        30,
        2007 and 2006, respectively. This represents an increase of $9.0 million,
        or
        32%, during a period when sales increased 40%. These amounts represent 68%
        and
        72% of total revenues for the years ended June 30, 2007 and 2006, respectively.
 
 Cost
        of
        revenues for infrastructure construction and technical services increased
        $4.1
        million for the year ended June 30, 2007 as compared with the year ended
        June
        30, 2006. This represents an increase of approximately 16% during a period
        when
        sales for this segment increased 23%.  Newly
        acquired regional markets resulting from the Digitcom and Radian acquisitions
        accounted for approximately $5.9 million of the total cost of revenues for
        this
        segment during Fiscal 2007.
 
 Cost
        of
        revenues for real estate acquisition and zoning services increased $4.9 million
        for the year ended June 30, 2007 from the similar period ended June 30, 2006.
        This represents an increase of approximately 185% during a period when sales
        for
        this segment increased 205%.  Newly
        acquired regional markets resulting from the Digitcom and Radian acquisitions
        accounted for approximately $0.6 million of the total cost of revenues for
        this
        segment during Fiscal 2007.
 
 ***Gross
        Margin***
 Years
                    ended
                  June
                    30,2007
                
                2006Amount
                
                %
                
                Amount
                
                %Infrastructure
                    construction and technical services
                
                $
                13,827
                
                
                32%
                
                $
                9,968
                
                
                28%Real
                    estate acquisition and zoning
                
                
                4,033
                
                
                35%
                
                
                1,155
                
                
                30%Total
                    gross profit
                
                $
                17,860
                
                
                32%
                
                $
                11,123
                
                
                28%
  Our
          gross
          margin for the years ended June 30, 2007 and 2006 was $17.9 million and
          $11.1
          million, or 32% and 28% of revenues, respectively. Gross margins increased
          primarily because of increased revenues from real estate acquisition and
          zoning,
          which has higher gross margins, and a trend towards obtaining longer-term
          projects which enable us to plan the projects in a more efficient
          manner.
  23
  ***Selling,
        General and Administrative Expenses***
  Years
                    ended
                  June
                    30,2007
                
                2006
                
                IncreaseInfrastructure
                    construction and technical services
                
                $
                11,964
                
                $
                8,315
                
                $
                3,649Real
                    estate acquisition and zoning
                
                
                2,650
                
                
                1,133
                
                
                1,517Total
                    selling, general and administrative expenses
                
                $
                14,614
                
                $
                9,448
                
                $
                5,166
 Selling,
        general and administrative expenses for the year ended June 30, 2007 was
        $14.6
        million as compared to $9.4 million for the year ended June 30, 2006. This
        represents an increase of approximately $5.2 million, or 55% during a period
        when revenues increased 40%. $1.9 million of this increase represents additional
        expenses relating to the operations of the markets we acquired in the third
        and
        fourth quarters of fiscal 2007. $1.7 million represents additional payroll
        expenses in existing markets relating to increased staffing levels necessary
        to
        facilitate the increased sales and expected continued growth of our existing
        operations. Additionally, we recognized increased spending of approximately
        $0.3
        million in insurance premiums, $0.4 million in accounting and legal fees
        and
        $0.4 million for an additional provision for potential New Jersey sales taxes.
        For a more detailed discussion of our potential New Jersey sales tax exposure,
        see Note 7 of our Consolidated Financial Statements and to Item 1A. Risk
        Factors
        which are presented elsewhere in this Report.
 
 ***Depreciation
        and Amortization***
 
 Depreciation
        and amortization expense for the year ended June 30, 2007 was $0.5 million
        as
        compared to $0.2 million for the year ended June 30, 2006. This represents
        an
        increase of $0.3 million. The increase was primarily caused by an increase
        in
        purchases of property and equipment, including those acquired through the
        acquisitions of Digitcom and Radian. For a more complete discussion of the
        accounting for these acquisitions, see Note 13 of our Consolidated Financial
        Statements presented elsewhere in this Report. The increase also includes
        approximately $0.1 million in amortization of approximately $0.5 million of
        customer relationships and $0.5 million of covenants not to
        compete acquired as the result of the abovementioned
        acquisitions.
 
 ***Interest
        Income and Expense***
 
 Interest
        income for the year ended June 30, 2007 was $37 thousand, an increase of
        $23
        thousand from $14 thousand for the year ended June 30, 2006. This increase
        was
        caused by the additional cash and cash equivalents we received as a result
        of
        our financing transactions with Sigma Opportunity Fund and its affiliates
        and
        non-affiliated co-investors during the second and third quarters of fiscal
        2007
        (the “Sigma Transactions”). For a more complete discussion of the Sigma
        Transactions, see Note 10 of our Consolidated Financial Statements presented
        elsewhere in this Report.
 
 Interest
        expense for the year ended June 30, 2007 was $1.2 million. This represents
        an
        increase of $1.1 million from $0.1 million for the year ended June 30, 2006.
        This increase was caused by additional debt incurred related to the Sigma
        Transactions, our issuance of a promissory note as part of the purchase price
        for our acquisition of Digital Communications Services, Inc., and our expanded
        line of credit with Presidential Financial. Included in the year ended June
        30,
        2007 results are $0.3 million in amortization of deferred financing fees
        and
        $0.5 million in interest accretion caused by the issuance of warrants related
        to
        the Sigma Transactions.
 
 ***Financing
        Fees***
 
 During
        Fiscal 2007, we entered into a Note Purchase Agreement with Sigma Opportunity
        Fund, LLC, to which Pacific Asset Partners, LP, Operis Partners I, LLC and
        Sigma
        Berliner, LLC  have joined and are each deemed a party to issue in
        aggregate $6.0 million worth of 7% Senior Subordinated Secured Convertible
        Notes
        due on December 29, 2008 (collectively, the “Notes”). These Notes were initially
        convertible at $1.10 per share (subject to adjustment). In the aggregate,
        the
        Notes were initially convertible into a total of 5,454,545 shares of our
        common
        stock. In addition, we issued warrants to purchase up to 3,000,000 shares
        of our
        common stock with a strike price of $0.01 (the “Warrants”).
 
 Pursuant
        to the Note Purchase Agreement , we
        agreed
        to register the shares of common stock issuable upon conversion of the Notes
        and
        upon exercise of the 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 SEC 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, resulting in a maximum liquidated damages exposure of $0.7 million
        (the “Liquidated Damages”). On September 27, 2007, we signed a Waiver and
        Amendment to Note Purchase Agreement (the “Waiver”) with the noteholders whereby
        the noteholders agreed to amend
        the
        Note Purchase Agreement to, among other things, eliminate the provision which
        gave rise to the Liquidated Damages in exchange for our agreement to amend
        the
        Notes to lower the conversion price from $1.10 to $1.00 per share. Pursuant
        to
        the Waiver, we have agreed to continue to use our best efforts to register
        the
        shares underlying the Notes and the Warrants. We are obligated to register
        substantially all of the shares that may be registered on the form of
        registration statement (a) available to us at the time of such registration
        statement is filed, (b) under which an “at the market” offering may be made on a
        delayed or continuous basis under Rule 415, promulgated under the Securities
        Act
        of 1933, as amended, and (c) which shall not be considered or deemed to be
        a
        primary offering of securities by the SEC. In order to comply with our
        obligation, we anticipate filing a new registration statement to register
        approximately 1,222,632 of the shares of our common stock which underly the
        Warrants shortly following the filing of our 2007 proxy statement, expected
        to
        be at the end of October 2007. We also agreed to use our best efforts to
        maintain the effectiveness of any registration statement we file with respect
        to
        those shares. The reduction in the conversion price of the Notes will result
        in
        the holders of our common stock being diluted by an additional 545,455 shares
        in
        the event all of the Notes are converted.
  24
  This
        resulted in our recognizing a financing fee of $0.7 million as a non-cash
        charge
        to other expense in our statement of operations. This amount is based on
        the
        estimated value of the reduction of the conversion price from $1.10 to $1.00
        per
        share, which we estimated to be equal to the amount of the maximum exposure
        of
        our liquidated damages.
 
 ***Income
        (Loss) in Equity Investments***
 
 For
        the
        year ended June 30, 2006, income from equity investments resulted from our
        minority investment in Paciugo that was accounted for under the equity method
        of
        accounting. Under the equity method, our proportionate share of each
        subsidiary’s operating income or loss is included in income or loss from equity
        investments. We sold our interest in Paciugo on December 30, 2005 and recorded
        a
        gain of $0.2 million.
 
 ***Deemed
        Preferred Dividends***
 
 For
        the
        year ended June 30, 2006, the deemed dividend on our Series B and D Convertible
        Preferred Stock was recorded as the excess of the fair value of the
        consideration transferred to the preferred stockholders over the carrying
        value
        of the preferred stock on our balance sheet prior to the conversion. This
        amount
        was deemed to represent a return to the preferred stockholders and, therefore,
        was treated in a manner similar to dividends paid to stockholders of the
        preferred stock in the calculation of earnings per share.
 
 ***Income
        Tax Expense***
 
 In
        prior
        years, the Company has reduced its deferred tax assets and liabilities through
        the use of a valuation allowance because, in the opinion of management, based
        on
        the information available to it at the time, it was more likely than not
        that
        the benefits to be derived from these assets would not be realized. This
        opinion
        was based, among other things, on the history of net losses. Based on
        information currently available to BCI management, it now appears more likely
        than not that these net deferred tax assets will be realized. This resulted
        in
        the reversal of the valuation allowance the Company had recognized in prior
        years, resulting in reducing our current provision for income taxes by $738
        thousand.
 
 **FISCAL
        YEAR ENDED JUNE 30, 2006 COMPARED TO SIX MONTHS ENDED JUNE 30,
        2005**
 
 ***Revenues***
 
 We
        had
        revenues of $39.3 million for the year ended June 30, 2006, versus $10.2
        million
        for the six months ended June 30, 2005. Revenues from infrastructure equipment
        construction and installation contracts accounted for approximately 90% and
        89%
        in the year ended June 30, 2006, and in the six months ended June 30, 2005,
        respectively. Revenue from real estate site acquisition and zoning services
        accounted for approximately 10% and 11% of our total revenues for  these
        same periods, respectively. The increase in revenues in the year ended June
        30,
        2006, versus the six months ended June 30, 2005, is due to an additional
        six
        months of operations and the increased spending from our customers in
        infrastructure and equipment construction and installation and radio frequency
        engineering in order to improve their networks in preparation for future
        offerings of video and music and reduced spending in real estate acquisition
        and
        zoning services. We recognize revenues from infrastructure and equipment
        construction and installation contracts on the percentage of completion method
        of accounting and real estate site acquisition and zoning services upon the
        identification of an acceptable site and when the lease is signed between
        the
        landlord and the customer.
  25
  ***Cost
        of Revenues***
 
 Our
        cost
        of revenues was $28.2 million for the year ended June 30, 2006, versus $7.3
        million for the six months ended June 30, 2005.
 
 ***Gross
        Margin***
 
 Our
        gross
        margin for the year ended June 30, 2006, was $11.1 million or 28% of revenues
        as
        compared to $2.9 million or 28% of revenues for the six months ended June
        30,
        2005.
 
 ***Selling,
        General and Administrative Expenses***
 
 Selling,
        general and administrative expenses increased during the year ended June
        30,
        2006, to $9.4 million from $3.8 million in the six months ended June 30,
        2005.
        The increase in selling, general and administrative expenses during the year
        ended June 30, 2006, as compared to the six months ended June 30, 2005, resulted
        primarily from the additional six months of operations, additional costs
        due to
        an increased number of employees and additional office and warehouse facilities
        to handle our increased revenue. Selling, general and administrative expenses
        as
        a percentage of revenues decreased from 38% to 24% in the year ended June
        30,
        2006, as compared to the six months ended June 30, 2005 due to the increased
        revenues during the year ended June 30, 2006, without a corresponding increase
        in our selling, general and administrative expenses.
 
 Selling,
        general and administrative expenses for the year ended June 30, 2006 consisted
        primarily of approximately (i) $5.9 million of salaries and benefits, (ii)
        $0.8
        million of business insurance, (iii) $0.4 million of professional services,
        (iv)
        $0.6 million of office rents, (v) $0.4 million of travel and entertainment,
        (vi)
        $0.3 million of office expenses including telephone and utilities, (vii)
        $0.2
        million of repairs and maintenance and (viii) $0.8 million of other general
        operating expenses.
 
 ***Depreciation***
 
 Depreciation
        recorded on fixed assets during the year ended June 30, 2006, totaled
        approximately $0.2 million, as compared to approximately $0.1 million for
        six
        months ended June 30, 2005. The increase in depreciation is due to the sale
        of
        certain fixed assets and other fixed assets becoming fully depreciated and
        the
        comparison of a year versus six months.
 
 ***Loss
        in Equity Investments*** ****
 
 Loss
        in
        equity investments results from our minority ownership interest in Paciugo
        that
        was accounted for under the equity method of accounting. Under the equity
        method, our proportionate share of each subsidiary’s operating loss is included
        in equity in loss of investments. We sold our interest in Paciugo on
        December 30, 2005 and recorded a gain of $0.2 million.
 
 ***Other
        (Income) Expense***
 
 Other
        (income) expense during the year ended June 30, 2006, totaled expense of
        approximately $85 thousand, as compared to approximately $4 thousand for
        the six
        months ended June 30, 2005. The expense was comprised of an estimated liability
        for state sales tax for prior years offset by the recovery of approximately
        $88
        thousand of legal fees previously expensed, which had been paid on behalf
        of a
        third party.
 
 26
 
 ***Deemed
        Preferred Dividends***
 
 The
        deemed dividend on our Series B and D Convertible Preferred Stock was recorded
        as the excess of the fair value of the consideration transferred to the
        preferred holders as of the date of the Voting Agreement over the carrying
        value
        of the preferred stock on our balance sheet prior to the conversion. This
        amount
        was deemed to represent a return to the preferred holders and therefore,
        has
        been treated in a manner similar to dividends paid to holders of preferred
        stock
        in the calculation of earnings per share.
 
 **SIX
        MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004
        (Unaudited)**
 **(Amounts
        in thousands unless otherwise stated)**
 
 ***Revenues***
 
 **Six
                  Months Ended****June
                  30,**
              
              **Increase****2005**
              
              **2004**
              
              **(Decrease)****(Unaudited)**Infrastructure
                  construction and technical services
              
              $
              9,075
              
              $
              5,938
              
              $
              3,137Real
                  estate acquisition and zoning
              
              
              1,121
              
              
              1,484
              
              
              (363
              )Total
                  Revenues
              
              $
              10,196
              
              $
              7,422
              
              $
              2,774
 
 We
        had
        revenues of $10.2 million for the six months ended June 30, 2005 as compared
        with $7.4 million for the similar period ended June 30, 2004. This represents
        an
        increase of $2.8 million, or 37%. The increase in revenues for the six months
        ended June 30, 2005 as compared to the similar period ended June 30, 2004
        was
        primarily caused by increased spending from our customers in infrastructure
        construction and technical services in order to improve their networks in
        preparation for future offerings of video and music services, and reduced
        spending in real estate acquisition and zoning services.
 
 Revenues
        from infrastructure construction and technical services increased $3.1 million,
        or 53%, and accounted for approximately 89% and 80% of our total revenues
        for
        the six month periods ended June 30, 2005 and 2004, respectively.
 
 Revenues
        from real estate acquisition and zoning services decreased $0.4 million,
        or 25%,
        and accounted for approximately 11% and 20% of our total revenues for the
        six
        month periods ended June 30, 2005 and 2004, respectively.
 
 ***Cost
        of Revenues***
 
 Our
        cost
        of revenues was $7.3 million and $4.9 million, respectively, for the six
        months
        ended June 30, 2005 and 2004. These amounts represent 72% and 66% of total
        revenues for the six months ended June 30, 2005 and 2004, respectively.
 
 ***Gross
        Margin***
 
 Our
        gross
        margin for the six months ended June 30, 2005 and 2004 was $2.9 million and
        $2.5
        million, or 28% and 34% of revenues, respectively.
 
 ***Selling,
        General and Administrative Expenses***
 
 Selling,
        general and administrative expenses increased approximately $0.9 million,
        or 30%
        to $3.8 million during the six months ended June 30, 2005 as compared to
        $2.9
        million in the six months ended June 30, 2004. The increase in selling, general
        and administrative expenses resulted primarily from general administration
        costs
        of approximately $0.6 million from Novo that included the salaries of two
        of our
        senior executives, legal and accounting fees associated with the Acquisition,
        business insurance and office expenses. In addition to the costs associated
        with
        the Acquisition, we incurred additional costs due to an increased number
        of
        employees and additional warehouse facilities to handle our increased
        revenue.
  27
  ***Depreciation***
 
 Depreciation
        expense during the six months ended June 30, 2005 totaled approximately $0.1
        million as compared to approximately $0.2 million for the six months ended
        June
        30, 2004. The decrease was primarily caused by the sale of certain property
        and
        equipment and other fixed assets which became fully depreciated.
 
 ***Loss
        in Equity Investments***
 
 Loss
        in
        equity investments results from our minority ownership in Paciugo that was
        accounted for under the equity method of accounting. Under the equity method,
        our proportionate share of each subsidiary’s operating loss is included in
        equity in loss of investments.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 At
        June
        30, 2007, we had consolidated current assets of approximately $27.2 million,
        including cash and cash equivalents of approximately $2.5 million and net
        working capital of approximately $6.5 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, 2007
        have been working capital, purchases of property and equipment and
        acquisitions.
 
 In
        September 2003, we entered into a revolving credit facility with Presidential
        Financial Corporation of Delaware Valley (“Presidential”). On April 3, 2007, we
        amended this facility to, among other things, increase the availability under
        the credit facility to $8.0 million. The credit facility is available for
        working capital, capital expenditures and general corporate purposes. The
        credit
        facility interest rate is prime plus one and one-half percent (1.5%). As
        of June
        30, 2007, the prime rate was 8.25%. In addition, we pay .25% per month on
        the
        average daily balance.
 
 The
        credit facility is secured by substantially all of BCI’s assets and a guarantee
        from Berliner. The balance outstanding at June 30, 2007 was $5.5 million.
        The
        revolving credit facility has a term of twelve months and currently matures
        on
        April 3, 2008, and we can elect to renew on a month-to-month basis
        thereafter.
 
 On
        December 29, 2006, we entered into a Note Purchase Agreement (the “Note Purchase
        Agreement”) with Sigma Opportunity Fund, LLC 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 “Sigma 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 “Sigma
        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 to Pacific
        (the “Pacific Note”) and a third 7% Senior Subordinated Secured Convertible Note
        due on December 29, 2008 to Operis (the “Operis Note”) in the original principal
        amount of $0.5 million and a warrant to purchase up to 250,000 shares of
        our
        common stock respectively, all on substantially the same terms as the Sigma
        Note
        and Sigma Warrant.
 
 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 to Sigma Berliner,
        also on substantially the same terms as the Sigma Note and Sigma
        Warrant.
  The
        Sigma
        Note, the Pacific Note, the Operis Note and the Sigma Berliner Note are each
        junior to our existing $8.0 million line of credit with Presidential. We
        will
        make periodic payments of interest throughout the life of the
        notes.
 
 On
        February 28, 2007, in connection with the Asset Purchase Agreement with Digital
        Communication Services, Inc., J&J Leasing Partnership and the shareholders
        of Digitcom for the purchase certain of the assets of Digitcom, we issued
        a
        promissory note to J&J Leasing Partnership (the “J&J Note”) in the
        amount of $1.75 million. The principal amount and any accrued and unpaid
        interest thereon is due and payable quarterly for a three year period ending
        on
        March 1, 2010. The outstanding principal amount of the J&J Note bears
        interest at the rate of 8.25% per year. The J&J Note is secured by certain
        land and buildings sold to us by J&J Leasing Partnership.
  28
  Our
        ability to satisfy our current obligations is dependent upon our cash on
        hand,
        borrowings under our credit facility with Presidential, borrowings under
        our 7%
        Senior Secured Convertible Notes and the operations of BCI. Our current
        obligations consist of capital expenditures, debt service and funding working
        capital. In the event we do not continue to generate positive cash flow,
        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
        net
        cash flows for the years ended June 30, 2007 and 2006 are as
        follows:
 
 **For
                  the Years Ended****June
                  30,**2007
              
              2006Net
                  cash used in operating activities
              
              $
              (1,
                  064
              )
              $
              (224
              )Net
                  cash used in investing activities
              
              
              (6,239
              )
              
              (75
              )Net
                  cash provided by financing activities
              
              
              9,252
              
              
              431
 
 *Cash
        Used in Operating Activities*
 
 Net
        cash
        used in operating activities for the years ended June 30, 2007 and 2006 totaled
        approximately $1.1 million and $0.2 million, respectively.
 
 During
        the year ended June 30, 2007, cash provided by operating activities primarily
        resulted from operating income of $2.2 million, net of non-cash charges.
        Cash
        used in operating activities primarily resulted from an increase in accounts
        receivable of $4.2 million due to increased revenue during the period, increased
        accrued expenses of $0.6 million, and decreases in accounts payable (net
        of
        accounts payable realized for the acquisition of Radian) of $1.0
        million.
 
 Cash
        used
        in operating activities for the year ended June 30, 2006 primarily resulted
        from
        operating income, net of non-cash charges, of $1.6 million, an increase in
        accounts receivable of $7.2 million due to increased revenue during the period,
        decreases in inventories and other assets of $0.5 million, and an increase
        in
        accounts payable and accrued expenses of $4.7 million, mainly attributed
        to
        subcontractor costs associated with our increased revenues.
 
 *Cash
        Used in Investing Activities*
 
 Cash
        used
        in investing activities for the years ended June 30, 2007 and 2006 totaled
        approximately $6.2 million and $0.08 million, respectively.
 
 During
        the year ended June 30, 2007, cash used in investing activities primarily
        resulted from asset acquisitions of $5.7 million and purchases of property
        and
        equipment of $0.5 million.
  29
  Cash
        used
        in investing activities for the year ended June 30, 2006 was primarily the
        result of $0.3 million purchases of property and equipment, which was partly
        offset by $0.2 million proceeds from the sale of the Paciugo
        business.
 
 *Cash
        Provided by Financing Activities*
 
 Cash
        provided by financing activities for the years ended June 30, 2007 and 2006
        totaled approximately $9.3 million and $0.4 million, respectively.
 
 During
        the year ended June 30, 2007, cash provided by financing activities primarily
        resulted from net borrowings under our credit line of $4.4 million and new
        debt
        incurred of $6.0 million which were partially offset by financing fees paid
        of
        $0.6 million.
 
 Cash
        provided by financing activities for the year ended June 30, 2006 was primarily
        the result of $0.6 million net proceeds from the line of credit and $0.1
        million
        proceeds from long-term debt which were partly offset by $0.3 million repayment
        of long-term debt and $53 thousand repayment of capital leases.
 
 We
        believe our existing cash, cash equivalents and line of credit will be
        sufficient to meet our cash requirements in the near term. However, we may
        be
        required, or could elect, to seek additional funding within the next twelve
        months. 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. Our sources of liquidity beyond twelve months, in management’s
        opinion, will be our then current cash balances, funds from operations, if
        any,
        and our current credit facility and any additional equity or credit facilities
        we can arrange. We have no other agreements or arrangements with third parties
        to provide us with sources of liquidity and capital resources beyond twelve
        months.
 
 The
        following represents our contractual obligations over the next five
        years:
 
 **Total**
              
              **2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **2012**
              
              **Thereafter**Long-term
                  debt obligations
              $
              7,934
              
              $
              684
              
              $
              6,679
              
              $
              529
              
              $
              42
              
              $
              -
              
              $
              -Amounts
                  representing interest
              
              878
              
              
              558
              
              
              292
              
              
              26
              
              
              2
              
              
              -
              
              
              -Capital
                  lease obligations
              
              251
              
              
              55
              
              
              50
              
              
              54
              
              
              49
              
              
              42
              
              
              1Amounts
                  representing interest
              
              64
              
              
              21
              
              
              18
              
              
              13
              
              
              8
              
              
              4
              
              
              -Operating
                  lease obligations
              
              1,
                  213
              
              
              769
              
              
              288
              
              
              156
              
              
              -
              
              
              -
              
              
              -$
              10,340
              
              $
              2,
                  087
              
              $
              7,327
              
              $
              778
              
              $
              101
              
              $
              46
              
              $
              1
 
 **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;
 ·
              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 its service
                  offerings.
  30
  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*
 
 Revenue
        from radio frequency and network design and engineering, infrastructure
        equipment construction and installation, radio transmission base station
        modifications and project management services are recognized as work is
        performed. Revenue from real estate acquisition and zoning services is
        recognized under the completed contract method of accounting. Revenue associated
        with multiple element contracts reflects the relative fair value of the services
        included in the contract. 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 on infrastructure equipment construction and installation contracts
        are
        recognized when such losses become known.
 
 *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 collectibility
        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
        June
        2006, the FASB issued FASB Interpretation No. 48, *Accounting
        for Uncertainty in Income Taxes - an interpretation of FASF Statement No.
        109,* (FIN
        48), which establishes that the financial statement effects of a tax position
        taken or expected to be taken in a tax return are to be recognized in the
        financial statements when it is more likely than not, based on the technical
        merits, that the position will be sustained upon examination. FIN 48 is
        effective for fiscal years beginning after December 15, 2006. We do not believe
        that the adoption of FIN 48 will have a material impact on our results from
        operations or financial position.
 
 In
        September 2006, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards No. 157, *Fair
        Value Measurements* ("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. SFAS No. 157
        is
        effective for financial statements issued for the fiscal years beginning
        after
        November 15, 2007, and interim periods within those fiscal years. The Company
        is
        in the process of evaluating this guidance and therefore has not yet determined
        the impact, if any, that SFAS 157 will have on its consolidated financial
        statements upon adoption.
  31
  In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108, *Considering
        the Effects of Prior Year Misstatements in Current Year Financial Statements* (“SAB
        108”). SAB 108 provides interpretive guidance on how the effects of the
        carryover or reversal of prior year misstatements should be considered in
        quantifying a current year misstatement. Specifically, SAB 108 states that
        registrants should quantify errors using both a balance sheet and income
        statement approach and evaluate whether either approach results in quantifying
        a
        misstatement that, when all relevant quantitative factors are considered,
        is
        material. SAB 108 is effective for fiscal years ending after November 15,
        2006.
        The adoption of SAB 108 did not have a material impact on our results of
        operations or financial position.
 
 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. SFAS
        159
        is effective for fiscal years beginning after November 15, 2007. The Company
        is
        in the process of evaluating this guidance and therefore has not yet determined
        the impact, if any, that SFAS 159 will have on its consolidated financial
        statements upon adoption.
 
 **ITEM
        7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
 
 We
        are
        exposed to the impact of interest rates and other risks. We have investments
        in
        money market funds of approximately $2.0 million at June 30, 2007 and borrowings
        under our line of credit of approximately $5.5 million. We believe that the
        effects of changes in interest rates are limited and would not materially
        affect
        our operations or financial condition.
 
 **ITEM
        8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**
 
 Please
        refer to pages F-1 through F-30.
  **ITEM
        9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 None.
 
 **ITEM
        9A. CONTROLS AND PROCEDURES**
 
 Based
        upon the required evaluation of our disclosure controls and procedures (as
        defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
        of
        1934, as amended (the “Exchange Act”)), our Chief Executive Officer and our
        Chief Financial Officer have concluded that, as of June 30, 2007, our disclosure
        controls and procedures were effective to ensure that information was gathered,
        analyzed and disclosed on a timely basis.
 
 There
        has
        been no change in our internal control over financial reporting (as defined
        in
        rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
        our
        fiscal quarter ended June 30, 2007, that has materially affected, or is
        reasonably likely to materially affect, our internal control over financial
        reporting.
  32
  **PART
        III**
 
 **ITEM
        10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**
 
 Information
        called for by Item 10 will be set forth under the caption “Election of
        Directors” in our 2007 Proxy Statement, which will be filed not later than 120
        days after the end of our fiscal year ended June 30, 2007, 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 2007 Proxy Statement, which will be filed
        not later than 120 days after the end of our fiscal year ended June 30, 2007,
        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 2007 Proxy Statement,
        which will be filed not later than 120 days after the end of our fiscal year
        ended June 30, 2007, and which is incorporated herein by this
        reference.
 
 **ITEM
        13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 Information
        called for by Item 13 will be set forth under the caption “Certain Relationships
        and Related Transactions” in our 2007 Proxy Statement, which will be filed not
        later than 120 days after the end of our fiscal year ended June 30, 2007,
        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 2007 Proxy Statement, which will be filed not later
        than 120 days after the end of our fiscal year ended June 30, 2007, 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, 2007 and 2006
 Our
        Consolidated Statements of Operations for the years ended June 30, 2007 and
        2006, the six months ended June 30, 2005 and 2004 (Unaudited), and the year
        ended December 31, 2004
 Our
        Consolidated Statements of Stockholders’ Equity for the years ended June 30,
        2007 and 2006, the six months ended June 30, 2005 and the year ended December
        31, 2004
 Our
        Consolidated Statements of Cash Flows for the years ended June 30, 2007 and
        2006, the six months ended June 30, 2005 and 2004 (Unaudited), and the year
        ended December 31, 2004
 
 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 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 27, 2007. Each person whose signature appears
        below constitutes and appoints Rich B. Berliner and Nicholas Day, each or
        either of them, his true and lawful attorney-in-fact and agent, each acting
        alone, with full power of substitution and resubstitution, for him and in
        his
        name, place and stead, in any and all capacities, to sign any or all amendments
        (including post-effective amendments) to this Annual Report on Form 10-K
        and to
        file the same, with all the exhibits thereto, and other documents in connection
        therewith, with the Securities and Exchange Commission, granting unto said
        attorneys-in-fact and agents, each acting alone, full power and authority
        to do
        and perform each and every act and thing requisite or necessary to be done
        in
        and about the premises as fully, to all intents and purposes, as he might
        or
        could do in person, hereby ratifying and confirming all that said
        attorneys-in-fact and agents, each acting alone, or his substitute or
        substitutes, may lawfully do or cause to be done by virtue hereof.
  SIGNATURE
                
                TITLE/s/
                    Rich Berliner
                
                Chief
                    Executive OfficerRich B.
                    Berliner
                
                (Principal
                  Executive
                  Officer)/s/
                    Albert E. Gencarella
                
                Chief
                    Financial OfficerAlbert
                    E. Gencarella
                
                (Principal
                    Financial and Accounting Officer)/s/
                    Mark S. Dailey
                
                DirectorMark
                    S. Dailey/s/
                    Peter J. Mixter
                
                DirectorPeter
                    J. Mixter/s/
                    Mehran Nazari
                
                DirectorMehran
                    Nazari/s/
                    Steve Robling
                
                DirectorJohn
                    Stevens Robling, Jr./s/
                    Thom Waye
                
                DirectorThom
                    Waye
 34
 **INDEX
        TO EXHIBITS**
 
 
 **Exhibit
                  Number**
              **Description**
              **Filed
                  Herewith**10.1
              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
              X21.1
              Subsidiaries
                  of Berliner Communications, Inc.
              X23.1
              Consent
                  of BDO Seidman, LLP
              X24
              Power
                  of Attorney
              See
                  Signature Pages31.1
              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
 
 35
  **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, 2007 and 2006
              
              
              F-3Consolidated
                  Statements of Operations for the years ended June 30, 2007 and
                  2006,
                  andthe
                  six months ended June 30, 2005 and 2004 (unaudited) and for the
                  year
                  endedDecember
                  31, 2004
              
              
              F-4Consolidated
                  Statements of Stockholders' Equity for the years ended June 30,
                  2007 and
                  2006, the sixMonths
                  ended June 30, 2005 and for the year ended December 31,
                  2004
              
              
              F-5Consolidated
                  Statements of Cash Flows for the years ended June 30, 2007 and
                  2006,
                  andthe
                  six months ended June 30, 2005 and 2004 (unaudited) and for the
                  year
                  endedDecember
                  31, 2004
              
              
              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, 2007 and 2006 and the related consolidated
        statements of operations, stockholders’ equity, and cash flows for the years
        ended June 30, 2007 and 2006, the six months ended June 30, 2005, and the
        year
        ended December 31, 2004. 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, 2007 and 2006, and the results of their
        operations and cash flows for the years ended June 30, 2007 and 2006, and
        the
        six months ended June 30, 2005, and the year ended December 31, 2004, in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 /s/
        BDO Seidman, LLP
 Valhalla,
        New York
 October
        1, 2007
  F-2
  **BERLINER
                  COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS****(Amounts
                  in thousands)**
  **June
                  30,****2007**
              
              **2006****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              2,483
              
              $
              534Accounts
                  receivable, net of allowance for doubtful accountsof
                  $261 and $180 at June 30, 2007 and 2006, respectively
              
              
              22,911
              
              
              12,334Inventories
              
              
              666
              
              
              322Deferred
                  tax assets - current
              
              
              336
              
              
              -Prepaid
                  expenses and other current assets
              
              
              771
              
              
              33227,
                  167
              
              
              13,522Property
                  and equipment, net
              
              
              2,569
              
              
              566Amortizable
                  intangible assets, net
              
              
              960
              
              
              -Goodwill
              
              
              2,270
              
              
              -Deferred
                  tax assets - long-term
              
              
              950
              
              
              -Other
                  assets
              
              
              387
              
              
              168Total
                  Assets
              
              $
              34,303
              
              $
              14,256**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              7,399
              
              $
              5,356Accrued
                  liabilities
              
              
              6,588
              
              
              3,909Accrued
                  income taxes
              
              
              326
              
              
              128Line
                  of credit
              
              
              5,537
              
              
              1,111Current
                  portion of long-term debt
              
              
              797
              
              
              374Current
                  portion of capital lease obligations
              
              
              52
              
              
              3320,699
              
              
              10,911Long-term
                  debt, net of current portion
              
              
              5,765
              
              
              163Long-term
                  capital lease obligations, net of current portion
              
              
              199
              
              
              24Other
                  long-term liabilities
              
              
              694
              
              
              -Deferred
                  tax liabilities - long-term
              
              
              39
              
              
              -Total
                  liabilities
              
              
              27,396
              
              
              11,098**COMMITMENTS****STOCKHOLDERS'
                  EQUITY**Common
                  stock
              
              
              -
              
              
              -Additional
                  paid-in capital
              
              
              15,655
              
              
              13,018Accumulated
                  deficit
              
              
              (8,748
              )
              
              (9,860
              )Total
                  stockholders' equity
              
              
              6,907
              
              
              3,158Total
                  liabilities and stockholders' equity
              
              $
              34,303
              
              $
              14,256
  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****Year
                  ended June 30,**
              
              **Six
                  Months Ended June 30.**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2004****(Unaudited)**Revenues
              
              $
              55,
                  135
              
              $
              39,325
              
              $
              10,196
              
              $
              7,422
              
              $
              15,286Costs
                  of revenues
              
              
              37,275
              
              
              28,202
              
              
              7,339
              
              
              4,927
              
              
              9,605Gross
                  margin
              
              
              17,860
              
              
              11,123
              
              
              2,857
              
              
              2,495
              
              
              5,681Selling,
                  general and administrative expenses
              
              
              14,614
              
              
              9,448
              
              
              3,831
              
              
              2,940
              
              
              6,123Depreciation
                  and amortization
              
              
              484
              
              
              247
              
              
              139
              
              
              181
              
              
              343Gain
                  on sale of fixed assets
              
              
              (5
              )
              
              (7
              )
              
              (23
              )
              
              (14
              )
              
              (10
              )Income
                  (loss) from operations
              
              
              2,767
              
              
              1,435
              
              
              (1,090
              )
              
              (612
              )
              
              (775
              )Other
                  (income) expenseInterest
                  expense
              
              
              1,238
              
              
              74
              
              
              22
              
              
              19
              
              
              47Interest
                  income
              
              
              (37
              )
              
              (14
              )
              
              (5
              )
              
              (1
              )
              
              (2
              )Financing
                  fees
              
              
              695
              
              
              -
              
              
              -
              
              
              -
              
              
              -(Income)
                  loss in equity investments
              
              
              (41
              )
              
              (98
              )
              
              94
              
              
              -
              
              
              -Other
              
              
              (14
              )
              
              85
              
              
              (4
              )
              
              -
              
              
              -Income
                  (loss) before income taxes
              
              
              926
              
              
              1,388
              
              
              (1,197
              )
              
              (630
              )
              
              (820
              )Income
                  tax (benefit) expense
              
              
              (186
              )
              
              133
              
              
              (7
              )
              
              (2
              )
              
              16Net
                  income (loss)
              
              
              1,112
              
              
              1,255
              
              
              (1,190
              )
              
              (628
              )
              
              (836
              )Deemed
                  Series B and D preferred dividends
              
              
              -
              
              
              19,936
              
              
              -
              
              
              -
              
              
              -Net
                  income (loss) allocable to common shareholders
              
              $
              1,112
              
              $
              (18,681
              )
              $
              (1,190
              )
              $
              (628
              )
              $
              (836
              )Net
                  income (loss) per share:Basic
              
              $
              0.07
              
              $
              (1.38
              )
              $
              (2.36
              )
              $
              (9.31
              )
              $
              (12.41
              )Diluted
              
              $
              0.06
              
              $
              (1.38
              )
              $
              (2.36
              )
              $
              (9.31
              )
              $
              (12.41
              )Weighted
                  average number of shares outstanding:Basic
              
              
              17,035
              
              
              13,582
              
              
              504
              
              
              67
              
              
              67Diluted
              
              
              19,062
              
              
              13,582
              
              
              504
              
              
              67
              
              
              67
  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)**
  **Preferred
                  Stock**
              
              **Common
                  Stock****2,000,000
                  shares authorized;**
              
              **100,000,000
                  shares authorized**
              
              **Additional**
              
              
              
              **Total****$0.00002
                  par value**
              
              **$0.00002
                  par value**
              
              **Paid-in**
              
              **Accumulated**
              
              **Stockholders'****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Equity**Balance
                  at December 31, 2003
              
              
              -
              
              $
              -
              
              
              20,224,320
              
              $
              202
              
              $
              10,531
              
              $
              (9,023
              )
              $
              1,710Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (837
              )
              
              (837
              )Balance
                  at December 31, 2004
              
              
              -
              
              
              -
              
              
              20,224,320
              
              
              202
              
              
              10,531
              
              
              (9,860
              )
              
              873Deemed
                  retroactive stock split to recapitalizeBerliner
                  Communications, Inc. with 147,676,299 common shares, $0.00002 par
                  value
              
              
              -
              
              
              -
              
              
              127,451,979
              
              
              (199
              )
              
              199
              
              
              -
              
              
              -Deemed
                  retroactive stock split to recapitalizeBerliner
                  Communications, Inc. with 3,913,669 Series E Preferred shares,
                  $0.00002
                  par value, liquidation preference of $0.26 per share
              
              
              3,913,669
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Deemed
                  dividend of Berliner Communications, Inc.of
                  net assets not transferred in recapitalization
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (65
              )
              
              (65
              )Novo
                  Networks, Inc. preferred stock recapitalizedas
                  of February 18, 2005, into 4,500 Series B and 9,473 Series D Preferred
                  shares, $0.00002 par value, liquidation preference of $1,000 per
                  share
              
              
              13,973
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Novo
                  Networks, Inc. shareholder equity recapitalizedas
                  of February 18, 2005, into 52,323,701 common shares, $0.00002 par
                  value
              
              
              -
              
              
              -
              
              
              52,323,701
              
              
              1
              
              
              2,188
              
              
              -
              
              
              2,189Reverse
                  stock split of one share for every 300shares
                  on September 16, 2005
              
              
              -
              
              
              -
              
              
              (199,333,333
              )
              
              (4
              )
              
              4
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,190
              )
              
              (1,190
              )Balance
                  at June 30, 2005
              
              
              3,927,642
              
              
              -
              
              
              666,667
              
              
              -
              
              
              12,922
              
              
              (11,115
              )
              
              1,807Deemed
                  dividend in the conversion of Series Band
                  Series D Convertible Preferred Stock
              
              
              (13,973
              )
              
              -
              
              
              996,788,940
              
              
              20
              
              
              (20
              )
              
              -
              
              
              -Conversion
                  of Series E Convertible Preferred Stock
              
              
              (3,913,669
              )
              
              -
              
              
              3,913,668,046
              
              
              78
              
              
              (78
              )
              
              -
              
              
              -Reverse
                  stock split of one share for every 300shares
                  of Common Stock on September 16, 2005
              
              
              -
              
              
              -
              
              
              (4,894,088,796
              )
              
              (98
              )
              
              98
              
              
              -
              
              
              -Stock
                  based compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              67
              
              
              -
              
              
              67Issuance
                  of warrants for consulting services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              29
              
              
              -
              
              
              29Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,255
              
              
              1,255Balance
                  at June 30, 2006
              
              
              -
              
              
              -
              
              
              17,034,857
              
              
              -
              
              
              13,018
              
              
              (9,860
              )
              
              3,158Exercise
                  of stock options
              
              
              -
              
              
              
              
              
              46,929
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock-based
                  compensation expense
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              300
              
              
              -
              
              
              300Value
                  of warrants granted with debt
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              2,337
              
              
              -
              
              
              2,337Net
                  income
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              
              
              
              1,112
              
              
              1,112Balance
                  at June 30, 2007
              
              
              -
              
              $
              -
              
              
              17,081,786
              
              $
              -
              
              $
              15,655
              
              $
              (8,748
              )
              $
              6,907
  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****Year
                  ended June 30,**
              
              **Six
                  Months Ended June 30,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2004****(Unaudited)**Cash
                  flows from operating activitiesNet
                income (loss)
              
              $
              1,112
              
              $
              1,255
              
              $
              (1,190
              )
              $
              (628
              )
              $
              (836
              )Adjustments
                to reconcile net income (loss) to net cash
                (used in) provided by operating activities:Depreciation
                  and amortization
              
              
              484
              
              
              247
              
              
              139
              
              
              181
              
              
              343Amortization
                  of deferred financing fees
              
              
              189
              
              
              -
              
              
              -
              
              
              -
              
              
              -Loss
                  in equity investments
              
              
              -
              
              
              102
              
              
              94
              
              
              -
              
              
              -Bad
                  debt expense
              
              
              140
              
              
              104
              
              
              10
              
              
              -
              
              
              46Stock
                  based compensation
              
              
              300
              
              
              96
              
              
              -
              
              
              -
              
              
              -Gain
                  on sale of equity investment
              
              
              -
              
              
              (200
              )
              
              -
              
              
              -
              
              
              -Gain
                  on sale of fixed assets
              
              
              (5
              )
              
              (7
              )
              
              (23
              )
              
              (14
              )
              
              (10
              )Accretion
                  of interest from warrants
              
              
              509
              
              
              -
              
              
              -
              
              
              -
              
              
              -Financing
                  fees
              
              
              695
              
              
              -
              
              
              -
              
              
              -
              
              
              -Deferred
                  tax assets, net
              
              
              (1,247
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Changes
                in operating assets and liabilities:Accounts
                  receivable
              
              
              (4,212
              )
              
              (7,177
              )
              
              (1,886
              )
              
              2,060
              
              
              2,065Inventories
              
              
              1,039
              
              
              185
              
              
              9
              
              
              34
              
              
              96Prepaid
                  expenses and other current assets
              
              
              39
              
              
              185
              
              
              (47
              )
              
              112
              
              
              (54
              )Other
                  assets
              
              
              20
              
              
              89
              
              
              14
              
              
              (2
              )
              
              (9
              )Accounts
                  payable
              
              
              (974
              )
              
              3,146
              
              
              506
              
              
              (288
              )
              
              (285
              )Accrued
                  liabilities
              
              
              649
              
              
              1,623
              
              
              808
              
              
              (881
              )
              
              (712
              )Accrued
                  income taxes
              
              
              198
              
              
              128
              
              
              (13
              )
              
              -
              
              
              (22
              )Deferred
                  revenues
              
              
              -
              
              
              -
              
              
              (11
              )
              
              (9
              )
              
              9**Net
                  cash (used in) provided by operating activities**
              
              
              (1,064
              )
              
              (224
              )
              
              (1,590
              )
              
              565
              
              
              631Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (519
              )
              
              (293
              )
              
              (89
              )
              
              (42
              )
              
              (80
              )Proceeds
                  from the sale of property and equipment
              
              
              8
              
              
              18
              
              
              60
              
              
              10
              
              
              25Proceeds
                  from the sale of equity investments
              
              
              -
              
              
              200
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of Digitcom
              
              
              (2,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of Radian
              
              
              (3,630
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of Comtech
              
              
              (98
              )
              
              -
              
              
              -
              
              
              -
              
              
              -**Net
                  cash used in investing activities**
              
              
              (6,239
              )
              
              (75
              )
              
              (29
              )
              
              (32
              )
              
              (55
              )Cash
                  flows from financing activities:Proceeds
                  from line of credit
              
              
              23,843
              
              
              4,809
              
              
              1,237
              
              
              701
              
              
              1,888Proceeds
                  from long-term debt
              
              
              6,000
              
              
              149
              
              
              30
              
              
              -
              
              
              102Repayment
                  of line of credit
              
              
              (19,417
              )
              
              (4,192
              )
              
              (1,088
              )
              
              (1,028
              )
              
              (1,979
              )Repayment
                  of long-term debt
              
              
              (529
              )
              
              (282
              )
              
              (199
              )
              
              (89
              )
              
              (181
              )Financing
                  fees
              
              
              (604
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Repayment
                  of loan from shareholder
              
              
              -
              
              
              -
              
              
              (102
              )
              
              -
              
              
              -Repayment
                  of capital leases
              
              
              (41
              )
              
              (53
              )
              
              (34
              )
              
              (44
              )
              
              (90
              )**Net
                  cash (used in) provided by financing activities**
              
              
              9,252
              
              
              431
              
              
              (156
              )
              
              (460
              )
              
              (260
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,949
              
              
              132
              
              
              (1,775
              )
              
              73
              
              
              316Cash
                  and cash equivalents at beginning of period
              
              
              534
              
              
              402
              
              
              454
              
              
              138
              
              
              138Cash
                  and cash equivalents acquired
              
              
              -
              
              
              -
              
              
              1,723
              
              
              -
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              2,483
              
              $
              534
              
              $
              402
              
              $
              211
              
              $
              454
  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****Year
                  ended June 30,**
              
              **Six
                  Months Ended June 30,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2004**(Unaudited)**Supplemental
                  cash flow information:**Interest
                paid
              
              $
              164
              
              $
              74
              
              $
              21
              
              $
              19
              
              $
              47Income
                taxes paid
              
              $
              863
              
              $
              6
              
              $
              13
              
              $
              5
              
              $
              10**Non-cash
                  investing and financing activities:**Assets
                purchased under capital leases
              
              $
              235
              
              $
              61
              
              $
              -
              
              $
              -
              
              $
              55Note
                payable in connection with acquisition ofDigitcom
              
              $
              1,750
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Fair
                value of warrants associated with debt issuancesand
                  professional services
              
              $
              2,336
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
  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, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **1.**
              **Business**
 
 General
 
 The
        company now known as Berliner Communications, Inc. (“Berliner”, “we”, “us”, and
“our”) was originally incorporated in Delaware in 1987 as Adina, Inc. (“Adina”).
        Adina’s corporate existence was permitted to lapse in February 1996 and was
        subsequently reinstated as eVentures Group, Inc. (“eVentures”) in August 1999.
        In December 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. (“Old Berliner”) and BCI Communications, Inc.
        (“BCI”), a Delaware corporation and our wholly-owned subsidiary, whereby BCI
        acquired (the “Acquisition”) the operations and substantially all of the assets
        and liabilities of Old Berliner. In September 2005, Novo changed its name
        to
        Berliner Communications, Inc.
 
 Since
        the
        Acquisition was settled through the issuance of a controlling interest in
        Novo’s
        common stock, Old Berliner was deemed to be the acquirer for accounting
        purposes. Furthermore, since Novo was deemed to be a shell company prior
        to the
        Acquisition, purchase accounting was not applied. Therefore, the transaction
        was
        accounted for as a reverse acquisition and recapitalization of Old Berliner.
        The
        accompanying consolidated financial statements for the six months ended June
        30,
        2005, include the accounts of Old Berliner through February 18, 2005, BCI,
        our
        wholly-owned subsidiary, and us since February 18, 2005.
 
 Founded
        in 1995, Old Berliner originally provided wireless carriers with comprehensive
        real estate acquisition and zoning services. Over the course of the following
        years, the 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 historical operations of Old Berliner.
 
 On
        February 19, 2007, we acquired substantially all of the assets of Comtech
        Systems, Inc.
  On
          February 28, 2007, BCI entered into an Asset Purchase Agreement (the “Digitcom
          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 expanded our presence in Texas and the
          Southeast markets. 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 (the “Wireless Operations of Radian”). This acquisition
          has expanded our presence in the Los Angeles, California, Las Vegas, Nevada,
          and
          Seattle, Washington markets, and adds offices in Salem, Oregon, Tempe,
          Arizona
          and Salt Lake City, Utah.
 The
        results of these acquired businesses have been incorporated into our
        consolidated financial statements since the date of acquisition.
 
 **2.**
              **Summary
                  of Significant Accounting
                  Policies**
 
 ***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.
        Some of the more significant estimates being made include the allowance for
        doubtful accounts and percentage of completion of construction
        projects.
  F-8
 **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  The
        amounts presented for the six months ended June 30, 2004, in the accompanying
        Consolidated Statement of Operations and Statement of Cash Flows have been
        prepared by us, without audit, pursuant to the interim financial statement
        rules
        and regulations of the United States Securities and Exchange Commission (“SEC”).
        In our opinion, the accompanying Unaudited Consolidated Statement of Operations
        and Statement of Cash Flows include all adjustments necessary to present
        fairly
        the results of operations and cash flows for the six months ended June 30,
        2004.
 
 ***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. At June 30, 2007, cash and cash
        equivalents totaled approximately $2.5 million and consisted of bank balances,
        a
        corporate bond and a money market account. We maintain our cash and cash
        equivalents with two financial institutions that, at times, may have amounts
        in
        excess of the FDIC insurance limit.
 
 ***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 collectibility
        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.
 
 ***Inventories***
 
 Inventories,
        which consist mainly of parts and raw materials, are stated at the lower
        of cost
        or market. Cost is determined using the first-in, first-out 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, 2007 and 2006, current prepaid expenses
        and
        other current assets totaled approximately $0.8 million and $0.3 million,
        respectively, and consisted mainly of insurance, deferred financing fees
        and
        rents. Non-current other assets of approximately $0.4 million at June 30,
        2007,
        and $0.2 million at June 30, 2006 are mainly deposits for our office and
        warehouse locations and long-term insurance.
 
 ***Property
        and Equipment***
 
 Property
        and equipment consist of automobiles and trucks, computer equipment, equipment
        and software, furniture and fixtures and leasehold improvements. Each class
        of
        asset is recorded at cost and depreciated using the straight-line method
        over
        the estimated useful lives of three to five years. Leasehold improvements
        are
        amortized over the term of the lease or the estimated useful life, whichever
        is
        shorter. 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
        operations.
  F-9
 **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 ***Long-lived
        Assets***
 
 We
        assess
        the recoverability of long-lived assets, including goodwill, by determining
        whether the net book value of the assets can be recovered through projected
        undiscounted future cash flows. The amount of impairment, if any, is measured
        based on fair value and is charged to operations in the period in which the
        impairment occurs.
 
 ***Equity
        Investments***
 
 Subsidiaries
        whose results are not consolidated, but over whom we exercise significant
        influence, are generally accounted for under the equity method of accounting.
        Whether we exercise significant influence with respect to a subsidiary depends
        on an evaluation of several factors, including, without limitation,
        representation on the subsidiary’s governing board and ownership level, which is
        generally a 20% to 50% interest in the voting securities of the subsidiary,
        including voting rights associated with our holdings in common stock, preferred
        stock and other convertible instruments in the subsidiary. Under the equity
        method of accounting, the subsidiary’s accounts are not reflected in our
        consolidated financial statements. Our proportionate share of a subsidiary’s
        operating earnings and losses are included in the caption “(Income) loss in
        equity investments” in our consolidated statements of operations. During the
        year ended June 30, 2006, we sold our equity investment in Paciugo Management,
        LLC for a gain (see Note 6 - Equity Investments).
 
 ***Revenue
        Recognition***
 
 Revenue
        from radio frequency and network design and engineering, infrastructure
        equipment construction and installation, radio transmission base station
        modifications and project management services is recognized as work is
        performed. Revenue from real estate acquisition and zoning services is
        recognized under the completed contract method of accounting. Revenue associated
        with multiple element contracts reflects the relative fair value of the services
        included in the contract. 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 estimated
        percentage that total direct costs incurred to date bear to estimated total
        costs at completion. Losses on infrastructure equipment construction and
        installation contracts are recognized when such losses become
        known.
 
 Unbilled
        receivables represent revenues on uncompleted infrastructure equipment
        construction and installation contracts that are not yet billed or billable,
        pursuant to contract terms.
 
 ***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, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 ***Stock-based
        Compensation***
 
 Historically,
        Old Berliner applied the intrinsic value based method of accounting prescribed
        by Accounting Principle Board Opinion No. 25, *Accounting
        for Stock Issued to Employees* ,
        and
        related interpretations, in accounting for our employee-based stock options
        plan. As such, compensation expense would be recorded on the date of grant
        only
        if the current market price of the underlying stock exceeded the exercise
        price.
        Statement of Financial Accounting Standard No. 123, *Accounting
        for Stock-Based Compensation* ,
        (“SFAS
        123”) established accounting and disclosure requirements using a fair value
        based method of accounting for stock-based compensation. As permitted by
        SFAS
        123, Old Berliner elected to continue to apply the intrinsic value based
        method
        of accounting for its employee-based stock option grants and adopted the
        disclosure requirements of SFAS 123.
 
 During
        2004 and through the date of the Acquisition, Old Berliner did not grant
        any
        stock options under its plans. The holders of Old Berliner’s plans forfeited all
        of their stock options 90 days after the Acquisition date due to all of the
        employees becoming employees of Berliner. There were no stock options granted
        from the Acquisition to June 30, 2005. During the years ended June 30, 2007
        and
        2006, we granted stock options totaling 1,091,526 and 530,300 shares,
        respectively, under our plans.
 
 Prior
        to
        July 31, 2005, we adopted the disclosure-only provisions of SFAS 123. SFAS
        123
        required pro forma information to be presented as if we had accounted for
        the
        stock options during the fiscal periods presented using the fair value method.
        The fair value of options granted during the fiscal year ended June 30, 2005
        were estimated as of the date of grant using the Black-Scholes option pricing
        model with the following weighted average assumptions: expected volatility
        of
        48.6%, expected dividend yield of 0%, risk-free interest rate of 3.88% and
        an
        expected life of 10 years.
 
 For
        purposes of pro forma disclosures related to prior years, the estimated fair
        values of the options are amortized to expense over the options’ vesting period
        of one to three years.
  **Year
                    Ended****Six
                    Months Ended June 30,**
                
                **December
                    31,****2005**
                
                **2004**
                
                **2004****Pro
                    forma net loss**
                
                
                
                
                
                **(Unaudited)**Net
                    loss allocable to common shareholders, as reported
                
                $
                (1,190
                )
                $
                (628
                )
                $
                (836
                )Less:
                    stock-based compensation determined under fair value based method
                
                
                (13
                )
                
                -
                
                
                -Net
                    loss allocable to common shareholders, pro forma
                
                $
                (1,203
                )
                $
                (628
                )
                $
                (836
                )Net
                    loss per share, as reported
                
                $
                (2.36
                )
                $
                (9.31
                )
                $
                (12.41
                )Net
                    loss per share, pro forma
                
                $
                (2.36
                )
                $
                (9.31
                )
                $
                (12.41
                )
 
 In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        123 (revised 2004), *Share-Based
        Payment,* (SFAS
        123R) which requires all share-based payments to employees, including grants
        of
        employee stock options, to be recognized in the financial statements based
        on
        fair values (i.e. pro forma disclosure is no longer an alternative to financial
        statement recognition). SFAS 123R is effective for public companies at the
        beginning of the first interim or annual period beginning after December
        15,
        2005. This required us to adopt SFAS 123R effective July 1, 2005. We elected
        to
        adopt 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).
  F-11
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 In
        addition, 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 option pricing model. Expected volatilities are based on
        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,
        is
        recognized on a straight-line basis over the period between the grant and
        vesting dates.
 
 The
        following weighted average assumptions used for purposes of determining the
        fair
        value were as follows:
 
 **2007**
              
              **2006**Expected
                  volatility
              
              70%
                  - 78%
              
              
              75%Expected
                  dividend yield
              
              0%
              
              
              0%Risk-free
                  interest rate
              
              4.51%-5.01%
              
              4.39%-5.04%Expected
                  life
              
              5
                  Years
              
              
              5.5
                  Years
 
 The
        adoption of SFAS 123R did not have a significant impact on our overall results
        of operations or financial position.
 
 ***Earnings
        per Share***
 
 Basic
        earnings per share are computed by dividing income 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 would
        be
        reflected in diluted earnings per share by application of the treasury stock
        method.
 
 The
        following table sets forth the computations of basic earnings per share and
        diluted earnings per share:
 
 **Year
                  Ended****Year
                  ended June 30,**
              
              **Six
                  Months Ended June 30,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2004****Basic
                  earnings per share:**Numerator:Net
                  income (loss) allocable to common shareholders
              
              $
              1,112
              
              $
              (18,681
              )
              $
              (1,190
              )
              $
              (628
              )
              $
              (836
              )Denominator:Weighted
                  average common shares outstanding
              
              
              17,035
              
              
              13,582
              
              
              504
              
              
              67
              
              
              67Net
                  income (loss) per share - basic
              
              $
              0.
                  07
              
              $
              (1.38
              )
              $
              (2.36
              )
              $
              (9.31
              )
              $
              (12.41
              )**Diluted
                  earnings per share:**Numerator:Net
                  income (loss) allocable to common shareholders
              
              $
              1,112
              
              $
              (18,681
              )
              $
              (1,190
              )
              $
              (628
              )
              $
              (836
              )Denominator:Weighted
                  average common shares outstanding
              
              
              17,035
              
              
              13,582
              
              
              504
              
              
              67
              
              
              67Effect
                  of dilutive securities:Stock
                  options
              
              
              528
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
              
              
              1,499
              
              
              -
              
              
              -
              
              
              -
              
              
              -Weighted
                  average common shares outstanding-assuming
                  dilution
              
              
              19,062
              
              
              13,582
              
              
              504
              
              
              67
              
              
              67Net
                  income (loss) per share - diluted
              
              $
              0.06
              
              $
              (1.38
              )
              $
              (2.36
              )
              $
              (9.31
              )
              $
              (12.41
              )
  F-12
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  Common
        share equivalents consist of stock options and warrants using the treasury
        stock
        method. For the year ended June 30, 2007, 452,026 stock options and 5,454,545
        shares convertible upon conversion of our 7% Notes 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.
 
 ***Recently
        Issued Accounting Pronouncements***
 
 In
        June
        2006, the FASB issued FASB Interpretation No. 48, *Accounting
        for Uncertainty in Income Taxes - an interpretation of FASF Statement No.
        109,* (FIN
        48), which establishes that the financial statement effects of a tax position
        taken or expected to be taken in a tax return are to be recognized in the
        financial statements when it is more likely than not, based on the technical
        merits, that the position will be sustained upon examination. FIN 48 is
        effective for fiscal years beginning after December 15, 2006. We do not believe
        that the adoption of FIN 48 will have a material impact on our results from
        operations or financial position.
 
 In
        September 2006, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards No. 157, *Fair
        Value Measurements* ("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. SFAS No. 157
        is
        effective for financial statements issued for the fiscal years beginning
        after
        November 15, 2007, and interim periods within those fiscal years. The Company
        is
        in the process of evaluating this guidance and therefore has not yet determined
        the impact, if any, that SFAS 157 will have on its consolidated financial
        statements upon adoption.
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108, *Considering
        the Effects of Prior Year Misstatements in Current Year Financial Statements,* (“SAB
        108”). SAB 108 provides interpretive guidance on how the effects of the
        carryover or reversal of prior year misstatements should be considered in
        quantifying a current year misstatement. Specifically, SAB 108 states that
        registrants should quantify errors using both a balance sheet and income
        statement approach and evaluate whether either approach results in quantifying
        a
        misstatement that, when all relevant quantitative factors are considered,
        is
        material. SAB 108 is effective for fiscal years ending after November 15,
        2006.
        The adoption of SAB 108 did not have a material impact on our results of
        operations or financial position.
 
 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. SFAS
        159
        is effective for fiscal years beginning after November 15, 2007. The Company
        is
        in the process of evaluating this guidance and therefore has not yet determined
        the impact, if any, that SFAS 159 will have on its consolidated financial
        statements upon adoption.
  F-13
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **3.**
              **Accounts
                  Receivable**
 
 Accounts
        receivable at June 30, 2007 and 2006 consist of the following:
 
 **June
                  30,****2007**
              
              **2006**Accounts
                  receivable
              
              $
              17,727
              
              $
              9,723Unbilled
                  receivables
              
              
              5,445
              
              
              2,79123,172
              
              
              12,514Allowance
                  for doubtful accounts
              
              
              (261
              )
              
              (180
              )Total
              
              $
              22,911
              
              $
              12,334
 
 Unbilled
        receivables represent the value of services rendered to customers which have
        not
        yet been billed to customers as of the balance sheet date. Unbilled receivables
        are generally billed within three months upon the completion of
        services.
 
 The
        allowance for doubtful accounts for the year ended December 31, 2004, the
        six
        months ended June 30, 2005 and the years ended June 30, 2006 and 2007 consisted
        of the following:
 **Balance
                    at**
                
                
                
                **Recoveries/**
                
                **Balance
                    at****Beginning**
                
                **Charged
                    to**
                
                **Deductions/**
                
                **End
                    of****of
                    Period**
                
                **Expense**
                
                **Write-offs**
                
                **Period**Allowance
                    for doubtful accountsYear
                    ended December 31, 2004
                
                $
                148
                
                
                46
                
                
                (88
                )
                $
                106Six
                    months ended June 30, 2005
                
                $
                106
                
                
                10
                
                
                (24
                )
                $
                92Year
                    ended June 30, 2006
                
                $
                92
                
                
                104
                
                
                (16
                )
                $
                180Year
                    ended June 30, 2007
                
                $
                180
                
                
                140
                
                
                (59
                )
                $
                261
  F-14
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **4.**
              **Property
                  and Equipment**
 
 Property
        and equipment at June 30, 2007 and 2006 consisted of the following:
  **June
                  30,****2007**
              
              **2006**Automobiles
                  and trucks
              
              $
              1,559
              
              $
              616Furniture
                  and fixtures
              
              
              427
              
              
              255Equipment
              
              
              2,622
              
              
              1,844Computer
                  equipment and software
              
              
              143
              
              
              93Buildings
              
              
              313
              
              
              -Leasehold
                  improvements
              
              
              118
              
              
              1195,182
              
              
              2,927Less:
                  Accumulated depreciation
              
              
              (2,703
              )
              
              (2,361
              )2,479
              
              
              566Land
              
              
              90
              
              
              -Total
              
              $
              2,569
              
              $
              566
 
 Depreciation
        on property and equipment for the years ended June 30, 2007 and 2006 was
        approximately $0.4 million and $0.2 million, respectively.
 
 **5.**
              **Long-Lived
                  Assets**
 
 Long-lived
        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 the
        Digitcom and Radian acquisitions. See note 13 for a more detailed discussion
        of
        these acquisitions. Amortization expense related to amortizable intangible
        assets was $0.1 million for the year ended June 30, 2007 and $0 for earlier
        periods, since the acquisition took place during Fiscal 2007.
 
 Intangible
        assets subject to amortization are amortized based upon the assets’ estimated
        useful lives. Customer relationships and covenants not to compete have estimated
        useful lives of approximately 3.75 years.
 
 Scheduled
        amortization charges for the intangible assets, as of June 30, 2007 are as
        follows:
 
 2008
              
              $
              3132009
              
              
              2842010
              
              
              2402011
              
              
              1232012
              
              
              -Total
              
              $
              960
 
 
 **6.**
              **Equity
                  Investments**
 
 Previously,
        we had a minority equity interest in Ad Astra Holdings LP, a Texas limited
        partnership, and Paciugo Management LLC, a Texas limited liability company
        and
        the sole general partner of Ad Astra (collectively “Paciugo”). During the year
        ended June 30, 2006, we recorded income of approximately $0.1 million from
        our
        equity investment composed of $0.1 million of our share of gains and losses
        and
        a gain from the sale of our interest of $0.2 million.
  F-15
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 **7.**
              **Accrued
                  Liabilities**
 
 Accrued
        liabilities at June 30, 2007 and 2006 consisted of the following:
 
 **June
                  30,****2007**
              
              **2006**Employee
                  compensation
              
              $
              874
              
              $
              536Construction
                  costs
              
              
              5,018
              
              
              3,179Other
              
              
              696
              
              
              194$
              6,588
              
              $
              3,909
 
 Included
        in other accrued liabilities is a potential liability for state sales tax.
        In
        January of 2007, we received an informal notice of assessment in the amount
        of
        $1.8 million including unpaid taxes, penalties and interest for the years
        1998
        to 2004. We had previously recorded $0.2 million in the year ended June 30,
        2006
        related to these potential taxes. We have reviewed their findings and believe
        that certain items that they deemed subject to tax were exempt. Accordingly,
        we
        increased our estimated reserve in the quarter ended December 31, 2006 to
        $0.6
        million based on our revised best estimate of the potential liability and
        continue to maintain that level of reserve at June 30, 2007.
 
 **8.**
              **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:
 
 **Six
                  Months**
              
              **Year****Ended**
              
              **Ended****Year
                  ended June 30,**
              
              **June
                  30,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**Tax
                  expense at statutory rate of 34%
              
              $
              315
              
              $
              472
              
              $
              (407
              )
              $
              (279
              )Increase
                  (decrease) in valuation allowance against deferred tax assets
              
              
              (738
              )
              
              (506
              )
              
              429
              
              
              305State
                  income tax expense, net of federal income tax benefit
              
              
              11
              
              
              82
              
              
              (71
              )
              
              (74
              )Meals
                and Entertainment
              
              
              24
              
              
              -
              
              
              -
              
              
              -Financing
                Fees
              
              
              236
              
              
              -
              
              
              -
              
              
              -Other,
                  net
              
              
              (34
              )
              
              85
              
              
              42
              
              
              64$
              (186
              )
              $
              133
              
              $
              (7
              )
              $
              16
  The
          following summarizes the (benefit) provision for income taxes:
 **Six****Months**
                  
                  **Year****Ended****Yearended
                      June 30,**
                  
                  **Ended
                      June 30,**
                  
                  **December****31**,**2007**
                  
                  **2006**
                  
                  **2005**
                  
                  **2004**Current:Federal
                  
                  $
                  858
                  
                  $
                  133
                  
                  $
                  (7
                  )
                  $
                  16State
                  
                  
                  203
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Total
                      Current
                  
                  
                  1,061
                  
                  
                  133
                  
                  
                  (7
                  )
                  
                  16DeferredFederal
                  
                  
                  (1,124
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -State
                  
                  
                  (123
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Total
                      Deferred
                  
                  
                  (1,247
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -(Benefit)
                      provision for income taxes
                  
                  $
                  (186
                  )
                  $
                  133
                  
                  $
                  (7
                  )
                  $
                  16
 F-16
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 The
        tax
        effects of temporary differences that give rise to deferred tax assets and
        liabilities at June 30, 2007 and 2006 are as follows:
  **Balance
                    at June 30,****2007**
                
                **2006****Deferred
                    Tax Assets**
                
                **Federal**
                
                **State**
                
                **Total****Current:**Allowance
                    for doubtful accounts
                
                $
                89
                
                $
                15
                
                $
                104
                
                $
                72Allowance
                    for obsolete inventory reserve
                
                
                37
                
                
                7
                
                
                44
                
                
                26NOL
                    Carryforward
                
                
                -
                
                
                -
                
                
                -
                
                
                64Accrued
                    Bonus
                
                
                136
                
                
                24
                
                
                160
                
                
                -AMT
                    Carryforward
                
                
                28
                
                
                -
                
                
                28
                
                
                28290
                
                
                46
                
                
                336
                
                
                190**Non-Current:**Stock-based
                    compensation
                
                
                129
                
                
                23
                
                
                152
                
                
                38NOL
                    Carryforward
                
                
                391
                
                
                -
                
                
                391
                
                
                510Accrued
                       Sales Tax
                
                
                145
                
                
                25
                
                
                170
                
                
                -Accretion
                    of debt discount
                
                
                173
                
                
                30
                
                
                203
                
                
                -Customer
                    list amortization
                
                
                27
                
                
                5
                
                
                32
                
                
                -Covenant
                    amortization
                
                
                1
                
                
                1
                
                
                2
                
                
                -866
                
                
                84
                
                
                950
                
                
                548Total
                    Deferred Tax Assets
                
                
                1,156
                
                
                130
                
                
                1,286
                
                
                738**Deferred
                    Tax Liabilities**Long-TermGoodwill
                    Amortization
                
                
                15
                
                
                3
                
                
                18
                
                
                -Depreciation
                    Expense
                
                
                18
                
                
                3
                
                
                21
                
                
                -Total
                    Deferred Tax Liabilities
                
                
                33
                
                
                6
                
                
                39
                
                
                -1,123
                
                
                124
                
                
                1,247
                
                
                738Less:
                    valuation allowance
                
                
                -
                
                
                -
                
                
                -
                
                
                (738
                )Net
                    deferred tax assets
                
                $
                1,123
                
                $
                124
                
                $
                1,247
                
                $
                -
 F-17
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
 
 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.
 
 In
        prior
        years, in accordance with the provisions of Financial Accounting Standards
        Board
        Statement No. 109 “Accounting for Income Taxes” (FASB 109), the Company has
        reduced its deferred tax assets and liabilities through the use of a valuation
        allowance because, in the opinion of management, based on the information
        available to it at the time, it was more likely than not that the benefits
        to be
        derived from these assets would not be realized. This opinion was based,
        among
        other things, by the history of net losses.
 
 Based
        on
        information currently available to BCI management, it now appears more likely
        than not that these net deferred tax assets will be realized.
 
 Therefore,
        in accordance with the provisions of Financial Accounting Standards Board
        Statement No. 154 *Accounting
        Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB
        Statement No. 3* (FASB
        154), BCI management has determined that the cumulative effect of future
        tax
        benefits derived from activity in the current and prior years shall be reflected
        in the financial statements of the Company effective as of June 30, 2007.
        The
        effect of this change in accounting estimate is as follows:
 
 **For
                  the Year Ended June 30, 2007****Before**
              
              
              
              **After****Change**
              
              **Change**
              
              **Change**Income
                  from operations
              
              $
              2,767
              
              $
              -
              
              $
              2,767Net
                  income
              
              $
              374
              
              $
              738
              
              $
              1,112Net
                  income per common share:Basic
              
              $
              0.03
              
              $
              0.04
              
              $
              0.07Diluted
              
              $
              0.02
              
              $
              0.04
              
              $
              0.06
 
 We
        have
        net operating loss carryforwards for federal and state income tax purposes
        of
        approximately $1.2 million expiring in 2026, which may be applied against
        future taxable income. We can only utilize approximately $64 thousand  per
        year due to limitations as a result of the Acquisition.
  F-18
 **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
 
 **9.**
              **Revolving
                  Credit Facility**
 
 In
        September 2003, we entered into a revolving credit facility with Presidential
        Financial Corporation of Delaware Valley (“Presidential”). On April 3, 2007, we
        amended this facility to, among other things, increase the availability under
        the credit facility to $8.0 million. The credit facility is available for
        working capital, capital expenditures and general corporate purposes. The
        credit
        facility interest rate is prime plus one and one-half percent (1.5%). As
        of June
        30, 2007, the prime rate was 8.25%. In addition, we pay .25% per month on
        the
        average daily balance.
 
 The
        credit facility is secured by substantially all of BCI’s assets and a guarantee
        from Berliner. The balance outstanding at June 30, 2007 and 2006 was $5.5
        million and $1.1 million, respectively. The revolving credit facility has
        a term
        of twelve months and currently matures on April 3, 2008, and we can elect
        to
        renew on a month-to-month basis thereafter.
 
 **10.**
              **Long-Term
                  Debt**
 
 Long-term
        debt at June 30, 2007 and 2006 consisted of the following:
  **June
                  30,****2007**
              
              **2006**7%
                  Senior Subordinated Secured Convertible Notes due December 29,
                  2008in
                  the original principal amount of $6.0 million, convertible at $1.10
                  per
                  shareless
                  unamortized debt discount plus accreted interest
              $
              4,628
              
              $
              -Note
                  payable to J&J Leasing due February 2010, at Prime Rate
              
              1,604
              
              
              -Loans
                  payable to financing companies, payable in monthly installments
                  of $10
                  thousand,interest
                  ranging from 0% to 11.2% annually, due August 2008 through March
                  2011,secured
                  by automobiles
              
              330
              
              
              213Notes
                  payable to Greenhill Capital Partners LP and PWIBD Partners LP
                  issuedin
                  2003, maturing March, 2007
              
              -
              
              
              323Capital
                  leases (Note 11)
              
              251
              
              
              576,813
              
              
              593Less
                  current portion
              
              (849)
              
              
              (406)$
              5,964
              
              $
              187
  **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 $0.6 million) to Sigma Berliner, also
          on
          substantially the same terms as the Note and Warrant issued to
          Sigma.
 Pursuant
        to the Note Purchase Agreement, we agreed to register the shares of common
        stock
        issuable upon conversion of the Note and upon exercise of the Warrant and
        the
        Additional Warrants (collectively, the “Registrable Shares”) for resale under
        the Securities Act. We agreed to file with the SEC a Registration Statement
        with
        respect to the Registrable Shares, which was filed with the SEC on March
        19,
        2007, and to cause the Registration Statement to become effective on or before
        June 15, 2007.
  F-19
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 We
        are
        liable for liquidated damages under the following circumstances (each, a
        “Registration Event”):
 ·
              If
                  the Registration Statement is not declared effective by the SEC
                  on or
                  prior to June 15, 2007;
 ·
              If,
                  after the effective date of the Registration Statement, sales cannot
                  be
                  made under the Registration Statement, except in certain
                  situations;
 ·
              If,
                  after the date on which our securities are listed or included for
                  quotation on any of the Over-the Counter Bulletin Board, the American
                  Stock Exchange, NASDAQ or the New York Stock Exchange (each, a
“Trading
                  Market”), our common stock, or the Registrable Securities specifically,
                  are not listed or included for quotation on a Trading Market, or
                  the
                  trading of our common stock is suspended or halted for five or
                  more days
                  on the Trading Market on which our common stock principally trades;
                  or
 ·
              If
                  we fail, refuse or are otherwise unable to timely issue common
                  stock to
                  Sigma upon conversion of the Note or exercise of the Warrant or
                  Additional
                  Warrants, or if we fail, refuse or are otherwise unable to timely
                  transfer
                  any such shares as required under the Note Purchase Agreement or
                  any
                  related document executed
                  therewith.
 
 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 with the noteholders whereby
        the
        noteholders agreed to waive this damages provision in exchange for our agreement
        to lower the conversion price of the Notes from $1.10 to $1.00 per share.
        Pursuant to this Waiver and Amendment to Note Purchase Agreement, 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. Refer to Note
        21 -
        Subsequent Events.
 
 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.
  F-20
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share amounts)**
 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:
 
 **Loan****Face**
              
              **Warrants**
              
              **Debt****Amount**
              
              **Issued**
              
              **Discount**Sigma
                  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
 
 We
        reduced the carrying value of these notes on the books accordingly with the
        corresponding entries to paid-in capital. We will accrete these amounts over
        the
        lives of the notes, charging interest expense whereby the notes balances
        will
        equal the face amounts at December 29, 2008. If we default on a note, or
        a note
        is otherwise accelerated, we will charge the balance remaining at that time
        to
        interest expense.
 
 The
        Sigma
        note, the Pacific note, the Operis note and the Sigma Berliner note are each
        junior to our existing $8.0 million line of credit with Presidential. We
        will
        make periodic payments of interest throughout the lives of the
        notes.
 
 In
        connection with Waiver and Amendment to Note Purchase Agreements, the number
        of
        common shares issuable upon conversion changed as follows:
 
 **Number
                  of shares****Issued
                  to**
              
              **Original**
              
              **Revised**Sigma
                  Opportunity Fund, LLC
              
              
              2,727,273
              
              
              3,000,000Pacific
                  Asset Partners, LP
              
              
              909,091
              
              
              1,000,000Operis
                  Partners I, LLC
              
              
              454,545
              
              
              500,000Sigma
                  Berliner, LLC
              
              
              1,363,636
              
              
              1,500,0005,454,545
              
              
              6,000,000
 
 **11.**
              **Capitalized
                  Leases**
 
 We
        have
        entered into capital leases for certain automobiles and trucks. As of June
        30,
        2007 and 2006, the total cost of the vehicles was approximately $0.5 million
        and
        $0.4 million, respectively, and the related accumulated depreciation was
        approximately $0.2 million and $0.3 million, respectively.
 
 The
        following is a schedule of future minimum lease payments under capital leases
        as
        of June 30, 2007:
 
 2008
              
              $
              762009
              
              
              682010
              
              
              662011
              
              
              572012
              
              
              47Thereafter
              
              
              1315Amounts
                  representing interest
              
              
              (
                  64
              )Future
                  minimum lease payments
              
              $
              251
  F-21
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **12.**
              **Commitments
                  and Contingencies**
 
 **Operating
        Leases**
 
 We
        lease
        office and warehouse space under various operating leases. Rent expense for
        the
        years ended June 30, 2007 and 2006 was approximately $0.8 million and $0.6
        million, respectively.
 
 Minimum
        future amounts due under operating leases are as follows:
 
 2008
              
              $
              7692009
              
              
              2882010
              
              
              156$
              1,213
  **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.**
              **Acquisitions**
 
 **Digitcom**
 
 On
        February 28, 2007 (the “Digitcom Closing Date”), BCI entered into an Asset
        Purchase Agreement (the “Digitcom Asset Purchase Agreement”) with Digital
        Communication Services, Inc., a Texas corporation (“Digitcom”), J&J Leasing
        Partnership, a Texas general partnership (“J&J”), and the shareholders of
        Digitcom for the purchase of certain assets, excluding cash and receivables,
        of
        Digitcom and property of J&J.
 
 Pursuant
        to the Digitcom Asset Purchase Agreement, BCI acquired certain of Digitcom’s
        assets, except for cash and accounts receivable (the “Purchased Assets”). In
        exchange for the Purchased Assets, among other things:
 ·
              BCI
                  made an initial cash payment of $2.0
                  million
 ·
              BCI
                  executed a limited recourse promissory note in the aggregate principal
                  amount of $1.75 million (the “Note”) to J&J. The Note bears an annual
                  interest rate at the prime rate and is due and payable in quarterly
                  installments for a three-year period ending on the third anniversary
                  of
                  the Digitcom Closing Date. The Note is secured by land and buildings
                  purchased from J&J evidenced by a Deed of Trust made for the benefit
                  of J&J (the “Deed of Trust”);
 ·
              We
                  issued Digitcom a warrant to purchase up to 500,000 shares of our
                  common
                  stock, par value $0.00002 per share (the “Common Stock”) at a per share
                  exercise price of $0.73 (the “Digitcom Warrants”), which was valued at
                  approximately $0.2 million using the Black-Scholes option pricing
                  model
                  with the following assumptions: dividend yield of 0%; risk-free
                  interest
                  rate of 4.69%; volatility rate of 72%, and; estimated life of 5
                  years;
                  and
 ·
              Digitcom
                  and J&J granted BCI a limited, exclusive license to use the name
                  “Digitcom” for a period of one year from the Digitcom Closing Date for
                  certain business-related purposes.
 
 In
        addition to the foregoing, BCI agreed to pay the Digitcom Shareholders an
        additional $1.0 million in three annual installments of $0.3 million (each,
        a
“Contingent Purchase Price Payment”) if the following conditions are
        met:
 ·
              certain
                  performance objectives related to the combined operating results
                  of the
                  Digitcom business and our existing business in Texas (the “Texas
                  Business”); and
 ·
              the
                  Digitcom Shareholders are employed by BCI on each of March 1, 2008,
                  2009
                  and 2010, unless terminated “with cause”, as such term is defined in each
                  Digitcom Shareholder’s respective employment agreement with
                  BCI.
  F-22
 **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  For
        purposes of determining whether the Digitcom Shareholders have earned a
        Contingent Purchase Price Payment, the operating results for the Texas Business
        will be measured for the twelve month periods ending on February 29, 2008,
        2009
        and February 28, 2010, respectively (each, a “Measurement Period”). If the
        Digitcom Shareholders earn a Contingent Purchase Price Payment in any period,
        BCI is obligated to make such payment to the Digitcom Shareholders within
        thirty
        days of the end of the applicable Measurement Period.
 
 The
        transaction was recorded as a purchase of a business that included real estate,
        vehicles and equipment, and inventory. The
        allocation of the purchase price is a preliminary allocation to identifiable
        net
        assets acquired with the excess to goodwill, and was based on an outside
        appraisal. The company is considering a potential adjustment to the purchase
        price allocation based on a review of the value of the customer relationships
        and covenants not to compete acquired from Digitcom. The Company does not
        believe these amounts will be material. The
        allocation of the purchase price was as follows:
  Land
                  and building
              
              $
              402Vehicles
                  and equipment
              
              
              357Inventory
              
              
              325Customer
                  relationships
              
              
              544Covenants
                  not to compete
              
              
              523Goodwill
              
              
              1,840$
              3,991
 
 **Comtech
        Systems**
 
 On
        February 19, 2007, BCI acquired substantially all of the assets of Comtech
        Systems, Inc., a specialty communications services provider located in Dayton,
        New Jersey, for approximately $0.1 million cash plus a commitment to pay
        an
        additional $40 thousand so long as the principal of Comtech remains an employee
        of ours through August 20, 2007.
 
 **Radian
        Communication Services**
 
 On
        April
        16, 2007, BCI entered into an Asset Purchase Agreement with Radian Communication
        Services, Inc., a Delaware corporation (“Radian”) to purchase certain of the
        U.S. assets and operations of Radian and assume certain liabilities of
        Radian.
 
 The
        transaction was recorded as a purchase of a business that included accounts
        receivable, work in process, vehicles and equipment, and inventory. The purchase
        price, after post-closing adjustments, was $8.8 million, $3.9 million of
        which
        was paid in cash ($3.3 million to the seller and $0.6 million into an escrow
        account). We expect that approximately $0.2 million will be released to us
        from
        the escrow account at final settlement, pursuant to the terms of the Asset
        Purchase Agreement with Radian. An additional $2.0 million will be paid to
        the
        seller as receivables are collected. BCI also assumed, after post-closing
        adjustments, $3.2 million in accounts payable and accrued
        liabilities.
 
 The
        allocation of the purchase price was as follows:
 
 Accounts
                  receivable
              
              $
              6,504Work
                  in process
              
              
              1,076Vehicles
                  and equipment
              
              
              801Goodwill
              
              
              388Other
                  assets
              
              
              59Total
                  assets acquired
              
              
              8,828Liabilities
                  assumed
              
              
              (3,173
              )Total
                  cash paid or to be paid
              
              $
              5,655
  F-23
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
 The
        following table summarizes the unaudited pro forma financial information
        for the
        years ended June 30, 2006 and 2007 assuming the Digitcom and Radian acquisitions
        had occurred on July 1, 2005. The Digitcom fiscal year end was December 31.
        The
        unaudited pro forma financial information uses data corresponding to Berliner’s
        reporting period. This unaudited pro forma financial information does not
        represent what would have occurred if the transactions had taken place on
        July
        1, 2005 and does not reflect our future combined results of operations or
        financial position.
 
 **For
                  the Years Ended June 30,****2007**
              
              **2006****(Unaudited)**Sales
              
              $
              78,144
              
              $
              66,282Net
                  income (loss)
              
              
              (821
              )
              
              (17,261
              )Net
                  income per share:basic
                and diluted
              
              
              (0.05
              )
              
              (1.27
              )
  **14.**
              **Recapitalization**
 
 In
        connection with the Acquisition (Note 1), we entered into a voting agreement
        (the “Voting Agreement”) with Old Berliner as a holder of a majority of our
        common stock, as sole holder of our newly issued Series E Preferred Stock,
        as
        sole holder of our Series D Preferred Stock and more than two-thirds holder
        of
        our Series B Preferred Stock. The Voting Agreement provided for, among other
        things, the approval of certain amendments to our Certificate of Incorporation
        and the Certificates of Designation for the Series B Preferred Stock and
        the
        Series D Preferred Stock (the “Recapitalization”).
 
 As
        part
        of the Recapitalization, we recorded a deemed dividend of approximately $19.9
        million on the conversion of the Series B and Series D Preferred Stock due
        to
        the reduction in the conversion price that appears on the accompanying
        Consolidated Statement of Operations in computing the net loss allocable
        to
        common shareholders in the six months ended December 31, 2005. The deemed
        dividend on the Series B and D Convertible Preferred Stock was recorded as
        the
        excess of the fair value of the consideration transferred to the preferred
        shareholders as of the date of the Voting Agreement over the carrying value
        of
        the preferred stock on our balance sheet prior to the conversion. This amount
        is
        deemed to represent a return to the preferred shareholders and therefore
        is
        treated in a manner similar to dividends paid to holders of preferred stock
        in
        the calculation of earnings per share.
 
 **15.**
              **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. Both entities retain the right
        to
        provide for a discretionary matching contribution in addition to discretionary
        contributions based upon participants’ salaries. We did not make any matching or
        discretionary contributions to our plans in the year ended June 30, 2006.
        We
        accrued for voluntary matching or discretionary contributions totaling $52
        thousand for the year ended June 30, 2007.
 
 **16.**
              **Concentration
                  of Credit Risk**
 
 As
        of and
        for the year ended June 30, 2007, we derived 87% of our total revenues from
        our
        two largest customers, and those customers represented 77% of our accounts
        receivable. Of those customers, both of them individually represented greater
        than 5% of net revenues, and one of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2007, Sprint Nextel
        Corporation represented 80% and T-Mobile USA, Inc. represented 7%.
  F-24
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  As
        of and
        for the year ended June 30, 2006, we had four customers that collectively
        represented approximately 83% of our net revenues and 83% of our accounts
        receivable. Of those customers, all of them individually represented greater
        than 5% of net revenues, and three of them represented greater than 10% of
        net
        revenues for the period. During the year ended June 30, 2006, Sprint Nextel
        Corporation represented 43%, T-Mobile USA, Inc. represented 20%, General
        Dynamics Corporation represented 12% and Metro PCS Communications, Inc.
        represented 8% of net revenues.
 
 **17.**
              **Related
                  Party Transactions**
 
 We
        contract with RBI Real Estate, LLC (“RBI”) for the lease of certain vehicles
        used in our operations. This contract resulted in payments to RBI in an amount
        equal to $95 thousand and $97 thousand during the years ended June 30, 2007
        and
        2006, respectively. Our current Chief Executive Officer, a major beneficial
        owner of us, and a former senior executive officer of Old Berliner own RBI
        equally.
 
 In
        addition, pursuant to the provisions of the Note Purchase Agreement described
        in
        Note 10, 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. 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. We paid Sigma Capital Advisors a one-time fee of $0.1 million
        for
        business, finance and organizational strategy, advisory, consulting and other
        services related to our business for as long as the Note is outstanding,
        and
        issued warrants to them to purchase up to 175,000 shares of our common stock
        exercisable over a period of five years at an exercise price of $0.55 per
        share,
        which were valued at $55 thousand using the Black-Scholes option pricing
        model
        using the following assumptions:
  **Black-Scholes
                  Assumptions****Expected**
              
              **Risk-free****Warrants**
              
              
              
              
              **Expected**
              
              **Dividend**
              
              **Interest**
              
              **Expected****Issued**
              
              **Value**
              
              **Volatility**
              
              **Yield**
              
              **Rate**
              
              **Life**150,000
              
              
              42
              
              
              62%
              
              
              0%
              
              
              4.70%
              
              
              5
                  Years25,000
              
              
              13
              
              
              72%
              
              
              0%
              
              
              4.76%
              
              
              5
                  Years
 
 We
        also
        paid Sigma $0.1 million for expenses associated with the Note through June
        30,
        2007. We also paid (or accrued to) Sigma $0.1 million in interest on the
        Note.
 
 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.
 
 F-25
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **18.**
              **Stockholders’
                  Equity**
 
 ***Common
        and Preferred Stock***
 
 As
        of
        June 30, 2007, 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.
 
 ***Stock
        Options***
 
 At
        June
        30, 2007, 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
        holders of Old Berliner’s plans forfeited all of their stock options 90 days
        after the Acquisition due to all of the employees becoming employees of
        us.
 
 The
        following table represents stock options under our Plans as of June 30,
        2007:
 
 **2001
                  Plan**
              
              **1999
                  Plan**
              
              **Non-Plan****Weighted**
              
              
              
              **Weighted**
              
              
              
              **Weighted****Average**
              
              
              
              **Average**
              
              
              
              **Average****Number**
              
              **Exercise**
              
              **Number**
              
              **Exercise**
              
              **Number**
              
              **Exercise****of
                  Shares**
              
              **Price**
              
              **of
                  Shares**
              
              **Price**
              
              **of
                  Shares**
              
              **Price**Balance
                  at June 30, 2005
              
              
              17,924
              
              $
              1,387.50
              
              
              6,700
              
              $
              1,747.52
              
              
              18,704
              
              $
              6,786.00Options
                  granted at fair value
              
              
              -
              
              
              -
              
              
              530,300
              
              
              0.41
              
              
              -
              
              
              -Options
                  exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Options
                  cancelled
              
              
              (200
              )
              
              1,387.50
              
              
              (53,700
              )
              
              19.26
              
              
              -
              
              
              -Outstanding
                  at June 30, 2006
              
              
              17,724
              
              $
              1,387.50
              
              
              483,300
              
              $
              22.53
              
              
              18,704
              
              $
              6,786.00Exercisable
                  at June 30, 2006
              
              
              17,724
              
              $
              1,387.50
              
              
              212,175
              
              $
              50.80
              
              
              18,704
              
              $
              6,786.00Options
                  granted at fair value
              
              
              -
              
              
              -
              
              
              1,091,526
              
              
              0.84
              
              
              -
              
              
              -Options
                  exercised
              
              
              -
              
              
              -
              
              
              (75,500
              )
              
              0.40
              
              
              -
              
              
              -Options
                  cancelled
              
              
              (833
              )
              
              1,387.50
              
              
              (91,275
              )
              
              78.77
              
              
              -
              
              
              -Outstanding
                  at June 30, 2007
              
              
              16,891
              
              $
              1,387.50
              
              
              1,408,051
              
              $
              3.26
              
              
              18,704
              
              $
              6,786.00Exercisable
                  at June 30, 2007
              
              
              16,891
              
              $
              1,387.50
              
              
              501,426
              
              $
              7.59
              
              
              18,704
              
              $
              6,786.00
 
 The
        intrinsic value of options exercised, outstanding and exercisable as of and
        for
        the year ending June 30, 2007 were as follows:
 
 Options
                  exercised
              
              $
              30,200Options
                  outstanding
              
              $
              4,591,627Options
                  exercisable
              
              $
              3,807,875
  F-26
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  Stock-based
        compensation expense included in the consolidated statement of operations
        for
        the years ended June 30, 2007 and 2006 was approximately $0.3 million and
        $67
        thousand, respectively. As of June 30, 2007, there was approximately $0.4
        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, 2007, the range of exercise prices, weighted average exercise price and
        weighted average remaining contractual life for options outstanding were
        as
        follows:
  **Options
                    Outstanding and Exercisable****Weighted****Weighted**
                
                **Average****Average**
                
                **Remaining****Number**
                
                
                
                **Exercise**
                
                **Contractual****Option
                    Price Range**
                
                **of
                    Shares**
                
                **Exercisable**
                
                **Price**
                
                **Life**2001
                    Plan
                
                
                
                
                $
                1,387.50
                
                
                16,891
                
                
                16,891
                
                $
                1,387.50
                
                
                3.53
                    Years1999
                    Plan
                
                $
                0.30
                
                $
                0.81
                
                
                953,400
                
                
                478,775
                
                $
                0.48
                
                
                8.90
                    Years$
                1.05
                
                $
                1.46
                
                
                450,651
                
                
                18,651
                
                $
                1.46
                
                
                9.20
                    Years$
                7.05
                
                
                167
                
                
                167
                
                $
                7.05
                
                
                7.05
                    Years$
                8.01
                
                
                250
                
                
                250
                
                $
                8.01
                
                
                6.67
                    Years$
                16.50
                
                
                2,416
                
                
                2,416
                
                $
                16.50
                
                
                3.03
                    Years$
                3,000.00
                
                
                1,167
                
                
                1,167
                
                $
                3,000.00
                
                
                2.28
                    YearsNon-Plan
                
                
                
                
                $
                3,600.00
                
                
                637
                
                
                637
                
                $
                3,600.00
                
                
                2.70
                    Years$
                6,900.00
                
                
                18,067
                
                
                18,067
                
                $
                6,900.00
                
                
                2.76
                    Years
 
 During
        the year ended June 30, 2007, we issued 1,091,526 options to 36 individuals
        with
        vesting as follows:
 
 **Weighted****Number
                  of**
              
              **Average****Vesting
                  Period**
              
              **Shares**
              
              **Fair
                  Value**Immediate
              
              
              238,026
              
              $
              0.44100%
                  after 1 year
              
              
              130,000
              
              
              0.4750%
                  after 1 year, 25% per year thereafter
              
              
              35,000
              
              
              0.2425%
                  Immediate, 25% per year thereafter
              
              
              250,000
              
              
              0.3625%
                  per year after one year
              
              
              438,500
              
              
              0.841,091,526
              
              
              0.58
 
 The
        value
        of this stock based on quoted market values at the time of grant was $0.9
        million.
  F-27
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  The
        following table summarizes information about unvested stock option
        transactions:
 
 **2001
                  Plan**
              
              **1999
                  Plan**
              
              **Non-Plan****Weighted**
              
              **Weighted**
              
              
              
              **Weighted****Average**
              
              **Average**
              
              
              
              **Average****Number**
              
              **Number**
              
              **Exercise**
              
              **Fair**
              
              **Number**
              
              **Exercise****of
                  Shares**
              
              **of
                  Shares**
              
              **Price**
              
              **Value**
              
              **of
                  Shares**
              
              **Price**Balance
                  at June 30, 2005
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              -Options
                  granted at fair value
              
              
              -
              
              
              530,300
              
              $
              0.41
              
              $
              0.27
              
              
              -Options
                  vested
              
              
              -
              
              
              (205,675
              )
              
              0.40
              
              
              0.27
              
              
              -Options
                  cancelled
              
              
              -
              
              
              (53,500
              )
              
              0.40
              
              
              0.27
              
              
              -Outstanding
                  at June 30, 2006
              
              
              -
              
              
              271,125
              
              $
              0.41
              
              
              0.27
              
              
              -Options
                  granted at fair value
              
              
              -
              
              
              1,091,526
              
              
              0.84
              
              
              0.58
              
              
              -Options
                  vested
              
              
              -
              
              
              (420,401
              )
              
              0.56
              
              
              0.38
              
              
              -Options
                  cancelled
              
              
              -
              
              
              (35,625
              )
              
              0.44
              
              
              0.29
              
              
              -Outstanding
                  at June 30, 2007
              
              
              -
              
              
              906,625
              
              $
              0.86
              
              
              0.59
              
              
              -
 
 ***Stock
        Warrants***
 
 At
        June
        30, 2007, we had issued warrants to purchase up to 4,203,572 shares of our
        common stock. The following table summarizes those warrant grants:
 
 **Number
                  of**
              
              **Grant**
              
              **Strike****Issued
                  to**
              
              **Shares**
              
              **Date**
              
              **Price**
              
              **Note**Punk,
                  Ziegel & Company, L.P.
              
              
              100,000
              
              
              June
                  21, 2006
              
              $
              1.00
              
              
              APunk,
                  Ziegel & Company, L.P.
              
              
              214,286
              
              
              December
                  29, 2006
              
              
              0.70
              
              
              ASigma
                  Opportunity Fund, LLC
              
              
              1,500,000
              
              
              December
                  29, 2006
              
              
              0.01
              
              
              BSigma
                  Capital Advisors, LLC
              
              
              150,000
              
              
              December
                  29, 2006
              
              
              0.55
              
              
              BPacific
                  Asset Partners, LP
              
              
              500,000
              
              
              February
                  2, 2007
              
              
              0.01
              
              
              BOperis
                  Partners I, LLC
              
              
              250,000
              
              
              February
                  2, 2007
              
              
              0.01
              
              
              BSigma
                  Berliner, LLC
              
              
              750,000
              
              
              February
                  15, 2007
              
              
              0.01
              
              
              BSigma
                  Capital Advisors, LLC
              
              
              25,000
              
              
              February
                  15, 2007
              
              
              0.55
              
              
              APunk,
                  Ziegel & Company, L.P.
              
              
              214,286
              
              
              February
                  15, 2007
              
              
              0.70
              
              
              BDigital
                  Communication Services, Inc.
              
              
              500,000
              
              
              February
                  28, 2007
              
              
              0.73
              
              
              C4,203,572
 
 A
        - Part
        of advisory services fee. We recorded stock-based compensation expense of
        $0.2
        million related to these warrants.
 B
        -
        Warrants issued relating to the issuance of 7% Senior Subordinated Secured
        Convertible Notes. See Note 10.
 C
        -
        Warrants issued related to the acquisition of Digitcom. See Note
        13.
  F-28
  **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  **19.**
              **Unaudited
                  Quarterly Results of
                  Operations**
 
 The
        following tables present unaudited summary data relating to our results of
        operations for each quarter of the years ended June 30, 2007 and
        2006:
  **For
                  the Year Ended June 30, 2007**First
                  Quarter
              
              Second
                  Quarter
              
              Third
                  Quarter
              
              Fourth
                  Quarter
              
              Total**(Unaudited)**Revenues
              
              $
              7,805
              
              $
              13,688
              
              $
              15,394
              
              $
              18,248
              
              $
              55,135Gross
                  margin
              
              
              2,088
              
              
              5,030
              
              
              4,172
              
              
              6,570
              
              
              17,860Income
                  (loss) from operations
              
              
              (552
              )
              
              1,684
              
              
              1,134
              
              
              501
              
              
              2,767Net
                  Income (loss)
              
              
              (562
              )
              
              1,153
              
              
              361
              
              
              160
              
              
              1,112Net
                  income (loss) per common share:Basic
              
              $
              (0.03
              )
              $
              0.07
              
              $
              0.02
              
              $
              0.01
              
              $
              0.07Diluted
              
              $
              (0.03
              )
              $
              0.06
              
              $
              0.02
              
              $
              0.01
              
              $
              0.06
 
 
 **For
                  the Year Ended June 30, 2006**First
                  Quarter
              
              Second
                  Quarter
              
              Third
                  Quarter
              
              Fourth
                  Quarter
              
              Total**(Unaudited)**Revenues
              
              $
              8,657
              
              $
              11,107
              
              $
              8,547
              
              $
              11,014
              
              $
              39,325Gross
                  margin
              
              
              2,440
              
              
              2,519
              
              
              2,064
              
              
              4,100
              
              
              11,123Income
                  (loss) from operations
              
              
              335
              
              
              215
              
              
              (356
              )
              
              1,241
              
              
              1,435Net
                  Income (loss)
              
              
              262
              
              
              448
              
              
              (365
              )
              
              910
              
              
              1,255Net
                  Income (loss) allocable to common shareholders
              
              
              (19,674
              )
              
              448
              
              
              (365
              )
              
              910
              
              
              (18,681
              )Net
                  income (loss) per common share:Basic
                  and diluted
              
              $
              (5.90
              )
              $
              0.04
              
              $
              (0.40
              )
              $
              0.05
              
              $
              (1.38
              )
  The
        Company’s quarterly revenue is subject to seasonal
        fluctuations, since most of the services we perform are performed out of
        doors.
        The quarterly period ended March 30, 2007 was impacted by the additional
        $0.4
        million sales tax accrual discussed in Note 7 and by interest charges incurred
        relating to the issuance of the 7% Senior Subordinated Secured Convertible
        Notes
        (the “Notes”) discussed in Note 10. The quarterly period ended June 30, 2007 was
        also impacted by interest charges incurred relating to the Notes, the finance
        fee recognized in regard to the change in the conversion rate on the
        abovementioned Notes and the reversal of the valuation allowance against
        our net
        deferred tax assets which is discussed in Note 8.
  **20.**
              **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 (Infrastructure)s:* 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.
 
 *Real
        estate site acquisition and zoning (Site)* :
        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.
  F-29
 **BERLINER
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED JUNE 30, 2007**
 **($
          amounts in thousands except share and per share
          amounts)**
  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.
  **Years
                  Ended June 30,****2007**
              
              **2006****Infrastructure**
              
              **Site**
              
              **Total**
              
              **Infrastructure**
              
              **Site**
              
              **Total**Revenues
              
              $
              43,501
              
              $
              11,634
              
              $
              55,135
              
              $
              35,506
              
              $
              3,819
              
              $
              39,325Cost
                  of revenues
              
              
              29,674
              
              
              7,601
              
              
              37,275
              
              
              25,538
              
              
              2,664
              
              
              28,202Gross
                  profit
              
              
              13,827
              
              
              4,033
              
              
              17,860
              
              
              9,968
              
              
              1,155
              
              
              11,123Selling,
                  general and administrative expenses
              
              
              11,964
              
              
              2,650
              
              
              14,614
              
              
              8,315
              
              
              1,133
              
              
              9,448Depreciation
                  and amortization
              
              
              382
              
              
              102
              
              
              484
              
              
              223
              
              
              24
              
              
              247Loss
                  on sale of fixed assets
              
              
              (4
              )
              
              (1
              )
              
              (5
              )
              
              (6
              )
              
              (1
              )
              
              (7
              )Operating
                  income (loss)
              
              $
              1,
                  485
              
              $
              1,282
              
              $
              2,767
              
              $
              1,436
              
              $
              (1
              )
              $
              1,435
 
 **21.**
              **Subsequent
                  Events**
 
 On
        September 27, 2007, we signed a Waiver and Amendment to Note Purchase Agreement
        with the Sigma Opportunity Fund, LLC, Pacific Asset Partners, LP, Operis
        Partners I, LLC and Sigma Berliner, LLC, (collectively the "Noteholders")
         whereby the Noteholders agreed to waive the liquidated damages
        clause in their respective Note Purchase Agreements (collectively the "Notes")
         in exchange for our agreement to lower the conversion price of the Notes
        from $1.10 to $1.00 per share. Pursuant to this Waiver and Amendment to Note
        Purchase Agreement, 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.
 This
          resulted in our recognizing a financing fee of $0.7 million as a non-cash
          charge
          to other expense in our statement of operations. This amount is based on
          the
          estimated value of the reduction of the conversion price from $1.10 to
          $1.00 per
          share, which we estimated to be equal to the amount of the maximum exposure
          of
          our liquidated damages.
 
 F-30