##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 FOR THE FISCAL YEAR ENDED JUNE 30, 2006
 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.
  DELAWARE
    
    75-2233445(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 20 BUSHES LANE
ELMWOOD PARK, NEW JERSEY 07407
 201.791.3200
 Securities Registered Pursuant to Section 12(b) of the Act:
    
    Name of Each Exchange on Which Registered:NONE
    
    NONE
 COMMON STOCK, PAR VALUE $0.00002 PER SHARE
 o þ
 o o
 þ o
 o
  o o þ
 o þ
    PART III 
    
    Incorporated by reference to the registrants proxy statement to be mailed or sent to
securities holders on or about October 27, 2006.




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##### 



PAGEPART IITEM 1.
    
    Business
    
    3ITEM 1A.
    
    Risk Factors
    
    6ITEM 2.
    
    Properties
    
    11ITEM 3.
    
    Legal Proceedings
    
    11ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    11PART IIITEM 5.
    
    Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    12ITEM 6.
    
    Selected Financial Data
    
    14ITEM 7.
    
    Managements
Discussion and Analysis of Financial Condition and Results of Operations
    
    15ITEM 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    24ITEM 8.
    
    Financial Statements and Supplementary Data
    
    24ITEM 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    24ITEM 9A.
    
    Controls and Procedures
    
    24PART IIIITEM 10.
    
    Directors and Executive Officers of the Registrant
    
    25ITEM 11.
    
    Executive Compensation
    
    25ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    25ITEM 13.
    
    Certain Relationships and Related Transactions
    
    25ITEM 14.
    
    Principal Accountant Fees and Services
    
    25PART IVITEM 15.
    
    Exhibits and Financial Statement Schedules
    
    25SIGNATURES
    
    
    
    28EXHIBIT INDEX
    
    
    
    A-1Demand Secured Promissory NoteAmendment to Demand Secured Promissory Note and Loan Modification AgreementSubsidiariesConsent of BDO Seidman, LLPConsent of Grant Thornton LLPCertification of the Principal Executive Officer Pursuant to Section 302Certification of the Principal Financial Officer Pursuant to Section 302Certification of the Principal Accounting Officer Pursuant to Section 302Certification Pursuant to Section 906
  2




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Cautionary Statement for the Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
  General
   §
    
    147,676,299 shares of newly issued, non-assessable shares of Novo Common Stock, par
value $0.00002 per share; and§
    
    3,913,669 shares of newly issued, non-assessable shares of Novo Series E Convertible
Preferred Stock (Series E Preferred Stock), par value $0.00002 per share.
  §
    
    To increase the aggregate number of shares that we will have the authority to
issue from 225,000,000 to 6,600,000,000 shares, of which 6,000,000,000 shares will
be shares of Common Stock, and 600,000,000 shares will be shares of Preferred Stock;§
    
    To change our name from Novo Networks, Inc. to Berliner Communications, Inc.;§
    
    To amend the Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock to reduce the conversion price of the Series B
Convertible Preferred Stock to $0.014018, and thereby increase the number of shares
of Common Stock issuable upon conversion of such shares of the Series B Convertible
Preferred Stock to 321,015,546 (in the quarter ended September 30, 2005, we recorded
a deemed dividend of approximately $6.4 million 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);§
    
    To amend the Certificate of Designation, Preferences and Rights of Series D
Convertible Preferred Stock to reduce the conversion price of the Series D
Convertible Preferred Stock to $0.014018, and thereby increase the number of shares
of Common Stock issuable upon conversion of such shares of the Series D
 3




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##### Table of Contents



Convertible Preferred Stock to 675,773,394 (in the quarter ended September 30, 2005,
we recorded a deemed dividend of approximately $13.5 million 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);
 §
    
    To provide that, upon the filing of the Certificate of Amendment, all shares of
the Series B Convertible Preferred Stock, Series D Convertible Preferred Stock, and
Series E Convertible Preferred Stock will be automatically converted into Common
Stock;§
    
    To effect a 1:300 reverse stock split, such that the outstanding shares of Common
Stock and Convertible Preferred Stock will be reclassified and one new share of
Common Stock will be issued for every 300 shares of existing Common Stock (which has
been retroactively reflected in the accompanying Balance Sheet); and§
    
    To amend the Certificate of Incorporation, such that, after giving effect to the
reverse stock split, the aggregate number of shares that we will have the authority
to issue is 22,000,000 shares, of which 20,000,000 shares will be shares of Common
Stock, and 2,000,000 shares will be shares of Preferred Stock.
  Business
  Real Estate Site Acquisition and Zoning.
 Infrastructure Equipment Construction and Installation.
 4




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##### Table of Contents



Radio Frequency and Network Design and Engineering.
 Radio Transmission Base Station Modification.
 In-Building Network Design, Engineering and Construction.
 Project Management.
 Specialty Communication Services.
 Competition
  Government Regulation
  Major Suppliers and Vendors
  5




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##### Table of Contents



Major Customers
   Seasonality
  Backlog
  Employees
  
  We may need additional working capital, the lack of which would likely have a
significant negative impact on our ability to grow our business.
  6




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Old Berliner has had a history of losses and may never achieve sustained profitability.
  If the percentage of our revenues derived from construction-related activities increases, our gross
margins may suffer.
  We generate a substantial portion of our revenues from a limited number of customers, and if our
relationships with such customers were harmed, our business would 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 revenues, which would negatively impact our ability to generate income as well as
result in lower profitability.
  7




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If we experience delays and or defaults in customer payments, we could be unable to cover all
expenditures.
  Many of our customers face difficulties in obtaining financing to fund the expansion of their
wireless networks, including deployments and upgrades, which may reduce demand for our services.
  Our business is dependent upon our ability to keep pace with the latest technological changes.
  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.
   Further delays in the adoption and deployment of next generation wireless networks could negatively
affect the demand for our services and its ability to grow our revenues.
  8




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We bear the risk of cost overruns in some of our contracts.
  Our dependence on subcontractors and equipment manufacturers could adversely affect us.
  If we guarantee the timely completion or performance standard of a project, we could incur
significant, additional costs.
  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 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.
  9




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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.
  Intense competition in the engineering and construction industry could reduce our market share.
  We are vulnerable to the cyclical nature of the market we serve.
  We may experience significant fluctuations in our quarterly results as a result of uncertainties
relating to our ability to generate additional revenues, manage expenditures and other factors,
certain of which are outside of our control.
  §
    
    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 a 3G 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 generally.
  Because Old Berliner experienced, and we 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.
  10




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If we are unable to identify and complete future acquisitions, we may be unable to continue our
growth.
  
   Size in
    
    
    
    Monthly
    
    End ofLocation
    
    Square Feet
    
    Description
    
    Cost
    
    Lease Term20 Bushes Lane 
Elmwood Park, NJ
    
    
    15,800
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    8,637
    
    
    December of
200897 Linden Avenue*
Elmwood Park, NJ
    
    
    13,000
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    19,023
    
    
    June of
2008263 Molnar 
Elmwood Park, NJ
    
    
    1,800
    
    
    Single-story brick building
(parking and warehouse space)
    
    $
    3,200
    
    
    October of
20071100 Taylors Land 
Cinnaminson, NJ
    
    
    10,209
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    5,496
    
    
    November of
20067402 Virginia Manor
Road 
Beltsville, MD
    
    
    9,580
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    10,790
    
    
    June of
200811861 North Profit Road 
Forney, TX
    
    
    6,000
    
    
    Single-story metal building
(office and warehouse space)
    
    $
    1,675
    
    
    Month to
Month215 Pineda 
Longwood, FL
    
    
    4,500
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    2,107
    
    
    September of
20071460 S.W. Third Street 
Pompano, FL
    
    
    2,600
    
    
    Single-story brick building
(office and warehouse space)
    
    $
    2,227
    
    
    May of
20082591 Dallas Parkway 
Frisco, TX
    
    
    135
    
    
    Six-story brick building
(office space)
    
    $
    1,122
    
    
    April of
2007
 
 *
    
    We sublease one-half of this space 
   
   11




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ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  From
    
    To
    
    Ticker
    
    MarketSeptember 17, 2006
    
    Present
    
    BERL
    
    OTCBBJanuary 1, 2002
    
    September 16, 2006
    
    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.  Quarter Ending
    
    Low
    
    HighJune 30, 2006
    
    $
    0.55
    
    
    $
    2.25March 31, 2006
    
    
    0.30
    
    
    
    2.00December 31, 2005
    
    
    0.25
    
    
    
    1.01September 30, 2005
    
    
    0.0091
    
    
    
    0.25June 30, 2005
    
    
    2.40
    
    
    
    7.50March 31, 2005
    
    
    2.40
    
    
    
    8.40December 31, 2004
    
    
    1.50
    
    
    
    8.40September 30, 2004
    
    
    6.60
    
    
    
    10.20June 30, 2004
    
    
    6.30
    
    
    
    9.00March 31, 2004
    
    
    6.00
    
    
    
    9.60December 31, 2003
    
    
    6.00
    
    
    
    12.00September 30, 2003
    
    
    5.10
    
    
    
    15.00June 30, 2003
    
    
    9.00
    
    
    
    21.00March 31, 2003
    
    
    12.00
    
    
    
    24.00
   Recent Sales of Unregistered Securities
  12




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Securities Authorized for Issuance under Equity Compensation Plans
  (A)
    
    (B)
    
    (C)Number of securitiesremaining available forNumber of Securities to
    
    Weighted average
    
    future issuance underbe issued upon exercise
    
    exercise price of
    
    equity compensation plansof outstanding options,
    
    of outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column (A)Equity Compensation
on Plans Approved by
Security Holders
    
    
    501,024
    (a)
    
    
    $      70.82
    
    
    
    2,094,205Equity Compensation
on Plans Not Approved by
Security Holders
    
    
    18,704
    (b)
    
    
    $ 6,787.76
    
    
    None519,728
    
    
    
    $      12.63
    
    
    
    2,094,205
 
 (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
  13




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Six months ended
    
    
    Year endedYear ended
    
    
    June 30,
    
    
    December 31,June 30, 2006
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2003(Unaudited)Statement of Operations data:Revenues
    
    $
    39,325,312
    
    
    $
    10,196,270
    
    
    $
    7,421,961
    
    
    $
    15,285,904
    
    
    $
    17,955,834Costs of revenues
    
    
    28,202,105
    
    
    
    7,339,171
    
    
    
    4,926,639
    
    
    
    9,604,839
    
    
    
    13,098,669Gross margin
    
    
    11,123,207
    
    
    
    2,857,099
    
    
    
    2,495,322
    
    
    
    5,681,065
    
    
    
    4,857,165Selling, general and administrative expenses
    
    
    9,447,967
    
    
    
    3,830,947
    
    
    
    2,939,614
    
    
    
    6,123,328
    
    
    
    5,898,143Depreciation
    
    
    246,503
    
    
    
    139,220
    
    
    
    180,832
    
    
    
    342,934
    
    
    
    580,207(Gain) loss on sale of fixed assets
    
    
    (6,627
    )
    
    
    (22,785
    )
    
    
    (13,972
    )
    
    
    (9,699
    )
    
    
    45,445Income (loss) from operations
    
    
    1,435,364
    
    
    
    (1,090,283
    )
    
    
    (611,152
    )
    
    
    (775,498
    )
    
    
    (1,666,630
    )Other (income) expenseInterest expense
    
    
    73,626
    
    
    
    22,282
    
    
    
    19,114
    
    
    
    46,813
    
    
    
    34,112Interest income
    
    
    (14,046
    )
    
    
    (5,487
    )
    
    
    (550
    )
    
    
    (1,639
    )
    
    
    (12,763
    )(Income) loss in equity of investments
    
    
    (97,995
    )
    
    
    93,982
    
    
    
    
    
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,171,119
    )Other
    
    
    85,201
    
    
    
    (3,895
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    1,388,578
    
    
    
    (1,197,165
    )
    
    
    (629,716
    )
    
    
    (820,672
    )
    
    
    5,483,140Income tax expense (recovery)
    
    
    133,427
    
    
    
    (6,581
    )
    
    
    (1,840
    )
    
    
    16,160
    
    
    
    44,250Net income (loss)
    
    
    1,255,151
    
    
    
    (1,190,584
    )
    
    
    (627,876
    )
    
    
    (836,832
    )
    
    
    5,438,890Deemed Series B and D preferred dividends
    
    
    19,935,779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378,355Net loss allocable to common shareholders
    
    $
    (18,680,628
    )
    
    $
    (1,190,584
    )
    
    $
    (627,876
    )
    
    $
    (836,832
    )
    
    $
    5,060,535Net loss per common share  basic and diluted
    
    $
    (1.38
    )
    
    $
    (2.36
    )
    
    $
    (9.31
    )
    
    $
    (12.41
    )
    
    $
    91.27Weighted average number of common shares
outstanding  basic and diluted
    
    
    13,581,842
    
    
    
    504,438
    
    
    
    67,414
    
    
    
    67,414
    
    
    
    55,446Balance Sheet data:Cash and cash equivalents
    
    $
    534,350
    
    
    $
    402,432
    
    
    $
    211,162
    
    
    $
    453,818
    
    
    $
    137,870Working capital
    
    $
    2,611,496
    
    
    $
    1,232,152
    
    
    $
    1,100,183
    
    
    $
    679,889
    
    
    $
    1,554,608Total assets
    
    $
    14,255,619
    
    
    $
    7,516,194
    
    
    $
    5,035,792
    
    
    $
    5,192,579
    
    
    $
    7,244,206Long term liabilities
    
    $
    186,850
    
    
    $
    254,010
    
    
    $
    719,594
    
    
    $
    431,461
    
    
    $
    683,333Total liabilities
    
    $
    11,097,171
    
    
    $
    5,709,058
    
    
    $
    3,953,061
    
    
    $
    4,318,802
    
    
    $
    5,533,597Stockholders equity
    
    $
    3,158,448
    
    
    $
    1,807,136
    
    
    $
    1,082,732
    
    
    $
    873,777
    
    
    $
    1,710,609
 14




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Basis of Presentation
    Industry Background
 Wireless Telecommunications Networks
     15




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Growth and Evolution of the Wireless Telecommunications Industry
   Industry Challenges
  Position in Industry
    Key Drivers of Change in Our Business
  16




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##### Table of Contents



§
    
    The issuance of new or additional licenses to wireless service providers. 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.§
    
    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, and as a result, outsourcing an increasing portion of their network services.
In addition, the Federal Communications Commission (the FCC), in November of 2003, began
requiring wireless service providers to provide local number portability (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.§
    
    The increases in the number of wireless subscribers served by wireless providers. The
increases 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 2.5G, 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.§
    
    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.
 Plan of Operation
  Increase Staffing
 
 17




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##### Table of Contents



Increase Subcontractor Base
  Increase Marketing Activities
  Increase Business Development Activities
  Seek Strategic Acquisitions
  Major Customers
   Revenues.
 Cost of Revenues.
 18




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##### Table of Contents



Gross Margin.
 Selling, General and Administrative Expenses.
  Depreciation.
 Loss in Equity Investments
 Other (Income) Expense.
 Deemed preferred dividends.
  Revenues.
 Cost of Revenues.
 19




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##### Table of Contents



Gross Margin.
 Selling, General and Administrative Expenses.
  Depreciation.
 Loss in Equity Investments
  Revenues.
 Cost of Revenues.
 Gross Margin.
 Selling, General and Administrative Expenses.
 20




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Depreciation.
 Gain on Extinguishment of Debt.
        21




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Payments due in fiscal year ended June 30,Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011Long-term debt obligations
    
    $
    536,625
    
    
    $
    373,855
    
    
    $
    57,210
    
    
    $
    48,607
    
    
    $
    43,873
    
    
    $
    13,080Capital lease obligations
    
    
    57,186
    
    
    
    33,095
    
    
    
    15,512
    
    
    
    3,765
    
    
    
    4,094
    
    
    
    720Operating lease obligations
    
    
    1,167,448
    
    
    
    610,608
    
    
    
    505,018
    
    
    
    51,822
    
    
    
    
    
    
    
    $
    1,761,259
    
    
    $
    1,017,558
    
    
    $
    577,740
    
    
    $
    104,194
    
    
    $
    47,967
    
    
    $
    13,800
 Forward-Looking Statements
    §
    
    our financial condition and strategic direction;§
    
    our ability to continue as a going concern;§
    
    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 BCI from new and emerging wireless technologies;§
    
    our ability to obtain additional financing;
 22




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##### Table of Contents



§
    
    our growth strategy for BCI;§
    
    trends in the wireless telecommunications industry;§
    
    key drivers of change in BCIs business;§
    
    our position in the wireless telecommunications industry;§
    
    our competitive position; and§
    
    other statements that contain words like believe, anticipate, expect and similar
expressions are also used to identify forward-looking statements.
  §
    
    risks inherent in our ability to continue as a going concern;§
    
    risks associated with competition in the wireless telecommunications sector we entered
with the acquisition of the Berliner Assets;§
    
    risks that we will not be able to generate positive cash flow with the acquisition of the Berliner Assets;§
    
    BCIs function as an early stage company;§
    
    risk that we may not be able to obtain additional financing;§
    
    risks associated with Old Berliners history of losses;§
    
    risks related to a concentration in revenues from a small number of customers;§
    
    risks that BCI will not be able to take advantage of new and emerging wireless technologies; and§
    
    risks that BCI will be unable to adequately staff its service offerings.
    Revenue Recognition
  Risks and Uncertainties.
  23




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##### Table of Contents



24




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##### Table of Contents



1.
    
    Financial Statements:Our Consolidated Financial Statements of as of June 30, 2006, 2005, six months ended June
30, 2004 (unaudited) and as of December 31, 2004, and 2003
 25




---



##### Table of Contents



EXHIBIT
    
    
    
    INCORPORATED BY REFERENCE
    
    FILEDNUMBER
    
    DESCRIPTION
    
    FORM
    
    DATE
    
    NUMBER
    
    HEREWITH3.1
    
    Amended and Restated Certificate
of Incorporation of eVentures
Group, Inc.
    
    X
    
    9/27/2005
    
    
    3.13.2
    
    Amendment to Amended and Restated
Certificate of Incorporation,
filed with the Secretary of State
of the State of Delaware on
November 13, 2000.
    
    X
    
    9/27/2005
    
    
    3.23.3
    
    Amendment to Amended and Restated
Certificate of Incorporation,
filed with the Secretary of State
of the State of Delaware on
December 11, 2000.
    
    X
    
    9/27/2005
    
    
    3.33.4
    
    Certificate of Amendment, dated
September 16, 2005, to the
Restated Certificate of
Incorporation
    
    X
    
    9/27/2005
    
    
    3.43.5
    
    Certificate of Amendment, dated
September 16, 2005, to the
Restated Certificate of
Incorporation
    
    X
    
    9/27/2005
    
    
    3.53.6
    
    Amended and Restated By-Laws of
eVentures Group, Inc.
    
    X
    
    9/27/2005
    
    
    3.610.01
    
    Stock Option Agreement, dated as
of April 4, 2000 between eVentures
Group, Inc. and Daniel J. Wilson.
(compensatory agreement)
    
    10-Q
    
    5/15/2000
    
    
    10.610.02
    
    Stock Option Agreement, dated as
of April 4, 2000 between eVentures
Group, Inc. and Chad E. Coben.
(compensatory agreement).
    
    10-Q
    
    5/15/2000
    
    
    10.810.03
    
    Stock Option Agreement, dated as
of April 4, 2000 between eVentures
Group, Inc. and Barrett N.
Wissman. (compensatory agreement).
    
    10-Q
    
    5/15/2000
    
    
    10.1010.09
    
    2001 Equity Incentive Plan
    
    10-Q
    
    5/15/2000
    
    
    10.110.10
    
    Employment Agreement, dated as of
January 1, 2006, between Berliner
Communications, Inc. and Richard
B. Berliner. (compensatory
agreement)
    
    10-Q
    
    2/17/2006
    
    
    10.1610.11
    
    Employment Agreement, dated as of
January 1, 2006, between Berliner
Communications, Inc. and Patrick
G. Mackey. (compensatory
agreement)
    
    10-Q
    
    2/17/2006
    
    
    10.1710.12
    
    Nonqualified Stock Option
Agreement between the Registrant
and Barrett N. Wissman
    
    10-Q
    
    5/15/03
    
    
    10.110.13
    
    Nonqualified Stock Option
Agreement between the Registrant
and Steven W. Caple
    
    10-Q
    
    5/15/03
    
    
    10.210.14
    
    Nonqualified Stock Option
Agreement between the Registrant
and Jan Robert Horsfall
    
    10-Q
    
    5/15/03
    
    
    10.3
 26




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##### Table of Contents



EXHIBIT
    
    
    
    INCORPORATED BY REFERENCE
    
    FILEDNUMBER
    
    DESCRIPTION
    
    FORM
    
    DATE
    
    NUMBER
    
    HEREWITH10.15
    
    Nonqualified Stock Option
Agreement between the Registrant
and John Stevens Robling
    
    10-Q
    
    5/15/03
    
    
    10.410.16
    
    Nonqualified Stock Option
Agreement between the Registrant
and Russell W. Beiersdorf
    
    10-Q
    
    5/15/03
    
    
    10.510.17
    
    Nonqualified Stock Option
Agreement between the Registrant
and Patrick Mackey
    
    10-Q
    
    5/15/03
    
    
    10.610.18
    
    Nonqualified Stock Option
Agreement between the Registrant
and Susie C. Holliday
    
    10-Q
    
    5/15/03
    
    
    10.710.19
    
    Non-Qualified Stock Option
Agreement dated as of February 27,
2004 between Novo Networks, Inc.
and Barrett N. Wissman
    
    10-Q
    
    5/17/07
    
    
    10.110.20
    
    Non-Qualified Stock Option
Agreement dated as of February 27,
2004 between Novo Networks, Inc.
and John Stevens Robling, Jr.
    
    10-Q
    
    5/17/04
    
    
    10.210.21
    
    Non-Qualified Stock Option
Agreement dated February 27, 2004
between Novo Networks, Inc. and
Russell W. Beiersdorf
    
    10-Q
    
    5/17/04
    
    
    10.310.22
    
    Demand Secured Promissory Note
dated February, 22, 2005,between
BCI Communications, Inc. and
Presidential Financial Corporation
of Delaware Valley
    
    10-K
    
    9/28/2006
    
    
    
    
    
    X10.23
    
    Amendment to Demand Secured
Promissory Note and Loan
Modification Agreement dated July
6, 2006 between BCI
Communications, Inc. and
Presidential Financial Corporation
of Delaware Valley
    
    10-K
    
    9/28/2006
    
    
    
    
    
    X21.1
    
    Subsidiaries of Berliner
Communications, Inc.
    
    
    
    
    
    
    
    
    
    X23.1
    
    Consent of BDO Seidman, LLP
    
    
    
    
    
    
    
    
    
    X23.2
    
    Consent of Grant Thornton LLP
    
    
    
    
    
    
    
    
    
    X31.1
    
    Certification of the Principal
Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of the Principal
Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    
    
    
    
    
    
    
    X31.3
    
    Certification of the Principal
Accounting 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
 27




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##### Table of Contents



Berliner Communications, Inc.By:
    
    /s/ Richard B. BerlinerName: Richard B. BerlinerTitle: Chief Executive Officer
  SIGNATURE
    
    TITLE
    
    DATE/s/ Richard B. Berliner

Richard B. Berliner
    
    Chief Executive Officer
(Principal Executive Officer)
    
    September 28, 2006/s/ Albert E. Gencarella

Albert E. Gencarella
    
    Chief Financial Officer
(Principal Financial Officer)
    
    September 28, 2006/s/ Patrick G. Mackey

Patrick G. Mackey
    
    Senior Vice President
(Principal Accounting Officer)
    
    September 28, 2006/s/ Mark S. Dailey

Mark S. Dailey
    
    Director
    
    September 28, 2006/s/ Peter J. Mixter

Peter J. Mixter
    
    Director
    
    September 28, 2006/s/ Mehran Nazari.

Mehran Nazari
    
    Director
    
    September 28, 2006/s/ John Stevens Robling, Jr.

John Stevens Robling, Jr.
    
    Director
    
    September 28, 2006
 28




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Reports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Balance Sheets as of June 30, 2006, and 2005
    
    
    F-4Consolidated Statements of Operations for the year ended June 30, 2006, and the six months
ended June 30, 2005 and June 30, 2004 (unaudited), and the years ended
December 31, 2004, and 2003
    
    
    F-5Consolidated Statements of Shareholders Equity (Deficit) for the year ended June 30, 2006, the
six months ended June 30, 2005, and the years ended December 31, 2004, and 2003
    
    
    F-6Consolidated Statements of Cash Flows for the year ended June 30, 2006, and the six months
ended June 30, 2005, and June 30, 2004 (unaudited), and the years ended
December 31, 2004, and 2003
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ BDO
Seidman, LLP
 F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/
Grant Thornton, LLP
 F-3




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30,2006
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    534,350
    
    
    $
    402,432Accounts receivable, net of allowance for doubtful
accounts of $179,535 and $91,572 at June 30, 2006,
and 2005, respectively
    
    
    12,333,892
    
    
    
    5,261,311Inventories
    
    
    322,029
    
    
    
    506,615Prepaid expenses and other current assets
    
    
    331,546
    
    
    
    516,84213,521,817
    
    
    
    6,687,200LONG-TERM ASSETSProperty and equipment, net
    
    
    565,592
    
    
    
    469,855Other assets
    
    
    168,210
    
    
    
    359,139$
    14,255,619
    
    
    $
    7,516,194LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESLine of credit
    
    $
    1,110,803
    
    
    $
    493,824Current portion of long-term debt
    
    
    373,856
    
    
    
    425,964Current portion of capital lease obligations
    
    
    33,105
    
    
    
    39,596Accounts payable
    
    
    5,355,827
    
    
    
    2,209,775Accrued liabilities
    
    
    3,908,803
    
    
    
    2,285,889Accrued income taxes
    
    
    127,927
    
    
    
    10,910,321
    
    
    
    5,455,048LONG-TERM LIABILITIESLong-term debt, net of current portion
    
    
    162,769
    
    
    
    243,942Long-term capital lease obligations, net of current portion
    
    
    24,081
    
    
    
    10,068186,850
    
    
    
    254,010COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYPreferred stock
    
    
    
    
    
    
    79Common stock
    
    
    341
    
    
    
    13Additional paid-in capital
    
    
    13,018,241
    
    
    
    12,922,329Accumulated deficit
    
    
    (9,860,134
    )
    
    
    (11,115,285
    )3,158,448
    
    
    
    1,807,136$
    14,255,619
    
    
    $
    7,516,194
 The accompanying notes are an integral part of these financial statements.
 F-4




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Six months ended
    
    
    Year endedYear ended
    
    
    June 30,
    
    
    December 31,June 30, 2006
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2003(Unaudited)Revenues
    
    $
    39,325,312
    
    
    $
    10,196,270
    
    
    $
    7,421,961
    
    
    $
    15,285,904
    
    
    $
    17,955,834Costs of revenues
    
    
    28,202,105
    
    
    
    7,339,171
    
    
    
    4,926,639
    
    
    
    9,604,839
    
    
    
    13,098,669Gross margin
    
    
    11,123,207
    
    
    
    2,857,099
    
    
    
    2,495,322
    
    
    
    5,681,065
    
    
    
    4,857,165Selling, general and administrative expenses
    
    
    9,447,967
    
    
    
    3,830,947
    
    
    
    2,939,614
    
    
    
    6,123,328
    
    
    
    5,898,143Depreciation
    
    
    246,503
    
    
    
    139,220
    
    
    
    180,832
    
    
    
    342,934
    
    
    
    580,207(Gain) loss on sale of fixed assets
    
    
    (6,627
    )
    
    
    (22,785
    )
    
    
    (13,972
    )
    
    
    (9,699
    )
    
    
    45,445Income (loss) from operations
    
    
    1,435,364
    
    
    
    (1,090,283
    )
    
    
    (611,152
    )
    
    
    (775,498
    )
    
    
    (1,666,630
    )Other (income) expenseInterest expense
    
    
    73,626
    
    
    
    22,282
    
    
    
    19,114
    
    
    
    46,813
    
    
    
    34,112Interest income
    
    
    (14,046
    )
    
    
    (5,487
    )
    
    
    (550
    )
    
    
    (1,639
    )
    
    
    (12,763
    )(Income) loss in equity of investments
    
    
    (97,995
    )
    
    
    93,982
    
    
    
    
    
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,171,119
    )Other
    
    
    85,201
    
    
    
    (3,895
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    1,388,578
    
    
    
    (1,197,165
    )
    
    
    (629,716
    )
    
    
    (820,672
    )
    
    
    5,483,140Income tax expense (recovery)
    
    
    133,427
    
    
    
    (6,581
    )
    
    
    (1,840
    )
    
    
    16,160
    
    
    
    44,250Net income (loss)
    
    
    1,255,151
    
    
    
    (1,190,584
    )
    
    
    (627,876
    )
    
    
    (836,832
    )
    
    
    5,438,890Deemed Series B and D preferred dividends
    
    
    19,935,779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378,355Net loss allocable to common shareholders
    
    $
    (18,680,628
    )
    
    $
    (1,190,584
    )
    
    $
    (627,876
    )
    
    $
    (836,832
    )
    
    $
    5,060,535Net loss per common share  basic and diluted
    
    $
    (1.38
    )
    
    $
    (2.36
    )
    
    $
    (9.31
    )
    
    $
    (12.41
    )
    
    $
    91.27Weighted average number of common shares
outstanding  basic and diluted
    
    
    13,581,842
    
    
    
    504,438
    
    
    
    67,414
    
    
    
    67,414
    
    
    
    55,446
 The accompanying notes are an integral part of these financial statements.
 F-5




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Preferred Stock
    
    
    Common Stock2,000,000 shares authorized;
    
    
    20,000,000 shares authorized
    
    
    Additional
    
    
    
    
    
    Total$0.00002 par value
    
    
    $0.00002 par value
    
    
    Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    

Equity
    
    

Equity (Deficit)Balance at December 31, 2002
    
    
    
    
    
    $
    
    
    
    
    12,134,591
    
    
    $
    121,345
    
    
    $
    8,553,814
    
    
    $
    (14,083,300
    )
    
    $
    (5,408,141
    )Stock issued under standstill voting and
termination agreement
    
    
    
    
    
    
    
    
    
    
    8,089,729
    
    
    
    80,898
    
    
    
    1,977,317
    
    
    
    
    
    
    
    2,058,215Preferred dividends and accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (378,355
    )
    
    
    (378,355
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,438,890
    
    
    
    5,438,890Balance at December 31, 2003
    
    
    
    
    
    
    
    
    
    
    20,224,320
    
    
    
    202,243
    
    
    
    10,531,131
    
    
    
    (9,022,765
    )
    
    
    1,710,609Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (836,832
    )
    
    
    (836,832
    )Balance at December 31, 2004
    
    
    
    
    
    
    
    
    
    
    20,224,320
    
    
    $
    202,243
    
    
    $
    10,531,131
    
    
    $
    (9,859,597
    )
    
    $
    873,777Deemed retroactive stock split to recapitalize
Berliner Communications, Inc. with 147,676,299
common shares, $0.00002 par value
    
    
    
    
    
    
    
    
    
    
    127,451,979
    
    
    
    (199,210
    )
    
    
    199,131
    
    
    
    
    
    
    
    (79
    )Deemed retroactive stock split to recapitalize
Berliner Communications, Inc. with 3,913,669
Series E Preferred shares, $0.00002 par value;
liquidation preference of $0.26 per share
    
    
    3,913,669
    
    
    
    79
    
    
    
    
    
    
    
    (79
    )
    
    
    79
    
    
    
    
    
    
    
    79Deemed dividend of Berliner Communications, Inc.
of net assets not transferred in recapitalization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,104
    )
    
    
    (65,104
    )Novo Networks, Inc. preferred stock recapitalized
as 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 recapitalized
as of February 18, 2005, into 52,323,701 common
shares, $0.00002 par value
    
    
    
    
    
    
    
    
    
    
    52,323,701
    
    
    
    1,046
    
    
    
    2,188,001
    
    
    
    
    
    
    
    2,189,047Reverse stock split of one share for every
300 shares on September 16, 2005
    
    
    
    
    
    
    
    
    
    
    (199,333,333
    )
    
    
    (3,987
    )
    
    
    3,987
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,190,584
    )
    
    
    (1,190,584
    )Balance at June 30, 2005
    
    
    3,927,642
    
    
    $
    79
    
    
    
    666,667
    
    
    $
    13
    
    
    $
    12,922,329
    
    
    $
    (11,115,285
    )
    
    $
    1,807,136Deemed dividend in the conversion of
the Series B and Series D Convertible
Preferred Stock
    
    
    (13,973
    )
    
    
    
    
    
    
    996,788,940
    
    
    
    19,936
    
    
    
    19,915,843
    
    
    
    
    
    
    
    (19,935,779
    )Conversion of Series E Convertible
Preferred Stock
    
    
    (3,913,669
    )
    
    
    (79
    )
    
    
    3,913,668,046
    
    
    
    78,273
    
    
    
    (78,194
    )
    
    
    
    
    
    
    Reverse stock split of one share for every
300 shares on September 16, 2005
    
    
    
    
    
    
    
    
    
    
    (4,894,088,796
    )
    
    
    (97,881
    )
    
    
    97,881
    
    
    
    
    
    
    
    Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,791
    
    
    
    
    
    
    
    66,791Issuance of warrants for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,370
    
    
    
    
    
    
    
    29,370Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,255,151
    
    
    
    1,255,151Balance at June 30, 2006
    
    
    
    
    
    $
    
    
    
    
    17,034,857
    
    
    $
    341
    
    
    $
    13,018,241
    
    
    $
    (9,860,134
    )
    
    $
    3,158,448
 The accompanying notes are an integral part of these financial statements.
 F-6




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months ended
    
    
    Year endedYear ended
    
    
    June 30,
    
    
    December 31,June 30, 2006
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2003(Unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    1,255,151
    
    
    $
    (1,190,584
    )
    
    $
    (627,876
    )
    
    $
    (836,832
    )
    
    $
    5,438,890Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activitiesDepreciation
    
    
    246,503
    
    
    
    139,220
    
    
    
    180,832
    
    
    
    342,934
    
    
    
    580,207Loss in equity investments
    
    
    102,005
    
    
    
    93,982
    
    
    
    
    
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,171,119
    )Bad debt expense
    
    
    104,186
    
    
    
    10,000
    
    
    
    
    
    
    
    45,636
    
    
    
    67,000Stock based compensation
    
    
    96,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of equity investment
    
    
    (200,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Gain) loss on sale of fixed assets
    
    
    (6,627
    )
    
    
    (22,785
    )
    
    
    (13,972
    )
    
    
    (9,699
    )
    
    
    45,445Changes in operating assets and liabilitiesAccounts receivable
    
    
    (7,176,768
    )
    
    
    (1,886,407
    )
    
    
    2,060,024
    
    
    
    2,065,139
    
    
    
    (224,860
    )Inventories
    
    
    184,586
    
    
    
    8,950
    
    
    
    34,224
    
    
    
    96,409
    
    
    
    92,449Prepaid expenses and other current assets
    
    
    185,296
    
    
    
    (47,495
    )
    
    
    111,992
    
    
    
    (53,594
    )
    
    
    106,703Other assets
    
    
    88,924
    
    
    
    14,797
    
    
    
    (1,500
    )
    
    
    (8,730
    )
    
    
    4,561Accounts payable
    
    
    3,146,052
    
    
    
    505,588
    
    
    
    (288,276
    )
    
    
    (284,955
    )
    
    
    249,702Accrued liabilities
    
    
    1,622,914
    
    
    
    808,169
    
    
    
    (881,005
    )
    
    
    (712,574
    )
    
    
    (518,118
    )Accrued income taxes payable
    
    
    127,927
    
    
    
    (12,581
    )
    
    
    290
    
    
    
    (21,790
    )
    
    
    34,371Deferred revenues
    
    
    
    
    
    
    (11,435
    )
    
    
    (9,435
    )
    
    
    9,435
    
    
    
    (200,000
    )Net cash (used in) provided by operating
activities
    
    
    (223,690
    )
    
    
    (1,590,581
    )
    
    
    565,298
    
    
    
    631,379
    
    
    
    (1,494,769
    )Cash flow from investing activitiesPurchase of property and equipment
    
    
    (292,635
    )
    
    
    (89,397
    )
    
    
    (42,140
    )
    
    
    (80,358
    )
    
    
    (219,765
    )Proceeds from the sale of property and equipment
    
    
    17,750
    
    
    
    60,423
    
    
    
    10,268
    
    
    
    25,053
    
    
    
    28,849Proceeds from the sale of equity investment
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (74,885
    )
    
    
    (28,974
    )
    
    
    (31,872
    )
    
    
    (55,305
    )
    
    
    (190,916
    )Cash flows from financing activitiesPayment of preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137,500
    )Proceeds from line of credit
    
    
    4,808,753
    
    
    
    1,237,080
    
    
    
    701,146
    
    
    
    1,887,663
    
    
    
    435,995Proceeds from long-term debt
    
    
    148,514
    
    
    
    30,039
    
    
    
    
    
    
    
    101,640
    
    
    
    87,566Repayment of line of credit
    
    
    (4,191,774
    )
    
    
    (1,087,844
    )
    
    
    (1,028,263
    )
    
    
    (1,979,070
    )
    
    
    Repayment of long-term debt
    
    
    (281,795
    )
    
    
    (198,989
    )
    
    
    (89,256
    )
    
    
    (180,637
    )
    
    
    (89,288
    )Repayment of loan from shareholder
    
    
    
    
    
    
    (101,640
    )
    
    
    
    
    
    
    
    
    
    
    Repayment of capital leases
    
    
    (53,205
    )
    
    
    (33,886
    )
    
    
    (43,762
    )
    
    
    (89,722
    )
    
    
    (97,154
    )Cash paid on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (800,000
    )Net cash provided by (used) in financing activities
    
    
    430,493
    
    
    
    (155,240
    )
    
    
    (460,135
    )
    
    
    (260,126
    )
    
    
    (600,381
    )Net increase (decrease) in cash and cash equivalents
    
    
    131,918
    
    
    
    (1,774,795
    )
    
    
    73,291
    
    
    
    315,948
    
    
    
    (2,286,066
    )Cash and cash equivalents at beginning of period
    
    
    402,432
    
    
    
    453,818
    
    
    
    137,870
    
    
    
    137,870
    
    
    
    2,423,936Cash and cash equivalents, acquired
    
    
    
    
    
    
    1,723,409
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    534,350
    
    
    $
    402,432
    
    
    $
    211,161
    
    
    $
    453,818
    
    
    $
    137,870Supplemental disclosure of cash flow informationInterest paid
    
    $
    73,626
    
    
    $
    21,113
    
    
    $
    19,114
    
    
    $
    46,813
    
    
    $
    35,776Income taxes paid
    
    $
    5,500
    
    
    $
    13,087
    
    
    $
    5,144
    
    
    $
    9,789
    
    
    $
    Non-cash investing and financing activitiesPreferred stock accretion
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    240,855Assets purchased under capital leases
    
    $
    60,727
    
    
    $
    
    
    
    $
    
    
    
    $
    55,215
    
    
    $
    19,415Net assets acquired
    
    $
    
    
    
    $
    392,123
    
    
    $
    
    
    
    $
    
    
    
    $
    
 The accompanying notes are an integral part of these financial statements.
 F-7




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##### Table of Contents



BERLINER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts shown for the six months ended June 30, 2004, are unaudited)
 1. Business
      2. Summary of Significant Accounting Policies
 Basis of Presentation
   Principals of Consolidation
  F-8




---



##### Table of Contents



Cash and Cash Equivalents
  Risks and Uncertainties
  Inventories
  Prepaid Expenses and Other Assets
  Property and Equipment
  Long-lived Assets
  Equity Investments
  F-9




---



##### Table of Contents



Revenue Recognition
   Income Taxes
  Stock Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
   F-10




---



##### Table of Contents



Six MonthsEnded
    
    
    Fiscal Year Ended December 31,June 30, 2005
    
    
    June 30, 2004
    
    
    2004
    
    
    2003Pro forma net income (loss)
    
    
    
    
    
    (unaudited)Net income (loss) allocable to common shareholders,
as reported
    
    $
    (1,190,584
    )
    
    $
    (627,876
    )
    
    $
    (836,832
    )
    
    $
    5,060,535Less  Stock-based compensation determined under
fair value based method
    
    
    (12,500
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) allocable to common
shareholders, proforma
    
    $
    (1,203,084
    )
    
    $
    (627,876
    )
    
    $
    (836,832
    )
    
    $
    5,060,535Net income (loss) per share, pro
forma
    
    $
    (2.38
    )
    
    $
    (9.31
    )
    
    $
    (12.41
    )
    
    $
    91.27Net income (loss) per share, as
reported
    
    $
    (2.36
    )
    
    $
    (9.31
    )
    
    $
    (12.41
    )
    
    $
    91.27
 Share-Based Payment,
     F-11




---



##### Table of Contents



3. Accounts Receivable
  June 30,
    
    
    June 30,2006
    
    
    2005Accounts receivable
    
    $
    9,723,178
    
    
    $
    4,209,743Unbilled receivables
    
    
    2,790,249
    
    
    
    1,143,14012,513,427
    
    
    
    5,352,883Allowance for doubtful accounts
    
    
    (179,535
    )
    
    
    (91,572
    )Total
    
    $
    12,333,892
    
    
    $
    5,261,311
   Balance
    
    Charged
    
    
    
    
    
    Balanceat
    
    to Costs
    
    Recoveries/
    
    atBeginning of
    
    and
    
    Deductions/
    
    End ofPeriod
    
    Expenses
    
    Write-offs
    
    PeriodAllowance for doubtful accounts:Year ended December 31, 2003
    
    $
    171,169
    
    
    
    67,000
    
    
    
    (90,445
    )
    
    $
    147,724Year ended December 31, 2004
    
    $
    147,724
    
    
    
    45,636
    
    
    
    (87,299
    )
    
    $
    106,061Six months ended June 30, 2005
    
    $
    106,061
    
    
    
    10,000
    
    
    
    (24,489
    )
    
    $
    91,572Year ended June 30, 2006
    
    $
    91,572
    
    
    
    104,186
    
    
    
    (16,223
    )
    
    $
    179,535
 F-12




---



##### Table of Contents



4. Property and Equipment
  June 30,
    
    
    June 30,2006
    
    
    2005Automobiles and trucks
    
    $
    616,040
    
    
    $
    392,143Furniture and fixtures
    
    
    254,686
    
    
    
    252,361Equipment
    
    
    1,843,933
    
    
    
    1,800,477Computer equipment and software
    
    
    92,690
    
    
    
    81,490Leasehold improvements
    
    
    118,791
    
    
    
    118,4442,926,140
    
    
    
    2,644,915Less accumulated depreciation
    
    
    (2,360,548
    )
    
    
    (2,175,060
    )Total
    
    $
    565,592
    
    
    $
    469,855
  5. Equity Investments
  6. Accrued Liabilities
  June 30,
    
    
    June 30,2006
    
    
    2005Employee compensation
    
    $
    536,015
    
    
    $
    192,702Construction costs
    
    
    3,179,061
    
    
    
    1,937,786Other
    
    
    193,727
    
    
    
    155,401$
    3,908,803
    
    
    $
    2,285,889
 F-13




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##### Table of Contents



7. Income Taxes
  Six MonthsYear ended
    
    
    Ended
    
    
    Year endedJune 30,
    
    
    June 30,
    
    
    December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003Tax expense (recovery) of statutory rate of 34%
    
    $
    472,116
    
    
    $
    (407,036
    )
    
    $
    (279,028
    )
    
    $
    1,864,268Increase (decrease) in valuation allowance against deferred tax assets
    
    
    (505,681
    )
    
    
    429,080
    
    
    
    305,009
    
    
    
    899,512State income tax expense (recovery), net of federal income tax benefit
    
    
    82,482
    
    
    
    (71,112
    )
    
    
    (73,860
    )
    
    
    (159,333
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,438,180
    )Other, net
    
    
    84,510
    
    
    
    42,487
    
    
    
    64,039
    
    
    
    (122,017
    )Income tax expense (recovery)
    
    $
    133,427
    
    
    $
    (6,581
    )
    
    $
    16,160
    
    
    $
    44,250
  Six MonthsYear ended
    
    
    Ended
    
    
    Year endedJune 30,
    
    
    June 30,
    
    
    December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003Deferred tax assetsAllowance for doubtful accounts
    
    $
    71,706
    
    
    $
    36,574
    
    
    $
    42,424
    
    
    $
    59,090Reserve for obsolete and slow moving inventory
    
    
    25,589
    
    
    
    13,407
    
    
    
    6,084
    
    
    
    15,102Net operating loss carryforwards
    
    
    574,496
    
    
    
    1,193,898
    
    
    
    3,402,205
    
    
    
    3,062,334Non deductible stock based computation
    
    
    38,407
    
    
    
    
    
    
    
    
    
    
    
    Alternative
minimum tax carryforward
    
    
    28,000
    
    
    
    
    
    
    
    
    
    
    
    Excess of financial statement depreciation over tax depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,178Total gross deferred tax assets
    
    
    738,198
    
    
    
    1,243,879
    
    
    
    3,450,713
    
    
    
    3,145,704Less valuation allowance
    
    
    738,198
    
    
    
    1,243,879
    
    
    
    3,450,713
    
    
    
    3,145,074Net deferred taxes
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   F-14




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##### Table of Contents



8. Revolving Credit Facility
   9. Long-term Debt
  June 30,
    
    
    June 30,2006
    
    
    2005Loans payable to financing companies, payable in monthly
installments of $2,656, interest ranging from-0-% and 7.99%
annually,
due August, 2008 through March, 2011, secured by automobilies
    
    $
    213,415
    
    
    $
    106,403Notes payable to Greenhill Capital Partners LP and PWIBD
Partners LP issued in 2003, payable in quarterly installments
$80,500, bearing interest ranging from 0% to 6%, maturing in
in March, 2007
    
    
    323,210
    
    
    
    563,503536,625
    
    
    
    669,906Less current maturities
    
    
    (373,856
    )
    
    
    (425,964
    )$
    162,769
    
    
    $
    243,942
 10. Capitalized Leases
  F-15




---



##### Table of Contents



2006
    
    $
    37,0782007
    
    
    29,86166,939Amounts representing interest
    
    
    (9,753
    )Future minimum lease payments
    
    $
    57,186
 11. Commitments and Contingencies
    Year ending June 30, 2007
    
    $
    610,6002008
    
    $
    505,1002009
    
    $
    51,800
 Legal Proceedings
  12. Employee Benefit Plan
  13. Concentration of Credit Risk
   F-16




---



##### Table of Contents



14. Related Party Transactions
   15. Gain on Extinguishment of Debt
  16. Stockholders Equity
  §
    
    147,676,299 shares of newly issued, non-assessable shares of Novo Common Stock, par
value $0.00002 per share; and§
    
    3,913,669 shares of newly issued, non-assessable shares of Novo Series E Convertible
Preferred Stock (Series E Preferred Stock), par value $0.00002 per share.
  F-17




---



##### Table of Contents



§
    
    To increase the aggregate number of shares that we will have the authority to issue from
225,000,000 to 6,600,000,000 shares, of which 6,000,000,000 shares will he shares of Common
Stock, and 600,000,000 shares will be shares of Preferred Stock;§
    
    To change our name from Novo Networks, Inc. to Berliner Communications, Inc.;§
    
    To amend the Certificate of Designation, Preferences and Rights of Series B Convertible
Preferred Stock to reduce the conversion price of the Series B Convertible Preferred Stock
to $0.014018, and thereby increase the number of shares of Common Stock issuable upon
conversion of such shares of the Series B Convertible Preferred Stock to 321,015,546 (in
the quarter ended September 30, 2005, we will record a deemed dividend of approximately
$6.4 million due to the reduction in the conversion price);§
    
    To amend the Certificate of Designation, Preferences and Rights of Series D Convertible
Preferred Stock to reduce the conversion price of the Series D Convertible Preferred Stock
to $0.014018, and thereby increase the number of shares of Common Stock issuable upon
conversion of such shares of the Series D Convertible Preferred Stock to 675,773,394 (in
the quarter ended September 30, 2005, we will record a deemed dividend of approximately
$13.5 million due to the reduction in the conversion price);§
    
    To provide that, upon the filing of the Certificate of Amendment, all shares of the
Series B Convertible Preferred Stock, Series D Convertible Preferred Stock, and Series E
Convertible Preferred Stock will be automatically converted into Common Stock;§
    
    To effect a 1:300 reverse stock split, such that the outstanding shares of Common Stock
and Convertible Preferred Stock will be reclassified and one new share of Common Stock will
be issued for every 300 shares of existing Common Stock (which has been retroactively
reflected in the accompanying Balance Sheet); and§
    
    To amend the Certificate of Incorporation, such that, after giving effect to the reverse
stock split, the aggregate number of shares that we will have the authority to issue is
22,000,000 shares, of which 20,000,000 shares will be shares of Common Stock, and 2,000,000
shares will be shares of Preferred Stock.
  Common and Preferred Stock
  Stock Options
   F-18




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##### Table of Contents



2001 Plan
    
    
    1999 Plan
    
    
    Non-PlanWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Exercise
    
    
    Number
    
    
    Exercise
    
    
    Number
    
    
    Exerciseof Shares
    
    
    Price
    
    
    of Shares
    
    
    Price
    
    
    of Shares
    
    
    PriceBalance at February 18, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Existing Novo options
    
    
    17,924
    
    
    $
    1,387.50
    
    
    
    6,700
    
    
    $
    1,747.52
    
    
    
    18,704
    
    
    $
    6,786.00Options granted at fair value value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at June 30, 2005
    
    
    17,924
    
    
    $
    1,387.50
    
    
    
    6,700
    
    
    $
    1,747.52
    
    
    
    18,704
    
    
    $
    6,786.00Exercisable at June 30, 2005
    
    
    17,924
    
    
    $
    1,387.50
    
    
    
    6,700
    
    
    
    1,747.52
    
    
    
    18,704
    
    
    $
    6,786.00Options granted at fair value value
    
    
    
    
    
    
    
    
    
    
    530,300
    
    
    $
    0.41
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    Options cancelled
    
    
    
    
    
    
    
    
    
    
    (53,700
    )
    
    $
    19.26
    
    
    
    Outstanding at June 30, 2006
    
    
    17,924
    
    
    $
    1,387.50
    
    
    
    483,300
    
    
    $
    22.53
    
    
    
    18,704
    
    
    $
    6,786.00Exercisable at June 30, 2006
    
    
    17,924
    
    
    $
    1,387.50
    
    
    
    212,175
    
    
    $
    50.80
    
    
    
    18,704
    
    
    $
    6,786.00
  F-19




---



##### Table of Contents



Options Outstanding and ExercisableWeighted
    
    WeightedNumber
    
    
    
    
    
    Average
    
    AverageOption Price
    
    of
    
    
    
    
    
    Exercise
    
    RemainingRange
    
    Shares
    
    Exercisable
    
    Price
    
    Contractual Life2001 Plan
    
    
    
    
    
    $
    1,387.50
    
    
    
    17,724
    
    
    
    17,724
    
    
    $
    1,387.50
    
    
    
    4.75
    
    
    years1999 Plan
    
    $ 0.40
    to
    $
    0.55
    
    
    
    476,800
    
    
    
    205,675
    
    
    $
    0.40
    
    
    
    9.50
    
    
    years$
    7.05
    
    
    
    167
    
    
    
    167
    
    
    $
    7.05
    
    
    
    6.66
    
    
    years$
    8.01
    
    
    
    250
    
    
    
    250
    
    
    $
    8.01
    
    
    
    7.66
    
    
    years$
    16.50
    
    
    
    4,083
    
    
    
    4,083
    
    
    $
    16.50
    
    
    
    4.29
    
    
    years$
    3,000.00
    
    
    
    1,167
    
    
    
    1,167
    
    
    $
    3,000.00
    
    
    
    8.04
    
    
    years$
    8,550.00
    
    
    
    833
    
    
    
    833
    
    
    $
    8,550.00
    
    
    
    4.71
    
    
    yearsNon-Plan
    
    
    
    
    
    $
    3,600.00
    
    
    
    636
    
    
    
    636
    
    
    $
    3,600.00
    
    
    
    4.71
    
    
    years$
    6,900.00
    
    
    
    18,067
    
    
    
    18,067
    
    
    $
    6,900.00
    
    
    
    4.75
    
    
    years
   2001 Plan
    
    
    1999 Plan
    
    
    Non-PlanWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Fair
    
    
    Number
    
    
    Fair
    
    
    Number
    
    
    Fairof Shares
    
    
    Value
    
    
    of Shares
    
    
    Value
    
    
    of Shares
    
    
    ValueBalance at June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    530,300
    
    
    $
    0.41
    
    
    
    Vested
    
    
    
    
    
    
    
    
    
    
    (205,675
    )
    
    $
    0.40
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    (53,500
    )
    
    $
    0.40
    
    
    
    Outstanding at June 30, 2006
    
    
    
    
    
    
    
    
    
    
    271,125
    
    
    $
    0.41
    
    
    
    
    
    
    
    
 Outstanding Warrants
  F-20




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##### Table of Contents



17. Unaudited Quarterly Results of Operations
  For the Fiscal Year Ended June 30, 2006First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth Quarter
    
    
    Total(unaudited)Revenues
    
    $
    8,657,365
    
    
    $
    11,107,423
    
    
    $
    8,546,825
    
    
    $
    11,013,699
    
    
    $
    39,325,312Gross margin
    
    $
    2,439,815
    
    
    $
    2,519,308
    
    
    $
    2,063,831
    
    
    $
    4,100,253
    
    
    $
    11,123,207Income (loss) from operations
    
    $
    335,182
    
    
    $
    215,467
    
    
    $
    (356,248
    )
    
    $
    1,240,963
    
    
    $
    1,435,364Net income (loss)
    
    $
    261,510
    
    
    $
    448,408
    
    
    $
    (364,887
    )
    
    $
    910,120
    
    
    $
    1,255,151Net loss allocable to common
shareholders
    
    $
    (19,674,269
    )
    
    $
    448,408
    
    
    $
    (364,887
    )
    
    $
    910,120
    
    
    $
    (18,680,628
    )Net income (loss) per common share -
basic and diluted
    
    $
    (5.90
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.05
    
    
    $
    (1.38
    )
 For the Six Months Ended June 30, 2005First Quarter
    
    
    Second Quarter
    
    
    Total(unaudited)Revenues
    
    $
    3,750,688
    
    
    $
    6,445,582
    
    
    $
    10,196,270Gross
margin
    
    $
    954,481
    
    
    $
    1,902,618
    
    
    $
    2,857,099Loss from
operations
    
    $
    (916,556
    )
    
    $
    (173,727
    )
    
    $
    (1,090,283
    )Net
loss
    
    $
    (946,907
    )
    
    $
    (243,677
    )
    
    $
    (1,190,584
    )Net loss allocable
to common
shareholders
    
    $
    (946,907
    )
    
    $
    (243,677
    )
    
    $
    (1,190,584
    )Net loss per common
share  basic and
diluted
    
    $
    (1.66
    )
    
    $
    (0.48
    )
    
    $
    (2.36
    )
 For the Fiscal Year Ended December 31, 2004First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth Quarter
    
    
    Total(unaudited)Revenues
    
    $
    3,579,826
    
    
    $
    3,915,747
    
    
    $
    3,838,201
    
    
    $
    3,952,130
    
    
    $
    15,285,904Gross
margin
    
    $
    1,261,964
    
    
    $
    1,306,968
    
    
    $
    1,601,248
    
    
    $
    1,510,885
    
    
    $
    5,681,065Loss from
operations
    
    $
    (363,116
    )
    
    $
    (84,073
    )
    
    $
    (8,493
    )
    
    $
    (319,816
    )
    
    $
    (775,498
    )Net
loss
    
    $
    (374,183
    )
    
    $
    (101,069
    )
    
    $
    (20,957
    )
    
    $
    (340,623
    )
    
    $
    (836,832
    )Net loss allocable
to common
shareholders
    
    $
    (374,183
    )
    
    $
    (101,069
    )
    
    $
    (20,957
    )
    
    $
    (340,623
    )
    
    $
    (836,832
    )Net loss per common
share  basic and
diluted
    
    $
    (5.55
    )
    
    $
    (1.50
    )
    
    $
    (0.31
    )
    
    $
    (5.05
    )
    
    $
    (12.41
    )
 For the Fiscal Year Ended December 31, 2003First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth Quarter
    
    
    Total(unaudited)Revenues
    
    $
    3,432,491
    
    
    $
    4,283,079
    
    
    $
    5,148,922
    
    
    $
    5,091,342
    
    
    $
    17,955,834Gross margin
    
    $
    876,565
    
    
    $
    1,111,685
    
    
    $
    1,314,858
    
    
    $
    1,554,057
    
    
    $
    4,857,165Loss from operations
    
    $
    (698,558
    )
    
    $
    (284,910
    )
    
    $
    (244,279
    )
    
    $
    (438,883
    )
    
    $
    (1,666,630
    )Net income (loss)
    
    $
    (648,866
    )
    
    $
    (465,568
    )
    
    $
    (335,747
    )
    
    $
    6,889,071
    
    
    $
    5,438,890Net loss allocable to common
shareholders
    
    $
    (1,054,721
    )
    
    $
    (465,568
    )
    
    $
    (335,747
    )
    
    $
    6,916,571
    
    
    $
    5,060,535Net income (loss) per common share -
basic and diluted
    
    $
    (26.08
    )
    
    $
    (10.70
    )
    
    $
    (4.98
    )
    
    $
    102.60
    
    
    $
    91.27
 F-21




---



##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT
    
    
    
    FILEDNUMBER
    
    DESCRIPTION
    
    HEREWITH10.22
    
    Demand Secured Promissory Note
    
    X10.23
    
    Amendment to Demand Secured
Promissory Note
    
    X21.1
    
    Subsidiaries of Berliner Communications, Inc.
    
    X23.1
    
    Consent of BDO Seidman, LLP
    
    X23.2
    
    Consent of Grant Thornton, LLP
    
    X24
    
    Power of Attorney
    
    See Signature Pages31.1
    
    Certification of the Principal Executive
Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    X31.2
    
    Certification of the Principal Financial
Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    X31.3
    
    Certification of the Principal Accounting
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
 A-1