##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _________ to _________
 Commission File Number 333-133253
 BROOKSIDE TECHNOLOGY HOLDINGS CORP.
  Florida
    
    20-3634227State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization
    
    Identification No.)
 
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



Index
 ITEMPART I
 FINANCIAL INFORMATIONItem 1.
    
    Consolidated
Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    23Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4.
    
    Controls and
ProceduresItem 4(T)
    
    Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Securities Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    29EX-31.1EX-31.2EX-32.1EX-32.2
  2




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3




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED BALANCE SHEETS
As of March 31, 2009 and December 31, 2008
 March 31,
    
    
    December 31,2009 (Unaudited)
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    638,565
    
    
    $
    835,525Cash collateral account
    
    
    394,576
    
    
    
    368,666Restricted cash
    
    
    850,000
    
    
    
    1,366,666Accounts receivable, net
    
    
    3,369,848
    
    
    
    4,225,692Inventory
    
    
    1,603,130
    
    
    
    1,652,300Deferred contract costs
    
    
    13,016
    
    
    
    107,382Deferred finance charges, net of amortization
    
    
    487,002
    
    
    
    536,085Prepaid expenses
    
    
    202,101
    
    
    
    79,493Total current assets
    
    
    7,558,238
    
    
    
    9,171,809Property and equipmentOffice equipment
    
    
    492,624
    
    
    
    444,590Vehicles
    
    
    171,131
    
    
    
    171,131Furniture, fixtures and leasehold improvements
    
    
    160,652
    
    
    
    155,151824,407
    
    
    
    770,872Less: accumulated depreciation
    
    
    (361,986
    )
    
    
    (326,383
    )Property and equipment, net
    
    
    462,421
    
    
    
    444,489Goodwill
    
    
    16,980,030
    
    
    
    16,918,396Intangible assets, net
    
    
    498,376
    
    
    
    731,710Deposits and other assets
    
    
    27,464
    
    
    
    27,735TOTAL ASSETS
    
    $
    25,526,529
    
    
    $
    27,294,139LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    2,140,026
    
    
    $
    2,211,611Billings in excess of revenues
    
    
    2,522,838
    
    
    
    2,620,857Payroll liabilities
    
    
    711,285
    
    
    
    851,833Current portion of long term debt
    
    
    2,120,322
    
    
    
    2,669,177Income taxes payable
    
    
    162,700
    
    
    
    164,000Other current liabilities
    
    
    288,725
    
    
    
    228,390Total current liabilities
    
    
    7,945,896
    
    
    
    8,745,868Long term debt, less current portion
    
    
    5,412,900
    
    
    
    5,053,135Total liabilities
    
    
    13,358,796
    
    
    
    13,799,003Stockholders equity (deficit)Series A convertible preferred stock, 15,000,000 authorized,
12,216,716 issued and outstanding at March 31, 2009 and
December 31, 2008 at 8% dividend yield.
Liquidation preference of $13,076,929 and $12,832,595 at
March 31, 2009 and December 31, 2008, respectively.
    
    
    9,040,855
    
    
    
    8,796,521Common stock, $.01 par value, 1,000,000,000 shares
authorized, 140,228,340 shares issued and
outstanding at March 31, 2009 and December 31, 2008
    
    
    140,229
    
    
    
    140,229Additional paid in capital
    
    
    21,402,845
    
    
    
    21,385,901Accumulated deficit
    
    
    (18,416,196
    )
    
    
    (16,827,515
    )Total stockholders equity
    
    
    12,167,733
    
    
    
    13,495,136TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    25,526,529
    
    
    $
    27,294,139
  4




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2009 and 2008
Unaudited
 March 31,2009
    
    
    2008REVENUESInstallation and other services
    
    $
    1,573,177
    
    
    $
    1,012,309Equipment sales
    
    
    3,428,122
    
    
    
    3,195,757Total revenues
    
    
    5,001,299
    
    
    
    4,208,066COST OF SALES
    
    
    2,276,180
    
    
    
    2,229,881GROSS PROFIT
    
    
    2,725,119
    
    
    
    1,978,185OPERATING EXPENSESGeneral and administrative
    
    
    3,110,097
    
    
    
    1,744,490Depreciation expense
    
    
    35,132
    
    
    
    37,468Total operating expenses
    
    
    3,145,229
    
    
    
    1,781,958OTHER INCOME (EXPENSE)Interest expense
    
    
    (432,809
    )
    
    
    (675,453
    )Amortization expense of loan discount and
intangibles
    
    
    (476,674
    )
    
    
    (1,322,324
    )Other income, net
    
    
    1,615
    
    
    
    3,463Total other expense
    
    
    (907,868
    )
    
    
    (1,994,314
    )LOSS BEFORE INCOME TAXES
    
    
    (1,327,978
    )
    
    
    (1,798,087
    )Provision for income taxes
    
    
    
    
    
    
    NET LOSS
    
    $
    (1,327,978
    )
    
    $
    (1,798,087
    )Preferred Stock Dividends
    
    
    (244,334
    )
    
    
    (43,506
    )Net loss attributable to common
shareholders
    
    $
    (1,572,312
    )
    
    $
    (1,841,593
    )Loss per share-basic and fully diluted
    
    $
    (0.01
    )
    
    $
    (0.02
    )Weighted average shares outstanding
    
    
    140,228,340
    
    
    
    87,900,000
  5




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2009 and 2008
Unaudited
 2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,327,978
    )
    
    $
    (1,798,087
    )Adjustments to reconcile net loss to net
cash used in operating activities:Depreciation
    
    
    35,132
    
    
    
    37,468Amortization of loan discounts and intangibles
    
    
    476,674
    
    
    
    1,322,324Non-cash interest expense
    
    
    130,254
    
    
    
    258,076Bad debt expense
    
    
    26,450
    
    
    
    Stock based compensation
    
    
    16,944
    
    
    
    (Increase) decrease in:Accounts receivable
    
    
    829,394
    
    
    
    (154,548
    )Inventory
    
    
    49,170
    
    
    
    (269,840
    )Deferred contract costs
    
    
    94,366
    
    
    
    41,575Prepaid expenses
    
    
    (122,608
    )
    
    
    (7,753
    )Deposits and other assets
    
    
    271
    
    
    
    6,509Increase (decrease) in:Accounts payable and accrued expenses
    
    
    (71,585
    )
    
    
    385,560Accrued payroll liabilities
    
    
    (140,548
    )
    
    
    42,229Billings in excess of revenues
    
    
    (98,019
    )
    
    
    190,170Income taxes payable
    
    
    (1,300
    )
    
    
    Other current liabilites
    
    
    43,966
    
    
    
    (321,789
    )1,268,561
    
    
    
    1,529,981NET CASH USED IN OPERATING ACTIVITIES
    
    
    (59,417
    )
    
    
    (268,106
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
    
    
    (53,064
    )
    
    
    (83,911
    )Cash used for restricted cash
    
    
    (233,334
    )
    
    
    Cash provided by restricted cash
    
    
    750,000
    
    
    
    Acquisition of US Voice & Data, LLC (USVD) additional EBITDA Earnout
    
    
    (61,634
    )
    
    
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    401,968
    
    
    
    (83,911
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long term debt
    
    
    285,253
    
    
    
    3,862,760Repayment of long term debt
    
    
    (798,854
    )
    
    
    (3,609,596
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (513,601
    )
    
    
    253,164NET DECREASE IN CASH
    
    
    (171,050
    )
    
    
    (98,853
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    1,204,191
    
    
    
    187,846CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,033,141
    
    
    $
    88,993SUPPLEMENTAL DISCLOSUREIncome taxes paid
    
    $
    
    
    
    $
    Interest paid
    
    $
    302,555
    
    
    $
    9,237Non-cash financing and investing activitiesAccretion of preferred stock dividend
    
    $
    244,334
    
    
    
    43,506Accrued interest added to note payable balance
    
    $
    35,253
    
    
    $
    246,228
  6




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 1  Basis of Presentation and Nature of Business
 Basis of Presentation
  Operations
  nd
 7




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 1  Nature of Business (continued)
 Background/Name Change/Redomestication
  Redomestication
   US Voice & Data, LLC
  Acquisition of Standard Tel Networks, LLC
   8




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Liquidity and Capital Resources
   Note 3  Significant Accounting Policies
  Principles of Consolidation
  Cash Equivalents
  Use of Estimates
  9




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Financial Instruments and Credit Risk
    Convertible Securities With Beneficial Conversion Features
  
  
 
 
 
  10




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Goodwill and Intangibles
   Revenue Recognition
    11




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Warranty Reserves
  Advertising
  Reclassifications
  Income taxes
   Accounting for
Uncertainty in Income Taxes
 12




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Earnings Per Common Share
   Stock Based Compensation
 Share-Based Payment.
 13




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Recent Accounting Pronouncements
       14




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4 Billings in Excess of Revenues
  Quarter ended
    
    
    Year EndedMarch 31,
    
    
    December 31,2009
    
    
    2008Customer deposits and deferred income on installation contracts
    
    $
    1,382,386
    
    
    $
    1,683,266Deferred revenue on maintenance contracts
    
    
    1,140,452
    
    
    
    937,591$
    2,522,838
    
    
    $
    2,620,857
 Note 5 Accounts Payable and Accrued Expenses
  March 31,
    
    
    December 31,2009
    
    
    2008Accounts payable, trade
    
    $
    1,688,035
    
    
    $
    1,857,905Accrued warranty liability
    
    
    244,646
    
    
    
    231,906Other accrued expenses
    
    
    207,345
    
    
    
    121,800Total
    
    $
    2,140,026
    
    
    $
    2,211,611
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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 6 Long Term Debt
  March 31, 2009
    
    
    December 31, 2008Note payable to an individual,
unsecured, accruing interest at 2%
per annum, with monthly payments of
$5,215 due May 1, 2010.
    
    $
    82,869
    
    
    $
    98,049Note payable to executive officers
and shareholders, unsecured,
accruing interest at 0% per annum,
due in installments over 3 years
with a maturity date of September
26, 2009, less unamortized discount
of $23,923 and $75,812,
respectively.
    
    
    826,077
    
    
    
    1,524,188Notes payable to an individual,
unsecured, accruing interest at 7%
per annum, with monthly payments of
$1,130 due May 1, 2011.
    
    
    28,143
    
    
    
    31,006Note payable to executive officer
and shareholders, unsecured,
accruing interest at 7% per annum,
with monthly payments of $968, due
September 1, 2010.
    
    
    16,945
    
    
    
    16,945Notes payable to shareholder,
unsecured, accruing interest at 7%
per annum, with monthly payments of
$6,432 due June 1, 2010.
    
    
    97,982
    
    
    
    115,360Subordinated Note Payable to Vicis
Capital Master Fund, accruing
interest at 10%, maturing April 15,
2010, subordinated to the Chatham
senior note. Net of unamortized
discount of $89,632 and $118,917,
respectively. (STN acquisition.)
    
    
    1,410,368
    
    
    
    1,381,083Senior note payable, Chatham
Investment Fund III, LLC and Chatham
Investment Fund III QP, LLC,
accruing interest at the LIBOR rate
plus 9.00%, payments of $83,333
beginning on the first of the month
after 6 months from the closing
date, with the balance due on the
third anniversary of the closing
date of September 23, 2008, net of
unamortized discount of $2,414,712
and $2,658,050, respectively. (STN
acquisition)
    
    
    4,659,507
    
    
    
    4,380,916Senior line of credit, Chatham
Investment Fund III, LLC and Chatham
Investment Fund III QP, LLC,
accruing interest at LIBOR rate plus
4.00%, principal due on September
23, 2011.
    
    
    250,000
    
    
    
    Secured notes payable to Enterprise
Fleet Services, accruing interest at
5% per annum, with monthly payments
of $1,476, maturing June 1, 2010.
Notes are secured by vehicles.
    
    
    56,188
    
    
    
    60,617Secured notes payable to GMAC,
accruing interest at 9.25% with
monthly payments of $2,272,
maturing July 14, 2012. Notes are
secured by vehicles.
    
    
    77,670
    
    
    
    82,673Secured notes payable to Huntington
Bank, accruing interest at a prime
rate plus 3.73% with monthly
payments of $383, with a maturity
date of March 28, 2009. Note is
secured by a vehicle.
    
    
    624
    
    
    
    1,007Secured notes payable to NEC
Financial Services, accruing
interest at 11.25% with monthly
payments of $1,128, with a maturity
date of February 25, 2011. Note is
secured by testing equipment.
    
    
    26,849
    
    
    
    30,468Total long term debt
    
    
    7,533,223
    
    
    
    7,722,312Less current portion
    
    
    (2,120,322
    )
    
    
    (2,669,177
    )Long term portion
    
    $
    5,412,900
    
    
    $
    5,053,135
 16




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 6 Long Term Debt (Continued)
  Years Ending December 31,
    
    Gross2009
    
    $
    2,120,3222010
    
    
    2,639,0012011
    
    
    5,282,6202012
    
    
    19,5462013
    
    
    10,061,489Less: Unamortized discounts
    
    
    (2,528,266
    )Net of Discounts
    
    $
    7,533,223
 Warrants Issued in Connection with Financing
  Change in unamortized discount and loan costs of the Note 
  Note 7  Commitments and Contingencies
 Leases
  2009
    
    $
    557,5432010
    
    
    353,5102011
    
    
    169,1382012
    
    
    158,1762013
    
    
    
  17




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 7  Commitments and Contingencies (continued)
 Liquidated Damages Under Registration Payment Arrangements
  Litigation
  Risk Management
  ote 8   Related Party Transactions
  Note 9  Series A 8% Convertible Preferred Stock
      18




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 10  Cost of Sales
  March 31,2009
    
    
    2008Equipment costs
    
    $
    1,759,211
    
    
    $
    1,860,646Contract labor
    
    
    5,615
    
    
    
    78,211Direct labor
    
    
    334,939
    
    
    
    231,208Sales commissions and selling costs
    
    
    128,394
    
    
    
    3,435Software assurances costs
    
    
    
    
    
    
    Lite warranty costs
    
    
    30,919
    
    
    
    Other costs
    
    
    17,102
    
    
    
    56,381$
    2,276,180
    
    
    $
    2,229,881
 Note 11  Employee Benefit Plan
    19




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 12  Acquisition of Standard Tel Networks, LLC
  Note 13  Stock-Based Compensation
  Stock options.
  2007 Stock Incentive Plan
    WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2007
    
    
    14,000,000
    
    
    $
    0.186Cancelled during 2008
    
    
    (14,000,000
    )
    
    $
    0.186Granted during 2008
    
    
    19,200,000
    
    
    $
    0.03Forfeited or expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    19,200,000
    
    
    
    Granted during 2009
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at March 31, 2009
    
    
    19,200,000
    
    
    $
    0.03Vested and exercisable at March 31, 2009
    
    
    1,633,333
    
    
    $
    0.04
  Number of Shares
    
    Year Vested15,633,333
    
    
    20091,633,333
    
    
    2010300,000
    
    
    2011
 20




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 13  Stock-Based Compensation (continued)
  Note 14  Warrants
 Warrants
  Outstanding
    
    Exercise PriceSeries A *
    
    
    24,327,753
    
    
    $
    0.03Series B
    
    
    37,498,836
    
    
    $
    0.03Series C
    
    
    5,329,534
    
    
    $
    0.03Series D **
    
    
    25,080,000
    
    
    $
    0.03Series E
    
    
    61,273,835
    
    
    $
    0.03Series F
    
    
    250,000,000
    
    
    $
    0.03Chatham
    
    
    140,930,835
    
    
    $
    0.03Total warrants
    
    
    544,440,793
 
 *
    
    Includes 2,628,917 penalty warrants**
    
    Includes 1,080,000 penalty warrants.  21




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 15  Intangible Assets
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Life (years)Purchased customer contracts  USVD
    
    $
    600,000
    
    
    $
    600,000
    
    
    
    1Purchased customer contracts  STN
    
    
    900,000
    
    
    
    450,000
    
    
    
    1Non-compete agreements
    
    
    100,000
    
    
    
    51,624
    
    
    
    3$
    1,600,000
    
    
    $
    1,101,624Estimated Amortization Expense2009
    
    
    
    
    
    $
    475,0022010
    
    
    
    
    
    
    23,374$
    498,376
 Note 16  Subsequent Events
   22




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Item 2. Managements Discussion and Analysis or Plan of Operations
 The information presented in this section should be read in conjunction with our audited
consolidated financial statements and related notes for the periods ended December 31, 2008 and
2007 included in our Form 10-K , as filed with the Securities and Exchange Commission, as well as
the information contained in the consolidated financial statements, including the notes thereto,
appearing in this report. This discussion contains forward-looking statements reflecting our
current expectations that involve risks and uncertainties. Actual results and the timing of events
may differ materially from those contained in these forward-looking statements due to a number of
factors, including those discussed in the section entitled Risk Factors of our Form 10-K for the
year ended December 31, 2008, and elsewhere in this report.
 General
 Organizational History and Operations
  nd
 Background/Name Change/Redomestication
    23




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Acquisition of USVD
  Increase in Authorized Shares
  Vicis Equity Infusion
      Acquisition of Standard Tel Networks, LLC
  24




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Results of Operations
  25




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Revenues, Cost of Sales and Gross Margins
    General and Administrative Expenses
  Amortization Expense
  Interest Expense
  Net Profit/Net Loss from Operations
  26




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Liquidity and Capital Resources
   Critical Accounting Policies
  Revenue Recognition
    27




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  28




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. EXHIBITS
 Exhibit 31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.Exhibit 31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.Exhibit 32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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##### Table of Contents



SIGNATURES
  Brookside Technology Holdings CorpBy:
/s/ Bryan McGuireBryan McGuire, Chief Financial Officer(Principal Financial Officer) Dated: May 15, 2009
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