##### 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 September 30, 2008
 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
  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. Financial StatementsItem 2. Managements Discussion and Analysis or Plan of Operation
    
    
    28Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4. Controls and ProceduresItem 4(T) Controls and Procedures
    
    
    34PART II  OTHER INFORMATION
    
    
    35Item 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 4. Submission of Matters to a Vote of Securities Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35EX-31.1EX-31.2EX-32.1EX-32.2
  2




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3




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BROOKSIDE TECHNOLOGY PARTNERS, INC
BALANCE SHEETS
As of September 30, 2008 and December 31, 2007
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,998,911
    
    
    $
    187,846Restricted cash
    
    
    1,250,000
    
    
    
    Accounts receivable, net
    
    
    4,070,738
    
    
    
    2,113,675Inventory, net
    
    
    1,831,816
    
    
    
    849,176Deferred contract costs
    
    
    48,283
    
    
    
    89,922Deferred finance charges, net of amortization
    
    
    588,984
    
    
    
    245,155Prepaid expenses
    
    
    129,666
    
    
    
    40,954Total current assets
    
    
    9,918,398
    
    
    
    3,526,728Property and equipmentOffice equipment
    
    
    431,826
    
    
    
    330,022Furniture, fixtures and leasehold improvements
    
    
    153,571
    
    
    
    137,745Vehicles
    
    
    171,130
    
    
    
    756,527
    
    
    
    467,767Less: accumulated depreciation
    
    
    (292,052
    )
    
    
    (194,089
    )Property and equipment, net
    
    
    464,475
    
    
    
    273,678Goodwill
    
    
    16,804,632
    
    
    
    13,236,369Intangible assets, net
    
    
    965,044
    
    
    
    510,868Deposits and other assets
    
    
    27,464
    
    
    
    41,699TOTAL ASSETS
    
    $
    28,180,013
    
    
    $
    17,589,342LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    2,342,234
    
    
    $
    981,766Billings in excess of revenues
    
    
    4,081,735
    
    
    
    1,776,271Payroll liabilities
    
    
    370,250
    
    
    
    371,470Current portion of long term debt
    
    
    3,907,355
    
    
    
    8,207,900Other current liabilities
    
    
    96,738
    
    
    
    838,589Total
current liabilities
    
    
    10,798,312
    
    
    
    12,175,996Long term debt, less current portion
    
    
    3,501,866
    
    
    
    1,850,183Total liabilities
    
    
    14,300,178
    
    
    
    14,026,179Stockholders equitySeries A Convertible Preferred Stock, 12,226,716 and 2,175,322 issued
and outstanding at September 30, 2008 and December 31, 2007,
respectively, at 8% dividend yield. Liquidation preference of
$12,485,954 at September 30, 2008.
    
    
    9,974,486
    
    
    
    1,699,000Common stock, $.01 par value, 1,000,000,000 shares
authorized, 139,887,066 shares issued and
outstanding at September 30, 2008 and
87,900,000 shares issued and outstanding at
December 31, 2007, respectively
    
    
    139,888
    
    
    
    87,900Additional paid in capital
    
    
    19,873,900
    
    
    
    11,313,358Retained deficit
    
    
    (16,108,439
    )
    
    
    (9,537,095
    )Total stockholders equity
    
    
    13,879,835
    
    
    
    3,563,163TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    28,180,013
    
    
    $
    17,589,342
  4




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BROOKSIDE TECHNOLOGY PARTNERS, INC
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2008 and 2007
 Quarter Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)REVENUESInstallation and other services
    
    $
    1,577,260
    
    
    $
    314,469
    
    
    $
    3,924,799
    
    
    $
    624,495Equipment sales
    
    
    4,079,863
    
    
    
    612,567
    
    
    
    10,473,837
    
    
    
    1,303,980Total revenues
    
    
    5,657,123
    
    
    
    927,036
    
    
    
    14,398,636
    
    
    
    1,928,475COST OF SALES
    
    
    3,175,528
    
    
    
    555,217
    
    
    
    7,656,333
    
    
    
    1,146,865GROSS PROFIT
    
    
    2,481,595
    
    
    
    371,819
    
    
    
    6,742,303
    
    
    
    781,610OPERATING EXPENSESGeneral and administrative
    
    
    1,878,775
    
    
    
    841,130
    
    
    
    5,624,261
    
    
    
    1,634,398Stock Compensation Expense
    
    
    53,333
    
    
    
    
    
    
    
    168,833
    
    
    
    915,000Depreciation expense
    
    
    31,140
    
    
    
    15,741
    
    
    
    97,949
    
    
    
    37,317Total operating expenses
    
    
    1,963,248
    
    
    
    856,871
    
    
    
    5,891,043
    
    
    
    2,586,715OTHER INCOME (EXPENSE)Interest expense
    
    
    (459,624
    )
    
    
    (34,838
    )
    
    
    (1,799,207
    )
    
    
    (61,395
    )Amortization expense
    
    
    (1,003,282
    )
    
    
    (933,615
    )
    
    
    (3,673,806
    )
    
    
    (933,615
    )Gain on debt extinguishment
    
    
    151,619
    
    
    
    
    
    
    
    151,619
    
    
    
    Other income (expenses), net
    
    
    7,957
    
    
    
    8,814
    
    
    
    11,828
    
    
    
    10,341Total other income (expense)
    
    
    (1,303,330
    )
    
    
    (959,639
    )
    
    
    (5,309,566
    )
    
    
    (984,669
    )LOSS BEFORE
INCOME TAXES
    
    
    (784,983
    )
    
    
    (1,444,691
    )
    
    
    (4,458,306
    )
    
    
    (2,789,774
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (784,983
    )
    
    $
    (1,444,691
    )
    
    $
    (4,458,306
    )
    
    $
    (2,789,774
    )Preferred stock dividends and
accretion of discount
    
    
    (2,019,353
    )
    
    
    (43,506
    )
    
    
    (2,102,989
    )
    
    
    (96,350
    )Net loss attributable to common shareholders
    
    $
    (2,804,336
    )
    
    $
    (1,488,197
    )
    
    $
    (6,561,295
    )
    
    $
    (2,886,124
    )Loss per share-
basic and fully diluted
    
    $
    (0.028
    )
    
    $
    (0.018
    )
    
    $
    (0.071
    )
    
    $
    (0.037
    )Weighted average shares outstandings
    
    
    99,576,825
    
    
    
    81,327,632
    
    
    
    92,755,324
    
    
    
    77,691,575
  5




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BROOKSIDE TECHNOLOGY PARTNERS, INC
STATEMENTS OF CASH FLOWS
For the Nine Months September 30, 2008 and 2007
 2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (4,458,306
    )
    
    $
    (2,789,774
    )Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:Depreciation
    
    
    97,949
    
    
    
    37,317Amortization of debt discounts, deferred finance charges and intangibles
    
    
    3,673,806
    
    
    
    933,615Non-cash interest expense
    
    
    600,587
    
    
    
    Stock based compensation
    
    
    168,833
    
    
    
    915,000Gain on debt extinguishment
    
    
    (151,619
    )
    
    
    (Increase) decrease in:Accounts receivable
    
    
    (780,671
    )
    
    
    (250,551
    )Inventory
    
    
    (79,863
    )
    
    
    1,113,770Deferred contract costs
    
    
    41,639
    
    
    
    10,883Prepaid expenses
    
    
    (73,584
    )
    
    
    (8,278
    )Deposits and other assets
    
    
    41,699
    
    
    
    23,703Increase (decrease) in:Accounts payable and accrued expenses
    
    
    615,655
    
    
    
    117,737Accrued payroll liabilities
    
    
    (43,743
    )
    
    
    236,754Billings in excess of revenues
    
    
    462,885
    
    
    
    (1,291,783
    )Accrued warranty
    
    
    
    
    
    
    (793
    )Other
current liabilities
    
    
    (65,469
    )
    
    
    (84,293
    )4,508,104
    
    
    
    1,753,081NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    49,798
    
    
    
    (1,036,693
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
    
    
    (166,069
    )
    
    
    (56,632
    )Cash used for restricted cash
    
    
    (1,250,000
    )
    
    
    Acquisition of US Voice & Data, LLC (USVD), net of $855,791 in cash received
    
    
    
    
    
    
    (9,052,899
    )Acquisition of Standard Tel Networks, LLC (STN), net of $522,319 in cash received
    
    
    (2,835,610
    )
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (4,251,679
    )
    
    
    (9,109,531
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long term debt
    
    
    14,197,475
    
    
    
    7,442,685Cash paid for fees in conjunction with USVD acquisition financing
    
    
    
    
    
    
    (463,000
    )Proceeds from Series B Stock financing (Series B)
    
    
    
    
    
    
    3,000,000Cash paid for fees in conjunction with Series B financing
    
    
    
    
    
    
    (250,000
    )Deferred finance charges
    
    
    (588,984
    )
    
    
    (349,538
    )Proceeds from issuance of series A preferred Stock
net of issuance costs of $376,653
    
    
    
    
    
    
    1,280,337Proceeds from issuance of series A preferred Stock, in connection with the STN acquisition
    
    
    2,500,000
    
    
    
    Cash paid for fees in conjunction with the Share Exchange
    
    
    
    
    
    
    (293,963
    )Repayment of long term debt
    
    
    (10,095,545
    )
    
    
    (122,278
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    6,012,946
    
    
    
    10,244,243NET INCREASE IN CASH
    
    
    1,811,065
    
    
    
    98,019CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    187,846
    
    
    
    35,666CASH AND CASH EQUIVALENTSAT END OF YEAR
    
    $
    1,998,911
    
    
    $
    133,685SUPPLEMENTAL DISCLOSUREIncome taxes paid
    
    $
    
    
    
    $
    Interest paid
    
    $
    (27,872
    )
    
    $
    (34,838
    )Non-cash financing and investing activitiesExchange Transaction fee to Venture Fund II for
consulting fees, paid in preferred stock
    
    $
    
    
    
    $
    250,000Accrual of preferred stock dividend
    
    $
    119,382
    
    
    $
    96,350Accretion of Series A preferred stock beneficial conversion feature
    
    $
    1,983,607
    
    
    
    Conversion accrued interest to series A preferred stock
    
    $
    676,383
    
    
    
    Payment of notes payable paid in Preferred Stock
    
    $
    4,350,000
    
    
    $
    235,000Conversion of series B preferred stock to series A preferred stock
    
    $
    3,000,000
    
    
    $
    Note Payable issued in USVD acquisition
    
    $
    
    
    
    $
    3,100,000Value of Common Stock issued in USVD acquisition
    
    $
    
    
    
    $
    2,730,000Conversion of note for 400,000 shares of common stock
    
    $
    
    
    
    $
    60,000Warrant value assigned
    
    $
    4,909,851
    
    
    $
    6,751,270Beneficial conversion feature assigned to convertible debt
    
    $
    
    
    
    $
    1,445,006Accrued interest added to note payable balance
    
    $
    
    
    
    $
    46,556Value of Common Stock issued in STN acquisition
    
    $
    1,169,755
    
    
    $
    
  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
      Background/Name Change/Redomestication
  7




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 1  Basis of Presentation and Nature of Business (continued)
 Background/Name Change/Redomestication (continued)
    Stock Split
  
    
    Each outstanding share of Cruisestocks common stock, $0.001 per share, was
automatically converted into seven shares of Brookside Technology Holdings Corp.s
common stock, $0.001 par value per share;
    
    Each outstanding share of Cruisestocks series A preferred stock, $0.001 per share,
was automatically converted into one share of Brookside Technology Holdings Corp.s
series A preferred stock, $0.001 par value per share;
    
    The price at which the series A preferred stock converts into common stock was
automatically adjusted, on a proportionate basis, to account for the forward split of
the common shares by reducing the current conversion price of $0.40 per share to
$0.0571428; and
    
    The number of shares of common stock underlying all of Cruisestocks outstanding
options and warrants to purchase common stock, and the exercise price of such options
and warrants, was automatically adjusted to account for the 7-for-1 common share stock
split.
 Acquisition of USVD
  Reverse Stock Split
  8




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 1  Basis of Presentation and Nature of Business (continued)
 Increase in Authorized Shares
  Acquisition of Standard Tel Networks, LLC
  Vicis Equity Infusion
     9




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 1  Basis of Presentation and Nature of Business (continued)
 Vicis Equity Infusion (continued)
  Note 2  Liquidity and Capital Resources
  Note 3  Significant Accounting Policies
  Cash Equivalents
  Use of Estimates
  Property and Equipment
  Classification
    
    Useful LivesTelecom equipment
    
    3-5 yearsSoftware
    
    3-5 yearsComputer equipment
    
    3-5 yearsFurniture, fixtures and leasehold improvements
    
    2-7 years
  10




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Property and Equipment (continued)
  Financial Instruments and Credit Risk
    Inventories
  Redeemable Securities
     11




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Redeemable Securities (continued)
  Convertible Securities With Beneficial Conversion Features
   
    
    The Company effecting a merger or consolidation with another entity
    
    The Company sells all or substantially all of the Companys assets
    
    The Companys shareholders approve a tender or exchange offer, or
    
    The Companys holders of the common stock exchange their shares for securities or cash
   Goodwill and Intangibles
   12




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Extinguishment of Debt
   Revenue Recognition
    Warranty Reserves
  13




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Advertising
  Reclassifications
  Earnings Per Common Share
  Recent Accounting Pronouncements
  Determination of the Useful Life of Intangible Assets
  
    
    The weighted-average period prior to the next renewal or extension
(whether explicit and implicit) for each major intangible asset class
    
    The entitys accounting policy for the treatment of costs incurred to
renew or extend the term of a recognized intangible asset
    
    For intangible asset renewed or extended during the period:
 
    
    For entities that capitalize renewal or extension costs, the costs
incurred to review or extend the asset, for each major intangible
asset class
    
    The weighted-average period prior to the next renewal or extension
(whether explicit and implicit) for each major intangible asset class
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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Recent Accounting Pronouncements (continued)
  Fair Value Measurements
       Note 4 Billings in Excess of Revenues
  Quarter ended
    
    
    Year EndedSeptember 30,
    
    
    December 31,2008
    
    
    2007Customer deposits and deferred income on installation contracts
    
    $
    2,135,820
    
    
    $
    718,574Deferred revenue on maintenance contracts
    
    
    1,945,915
    
    
    
    1,057,697$
    4,081,735
    
    
    $
    1,776,271
 15




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 5 Accounts Payable and Accrued Expenses
 Accounts payable and accrued expenses consist of the following:
 September 30,
    
    
    December 31,2008
    
    
    2007Accounts payable, trade
    
    $
    1,769,104
    
    
    $
    981,766Accrued warranty liability
    
    
    247,417
    
    
    
    Other accrued expenses
    
    
    325,713
    
    
    
    Total
    
    $
    2,342,234
    
    
    $
    981,766
 Note 6 Long Term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Note payable to an individual,
unsecured, accruing interest at 2%
per annum, with monthly payments
of $5,215 due September 1, 2010
    
    $
    113,154
    
    
    $
    153,066Note 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
30, 2010, less unamortized
discount of $127,701 and $283,368,
respectively
    
    
    1,472,299
    
    
    
    2,816,632Notes payable to an individual,
unsecured, accruing interest at 7%
per annum, with monthly payments
of $1,130 due May 1, 2011
    
    
    33,819
    
    
    
    40,361Note payable to executive officer
and shareholders, unsecured,
accruing interest at 7% per annum,
with monthly payments of $1,343,
due September 1, 2009
    
    
    21,765
    
    
    
    28,558Notes payable to shareholder,
unsecured, accruing interest at 7%
per annum, with monthly payments
of $6,432 due June 1, 2010
    
    
    132,437
    
    
    
    176,547Note payable to Vicis, secured by
all assets of the Company,
accruing interest at 10% per
annum, principal and accrued
interest due in full September 26,
2008. Principal amount due of
$7,088,301. Formerly payable to
Hilco Financial, LLC. Note was
assigned to Vicis on June 18, 2008
and subsequently extinguished on
September 23, 2008
    
    
    
    
    
    
    3,235,930Note payable to Dynamic Decisions
Strategic Opportunities,
unsecured, accruing interest at
10% per annum, total principal and
accrued interest due September 26,
2008. Note was subsequently
assigned to Vicis on July 3, 2008
and subsequently extinguished on
September 30, 2008. This note had
an unamortized discount of
$403,677 at December 31, 2007
    
    
    
    
    
    
    596,323Series B Preferred Stock issued to
Vicis Capital, unsecured, accruing
interest at 16% per annum, matured
on December 27, 2007, converted to
series A preferred stock on July
3, 2008
    
    
    
    
    
    
    3,000,000Subordinated Note Payable to Vicis
Capital Master Fund, accruing
interest at 10%, maturing April
15, 2010, subordinated to the
Chatham senior note. Net of
discount of $151,619. (STN
acquisition.)
    
    
    1,348,381
    
    
    
    Senior 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 $2,901,388. (STN acquisition)
    
    
    4,098,612
    
    
    
    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
    
    
    57,034
    
    
    
    Secured notes payable to GMAC,
accruing interest at 9.25% with
monthly payments of $2,272,
maturing July 14, 2012. Notes
are secured by vehicles
    
    
    87,468
    
    
    
    Secured 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
    
    
    1,531
    
    
    
    10,666Secured 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
    
    
    42,721
    
    
    
    Total long term debt
    
    
    7,409,221
    
    
    
    10,058,083
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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 6 Long Term Debt (continued)
 September 30,
    
    
    December 31,2008
    
    
    2007Less current portion
    
    
    (3,907,355
    )
    
    
    (8,207,900
    )Long term portion
    
    $
    3,501,866,
    
    
    $
    1,850,183
  Nine months Ending September 30,
    
    
    
    
    
    Gross2008
    
    
    
    
    
    $
    81,3372009
    
    
    
    
    
    
    4,141,6442010
    
    
    
    
    
    
    1,139,0012011
    
    
    
    
    
    
    5,208,4012012
    
    
    
    
    
    
    19,54610,589,929Less: Unamortized discounts
    
    
    
    
    
    
    3,180,708Net of Discounts
    
    
    
    
    
    $
    7,409,221
 Warrants Issued in Connection with Financing
    Notional balance of Hilco Senior Convertible Note
    
    $
    6,000,000Adjustments:Discount for warrant issued (based on relative fair value assigned)
    
    
    (4,000,227
    )Discount for loan fees paid to Hilco on Note
    
    
    (340,000
    )Hilco Senior Convertible Note balance, net of unamortized discount at
September 26, 2007
    
    $
    1,659,773
   Notional balance of DD Subordinated Convertible Note at August 31, 2007
    
    $
    1,000,000Adjustments:Discount for warrant (based on relative fair value assigned)
    
    
    (696,049
    )DD Subordinated Convertible Note balance, net of unamortized discount
at August 31, 2007
    
    $
    303,951
  Warrants Issued in Connection with Financing (continued)
  Notional balance of Series B Preferred stock
    
    $
    3,000,000Adjustments:Discount for warrants issued (based on relative fair value assigned)
    
    
    (2,054,995
    )Discount for beneficial conversion feature (based on relative fair value assigned)
    
    
    (695,005
    )Discount for loan fees paid to Vicis
    
    
    (250,000
    )Series B Preferred Stock balance, net of unamortized discount at September 14, 2007
    
    $
    
  17




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 6 Long Term Debt (continued)
  Notional balance of USVD Sellers Note
    
    $
    3,100,000Adjustments:Discount for imputed interest
    
    
    (352,066
    )USVD Sellers Note balance, net of unamortized discount at September 14, 2007
    
    $
    2,747,934USVD Sellers Note at September 30, 2008-
  Notional balance of USVD Sellers Note at September 30, 2008
    
    $
    1,600,000Adjustments:Unamortized discount
    
    
    (127,701
    )USVD Sellers Note balance, net of unamortized discount at September 30, 2008
    
    $
    1,472,299
  Hilco Note
    
    DD Sub Debt
    
    Series BAssumptions
    
    Warrant
    
    Warrant
    
    WarrantDividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Risk-free interest rate
    
    
    4.21
    %
    
    
    4.21
    %
    
    
    4.21
    %Volatility
    
    
    61.55
    %
    
    
    61.55
    %
    
    
    61.55
    %Expected Term
    
    5 years
    
    
    5 years
    
    
    5 years
   Notional balance of Vicis Note
    
    $
    1,500,000Adjustments:Discount for warrant issued (based on relative fair value assigned)
    
    
    (151,619
    )Vicis Senior Convertible Note balance, net of unamortized discount at September 23, 2008
    
    $
    1,348,381
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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 6 Long Term Debt (continued)
 Long-term Debt  Acquisition of STN
   Notional balance of Chatham Senior Convertible Note
    
    $
    7,000,000Adjustments:Discount for warrant issued (based on relative fair value assigned)
    
    
    (2,901,388
    )Chatham Senior Convertible Note balance, net of unamortized discount
at September 23, 2008
    
    $
    4,098,612
  Chatham NoteAssumptions
    
    WarrantDividend yield
    
    
    0.00
    %Risk-free interest rate
    
    
    4.21
    %Volatility
    
    
    61.55
    %Expected Term
    
    5 years
   19




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 7  Commitments and Contingencies
 Leases
  2008 (remaining portion)
    
    $
    130,8142009
    
    
    451,5252010
    
    
    302,5832011
    
    
    181,0622012
    
    
    76,870
  Liquidated Damages Under Registration Payment Arrangements
  Litigation
  Risk Management
  Note 8  Series A 8% Convertible Preferred Stock
   20




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 8  Series A 8% Convertible Preferred Stock (continued)
    ote 9   Related Party Transactions
  Note 10  Cost of Sales
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Equipment costs
    
    $
    2,474,018
    
    
    $
    493,614
    
    
    $
    6,188,871
    
    
    $
    1,021,798Contract labor
    
    
    17,322
    
    
    
    41,005
    
    
    
    131,743
    
    
    
    85,797Direct labor
    
    
    259,876
    
    
    
    
    
    
    
    748,761
    
    
    
    Sales commissions and selling costs
selling costs
    
    
    42,310
    
    
    
    15,277
    
    
    
    68,411
    
    
    
    22,439Software assurances costs
    
    
    283,052
    
    
    
    
    
    
    
    286,875
    
    
    
    Lite warranty costs
    
    
    69,036
    
    
    
    
    
    
    
    169,052
    
    
    
    Other costs
    
    
    29,914
    
    
    
    5,321
    
    
    
    62,620
    
    
    
    16,831$
    3,175,528
    
    
    $
    555,217
    
    
    $
    7,656,333
    
    
    $
    1,146,865
 Note 11  General and Administrative Expenses
  21




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 11  General and Administrative Expenses (continued)
 Three Months Ended
    
    
    Nine months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Employee compensation and benefits
    
    $
    853,885
    
    
    $
    470,361
    
    
    $
    2,457,672
    
    
    $
    1,062,769Bad Debt Expense
    
    
    1,293
    
    
    
    
    
    
    
    2,029
    
    
    
    Telephone
    
    
    52,648
    
    
    
    12,755
    
    
    
    139,274
    
    
    
    32,827Travel expense
    
    
    130,276
    
    
    
    76,282
    
    
    
    198,742
    
    
    
    110,291Occupancy
    
    
    118,927
    
    
    
    29,971
    
    
    
    335,120
    
    
    
    42,854Professional fees
    
    
    121,572
    
    
    
    145,515
    
    
    
    527,562
    
    
    
    232,225Other
    
    
    600,174
    
    
    
    106,246
    
    
    
    1,963,862
    
    
    
    153,432$
    1,878,775
    
    
    $
    841,130
    
    
    $
    5,624,261
    
    
    $
    1,634,398
 Note 12  Employee Benefit Plan
   Note 13  Acquisition of US Voice & Data, LLC
     22




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 13  Acquisition of US Voice & Data, LLC (continued)
    (1)
    
    An initial preliminary allocation has been made to intangible assets as of the
December 31, 2007. Management will determine the proper value of intangible assets acquired
from USVD, Inc. and allocate any additional adjustments of the goodwill to intangible assets
within the twelve months after the acquisition date.
  Purchase price -Cash paid
    
    $
    9,938,690Stock issued
    
    
    2,345,000Notes payable issued to seller, net of discount
    
    
    2,747,934Additional amount due to seller
    
    
    356,160Legal & other acquisition costs
    
    
    41,458Acquisition costs
    
    
    15,429,242Net fair value of assets acquired and liabilities assumed
    
    
    (1,592,873
    )Excess of cost over fair value of tangible assets acquired
    
    $
    13,836,369Value assigned to customer contracts acquired
    
    
    600,000Goodwill acquired
    
    $
    13,236,369Fair value of assets acquired and liabilities assumed -Cash acquired
    
    $
    885,859Accounts receivable
    
    
    1,975,430Inventory and work in progress
    
    
    1,865,309Property and equipment
    
    
    203,249Other assets
    
    
    69,587Accounts payable and accrued expenses
    
    
    (529,903
    )Customer deposits and deferred income
    
    
    (2,773,232
    )Other liabilities
    
    
    (103,426
    )Net fair value of assets acquired and liabilities assumed
    
    $
    1,592,873
   23




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 14  Acquisition of Standard Tel Networks, LLC
        24




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 14  Acquisition of Standard Tel Networks, LLC (continued)
  (1)
    
    An initial preliminary allocation has been made to intangible assets as of the
September 30, 2008. Management will determine the proper value of intangible assets acquired
from STN, LLC and allocate any additional adjustments of the goodwill to intangible assets
within the twelve months after the acquisition date.
  Purchase price -Cash paid
    
    $
    3,209,265Stock issued
    
    
    1,169,755Legal & other acquisition costs
    
    
    138,619Acquisition costs
    
    
    4,517,639Net fair value of assets acquired and liabilities assumed
    
    
    (49,375
    )Excess of cost over fair value of tangible assets acquired
    
    $
    4,468,264Value assigned to customer contracts acquired
    
    
    (900,000
    )Goodwill acquired
    
    $
    3,568,264Fair value of assets acquired and liabilities assumed -Cash acquired
    
    $
    522,319Accounts receivable
    
    
    1,176,392Inventory and work in progress
    
    
    902,777Property and equipment
    
    
    122,677Other assets
    
    
    42,593Accounts payable and accrued expenses
    
    
    (787,336
    )Customer deposits and deferred income
    
    
    (1,842,579
    )Installment loan
    
    
    (87,468
    )Net fair value of assets acquired and liabilities assumed
    
    $
    49,375
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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 14  Acquisition of Standard Tel Networks, LLC
 (Unaudited)
    
    
    (Unaudited)Three Months Ended
    
    
    Nine months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Pro forma net revenues
    
    $
    7,594,976
    
    
    $
    3,891,696
    
    
    $
    21,460,421
    
    
    $
    21,734,227Pro forma net income (loss)
    
    
    (1,056,987
    )
    
    
    (1,398,801
    )
    
    
    (4,661,891
    )
    
    
    (1,585,774
    )Pro forma net income per share:Diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.05
    )
    
    $
    (0.020
    )
 Note 15  Stock-Based Compensation
  Stock options.
 2007 Stock Incentive Plan
    WeightedAverageOptions
    
    Exercise PriceOutstanding at December 31, 2007
    
    
    14,000,000
    
    
    $
    0.186Granted
    
    
    5,200,000
    
    
    $
    0.04Forfeited or expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at September 30, 2008
    
    
    19,200,000
    
    
    $
    0.147Vested and exercisable at September 30, 2008
    
    
    13,983,333
    
    
    $
    0.162
   26




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Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 16  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.  27




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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 financial
statements and related notes for the periods ended December 31, 2007 and 2006 included in our Form
10-KSB, as filed with the Securities and Exchange Commission, as well as the information contained
in the 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-KSB for the year ended December 31, 2007, and
elsewhere in this report.
 General
 Organizational History
   Stock Split
  
    
    Each outstanding share of Cruisestocks common stock, $0.001 per share, was
automatically converted into seven shares of Brookside Technology Holdings Corp.s
common stock, $0.001 par value per share;
    
    Each outstanding share of Cruisestocks series A preferred stock, $0.001 per share,
was automatically converted into one share of Brookside Technology Holdings Corp.s
series A preferred stock, $0.001 par value per share;
    
    The price at which the series A preferred stock converts into common stock was
automatically adjusted, on a proportionate basis, to account for the forward split of
the common shares by reducing the current conversion price of $0.40 per share to
$0.0571428, which was subsequently automatically adjusted down to $0.03 in conjunction
with the Vicis Equity Infusion; and
    
    The number of shares of common stock underlying all of Cruisestocks outstanding
options and warrants to purchase common stock, and the exercise price of such options
and warrants, was automatically adjusted to account for the 7-for-1 common share stock
split.
   28




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Reverse Stock Split
  Increase in Authorized Shares
  Acquisition of Standard Tel Networks, LLC
  Vicis Equity Infusion
  29




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Overview of Business
      Results of Operations
  30




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Revenues, Cost of Sales and Gross Margins
    General and Administrative Expenses
  31




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Stock Compensation Expense
   Amortization Expense
  Interest Expense
  32




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Gain on Debt Extinguishment
  Net Profit/Net Loss from Operations
  Liquidity and Capital Resources
   Critical Accounting Policies
  Revenue Recognition
  33




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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
  34




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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.
 35




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SIGNATURES
  Brookside Technology Holdings CorpBy:
    /s/ Michael NoleMichael Nole, 
Chief Executive Officer(Principal Executive Officer) Dated: November 14, 2008
 36