##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A- Amendment No. 1
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 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 0-52702
 BROOKSIDE TECHNOLOGY HOLDINGS CORP.
  Florida
    
    20-3634227State or other jurisdiction of 
incorporation or organization
    
    (I.R.S. Employer
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 Financial Condition and Results of Operation
    
    
    35Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    42Item 4.
    
    Controls and Procedures
    
    
    42Item 4(T)
    
    Controls and Procedures
    
    
    42PART II  OTHER INFORMATION
    
    
    44Item 1.
    
    Legal Proceedings
    
    
    44Item 1A.
    
    Risk Factors
    
    
    45Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3.
    
    Defaults Upon Senior Securities
    
    
    45Item 4.
    
    Submission of Matters to a Vote of Securities Holders
    
    
    45Item 5.
    
    Other Information
    
    
    45Item 6.
    
    Exhibits
    
    
    45EX-31.1EX-31.2EX-32.1EX-32.2
  2




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3




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##### Table of Contents



Item 1. Consolidated Financial Statements
 BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED BALANCE SHEETS
As of June 30, 2009 and December 31, 2008
 June 30,
    
    
    December 31,2009 (Unaudited)(Restated)
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    692,678
    
    
    $
    835,525Cash collateral account
    
    
    395,194
    
    
    
    368,666Restricted cash
    
    
    361,097
    
    
    
    1,366,666Accounts receivable, net
    
    
    3,611,339
    
    
    
    4,225,692Inventory
    
    
    1,911,718
    
    
    
    1,652,300Deferred contract costs
    
    
    37,283
    
    
    
    107,382Deferred finance charges, net of amortization
    
    
    437,920
    
    
    
    536,085Prepaid expenses
    
    
    96,246
    
    
    
    79,493Total current assets
    
    
    7,543,475
    
    
    
    9,171,809Property and equipmentOffice equipment
    
    
    522,496
    
    
    
    444,590Vehicles
    
    
    105,901
    
    
    
    171,131Furniture, fixtures and leasehold improvements
    
    
    169,365
    
    
    
    155,151797,762
    
    
    
    770,872Less: accumulated depreciation
    
    
    (387,679
    )
    
    
    (326,383
    )Property and equipment, net
    
    
    410,083
    
    
    
    444,489Goodwill
    
    
    16,980,030
    
    
    
    16,918,396Intangible assets, net
    
    
    225,000
    
    
    
    731,710Deposits and other assets
    
    
    85,867
    
    
    
    27,735TOTAL ASSETS
    
    $
    25,244,455
    
    
    $
    27,294,139LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    2,016,019
    
    
    $
    2,211,611Billings in excess of revenues
    
    
    2,728,379
    
    
    
    2,620,857Payroll liabilities
    
    
    705,489
    
    
    
    851,833Current portion of long term debt
    
    
    1,842,454
    
    
    
    2,669,177Income taxes payable
    
    
    4,000
    
    
    
    164,000Other current liabilities
    
    
    288,724
    
    
    
    228,390Total current liabilities
    
    
    7,585,065
    
    
    
    8,745,868Long term debt, less current portion
    
    
    5,586,460
    
    
    
    5,053,135Deriviative financial instruments at fair value
    
    
    7,512,529
    
    
    
    12,016,463Total liabilities
    
    
    20,684,054
    
    
    
    25,815,466Stockholders equitySeries A convertible preferred stock, 15,000,000 authorized,
13,191,716 and 12,216,716 issued and outstanding at June 30, 2009 and
December 31, 2008, respectively, at 8% dividend yield.
Liquidation preference of $14,296,120 and $12,832,595 at
June 30, 2009 and December 31, 2008, respectively.
    
    
    7,281,412
    
    
    
    6,812,914Common stock, $.01 par value, 1,000,000,000 shares
authorized, 146,657,102 and 140,228,340 shares issued and
outstanding at June 30, 2009 and December 31, 2008, respectively.
    
    
    146,657
    
    
    
    140,229Additional paid in capital
    
    
    11,853,637
    
    
    
    11,885,674Accumulated deficit
    
    
    (14,721,305
    )
    
    
    (17,360,144
    )Total stockholders equity
    
    
    4,560,401
    
    
    
    1,478,673TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    25,244,455
    
    
    $
    27,294,139
  4




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2009 and 2008
Unaudited
 Quarter Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)REVENUESInstallation and other services
    
    $
    1,505,267
    
    
    $
    1,335,230
    
    
    
    3,078,444
    
    
    $
    2,347,539Equipment sales
    
    
    3,038,784
    
    
    
    3,198,217
    
    
    
    6,466,906
    
    
    
    6,393,974Total revenues
    
    
    4,544,051
    
    
    
    4,533,447
    
    
    
    9,545,350
    
    
    
    8,741,513COST OF SALES
    
    
    1,696,552
    
    
    
    2,250,924
    
    
    
    3,972,732
    
    
    
    4,480,805GROSS PROFIT
    
    
    2,847,499
    
    
    
    2,282,523
    
    
    
    5,572,618
    
    
    
    4,260,708OPERATING EXPENSESGeneral and administrative
    
    
    2,840,295
    
    
    
    2,116,496
    
    
    
    5,950,392
    
    
    
    3,860,986Depreciation expense
    
    
    35,731
    
    
    
    29,341
    
    
    
    70,863
    
    
    
    66,809Total operating expenses
    
    
    2,876,026
    
    
    
    2,145,837
    
    
    
    6,021,255
    
    
    
    3,927,795OTHER INCOME (EXPENSE)Interest expense
    
    
    (479,446
    )
    
    
    (664,130
    )
    
    
    (912,255
    )
    
    
    (1,339,583
    )Amortization expense of loan discount and intangibles
    
    
    (516,713
    )
    
    
    (1,763,143
    )
    
    
    (993,387
    )
    
    
    (3,500,410
    )Finance expense on derivitives
    
    
    (925,571
    )
    
    
    
    
    
    
    (925,571
    )
    
    
    Gain on change in fair value of derivitive financial instruments
    
    
    5,751,603
    
    
    
    2,063,130
    
    
    
    6,429,505
    
    
    
    6,219,821Other income (expense), net
    
    
    (7,538
    )
    
    
    408
    
    
    
    (5,923
    )
    
    
    3,871Total other income (expense)
    
    
    3,822,335
    
    
    
    (363,735
    )
    
    
    3,592,369
    
    
    
    1,383,699INCOME (LOSS) BEFORE INCOME TAXES
    
    
    3,793,808
    
    
    
    (227,049
    )
    
    
    3,143,732
    
    
    
    1,716,612Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    3,793,808
    
    
    $
    (227,049
    )
    
    
    3,143,732
    
    
    $
    1,716,612Preferred Stock Dividends
    
    
    (244,190
    )
    
    
    (40,430
    )
    
    
    (488,524
    )
    
    
    (83,936
    )Net income (loss) attributable to common shareholders
    
    $
    3,549,618
    
    
    $
    (267,479
    )
    
    
    2,655,208
    
    
    $
    1,632,676Loss per share- basic
    
    $
    0.03
    
    
    $
    (0.00
    )
    
    
    0.02
    
    
    $
    0.02Weighted average shares outstandingbasic
    
    
    141,810,791
    
    
    
    90,714,185
    
    
    
    141,023,937
    
    
    
    89,307,092Loss per share- fully diluted
    
    $
    0.00
    
    
    $
    (0.00
    )
    
    
    0.00
    
    
    $
    0.00Weighted average shares outstandingfully diluted
    
    
    1,391,504,369
    
    
    
    90,714,185
    
    
    
    1,376,783,935
    
    
    
    1,310,978,692
  5




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2009 and 2008
Unaudited
 2009
    
    
    2008(Restated)
    
    
    (Restated)CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    3,143,732
    
    
    $
    1,716,612Adjustments to reconcile net loss to net
cash used in operating activities:Depreciation
    
    
    70,863
    
    
    
    66,809Amortization of loan discounts and intangibles
    
    
    993,387
    
    
    
    3,500,410Non-cash interest expense
    
    
    232,544
    
    
    
    518,069Finance expense on derivitives
    
    
    925,571
    
    
    
    Gain on change in fair value of derivitive financial instruments
    
    
    (6,429,505
    )
    
    
    (6,219,821
    )Loss on disposal of fixed assets
    
    
    6,717
    
    
    
    Bad debt expense
    
    
    26,700
    
    
    
    Stock based compensation
    
    
    24,364
    
    
    
    115,500(Increase) decrease in:Accounts receivable
    
    
    587,653
    
    
    
    (714,549
    )Inventory
    
    
    (259,418
    )
    
    
    (283,631
    )Deferred contract costs
    
    
    70,099
    
    
    
    (526
    )Prepaid expenses
    
    
    (16,753
    )
    
    
    (23,700
    )Deposits and other assets
    
    
    (58,132
    )
    
    
    (54,418
    )Increase (decrease) in:Accounts payable and accrued expenses
    
    
    (195,592
    )
    
    
    754,624Accrued payroll liabilities
    
    
    (146,344
    )
    
    
    20,166Billings in excess of revenues
    
    
    107,522
    
    
    
    209,928Income taxes payable
    
    
    (160,000
    )
    
    
    Other current liabilities
    
    
    43,966
    
    
    
    (59,790
    )(4,176,358
    )
    
    
    (2,170,929
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (1,032,626
    )
    
    
    (454,317
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
    
    
    (43,174
    )
    
    
    (83,912
    )Cash used for restricted cash
    
    
    (26,528
    )Cash used for cash collateral
    
    
    (233,334
    )
    
    
    Cash provided by cash collateral
    
    
    1,238,903
    
    
    
    Deposits and other assets related to the acquisition of Standard Tel Networks, LLC (STN)
    
    
    
    
    
    
    (65,000
    )Acquisition of US Voice & Data, LLC (USVD) additional EBITDA Earnout
    
    
    (61,634
    )
    
    
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    874,233
    
    
    
    (148,912
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long term debt
    
    
    464,891
    
    
    
    6,958,275Proceeds from issuance of Series A preferred stock, net of issuance costs of $70,000
    
    
    930,000
    
    
    
    Repayment of long term debt
    
    
    (1,379,345
    )
    
    
    (6,309,073
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    15,546
    
    
    
    649,202NET INCREASE (DECREASE) IN CASH
    
    
    (142,847
    )
    
    
    45,973CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    835,525
    
    
    
    187,846CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    692,678
    
    
    $
    233,819SUPPLEMENTAL DISCLOSUREIncome taxes paid
    
    $
    
    
    
    $
    (364,690
    )Interest paid
    
    $
    679,711
    
    
    $
    (17,147
    )Non-cash financing and investing activitiesAccretion of preferred stock dividend
    
    $
    488,524
    
    
    $
    83,936Accrued interest added to note payable balance
    
    $
    
    
    
    $
    503,893Cashless exercise of warrants
    
    $
    3,857
    
    
    $
    Accrual for derivitive financial intruments at fair value
    
    $
    1,925,571
    
    
    
    Conversion of series A preferred stock to common stock
    
    $
    20,026
    
    
    $
    260,328
  6




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##### Table of Contents



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




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##### Table of Contents



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  Restatement of Prior Periods
  As Reported
    
    
    Adjustments
    
    
    As RestatedJune 30, 2009 Summary Balance Sheet
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Current assets
    
    $
    7,543,475
    
    
    
    
    
    
    $
    7,543,475Property and equipment, net
    
    
    410,083
    
    
    
    
    
    
    
    410,083Goodwill
    
    
    16,980,030
    
    
    
    
    
    
    
    16,980,030Intangible assets, net
    
    
    225,000
    
    
    
    
    
    
    
    225,000Deposits and other assets
    
    
    85,867
    
    
    
    
    
    
    
    85,867Total assets
    
    $
    25,244,455
    
    
    
    
    
    
    $
    25,244,455Current liabilities:Accounts payable and accrued expenses
    
    $
    2,016,019
    
    
    
    
    
    
    $
    2,016,019Billings in excess of revenues
    
    
    2,728,379
    
    
    
    
    
    
    
    2,728,379Payroll liabilities
    
    
    705,489
    
    
    
    
    
    
    
    705,489Current portion of long term debt
    
    
    1,842,454
    
    
    
    
    
    
    
    1,842,454Income taxes payable
    
    
    4,000
    
    
    
    
    
    
    
    4,000Other current liabilities
    
    
    288,724
    
    
    
    
    
    
    
    288,724Total current liabilities
    
    
    7,585,065
    
    
    
    
    
    
    
    7,585,065Long-term debt, less current portion
    
    
    5,586,460
    
    
    
    
    
    
    
    5,586,460Derivative financial instruments at
Fair value
    
    
    
    (1)
    
    
    7,512,529
    
    
    
    7,512,529Total Liabilities
    
    
    13,171,525
    
    
    
    7,512,529
    
    
    
    20,684,054Stockholders equity:Series A convertible preferred stock
    
    
    9,531,980
    (2)
    
    
    (2,250,568
    )
    
    
    7,281,412Common stock
    
    
    146,657
    
    
    
    
    
    
    
    146,657Additional paid-in capital
    
    
    22,353,864
    (3)
    
    
    (10,500,227
    )
    
    
    11,853,637Accumulated deficit
    
    
    (19,959,571
    )    (4)
    
    
    5,238,266
    
    
    
    (14,721,305
    )Total stockholders equity
    
    
    12,072,930
    
    
    
    (7,512,529
    )
    
    
    4,560,401Total liabilities and stockholders
equity
    
    $
    25,244,455
    
    
    
    
    
    
    $
    25,244,455
 
 (1)
    
     Fair value of derivative financial instruments at June 30, 2009 based on
Black-Scholes model valuation.(2)
    
     Amount of beneficial conversion feature eliminated as debt was reduced to zero as
fair value of derivatives was recorded as a liability.(3)
    
     Represents the initial entries to record the fair value of derivatives at issuance
date. 9




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
 (4)
    
     Represents the total of amortization of additional discount on debt, finance expense
on derivatives, reversal of beneficial conversion feature and gain on change in fair value
of derivatives since issuance of warrants.
 Three Months Ended June 30, 2009 Summary
    
    As Reported
    
    
    
    
    Adjustments
    
    
    As RestatedConsolidated Statement of Operations:
    
    (Unaudited)
    
    
    
    
    (Unaudited)
    
    
    (Unaudited)Installation and other services
    
    $
    1,505,267
    
    
    
    
    
    
    
    
    $
    1,505,267Equipment sales
    
    
    3,038,784
    
    
    
    
    
    
    
    
    
    3,038,784Total revenues
    
    
    4,544,051
    
    
    
    
    
    
    
    
    
    4,544,051Cost of sales
    
    
    1,696,552
    
    
    
    
    
    
    
    
    
    1,696,552Gross Profit
    
    
    2,847,499
    
    
    
    
    
    
    
    
    
    2,847,499Operating Expenses:General and administrative
    
    
    2,840,295
    
    
    
    
    
    
    
    
    
    2,840,295Depreciation
    
    
    35,731
    
    
    
    
    
    
    
    
    
    35,731Total operating expenses
    
    
    2,876,026
    
    
    
    
    
    
    
    
    
    2,876,026Other Income (Expense):
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (479,446
    )
    
    
    
    
    
    
    
    
    (479,446
    )Amortization expense of loan discount
and intangibles
    
    
    (516,713
    )
    
    
    
    
    
    
    
    
    (516,713
    )Finance expense on derivatives
    
    
    
    
    (A
    )
    
    
    (925,571
    )
    
    
    (925,571
    )Gain on change in fair value of derivative
Financial instruments
    
    
    
    
    (B
    )
    
    
    5,751,603
    
    
    
    5,751,603Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    Other income (expense), net
    
    
    (7,538
    )
    
    
    
    
    
    
    
    
    (7,538
    )Total other expenses
    
    
    (1,003,697
    )
    
    
    
    
    4,826,032
    
    
    
    3,822,335Loss Before Income Taxes
    
    
    (1,032,224
    )
    
    
    
    
    4,826,032
    
    
    
    3,793,808Provision for Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    Net Loss
    
    $
    (1,032,224
    )
    
    
    
    $
    4,826,032
    
    
    $
    3,793,808Preferred Stock Dividends
    
    
    (511,151
    )
    (C
    )
    
    
    266,961
    
    
    
    (244,190
    )Net loss attributable to common
Shareholders
    
    $
    (1,543,375
    )
    
    
    
    $
    5,092,993
    
    
    $
    3,549,618Income (loss) loss per share-basic
    
    $
    (0.01
    )
    
    
    
    $
    0.04
    
    
    $
    0.03Weighted average shares outstanding-basic
    
    
    141,810,791
    
    
    
    
    
    
    
    
    
    141,810,791Income (loss) loss per share-fully diluted
    
    $
    (0.01
    )
    
    
    
    $
    0.01
    
    
    $
    0.00Weighted average shares outstanding-fully diluted
    
    
    141,810,791
    
    
    
    
    
    
    
    
    
    1,391,504,369
 
 (A)
    
     Financing expense recognized for warrants at fair value in excess of face amount of
debt.(B)
    
     Change in fair value of derivatives.(C)
    
     Amount of beneficial conversion feature eliminated as debt was reduced to zero as
fair value of derivative was recorded as a liability. 10




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
 Six Months Ended June 30, 2009 Summary
    
    As Reported
    
    
    
    
    Adjustments
    
    
    As RestatedConsolidated Statement of Operations:
    
    (Unaudited)
    
    
    
    
    (Unaudited)
    
    
    (Unaudited)Installation and other services
    
    $
    3,078,444
    
    
    
    
    
    
    
    
    $
    3,078,444Equipment sales
    
    
    6,466,906
    
    
    
    
    
    
    
    
    
    6,466,906Total revenues
    
    
    9,545,350
    
    
    
    
    
    
    
    
    
    9,545,350Cost of sales
    
    
    3,972,732
    
    
    
    
    
    
    
    
    
    3,972,732Gross Profit
    
    
    5,572,618
    
    
    
    
    
    
    
    
    
    5,572,618Operating Expenses:General and administrative
    
    
    5,950,392
    
    
    
    
    
    
    
    
    
    5,950,392Depreciation
    
    
    70,863
    
    
    
    
    
    
    
    
    
    70,863Total operating expenses
    
    
    6,021,255
    
    
    
    
    
    
    
    
    
    6,021,255Other Income (Expense):
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (912,255
    )
    
    
    
    
    
    
    
    
    (912,255
    )Amortization expense of loan discount
and intangibles
    
    
    (993,387
    )
    
    
    
    
    
    
    
    
    (993,387
    )Finance expense on derivatives
    
    
    
    
    (A
    )
    
    
    (925,571
    )
    
    
    (925,571
    )Gain on change in fair value of derivative
Financial instruments
    
    
    
    
    (B
    )
    
    
    6,429,505
    
    
    
    6,429,505Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    Other income (expense), net
    
    
    (5,923
    )
    
    
    
    
    
    
    
    
    (5,923
    )Total other expenses
    
    
    (1,911,565
    )
    
    
    
    
    5,503,934
    
    
    
    3,592,369Loss Before Income Taxes
    
    
    (2,360,202
    )
    
    
    
    
    5,503,934
    
    
    
    3,143,732Provision for Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    Net Loss
    
    $
    (2,360,202
    )
    
    
    
    $
    5,503,934
    
    
    $
    3,143,732Preferred Stock Dividends
    
    
    (755,485
    )
    (C
    )
    
    
    266,961
    
    
    
    (488,524
    )Net loss attributable to common
Shareholders
    
    $
    (3,115,687
    )
    
    
    
    $
    5,770,895
    
    
    $
    2,655,208Income (loss) per share-basic
    
    $
    (0.02
    )
    
    
    
    $
    0.04
    
    
    $
    0.02Weighted average shares outstanding-basic
    
    
    141,023,937
    
    
    
    
    
    
    
    
    
    141,023,937Income (loss) per share-fully diluted
    
    $
    (0.02
    )
    
    
    
    $
    0.02
    
    
    $
    0.00Weighted average shares outstanding-fully diluted
    
    
    141,023,937
    
    
    
    
    
    
    
    
    
    1,376,783,935
 
 (A)
    
     Financing expense recognized for warrants at fair value in excess of face amount of debt.(B)
    
     Change in fair value of derivatives.(C)
    
     Amount of beneficial conversion feature eliminated as debt was reduced to zero as fair
value of derivative was recorded as a liability. Summary Statement of Cash Flows for the SixMonths Ended June 30, 2009:
    
    As Reported
    
    
    Adjustments
    
    
    As RestatedNet Cash Used in Operating Activities
    
    $
    (1,032,626
    )
    
    
    
    
    
    $
    (1,032,626
    )Net Cash Provided by Investing Activities
    
    
    874,233
    
    
    
    
    
    
    
    874,233Net Cash Provided by Financing Activities
    
    
    15,546
    
    
    
    
    
    
    
    15,546Decrease in cash
    
    
    (142,847
    )
    
    
    
    
    
    
    (142,847
    )Cash at Beginning of Period
    
    
    835,525
    
    
    
    
    
    
    
    835,525Cash at End of Period
    
    $
    692,678
    
    
    
    
    
    
    $
    692,678
 11




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
 December 31, 2008 Summary ConsolidatedBalance Sheet
    
    As Reported
    
    
    
    
    Adjustments
    
    
    As RestatedCurrent assets
    
    $
    9,171,809
    
    
    
    
    
    
    
    
    $
    9,171,809Property and equipment, net
    
    
    444,489
    
    
    
    
    
    
    
    
    
    444,489Goodwill
    
    
    16,918,396
    
    
    
    
    
    
    
    
    
    16,918,396Intangible assets, net
    
    
    731,710
    
    
    
    
    
    
    
    
    
    731,710Deposits and other assets
    
    
    27,735
    
    
    
    
    
    
    
    
    
    27,735Total assets
    
    $
    27,294,139
    
    
    
    
    
    
    
    
    $
    27,294,139Current liabilities:Accounts payable and accrued expenses
    
    $
    2,211,611
    
    
    
    
    
    
    
    
    $
    2,211,611Billings in excess of revenues
    
    
    2,620,857
    
    
    
    
    
    
    
    
    
    2,620,857Payroll liabilities
    
    
    851,833
    
    
    
    
    
    
    
    
    
    851,833Current portion of long term debt
    
    
    2,669,177
    
    
    
    
    
    
    
    
    
    2,669,177Income taxes payable
    
    
    164,000
    
    
    
    
    
    
    
    
    
    164,000Other current liabilities
    
    
    228,390
    
    
    
    
    
    
    
    
    
    228,390Total current liabilities
    
    
    8,745,868
    
    
    
    
    
    
    
    
    
    8,745,868Long-term debt, less current portion
    
    
    5,053,135
    
    
    
    
    
    
    
    
    
    5,053,135Derivative financial instruments at
Fair value
    
    
    
    
    (1
    )
    
    
    12,016,463
    
    
    
    12,016,463Total Liabilities
    
    
    13,799,003
    
    
    
    
    
    12,016,463
    
    
    
    25,815,466Stockholders equity (deficit):Series A convertible preferred stock
    
    
    8,796,521
    
    (2
    )
    
    
    (1,983,607
    )
    
    
    6,812,914Common stock
    
    
    140,229
    
    
    
    
    
    
    
    
    
    140,229Additional paid-in capital
    
    
    21,385,901
    
    (3
    )
    
    
    (9,500,227
    )
    
    
    11,885,674Accumulated deficit
    
    
    (16,827,515
    )
    (4
    )
    
    
    (532,629
    )
    
    
    (17,360,144
    )Total stockholders equity (deficit)
    
    
    13,495,136
    
    (4
    )
    
    
    (12,016,463
    )
    
    
    1,478,673Total liabilities and stockholders
Equity (deficit)
    
    $
    27,294,139
    
    
    
    
    
    
    
    
    
    27,294,139
 
 (1)
    
     Fair value of derivative financial instruments at December 31, 2008 based on
Black-Scholes model valuation.(2)
    
     Amount of beneficial conversion feature eliminated as debt was reduced to zero as
fair value of derivatives was recorded as a liability.(3)
    
     Represents the initial entries to record the fair value of derivatives at issuance
date.(4)
    
     Represents the total of amortization of additional discount on debt, finance expense
on derivatives, reversal of beneficial conversion feature and gain on change in fair value
of derivatives since issuance of warrants. 12




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods
(Continued)
 Year Ended December 31, 2008 SummaryConsolidated Statement of Operations:
    
    As Reported
    
    
    
    
    Adjustments
    
    
    As RestatedInstallation and other services
    
    $
    5,327,723
    
    
    
    
    
    
    
    
    $
    5,327,723Equipment sales
    
    
    16,381,884
    
    
    
    
    
    
    
    
    
    16,381,884Total revenues
    
    
    21,709,607
    
    
    
    
    
    
    
    
    
    21,709,607Cost of sales
    
    
    11,160,248
    
    
    
    
    
    
    
    
    
    11,160,248Gross Profit
    
    
    10,549,359
    
    
    
    
    
    
    
    
    
    10,549,359Operating Expenses:
    
    
    
    
    
    
    
    
    General and administrative
    
    
    8,851,632
    
    
    
    
    
    
    
    
    
    8,851,632Depreciation
    
    
    132,294
    
    
    
    
    
    
    
    
    
    132,294Total operating expenses
    
    
    8,983,926
    
    
    
    
    
    
    
    
    
    8,983,926Other Income (Expense):
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (2,041,393
    )
    
    
    
    
    
    
    
    
    (2,041,393
    )Amortization expense of loan discount
and intangibles
    
    
    (4,358,031
    )
    (A
    )
    
    
    (1,244,830
    )
    
    
    (5,602,861
    )Finance expense on derivatives
    
    
    
    
    (B
    )
    
    
    (4,156,069
    )
    
    
    (4,156,069
    )Gain on change in fair value of derivative
Financial instruments
    
    
    
    
    (C
    )
    
    
    5,245,207
    
    
    
    5,245,207Gain on extinguishment of debt
    
    
    151,619
    
    
    
    
    
    
    
    
    
    151,619Other income, net
    
    
    15,582
    
    
    
    
    
    
    
    
    
    15,582Total other expenses
    
    
    (6,232,223
    )
    
    
    
    
    (155,692
    )
    
    
    (6,387,915
    )Loss Before Income Taxes
    
    
    (4,666,790
    )
    
    
    
    
    (155,692
    )
    
    
    (4,822,482
    )Provision for Income Taxes
    
    
    (164,000
    )
    
    
    
    
    
    
    
    
    (164,000
    )Net Loss
    
    $
    (4,830,790
    )
    
    
    
    $
    (155.692
    )
    
    $
    (4,986,482
    )Preferred Stock Dividends
    
    
    (2,459,630
    )
    (D
    )
    
    
    1,983,607
    
    
    
    (476,023
    )Net loss attributable to common
Shareholders
    
    $
    (7,290,420
    )
    
    
    
    $
    1,827,915
    
    
    $
    (5,462,505
    )Loss per share-basic and fully diluted
    
    $
    (0.070
    )
    
    
    
    $
    0.018
    
    
    $
    (0.052
    )Weighted average shares outstanding
    
    
    104,802,022
    
    
    
    
    
    
    
    
    
    104,802,022
 
 (A)
    
     Additional discount on debt being amortized.(B)
    
     Financing expense recognized for warrants at fair value in excess of face
amount of debt.(C)
    
     Change in fair value of derivatives.(D)
    
     Amount of beneficial conversion feature eliminated as debt was reduced to
zero as fair value of derivative was recorded as a liability. Summary Statement of Cash Flows for theYear Ended December 31, 2008:
    
    As Reported
    
    
    Adjustments
    
    
    As RestatedNet Cash Used in Operating Activities
    
    $
    (332,352
    )
    
    
    
    
    
    $
    (332,352
    )Net Cash Used in Investing Activities
    
    
    (4,862,410
    )
    
    
    
    
    
    
    (4,862,410
    )Net Cash Provided by Financing Activities
    
    
    5,842,441
    
    
    
    
    
    
    
    5,842,441Increase in cash
    
    
    647,679
    
    
    
    
    
    
    
    647,679Cash at Beginning of Period
    
    
    187,846
    
    
    
    
    
    
    
    187,846Cash at End of Period
    
    $
    835,525
    
    
    
    
    
    
    $
    835,525
 13




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
  2008 VicisHilco
    
    
    FinancingFinancing
    
    $
    6,000,000
    
    
    $
    5,500,000Total number of warrants
    
    
    61,273,872
    
    
    
    250,000,000Exercise Price
    
    $
    0.137
    
    
    $
    0.03Term of warrants (years)
    
    
    5
    
    
    
    5Debt issuance costs
    
    $
    1,659,773
    
    
    $
    Face value of debt/equity
    
    $
    4,340,227
    
    
    $
    5,500,000Fair value of derivative at
Inception
    
    $
    18,008,466
    
    
    $
    9,656,069Financing expense recorded
    
    $
    12,348,466
    
    
    $
    4,156,069
  20083/31/08
    
    
    6/30/08
    
    
    9/30/08
    
    
    12/31/08(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Derivative financial instrument at
opening balance sheet date
    
    $
    7,605,601
    
    
    $
    3,448,910
    
    
    $
    1,385,780
    
    
    $
    11,967,175Fair value of new derivative during
the period
    
    
    
    
    
    
    
    
    
    
    9,656,069
    
    
    
    Change in estimated fair market
value
of derivative financial instrument
    
    
    (4,156,691
    )
    
    
    (2,063,130
    )
    
    
    925,326
    
    
    
    49,288Derivative financial instrument at
closing balance sheet date
    
    $
    3,448,910
    
    
    $
    1,385,780
    
    
    $
    11,967,175
    
    
    $
    12,016,463
 14




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
 Effects of recording the above discussed derivatives at fair value on the applicable previously
issued unaudited quarterly financial statements for June 30, 2008 and March 31, 2009 are as
follows:
 Period ended June 30, 2008:
 As Reported
    
    
    Adjustments
    
    
    As RestatedBalance Sheet as of June 30, 2008
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Total current assets
    
    $
    4,420,853
    
    
    
    
    
    
    $
    4,420,853Total other assets
    
    
    13,818,289
    
    
    
    
    
    
    
    13,818,289Total Assets
    
    $
    18,239,142
    
    
    
    
    
    
    $
    18,239,142Total current liabilities
    
    $
    17,199,245
    
    
    
    
    
    
    $
    17,199,245Long-term debt
    
    
    1,044,607
    
    
    
    (414,944
    )
    
    
    629,663Derivative financial instruments at
Fair value
    
    
    
    
    
    
    1,385,780
    
    
    
    1,385,780Total Liabilities
    
    
    18,243,852
    
    
    
    970,836
    
    
    
    19,214,688Total stockholders equity (deficit)
    
    
    (4,710
    )
    
    
    (970,836
    )
    
    
    (975,546
    )Total Liabilities and Stockholders Equity
(Deficit)
    
    $
    18,239,142
    
    
    
    
    
    
    $
    18,239,142
 Summary Consolidated Statement ofOperations for the Three Months
    
    As Reported
    
    
    Adjustments
    
    
    As RestatedEnded June 30, 2008:
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Total revenues
    
    $
    4,533,447
    
    
    
    
    
    
    $
    4,533,447Total cost of goods sold
    
    
    2,250,924
    
    
    
    
    
    
    
    2,250,924Gross profit
    
    
    2,282,523
    
    
    
    
    
    
    
    2,282,523Total operating expenses
    
    
    2,145,837
    
    
    
    
    
    
    
    2,145,837Total other expenses
    
    
    (2,011,922
    )
    
    
    1,648,187
    
    
    
    (363,735
    )Net income (loss)
    
    
    (1,875,236
    )
    
    
    1,648,187
    
    
    
    (227,049
    )Preferred stock dividends
    
    
    (40,430
    )
    
    
    
    
    
    
    (40,430
    )Net income (loss)
attributable to common
Shareholders
    
    $
    (1,915,666
    )
    
    
    1,648,187
    
    
    
    (267,479
    )Net income (loss) per share-basic
    
    $
    (0.021
    )
    
    
    0.018
    
    
    $
    (0.003
    )Weighted average shares
outstanding-basic
    
    
    90,714,185
    
    
    
    
    
    
    
    90,714,185
 Summary Statement of Cash Flows for the
    
    As Reported
    
    
    Adjustments
    
    
    As RestatedPeriod Ended June 30, 2008:
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net Cash Used in Operating Activities
    
    $
    (454,317
    )
    
    
    
    
    
    $
    (454,317
    )Net Cash Used in Investing Activities
    
    
    (148,912
    )
    
    
    
    
    
    
    (148,912
    )Net Cash Provided by Financing Activities
    
    
    649,202
    
    
    
    
    
    
    
    649,202Increase in cash
    
    
    45,973
    
    
    
    
    
    
    
    45,973Cash at Beginning of Period
    
    
    187,846
    
    
    
    
    
    
    
    187,846Cash at End of Period
    
    $
    233,819
    
    
    
    
    
    
    $
    233,819
 15




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
 Period ended March 31, 2009:
 As Reported
    
    
    Adjustments
    
    
    As RestatedBalance Sheet as of March 31, 2009
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Total current assets
    
    $
    7,558,238
    
    
    
    
    
    
    $
    7,558,238Total other assets
    
    
    17,968,291
    
    
    
    
    
    
    
    17,968,291Total Assets
    
    $
    25,526,529
    
    
    
    
    
    
    $
    25,526,529Total current liabilities
    
    $
    7,945,896
    
    
    
    
    
    
    $
    7,945,896Long-term debt
    
    
    5,412,900
    
    
    
    
    
    
    
    5,412,900Derivative financial instruments at
Fair value
    
    
    
    
    
    
    11,338,561
    
    
    
    11,338,561Total Liabilities
    
    
    13,358,796
    
    
    
    11,338,561
    
    
    
    24,697,357Total stockholders equity (deficit)
    
    
    12,167,733
    
    
    
    (11,338,561
    )
    
    
    829,172Total Liabilities and Stockholders Equity
    
    $
    25,526,529
    
    
    
    
    
    
    $
    25,526,529
 Summary Consolidated Statement of Operations for
    
    As Reported
    
    
    Adjustments
    
    
    As Restatedthe Three Months Ended March 31, 2009:
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Total revenues
    
    $
    5,001,299
    
    
    
    
    
    
    $
    5,001,299Total cost of goods sold
    
    
    2,276,180
    
    
    
    
    
    
    
    2,276,180Gross profit
    
    
    2,725,119
    
    
    
    
    
    
    
    2,725,119Total operating expenses
    
    
    3,145,229
    
    
    
    
    
    
    
    3,145,229Total other expenses
    
    
    (907,868
    )
    
    
    677,902
    
    
    
    (229,966
    )Net loss
    
    
    (1,327,978
    )
    
    
    677,902
    
    
    
    (650,076
    )Preferred stock dividends
    
    
    (244,334
    )
    
    
    
    
    
    
    (244,334
    )Net loss attributable to common
Shareholders
    
    $
    (1,572,312
    )
    
    
    677,902
    
    
    
    (894,410
    )Net income loss per share-basic and fully diluted
    
    $
    (0.01
    )
    
    
    0.00
    
    
    $
    (0.01
    )Weighted average shares outstanding
    
    
    140,228,340
    
    
    
    
    
    
    
    140,228,340
 Summary Statement of Cash Flows for the
    
    As Reported
    
    
    Adjustments
    
    
    As RestatedPeriod Ended March 31, 2009:
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net Cash Used in Operating Activities
    
    $
    (59,417
    )
    
    
    
    
    
    $
    (59,417
    )Net Cash Provided by Investing Activities
    
    
    401,968
    
    
    
    
    
    
    
    401,968Net Cash Used in Financing Activities
    
    
    (513,601
    )
    
    
    
    
    
    
    (513,601
    )Decrease in cash
    
    
    (171,050
    )
    
    
    
    
    
    
    (171,050
    )Cash at Beginning of Period
    
    
    1,204,191
    
    
    
    
    
    
    
    1,204,191Cash at End of Period
    
    $
    1,033,141
    
    
    
    
    
    
    $
    1,033,141
  16




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 2  Restatement of Prior Periods (Continued)
  For the Three Months Ended 2009 (Unaudited)3/31/09
    
    
    6/30/09Net loss, as previously reported
    
    $
    (1,327,978
    )
    
    $
    (1,032,224
    )Net income (loss), as restated
    
    $
    (650,076
    )
    
    $
    3,793,808Total liabilities, as previously reported
    
    $
    13,358,796
    
    
    $
    13,171,525Total liabilities, as restated
    
    $
    24,697,357
    
    
    $
    20,684,054Total equity (deficit), as previously
Reported
    
    $
    12,167,733
    
    
    $
    12,072,930Total equity (deficit), as restated
    
    $
    829,172
    
    
    $
    4,560,401
 For the Three Months Ended 2008 (Unaudited) Year Ended3/31/08
    
    
    6/30/08
    
    
    9/30/08
    
    
    12/31/08Net loss, as previously reported
    
    $
    (1,798,087
    )
    
    $
    (1,875,236
    )
    
    $
    (784,983
    )
    
    $
    (4,830,790
    )Net income (loss), as restated
    
    $
    1,943,661
    
    
    $
    (227,049
    )
    
    $
    (6,281,322
    )
    
    $
    (4,986,482
    )Total liabilities, as previously reported
    
    $
    15,911,754
    
    
    $
    18,243,852
    
    
    $
    14,300,178
    
    
    $
    13,799,003Total liabilities, as restated
    
    $
    18,530,777
    
    
    $
    19,214,688
    
    
    $
    26,267,353
    
    
    $
    25,815,466Total equity (deficit), as previously
Reported
    
    $
    1,765,075
    
    
    $
    (4,710
    )
    
    $
    13,879,835
    
    
    $
    13,495,136Total equity (deficit), as restated
    
    $
    (853,948
    )
    
    $
    (975,546
    )
    
    $
    1,912,660
    
    
    $
    1,478,673
 Note 3  Liquidity and Capital Resources
   17




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 3  Liquidity and Capital Resources (continued)
    Note 4  Significant Accounting Policies
  18




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Principles of Consolidation
  Cash Equivalents
  Use of Estimates
  Financial Instruments and Credit Risk
    Inventory Reserves
  19




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Allowance for Doubtful Accounts
  Convertible Securities With Beneficial Conversion Features
 Warrant Valuation and Beneficial Conversion Feature Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios Application of Issue No. 98-5 to Certain Convertible Instruments (EITF No.
00-27)
  Derivative Financial Instruments at Fair Value
 20




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
  o
    
    The Company effecting a merger or consolidation with another entityo
    
    The Company sells all or substantially all of the Companys assetso
    
    The Companys shareholders approve a tender or exchange offer, oro
    
    The Companys holders of the common stock exchange their shares for securities or cash
  Goodwill and Intangibles
       21




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Impairment of Long-lived Assets and Long-lived Assets to be Disposed of
  Revenue Recognition
    22




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Warranty Reserves
  Reclassifications
  Income taxes
   Accounting for
Uncertainty in Income Taxes
 23




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Earnings Per Common Share
   Derivatives
  Stock Based Compensation
 Share-Based Payment.
 24




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Recent Accounting Pronouncements
     The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles
 Subsequent Events
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 25




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 4  Significant Accounting Policies (continued)
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements
  Note 5 Billings in Excess of Revenues
  Six Months
    
    
    Year Endedended June 30,
    
    
    December 31,2009
    
    
    2008Customer deposits and deferred income on installation contracts
    
    $
    1,007,015
    
    
    $
    1,683,266Deferred revenue on maintenance contracts
    
    
    1,721,364
    
    
    
    937,591$
    2,728,379
    
    
    $
    2,620,857
 Note 6 Accounts Payable and Accrued Expenses
  June 30,
    
    
    December 31,2009
    
    
    2008Accounts payable, trade
    
    $
    1,636,495
    
    
    $
    1,857,905Accrued warranty liability
    
    
    188,108
    
    
    
    231,906Other accrued expenses
    
    
    191,416
    
    
    
    121,800Total
    
    $
    2,016,019
    
    
    $
    2,211,611
 26




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 7 Long Term Debt
 Long-term debt as of June 30, 2009 and December 31, 2008 consisted of the following:
 June 30,
    
    
    December 31,2009
    
    
    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 former 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 $0 and $75,812, respectively.
    
    
    850,000
    
    
    
    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
$60,349 and $118,917, respectively (STN acquisition.)
    
    
    1,439,651
    
    
    
    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
$2,171,374 and $2,658,050, respectively (STN acquisition)
    
    
    4,843,581
    
    
    
    4,380,916Secured 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.
    
    
    43,005
    
    
    
    60,617Secured notes payable to GMAC, accruing interest at 9.25% with monthly payments of $2,272,
paid in full in June 2009 and refinanced as an operating lease. Notes are secured by
vehicles.
    
    
    
    
    
    
    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.
    
    
    
    
    
    
    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.
    
    
    26,738
    
    
    
    30,468Total long term debt
    
    
    7,428,914
    
    
    
    7,722,312Less current portion
    
    
    (1,842,454
    )
    
    
    (2,669,177
    )Long term portion
    
    $
    5,586,460
    
    
    $
    5,053,135
 27




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 7 Long Term Debt (Continued)
  Years Ending December 31,
    
    Gross2009
    
    $
    1,842,4542010
    
    
    2,617,9312011
    
    
    5,200,2522012
    
    
    2013
    
    
    9,660,637Less: Unamortized discounts
    
    
    (2,231,723
    )Net of Discounts
    
    $
    7,428,914
 Change in unamortized discount and loan costs of the Note 
  Note 8  Commitments and Contingencies
 Leases
  2009
    
    $
    557,5432010
    
    
    331,7342011
    
    
    212,4272012
    
    
    171,9972013
    
    
    
  28




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 8  Commitments and Contingencies (continued)
 Liquidated Damages Under Registration Payment Arrangements
  Litigation
       29




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 8  Commitments and Contingencies (continued)
    Risk Management
  Note 9  Related Party Transactions
  Note 10  Series A 8% Convertible Preferred Stock
   30




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 10  Series A 8% Convertible Preferred Stock (continued)
    Note 11  Cost of Sales
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Equipment costs
    
    $
    1,178,861
    
    
    $
    1,854,207
    
    
    $
    2,938,072
    
    
    $
    3,714,853Contract labor
    
    
    18,610
    
    
    
    36,210
    
    
    
    24,225
    
    
    
    114,421Direct labor
    
    
    328,881
    
    
    
    257,677
    
    
    
    663,820
    
    
    
    488,885Sales commissions and selling costs
    
    
    132,779
    
    
    
    22,666
    
    
    
    261,173
    
    
    
    26,101Lite warranty costs
    
    
    24,101
    
    
    
    
    
    
    
    55,020
    
    
    
    Other costs
    
    
    13,320
    
    
    
    80,164
    
    
    
    30,422
    
    
    
    136,545$
    1,696,552
    
    
    $
    2,250,924
    
    
    $
    3,972,732
    
    
    $
    4,480,805
 Note 12  Employee Benefit Plan
   31




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 13  Acquisition of Standard Tel Networks, LLC
  Note 14  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
    
    
    $
    0.03Granted during 2009
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    19,200,000
    
    
    $
    0.03Vested and exercisable at June 30, 2009
    
    
    1,933,333
    
    
    $
    0.04
 32




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 14  Stock-Based Compensation (continued)
  Number of Shares
    
    Year Vested15,333,333
    
    
    20091,633,334
    
    
    2010300,000
    
    
    2011
  Note 15  Warrants
 Warrants
  Outstanding
    
    
    Exercise PriceSeries A *
    
    
    71,631,216
    
    
    $
    0.01Series B
    
    
    80,896,508
    
    
    $
    0.01Series C
    
    
    15,988,602
    
    
    $
    0.01Series D **
    
    
    25,080,000
    
    
    $
    0.01Series E
    
    
    61,273,835
    
    
    $
    0.01Series F
    
    
    350,000,000
    
    
    $
    0.01Chatham
    
    
    140,930,835
    
    
    $
    0.01Total warrants
    
    
    745,800,996
 
 *
    
    Includes 2,628,917 penalty warrants**
    
    Includes 1,080,000 penalty warrants.   33




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Consolidated Financial Statements
 Note 16  Intangible Assets
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Life (years)Purchased customer contracts  USVD
    
    $
    600,000
    
    
    $
    600,000
    
    
    
    1Purchased customer contracts  STN
    
    
    900,000
    
    
    
    675,000
    
    
    
    1Non-compete agreements
    
    
    100,000
    
    
    
    100,000
    
    
    
    3$
    1,600,000
    
    
    $
    1,375,000Six months ended December 31, 2009 Amortization Expense
    
    
    
    
    
    $
    498,376
 34




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##### Table of Contents



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
    35




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##### Table of Contents



Acquisition of USVD
  Increase in Authorized Shares
  Vicis Equity Infusion
      36




---



##### Table of Contents



Acquisition of Standard Tel Networks, LLC
   Results of Operations
  Restatement of Prior Periods
  37




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##### Table of Contents



For the Three Months Ended 20083/31/08
    
    
    6/30/08
    
    
    9/30/08
    
    
    12/31/08Net loss, as previously reported
    
    $
    (1,798,087
    )
    
    $
    (1,875,236
    )
    
    $
    (784,983
    )
    
    $
    (4,830,790
    )Net income (loss), as restated
    
    $
    1,943,661
    
    
    $
    (227,049
    )
    
    $
    (6,281,322
    )
    
    $
    (4,986,482
    )Total liabilities, as previously reported
    
    $
    15,911,754
    
    
    $
    18,243,852
    
    
    $
    14,300,178
    
    
    $
    13,799,003Total liabilities, as restated
    
    $
    18,530,777
    
    
    $
    19,214,688
    
    
    $
    26,267,353
    
    
    $
    25,815,466Total equity (deficit), as previously
reported
    
    $
    1,765,075
    
    
    $
    (4,710
    )
    
    $
    13,879,835
    
    
    $
    13,495,136Total equity (deficit), as restated
    
    $
    (853,948
    )
    
    $
    (975,546
    )
    
    $
    1,912,660
    
    
    $
    1,478,673
 For the Three Months Ended 20093/31/09
    
    
    6/30/09Net loss, as previously reported
    
    $
    (1,327,978
    )
    
    $
    (1,032,224
    )Net income (loss), as restated
    
    $
    (650,076
    )
    
    $
    3,793,808Total liabilities, as previously reported
    
    $
    13,358,796
    
    
    $
    13,171,525Total liabilities, as restated
    
    $
    24,697,357
    
    
    $
    20,684,054Total equity (deficit), as previously
reported
    
    $
    12,167,733
    
    
    $
    12,072,930Total equity (deficit), as restated
    
    $
    829,172
    
    
    $
    4,560,401
 Revenues, Cost of Sales and Gross Margins
    38




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##### Table of Contents



General and Administrative Expenses
   Amortization Expense
   Interest Expense
  39




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##### Table of Contents



Gain on Change in Fair Value of Derivative Financial Instruments
   Finance Expense on Derivatives
   Net Income/Net Loss
   Liquidity and Capital Resources
   40




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Critical Accounting Policies
  Revenue Recognition
    41




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 
 Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
  (1)
    
    On November 17, 2009, and as a result of comments the Company received from the
SEC in connection with the SECs review of the Companys Form 10-K for the year ended
December 31, 2008 and Form 10-Q for the period ended June 30, 2009, the Companys board
of directors concluded that the Companys previously issued financial statements for
the years ended December 31, 2007 and 2008, and each interim quarter contained within
such years, and for the quarters ended March 31, 2009 and June 30, 2009, should no
longer be relied upon because of an error contained therein regarding the accounting of
certain warrants issued in connection with certain financings, which warrants should
have been accounted for as a liability under EITF 00-19 based on their fair value as of
the date of their issuance because they contain put provisions requiring the Company to
redeem the warrants under certain circumstances. The board of directors discussed the
forgoing matters with its Chief Financial Officer and the Companys independent
accountant.
 (2)
    
    As disclosed in Note 2 to the Financial Statements, the Company was not in
compliance with the leverage ratio imposed by the Chatham Senior Loan in the first
quarter of 2009. The Companys management and board of directors devoted a significant
amount of time to the negotiation of a modification to the ratio requirement and to the
impact the Companys non-compliance was having on its liquidity. As further disclosed
in Note 2 to the Financial Statements, effective August 13, 2009, among other things,
Chatham agreed to suspend the Companys obligation to comply with the leverage and debt
coverage ratios for the period July 31, 2009 through June 30, 2010.
 (3)
    
    On May 12, 2009, Messers. Fischer and Diamond ceased working for the USVD,
alleging that their employment was constructively terminated and that their
non-competition agreements were null and void. Shortly thereafter, several other USVD
employees resigned from USVD and went to work for a new company, which the Company
believes is owned by Messers. Fischer & Diamond and/or some of their family members,
either directly or indirectly. This new company shortly thereafter began soliciting
the Companys vendors and customers. As a result, management and the board of
directors were required to personally devote a significant amount of time and effort to
stabilize the situation at USVD.
   42




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Changes in Internal Control Over Financial Reporting
  43




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
         44




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##### Table of Contents



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.
 
 45




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##### Table of Contents



SIGNATURES
  Brookside Technology Holdings CorpBy:
    /s/ Bryan McGuireBryan McGuire, Chief Financial Officer(Principal Financial Officer) Dated:
February 8, 2010
 46