##### 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 June 30, 2010
 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
 ITEM
 PART I  FINANCIAL INFORMATIONItem 1. Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis Financial Condition and Results of Operation
    
    
    28Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4(T) Controls and Procedures
    
    
    35PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3. Defaults Upon Senior Securities
    
    
    38Item 4. Submission of Matters to a Vote of Securities Holders
    
    
    38Item 5. Other Information
    
    
    38Item 6. Exhibits
    
    
    38EX-31.1EX-31.2EX-32.1EX-32.2
  2




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3




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
 CONSOLIDATED BALANCE SHEETS  As of June 30, 2010 and December 31, 2009
 June 30,
    
    
    December 31,2010 (Unaudited)
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,251,362
    
    
    $
    196,424Cash collateral account
    
    
    
    
    
    
    361,097Accounts receivable, net
    
    
    3,057,334
    
    
    
    2,908,056Inventory
    
    
    2,252,434
    
    
    
    2,011,052Deferred contract costs
    
    
    (464
    )
    
    
    7,937Deferred finance charges, net of amortization
    
    
    241,592
    
    
    
    339,756Prepaid expenses
    
    
    97,791
    
    
    
    69,541Total current assets
    
    
    6,900,049
    
    
    
    5,893,863Property and equipmentOffice equipment
    
    
    592,554
    
    
    
    645,506Furniture, fixtures and leasehold improvements
    
    
    169,364
    
    
    
    169,364761,918
    
    
    
    814,870Less: accumulated depreciation
    
    
    (502,996
    )
    
    
    (459,059
    )Property and equipment, net
    
    
    258,922
    
    
    
    355,811Goodwill
    
    
    11,659,254
    
    
    
    11,659,254Deposits and other assets
    
    
    78,267
    
    
    
    28,267TOTAL ASSETS
    
    $
    18,896,492
    
    
    $
    17,937,195LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    2,369,709
    
    
    $
    2,728,404Billings in excess of revenues
    
    
    1,990,164
    
    
    
    2,350,065Payroll liabilities
    
    
    762,175
    
    
    
    443,945Current portion of long term debt
    
    
    943,135
    
    
    
    8,413,200Income taxes payable
    
    
    96,700
    
    
    
    96,700Other current liabilities
    
    
    288,724
    
    
    
    288,724Total current liabilities
    
    
    6,450,607
    
    
    
    14,321,038Long term debt, less current portion
    
    
    6,075,469
    
    
    
    17,392Derivative financial instruments at fair value
    
    
    9,938,127
    
    
    
    6,437,547Total liabilities
    
    
    22,464,203
    
    
    
    20,775,977Stockholders deficitSeries A convertible preferred stock, 15,000,000 authorized,
17,843,799 and 13,106,716 issued and outstanding at June 30,
2010 and
December 31, 2009, respectively, at 8% dividend yield.
Liquidation preference of $20,082,495 and $14,738,181 at
June 30, 2010 and December 31, 2009, respectively.
    
    
    13,084,696
    
    
    
    7,740,386Common stock, $.01 par value, 10,000,000,000 shares
authorized, 182,579,405 and 178,079,405 shares issued and
outstanding at June 30, 2010 and December 31, 2009, respectively.
    
    
    182,580
    
    
    
    178,080Additional paid in capital
    
    
    12,018,522
    
    
    
    11,943,670Accumulated deficit
    
    
    (28,853,509
    )
    
    
    (22,700,918
    )Total stockholders deficit
    
    
    (3,567,711
    )
    
    
    (2,838,782
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    18,896,492
    
    
    $
    17,937,195
  4




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2010 and 2009
Unaudited
 Quarter Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUESInstallation and other services
    
    $
    3,476,470
    
    
    $
    1,505,267
    
    
    
    5,566,615
    
    
    $
    3,078,444Equipment sales
    
    
    1,428,168
    
    
    
    3,038,784
    
    
    
    3,010,098
    
    
    
    6,466,906Total revenues
    
    
    4,904,638
    
    
    
    4,544,051
    
    
    
    8,576,713
    
    
    
    9,545,350COST OF SALES
    
    
    2,244,418
    
    
    
    1,696,552
    
    
    
    3,805,081
    
    
    
    3,972,732GROSS PROFIT
    
    
    2,660,220
    
    
    
    2,847,499
    
    
    
    4,771,632
    
    
    
    5,572,618OPERATING EXPENSESGeneral and administrative
    
    
    2,702,550
    
    
    
    2,840,295
    
    
    
    5,547,464
    
    
    
    5,950,392Depreciation expense
    
    
    25,740
    
    
    
    35,731
    
    
    
    54,285
    
    
    
    70,863Total operating expenses
    
    
    2,728,290
    
    
    
    2,876,026
    
    
    
    5,601,749
    
    
    
    6,021,255OTHER INCOME (EXPENSE)Interest expense
    
    
    (318,158
    )
    
    
    (479,446
    )
    
    
    (761,139
    )
    
    
    (912,255
    )Amortization expense of loan discount and intangibles
    
    
    (243,338
    )
    
    
    (516,713
    )
    
    
    (486,676
    )
    
    
    (993,387
    )Gain extinguishment of debt
    
    
    56,435
    
    
    
    
    
    
    
    56,435
    
    
    
    Finance expense on derivatives
    
    
    (4,290,875
    )
    
    
    (925,571
    )
    
    
    (4,290,875
    )
    
    
    (925,571
    )Gain on change in fair value of derivative financial instruments
    
    
    622,656
    
    
    
    5,751,603
    
    
    
    790,295
    
    
    
    6,429,505Other income (expense), net
    
    
    12,731
    
    
    
    (7,538
    )
    
    
    2,456
    
    
    
    (5,923
    )Total other income (expense)
    
    
    (4,160,549
    )
    
    
    3,822,335
    
    
    
    (4,689,504
    )
    
    
    3,592,369INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (4,228,619
    )
    
    
    3,793,808
    
    
    
    (5,519,621
    )
    
    
    3,143,732Provision for income taxes
    
    
    (160
    )
    
    
    
    
    
    
    (22,374
    )
    
    
    NET INCOME (LOSS)
    
    $
    (4,228,779
    )
    
    $
    3,793,808
    
    
    
    (5,541,995
    )
    
    $
    3,143,732Preferred Stock Dividends
    
    
    (345,296
    )
    
    
    (244,190
    )
    
    
    (607,230
    )
    
    
    (488,524
    )Net income (loss) attributable to common shareholders
    
    $
    (4,574,075
    )
    
    $
    3,549,618
    
    
    
    (6,149,225
    )
    
    $
    2,655,208Loss per share- basic
    
    $
    (0.03
    )
    
    $
    0.03
    
    
    
    (0.03
    )
    
    $
    0.02Weighted average shares outstanding-basic
    
    
    182,579,405
    
    
    
    141,810,791
    
    
    
    180,739,626
    
    
    
    141,023,937Loss per share- fully diluted
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    
    (0.03
    )
    
    $
    0.00Weighted average shares outstanding-fully diluted
    
    
    182,579,405
    
    
    
    1,391,504,369
    
    
    
    180,739,626
    
    
    
    1,376,783,935
 5




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BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2010 and 2009
Unaudited
 2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (5,541,995
    )
    
    $
    3,143,732Adjustments to reconcile net income (loss) to netcash used in operating activities:Depreciation
    
    
    54,285
    
    
    
    70,863Amortization of loan discounts and intangibles
    
    
    486,676
    
    
    
    993,387Non-cash interest expense
    
    
    217,121
    
    
    
    232,544Finance expense on derivatives
    
    
    4,290,875
    
    
    
    925,571Gain on change in fair value of derivative financial instruments
    
    
    (790,295
    )
    
    
    (6,429,505
    )Gain on extinguishment of debt
    
    
    (56,435
    )
    
    
    Loss on disposal of fixed assets
    
    
    42,604
    
    
    
    6,717Bad debt expense
    
    
    116,465
    
    
    
    26,700Stock based compensation
    
    
    49,075
    
    
    
    24,364(Increase) decrease in:Accounts receivable
    
    
    (265,743
    )
    
    
    587,653Inventory
    
    
    (241,382
    )
    
    
    (259,418
    )Deferred contract costs
    
    
    8,401
    
    
    
    70,099Prepaid expenses
    
    
    (28,250
    )
    
    
    (16,753
    )Deposits and other assets
    
    
    (50,000
    )
    
    
    (58,132
    )Increase (decrease) in:Accounts payable and accrued expenses
    
    
    (114,395
    )
    
    
    (195,592
    )Accrued payroll liabilities
    
    
    318,230
    
    
    
    (146,344
    )Billings in excess of revenues
    
    
    (359,901
    )
    
    
    107,522Income taxes payable
    
    
    
    
    
    
    (160,000
    )Other current liabilities
    
    
    
    
    
    
    43,9663,677,331
    
    
    
    (4,176,358
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (1,864,664
    )
    
    
    (1,032,626
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
    
    
    
    
    
    
    (43,174
    )Cash used for restricted cash
    
    
    
    
    
    
    (26,528
    )Cash used for cash collateral
    
    
    
    
    
    
    (233,334
    )Cash provided by cash collateral
    
    
    361,097
    
    
    
    Cash provided by restricted cash
    
    
    
    
    
    
    1,238,903Acquisition of US Voice & Data, LLC (USVD) additional EBITDA Earnout
    
    
    
    
    
    
    (61,634
    )NET CASH PROVIDED BY INVESTING ACTIVITIES
    
    
    361,097
    
    
    
    874,233CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long term debt
    
    
    
    
    
    
    464,891Proceeds from issuance of Series A preferred stock, net of issuance costs of $0 and $70,000
for the six months ended June 30, 2010 and 2009, respectively
    
    
    3,000,000
    
    
    
    930,000Repayment of long term debt
    
    
    (441,495
    )
    
    
    (1,379,345
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,558,505
    
    
    
    15,546NET INCREASE (DECREASE) IN CASH
    
    
    1,054,938
    
    
    
    (142,847
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    196,424
    
    
    
    835,525CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,251,362
    
    
    $
    692,678SUPPLEMENTAL DISCLOSUREIncome taxes paid
    
    $
    22,374
    
    
    $
    Interest paid
    
    $
    544,018
    
    
    $
    679,711Non-cash financing and investing activitiesAccretion of preferred stock dividend
    
    $
    607,230
    
    
    $
    488,524Accrued interest added to note payable balance
    
    $
    117,174
    
    
    $
    503,893Conversion of note payable and accrued interest to Series A preferred stock
    
    $
    1,737,080
    
    
    $
    Cashless exercise of warrants
    
    $
    
    
    
    $
    3,857Accrual for derivative financial instruments at fair value
    
    $
    4,290,875
    
    
    
    1,925,571Conversion of Series A preferred stock to common stock
    
    $
    
    
    
    $
    20,026
  6




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 1  Basis of Presentation and Nature of Business
 Basis of Presentation
  Operations
  nd
 Background/Name Change/Redomestication
  7




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 1  Nature of Business (continued)
 Redomestication
   US Voice & Data, LLC
  Standard Tel Networks, LLC
  Note 2  Liquidity and Capital Resources
   8




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##### Table of Contents



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




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Financial Instruments
  Redeemable Securities
  Convertible Securities With Beneficial Conversion Features
  Derivative Financial Instruments at Fair Value.
   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
  10




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##### Table of Contents



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




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Reclassifications
  Income taxes
    Earnings Per Common Share
   12




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
 Stock Based Compensation
  Recent Accounting Pronouncements
 Fair Value Measures
  Accounting Guidance Not Yet Effective
     13




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 3  Significant Accounting Policies (continued)
   Note 4 Billings in Excess of Revenues
  June 30,
    
    
    December 31,2010
    
    
    2009Customer deposits and deferred income on installation contracts
    
    $
    132,656
    
    
    $
    247,682Deferred revenue on maintenance contracts
    
    
    1,857,508
    
    
    
    2,102,383$
    1,990,164
    
    
    $
    2,350,065
 Note 5 Accounts Payable and Accrued Expenses
  June 30,
    
    
    December 31,2010
    
    
    2009Accounts payable, trade
    
    $
    2,049,760
    
    
    $
    2,175,376Accrued interest
    
    
    74,101
    
    
    
    306,954Accrued warranty liability
    
    
    154,231
    
    
    
    154,231Other accrued expenses
    
    
    91,617
    
    
    
    91,843Total
    
    $
    2,369,709
    
    
    $
    2,728,404
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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 6 Long Term Debt
  June 30, 2010
    
    
    December 31, 2009Subordinated note payable to an
individual, unsecured, accruing
interest at 2% per annum, with
monthly payments of $5,215 due May 1,
2010.
    
    $
    67,612
    
    
    $
    82,869Subordinated note payable to USVD
Sellers, unsecured, accruing interest
at 0% per annum, due in installments
over 3 years with a maturity date of
September 26, 2009. Currently in
litigation. Please see Note 7 
Commitments and Contingencies 
Litigation.
    
    
    850,000
    
    
    
    850,000Subordinated notes payable to an
individual, unsecured, accruing
interest at 7% per annum, with
monthly payments of $1,130 due May 1,
2011. On March 15, 2010, the Company
converted this note payable, which
had a balance of $28,143 plus accrued
interest of $2,134, to 4,500,000 in
common stock.
    
    
    
    
    
    
    28,143Subordinated note payable to
executive officer and shareholder,
unsecured, accruing interest at 7%
per annum, with monthly payments of
$968, due September 1, 2010.
    
    
    14,444
    
    
    
    16,945Subordinated notes payable to
shareholder, unsecured, accruing
interest at 7% per annum, with
monthly payments of $6,432 due June
1, 2010. Balance paid in full in
April 2010 for $50,000. This resulted
in a gain on extinguishment of debt
of $56,435.
    
    
    
    
    
    
    97,982Subordinated 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 $0
and $1,784, respectively. (STN
acquisition.) Balance converted to
Series A Stock on April 12, 2010.
    
    
    
    
    
    
    1,498,216Senior note payable, Chatham
Investment Fund III, LLC and Chatham
Investment Fund III QP, LLC, accruing
interest at the LIBOR rate plus
9.00%, monthly principal payments of
$83,333 beginning March 2011, with
the balance due on the third
anniversary of the closing date of
September 23, 2012, net of
unamortized discount of $1,198,023
and $1,684,699, respectively. (STN
acquisition)
    
    
    6,063,261
    
    
    
    5,820,507Secured notes payable to Enterprise
Fleet Services, accruing interest at
5% per annum, with monthly payments
of $4,941, with various maturities
ranging from August 2010 through May
2012. Notes were reclassified as
operating leases as of June 30, 2010.
These leases are secured by vehicles.
    
    
    
    
    
    
    11,446Secured 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.
    
    
    23,287
    
    
    
    24,484Total long term debt
    
    
    7,018,604
    
    
    
    8,430,592Less current portion
    
    
    (943,135
    )
    
    
    (8,413,200
    )Long term portion
    
    $
    6,075,469
    
    
    $
    17,392
  Years Ending December 31,
    
    Gross2010
    
    $
    943,1352011
    
    
    841,9472012
    
    
    6,431,5458,216,627Less: Unamortized discounts
    
    
    (1,198,023
    )Net of discounts
    
    $
    7,018,604
 15




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 6 Long Term Debt (Continued)
 Change in unamortized discount and loan costs of the Note 
  Note 7  Commitments and Contingencies
 Leases
  2010 (remainder)
    
    $
    229,3752011
    
    
    371,9132012
    
    
    339,5372013
    
    
    101,6592014
    
    
    48,236
  Liquidated Damages Under Registration Payment Arrangements
  16




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 7  Commitments and Contingencies (continued)
 Litigation
        17




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 7  Commitments and Contingencies (continued)
   Risk Management
  ote 8  Related Party Transactions
 Litigation
 18




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 9  Series A 8% Convertible Preferred Stock
       19




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 9  Series A 8% Convertible Preferred Stock (continued)
   Note 10  Cost of Sales
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Equipment costs
    
    $
    1,649,098
    
    
    $
    1,178,861
    
    
    $
    2,552,138
    
    
    $
    2,938,072Contract labor
    
    
    8,362
    
    
    
    18,610
    
    
    
    10,962
    
    
    
    24,225Software assurance
    
    
    161,990
    
    
    
    
    
    
    
    161,990
    
    
    
    Direct labor
    
    
    153,473
    
    
    
    328,881
    
    
    
    657,114
    
    
    
    663,820Sales commissions and selling costs
    
    
    232,544
    
    
    
    132,779
    
    
    
    354,613
    
    
    
    261,173Lite warranty costs
    
    
    20,150
    
    
    
    24,101
    
    
    
    43,579
    
    
    
    55,020Other costs
    
    
    18,801
    
    
    
    13,320
    
    
    
    24,685
    
    
    
    30,422$
    2,244,418
    
    
    $
    1,696,552
    
    
    $
    3,805,081
    
    
    $
    3,972,732
 20




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 11  Employee Benefit Plan
    Note 12  Stock-Based Compensation
  Stock options.
  2007 Stock Incentive Plan
    21




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 12  Stock-Based Compensation (continued)
  WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2009
    
    
    21,200,000
    
    
    $
    0.03Granted during 2010
    
    
    10,560,000
    
    
    $
    0.01Forfeited or expired
    
    
    (20,000
    )
    
    $
    0.01Exercised
    
    
    
    
    
    
    Outstanding at June 30, 2010
    
    
    31,740,000
    
    
    $
    0.02Vested and exercisable at June 30, 2010
    
    
    19,037,083
    
    
    $
    0.03
  Number of Shares
    
    
    Year Vested3,570,282
    
    
    2010 (Remainder)4,807,231
    
    
    20113,594,731
    
    
    2012730,673
    
    
    2013
 Valuation Assumptions
   22




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 12  Stock-Based Compensation (continued)
  Six Months Ended June 30,2010
    
    
    2009Stock-based compensation expense by caption:Cost of sales
    
    $
    
    
    
    $
    Selling, general and administrative
    
    
    49,075
    
    
    
    24,364Total stock-based compensation expense
    
    $
    49,075
    
    
    $
    24,364
  Note 13  Warrants
 Warrants
  Outstanding
    
    
    Exercise PriceSeries B
    
    
    318,041,815
    
    
    $
    0.01Series C
    
    
    5,329,534
    
    
    $
    0.01Series D **
    
    
    306,880,000
    
    
    $
    0.01Series E
    
    
    61,273,835
    
    
    $
    0.01Series F
    
    
    350,000,000
    
    
    $
    0.01Series G
    
    
    473,083,300
    
    
    $
    0.01Chatham
    
    
    506,906,835
    
    
    $
    0.01Total warrants
    
    
    2,022,140,319
 
 **
    
    Includes 1,080,000 penalty warrants.   Note 14  Goodwill and Purchased Intangible Assets
 (a) Goodwill
  Balance at
    
    
    
    
    
    
    Balance atDec. 31, 2009
    
    
    Impairment
    
    
    June 30, 2010USVD
    
    $
    8,204,318
    
    
    $
    
    
    
    $
    8,204,318STN
    
    
    3,454,936
    
    
    
    
    
    
    
    3,454,936Total
    
    $
    11,659,254
    
    
    $
    
    
    
    $
    11,659,254
 23




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 14  Goodwill and Purchased Intangible Assets (continued)
 (b) Purchased Intangible Assets
   Note 15  Derivative Financial Instruments at Fair Value
  2007 OriginalSeries A
    
    
    
    
    
    
    2008 Vicis
    
    
    2009 Vicis
    
    
    2010 VicisShareholders
    
    
    Hilco
    
    
    Financing
    
    
    Financing
    
    
    FinancingFinancing
    
    $
    1,280,237
    
    
    $
    6,000,000
    
    
    $
    5,500,000
    
    
    $
    1,000,000
    
    
    $
    4,737,083Total number of warrants
    
    
    475,478,304
    
    
    
    61,273,872
    
    
    
    250,000,000
    
    
    
    100,000,000
    
    
    
    473,083,300Exercise Price
    
    $
    .01
    
    
    $
    0.137
    
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.01Term of warrants (years)
    
    
    3-5
    
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Debt issuance costs
    
    $
    554,996
    
    
    $
    1,659,773
    
    
    $
    
    
    
    $
    
    
    
    $
    Face value of debt/equity
    
    $
    2,141,990
    
    
    $
    4,340,227
    
    
    $
    5,500,000
    
    
    $
    1,000,000
    
    
    $
    4,737,083Fair value of derivative at
Inception
    
    $
    2,886,233
    
    
    $
    18,008,466
    
    
    $
    9,656,069
    
    
    $
    1,925,571
    
    
    $
    4,290,875Financing expense recorded
    
    $
    2,886,233
    
    
    $
    12,348,466
    
    
    $
    4,156,069
    
    
    $
    925,571
    
    
    $
    4,290,875
 24




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 15  Derivative Financial Instruments at Fair Value (continued)
  20093/31/09
    
    
    6/30/09
    
    
    9/30/09
    
    
    12/31/09Derivative
financial
instrument at
opening balance
sheet date
    
    $
    12,016,463
    
    
    $
    11,338,561
    
    
    $
    7,512,529
    
    
    
    3,619,902Fair value of new
derivative During
the period
    
    
    
    
    
    
    1,925,571
    
    
    
    
    
    
    
    2,886,233Change in estimated
fair market Value
of derivative
financial
Instrument
    
    
    (677,902
    )
    
    
    (5,751,603
    )
    
    
    (3,892,627
    )
    
    
    (68,588
    )Derivative
financial
instrument at
closing balance
sheet date
    
    $
    11,338,561
    
    
    $
    7,512,529
    
    
    $
    3,619,902
    
    
    $
    6,437,547
 3/31/10
    
    
    6/30/10Derivative financial instrument at
opening balance sheet date
    
    $
    6,437,547
    
    
    $
    6,269,909Fair value of new derivative during the
Period
    
    
    
    
    
    
    4,290,875Change in estimated fair market
Value of derivative financial instrument
    
    
    (167,639
    )
    
    
    (622,657
    )Derivative financial instrument at
Closing balance sheet date
    
    $
    6,269,909
    
    
    $
    9,938,127
  25




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 16  Segment Information
    Three months ended June 30, 2010:
 Income (loss)
    
    
    FixedRevenue
    
    
    before income taxes
    
    
    AssetsSTN
    
    $
    2,447
    
    
    $
    271
    
    
    $
    62USVD
    
    
    2,655
    
    
    
    42
    
    
    
    138BTP/BKSD
    
    
    803
    
    
    
    (4,542
    )
    
    
    58$
    4,905
    
    
    $
    (4,229
    )
    
    $
    258
 Three months ended June 30, 2009:
 Income (loss)
    
    
    FixedRevenue
    
    
    before income taxes
    
    
    AssetsSTN
    
    $
    2,096
    
    
    $
    197
    
    
    $
    65USVD
    
    
    2,043
    
    
    
    302
    
    
    
    264BTP/BKSD
    
    
    405
    
    
    
    3,295
    
    
    
    82$
    4,544
    
    
    $
    (650
    )
    
    $
    411
 26




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##### Table of Contents



Brookside Technology Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 Note 16  Segment Information (continued)
 Six months ended June 30, 2010:
 Income (loss)
    
    
    FixedRevenue
    
    
    before income taxes
    
    
    AssetsSTN
    
    $
    3,930
    
    
    $
    (45
    )
    
    $
    62USVD
    
    
    3,630
    
    
    
    59
    
    
    
    138BTP/BKSD
    
    
    1,017
    
    
    
    (5,556
    )
    
    
    59$
    8,577
    
    
    $
    (5,542
    )
    
    $
    259
 Six months ended June 30, 2009:
 Income (loss)
    
    
    FixedRevenue
    
    
    before income taxes
    
    
    AssetsSTN
    
    $
    4,282
    
    
    $
    348
    
    
    $
    65USVD
    
    
    4,652
    
    
    
    362
    
    
    
    264BTP/BKSD
    
    
    611
    
    
    
    2,434
    
    
    
    82$
    9,545
    
    
    $
    3,144
    
    
    $
    411
 Other Segment Information
  Note 17  Subsequent Events
  27




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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, 2009 and
2008 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, 2009, and elsewhere in this report.
 General
 DESCRIPTION OF BROOKSIDE TECHNOLOGY HOLDINGS CORP.S BUSINESS
 Operations
  nd
 Background/Name Change/Redomestication
    28




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##### Table of Contents



Increase in Authorized Shares
  RECENT DEVELOPMENTS
 Recent Financings
   Results of Operations
  Revenues, Cost of Sales and Gross Margins
    29




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##### Table of Contents



General and Administrative Expenses
     Amortization Expense
   30




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##### Table of Contents



Interest Expense
   Gain on Change in Fair Value of Derivative Financial Instruments
   Finance Expense on Derivatives
  Loss on Impairment of Goodwill
   Income Taxes
    31




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##### Table of Contents



Net Income (Loss)
   Liquidity and Capital Resources
 Additional Capital
      32




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1
    
    Six Months Ended June 30Category
    
    2010
    
    
    2009Net cash used in operating activities
    
    $
    (1,864,664
    )
    
    
    (1,032,626
    )Net cash provided by investing activities
    
    
    361,097
    
    
    
    874,233Net cash provided by financing activities
    
    
    2,558,505
    
    
    
    15,546Net increase (decrease) in cash
    
    $
    1,054,938
    
    
    $
    (142,847
    )
    Net Cash Used in Operations
  Net Cash Provided by Investing Activities
  Net Cash Provided by Financing Activities
  Cash and Cash Equivalents
   33




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Critical Accounting Policies
  Revenue Recognition
    34




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##### Table of Contents



Stock-Based Compensation.
 Valuation of Long-Lived Assets Including Acquired Intangibles.
  Impairment of Excess of Purchase Price Over Net Assets Acquired.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
  35




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Changes in Internal Control Over Financial Reporting
  36




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
         37




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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.
 38




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SIGNATURES
  Brookside Technology Holdings CorpBy:
    /s/ Bryan McGuireBryan McGuire, Chief Financial Officer(Principal Financial Officer) Dated:
August 13, 2010
 39