UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





(Mark
One)





x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the quarterly period ended March 31, 2009





OR





 ̈ 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 0-28579





BERLINER
COMMUNICATIONS, INC.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
              75-2233445(State
      or Other Jurisdiction of Incorporation)
              (I.R.S.
      Employer Identification No.)





97
Linden Avenue


Elmwood
Park, New Jersey 07407


(Address
of Principal Executive Offices)





(201)
791-3200


(Registrant’s
Telephone Number, Including Area Code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x   No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes  ̈ No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of “large accelerated filer”, “accelerated
filer”  and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes  ̈  No  x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:





On May
12, 2009, 26,515,732 shares of the registrant's common stock, $0.00002 par value
per share, were outstanding.





BERLINER
COMMUNICATIONS, INC.





QUARTERLY
REPORT ON FORM 10-Q


INDEX





PAGE
      NO.PART
      I:
                  FINANCIAL
      INFORMATIONItem
      1.
                  Financial
      StatementsConsolidated
      Balance Sheets as of  March 31, 2009 (Unaudited), and June 30,
      2008
                  
                  3Consolidated
      Statements of Operations for the three and nine months ending March 31,
      2009 and 2008 (Unaudited)
                  
                  4Consolidated
      Statements of Cash Flows for the nine months ending March 31, 2009 and
      2008 (Unaudited)
                  
                  5Consolidated
      Statement of Stockholders' Equity (Unaudited)
                  
                  7Notes
      to Consolidated Financial Statements
                  
                  8Item
      2.
                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  22Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  30Item
      4T.
                  Controls
      and Procedures
                  
                  31PART
      II:
                  OTHER
      INFORMATIONItem
      1.
                  Legal
      Proceedings
                  
                  31Item
      1A.
                  Risk
      Factors
                  
                  31Item
      2.
                  Unregistered
      Sale of Equity Securities and Use of Proceeds
                  
                  33Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  33Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  
                  33Item
      5.
                  Other
      Information
                  
                  33Item
      6.
                  Exhibits
                  
                  33SIGNATURES
                  
                  34





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Amounts
in thousands)





March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008ASSETS
                    
                    (Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    3,067
                    
                    
                    $
                    3,173Accounts
      receivable, net of allowance for doubtful accounts of $732 at March 31,
      2009 and $830 at June 30, 2008, respectively
                    
                    
                    16,011
                    
                    
                    
                    31,189Inventories
                    
                    
                    1,041
                    
                    
                    
                    1,012Deferred
      tax assets - current
                    
                    
                    2,896
                    
                    
                    
                    536Prepaid
      expenses and other current assets
                    
                    
                    865
                    
                    
                    
                    76223,880
                    
                    
                    
                    36,672Property
      and equipment, net
                    
                    
                    2,394
                    
                    
                    
                    2,924Amortizable
      intangible assets, net
                    
                    
                    563
                    
                    
                    
                    816Goodwill
                    
                    
                    2,284
                    
                    
                    
                    2,084Deferred
      tax assets - long-term
                    
                    
                    2,749
                    
                    
                    
                    505Other
      assets
                    
                    
                    272
                    
                    
                    
                    268Total
      Assets
                    
                    $
                    32,142
                    
                    
                    $
                    43,269LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                    
                    $
                    3,478
                    
                    
                    $
                    4,820Accrued
      liabilities
                    
                    
                    4,495
                    
                    
                    
                    11,919Accrued
      income taxes
                    
                    
                    -
                    
                    
                    
                    1,849Line
      of credit
                    
                    
                    -
                    
                    
                    
                    217Current
      portion of long-term debt
                    
                    
                    1,098
                    
                    
                    
                    1,133Current
      portion of capital lease obligations
                    
                    
                    121
                    
                    
                    
                    1189,192
                    
                    
                    
                    20,056Long-term
      debt, net of current portion
                    
                    
                    26
                    
                    
                    
                    467Long-term
      capital lease obligations, net of current portion
                    
                    
                    219
                    
                    
                    
                    305Other
      long-term liabilities
                    
                    
                    110
                    
                    
                    
                    104Total
      liabilities
                    
                    
                    9,547
                    
                    
                    
                    20,932COMMITMENTSSTOCKHOLDERS'
      EQUITYCommon
      stock
                    
                    
                    1
                    
                    
                    
                    1Additional
      paid-in capital
                    
                    
                    25,658
                    
                    
                    
                    22,630Accumulated
      deficit
                    
                    
                    (3,064
                    )
                    
                    
                    (294
                    )Total
      stockholders' equity
                    
                    
                    22,595
                    
                    
                    
                    22,337Total
      liabilities and stockholders' equity
                    
                    $
                    32,142
                    
                    
                    $
                    43,269





The
accompanying notes are an integral part of these financial
statements.


3


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)


(Amounts
in thousands, except per share data)





Three
      months ended
                    
                    
                    Nine
      months endedMarch
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    11,105
                    
                    
                    $
                    28,696
                    
                    
                    $
                    38,726
                    
                    
                    $
                    103,971Costs
      of revenue
                    
                    
                    8,771
                    
                    
                    
                    20,207
                    
                    
                    
                    27,144
                    
                    
                    
                    71,255Gross
      margin
                    
                    
                    2,334
                    
                    
                    
                    8,489
                    
                    
                    
                    11,582
                    
                    
                    
                    32,716Selling,
      general and administrative expenses
                    
                    
                    5,039
                    
                    
                    
                    5,942
                    
                    
                    
                    15,682
                    
                    
                    
                    19,016Depreciation
      and amortization
                    
                    
                    323
                    
                    
                    
                    329
                    
                    
                    
                    951
                    
                    
                    
                    841(Gain)
      loss on sale of fixed assets
                    
                    
                    (4
                    )
                    
                    
                    -
                    
                    
                    
                    (9
                    )
                    
                    
                    8Income
      (loss) from operations
                    
                    
                    (3,024
                    )
                    
                    
                    2,218
                    
                    
                    
                    (5,042
                    )
                    
                    
                    12,851Other
      (income) expenseInterest
      expense
                    
                    
                    57
                    
                    
                    
                    263
                    
                    
                    
                    164
                    
                    
                    
                    952Amortization
      of deferred financing fees and accretion of debt discount
                    
                    
                    15
                    
                    
                    
                    355
                    
                    
                    
                    45
                    
                    
                    
                    1,076Financing
      fees
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    36Interest
      income
                    
                    
                    (5
                    )
                    
                    
                    (24
                    )
                    
                    
                    (57
                    )
                    
                    
                    (50
                    )Other
                    
                    
                    (9
                    )
                    
                    
                    (35
                    )
                    
                    
                    (365
                    )
                    
                    
                    (41
                    )Income
      (loss) before income taxes
                    
                    
                    (3,082
                    )
                    
                    
                    1,659
                    
                    
                    
                    (4,829
                    )
                    
                    
                    10,878Income
      tax (benefit) expense
                    
                    
                    (1,540
                    )
                    
                    
                    759
                    
                    
                    
                    (2,059
                    )
                    
                    
                    4,493Net
      income (loss)
                    
                    $
                    (1,542
                    )
                    
                    $
                    900
                    
                    
                    $
                    (2,770
                    )
                    
                    $
                    6,385Net
      income (loss) per share:Basic
                    
                    $
                    (0.06
                    )
                    
                    $
                    0.05
                    
                    
                    $
                    (0.10
                    )
                    
                    $
                    0.37Diluted
                    
                    $
                    (0.06
                    )
                    
                    $
                    0.04
                    
                    
                    $
                    (0.10
                    )
                    
                    $
                    0.27Weighted
      average number of shares outstanding:Basic
                    
                    
                    26,516
                    
                    
                    
                    17,358
                    
                    
                    
                    26,414
                    
                    
                    
                    17,174Diluted
                    
                    
                    26,516
                    
                    
                    
                    27,579
                    
                    
                    
                    26,414
                    
                    
                    
                    27,176





The
accompanying notes are an integral part of these financial
statements.


4





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)





Nine
      months endedMarch
      31,2009
                              
                              
                              2008Cash
      flows from operating activities:Net
      income (loss)
                              
                              $
                              (2,770
                              )
                              
                              $
                              6,385Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activities:Depreciation
      and amortization
                              
                              
                              951
                              
                              
                              
                              841Amortization
      of deferred financing fees
                              
                              
                              45
                              
                              
                              
                              285Bad
      debt expense
                              
                              
                              251
                              
                              
                              
                              35Stock-based
      compensation
                              
                              
                              616
                              
                              
                              
                              117(Gain)
      loss on sale of fixed assets
                              
                              
                              (9
                              )
                              
                              
                              8Accretion
      of debt discount associated with warrants
                              
                              
                              -
                              
                              
                              
                              766Financing
      fees
                              
                              
                              -
                              
                              
                              
                              26Deferred
      tax assets, net
                              
                              
                              (2,242
                              )
                              
                              
                              (397
                              )Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              14,927
                              
                              
                              
                              (17,299
                              )Inventories
                              
                              
                              (29
                              )
                              
                              
                              (307
                              )Prepaid
      expenses and other current assets
                              
                              
                              499
                              
                              
                              
                              (1
                              )Other
      assets
                              
                              
                              1
                              
                              
                              
                              108Accounts
      payable
                              
                              
                              (1,344
                              )
                              
                              
                              1,679Accrued
      liabilities
                              
                              
                              (7,405
                              )
                              
                              
                              9,513Accrued
      income taxes
                              
                              
                              (1,849
                              )
                              
                              
                              1,455Net
      cash provided by operating activities
                              
                              
                              1,642
                              
                              
                              
                              3,214Cash
      flows from investing activities:Purchases
      of property and equipment
                              
                              
                              (343
                              )
                              
                              
                              (873
                              )Proceeds
      from the sale of property and equipment
                              
                              
                              12
                              
                              
                              
                              12Acquisition
      of IND
                              
                              
                              (200
                              )
                              
                              
                              -Acquisition
      of Comtech
                              
                              
                              -
                              
                              
                              
                              (39
                              )Net
      cash used in investing activities
                              
                              
                              (531
                              )
                              
                              
                              (900
                              )Cash
      flows from financing activities:Proceeds
      from line of credit
                              
                              
                              56,208
                              
                              
                              
                              89,707Repayment
      of line of credit
                              
                              
                              (56,425
                              )
                              
                              
                              (92,651
                              )Repayment
      of long-term debt
                              
                              
                              (919
                              )
                              
                              
                              (626
                              )Repayment
      of capital leases
                              
                              
                              (132
                              )
                              
                              
                              (54
                              )Recapitalization
      expenses
                              
                              
                              (95
                              )
                              
                              
                              -Proceeds
      from exercise of stock options and warrants
                              
                              
                              146
                              
                              
                              
                              74Net
      cash used in financing activities
                              
                              
                              (1,217
                              )
                              
                              
                              (3,550
                              )Net
      decrease in cash and cash equivalents
                              
                              
                              (106
                              )
                              
                              
                              (1,236
                              )Cash
      and cash equivalents at beginning of period
                              
                              
                              3,173
                              
                              
                              
                              2,483Cash
      and cash equivalents at end of period
                              
                              $
                              3,067
                              
                              
                              $
                              1,247





The
accompanying notes are an integral part of these financial
statements.


5


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)





Nine
      months endedMarch
      31,2009
                
                
                2008Supplemental
      cash flow information:Interest
      paid
                
                $
                104
                
                
                $
                582Income
      taxes paid
                
                $
                2,029
                
                
                $
                3,421Non-cash
      investing and financing activities:Assets
      purchased under capital leases
                
                $
                13
                
                
                $
                272Federal
      net operating loss carryforwards acquired in Old Berliner
      recapitalization
                
                $
                2,361
                
                
                $
                -





The
accompanying notes are an integral part of these financial
statements.


6


BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


(Amounts
in thousands except share and per share data)


(Unaudited)





Common
      Stock100,000,000
      shares authorized
                
                
                Additional
                
                
                
                
                
                Total$0.00002
      par value
                
                
                Paid-in
                
                
                Accumulated
                
                
                Stockholders'Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                EquityBalance
      at June 30, 2008
                
                
                26,190,732
                
                
                $
                1
                
                
                $
                22,630
                
                
                $
                (294
                )
                
                $
                22,337Stock-based
      compensation
                
                
                
                
                
                
                
                
                
                
                479
                
                
                
                
                
                
                
                479Exercise
      of Warrants
                
                
                200,000
                
                
                
                
                
                
                
                146
                
                
                
                
                
                
                
                146Issuance
      of Director Shares
                
                
                125,000
                
                
                
                
                
                
                
                137
                
                
                
                
                
                
                
                137Recapitalization
      expenses
                
                
                
                
                
                
                
                
                
                
                (95
                )
                
                
                
                
                
                
                (95
                )Effect
      of Recapitalization
                
                
                
                
                
                
                
                
                
                
                2,361
                
                
                
                
                
                
                
                2,361Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,770
                )
                
                
                (2,770
                )Balance
      at March 31, 2009
                
                
                26,515,732
                
                
                $
                1
                
                
                $
                25,658
                
                
                $
                (3,064
                )
                
                $
                22,595





The
accompanying notes are an integral part of these financial
statements.


7


BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)




1.
            Business





Berliner
Communications, Inc. was originally incorporated in Delaware in 1987 as Adina,
Inc. (“Adina”). Adina’s corporate existence was permitted to lapse in February
of 1996 and in August of 1999 was reinstated as eVentures Group, Inc.
(“eVentures”).  In December of 2000, eVentures changed its name to
Novo Networks, Inc. (“Novo”).





On
February 18, 2005, Novo entered into an asset purchase agreement with the former
Berliner Communications, Inc., currently named Old Berliner,
Inc.  (“Old Berliner”) and BCI Communications, Inc. (“BCI”), a
Delaware corporation and our wholly-owned subsidiary.  As part of this
transaction, BCI acquired (the “Acquisition”) the operations and substantially
all of the assets and liabilities of Old Berliner. On September 16, 2005, Novo
changed its name to Berliner Communications, Inc. (“Berliner”). Berliner is now
the public reporting entity, and all of our operations are run out of Berliner’s
wholly-owned subsidiary, BCI. Unless the context otherwise requires, references
to “we”, “us”, “our” and “the Company” refer to Berliner and its consolidated
subsidiary BCI.





Prior to
the Acquisition, Old Berliner provided wireless carriers with comprehensive site
acquisition, construction and zoning services. Old Berliner was founded in 1995,
and over the course of the following years, its service offerings were expanded
to include radio frequency and network design and engineering, infrastructure
equipment construction and installation, radio transmission base station
modification and project management services. With the consummation of the
Acquisition, BCI carried on the operations of Old Berliner.





During
fiscal 2007, we entered into several asset purchase agreements which expanded
our presence primarily in the West and Southwest portions of the United
States.





On
November 1, 2008, we entered into an Agreement with T3 Communications, Inc. to
purchase certain of its assets and operations.  This acquisition
provided our Specialty Communications Services Division with additional
resources and a regional presence in the Southeast.





The
results of these acquired businesses have been incorporated into our
consolidated financial statements since the dates of acquisition.





The
Company operates in two business segments: (1) infrastructure construction and
technical services and (2) site acquisition and zoning.





2.
              Basis
      of Presentation





The
accompanying unaudited consolidated financial statements as of March 31, 2009,
and for the three and nine months ended March 31, 2009 and 2008, respectively,
have been prepared by us pursuant to the interim financial statements rules and
regulations of the United States Securities and Exchange Commission (“SEC”). In
our opinion, the accompanying unaudited consolidated financial statements
include all adjustments necessary to present fairly the results of our
operations and cash flows at the dates and for the periods
indicated.  The results of operations for the interim periods are not
necessarily indicative of the results for the full fiscal year.  The
accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2008.




3.
            Accounting
      Policies




Basis of Presentation, Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Major assets and liabilities that are subject to estimates include allowance for
doubtful accounts, goodwill and other acquired intangible assets, deferred tax
assets and certain accrued and contingent liabilities. One of the more
significant processes requiring estimates is percentage-of-completion of
construction projects.


8




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)




We
recognize revenue and profit on our contracts as the work progresses using the
percentage-of-completion method of accounting. Under this method, contracts in
progress are valued at cost plus accrued profits less earned revenue and
progress payments on uncompleted projects. This method relies on estimates of
total expected contract revenue and costs.





Principles
of Consolidation





The
consolidated financial statements include our accounts and the accounts of our
wholly-owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.





Cash
and Cash Equivalents





We
consider all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
stated at cost, which approximates fair value. The Company’s cash and cash
equivalents are invested in investment-grade, short-term investment instruments
with high quality financial institutions.





Accounts
Receivable, Allowance for Doubtful Accounts





Accounts
receivable are customer obligations for services sold to such customers under
normal trade terms. The Company’s customers are primarily communications
carriers, corporate and government customers, located primarily in the U.S. The
Company performs periodic credit evaluations of its customers’ financial
condition. The Company provides allowances for doubtful accounts. Provisions for
doubtful accounts are recorded in selling, general and administrative expenses.
The adequacy of the reserve is evaluated using several factors including length
of time a receivable is past due, changes in the customer’s credit worthiness,
customer’s payment history, the length of the customer’s relationship with the
Company, current industry trends and the current economic climate.





Inventories





Inventories,
which consist mainly of parts and raw materials, are stated at the lower of cost
or market. Cost is determined using the average cost method.





Prepaid
Expenses and Other Assets





Prepaid
expenses are recorded as assets and expensed in the period in which the related
services are received. At March 31, 2009 and June 30, 2008, current prepaid
expenses and other current assets totaled approximately $0.9 million and $0.8
million, respectively, and consisted mainly of insurance and deferred financing
fees.  Other non-current assets of approximately $0.3 million at March
31, 2009 and $0.3 million at June 30, 2008 are mainly deposits for our office
and warehouse locations.





Property
and Equipment





Property
and equipment consist of automobiles and trucks, equipment, computer equipment
and software, furniture and fixtures, buildings, land and leasehold
improvements. Each class of asset is recorded at cost and depreciated using the
straight-line method over their estimated useful lives which range from a period
of three to five years. Leasehold improvements are amortized over the term of
the lease or the estimated useful life, whichever is shorter. Buildings are
amortized over 27.5 years. Maintenance and repairs are charged to expense as
incurred. Significant renewals and betterments are capitalized. At the time of
retirement or other disposition of property and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations.


9




BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)


Goodwill
and Other Intangible Assets





In
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (“SFAS 142”), goodwill and indefinite lived intangible assets are
no longer amortized but are assessed for impairment on at least an annual basis.
SFAS 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment.





SFAS 142
requires that goodwill be tested at least annually, utilizing a two-step
methodology. The initial step requires the Company to determine the fair value
of the business acquired (reporting unit) and compare it to the carrying value,
including goodwill, of such business. If the fair value exceeds its carrying
value, no impairment loss is recognized. However, if the carrying value of the
reporting unit exceeds its fair value, the goodwill of the unit may be impaired.
The amount, if any, of the impairment is then measured in the second step, based
on the excess, if any, of the reporting unit’s carrying value of goodwill over
its implied value.





The
Company determines the fair value of the business acquired (reporting units) for
purposes of this test primarily using indications of value determined by the use
of Guideline Public Companies. The fair value of the Company’s reporting units
derived using the aforementioned analyses exceeded the carrying values of the
reporting units at January 31, 2009. Accordingly, step two was unnecessary and
no impairment charge was recognized in the consolidated statements of income for
the three and nine months ended March 31, 2009. On an ongoing basis, the Company
expects to perform its annual impairment test at January 31 absent any interim
impairment indicators.





Revenue
Recognition





Site
acquisition and zoning services revenue is based upon output measures using
contract milestones as the basis. Revenue from infrastructure equipment
construction and installation contracts, which are generally completed within 90
days, is recorded under the percentage-of-completion method based on the
percentage that total direct costs incurred to date bear to estimated total
costs at completion. Losses are recognized when such losses become known. All
other revenue is recognized as work is performed.





Unbilled
receivables represent revenue on uncompleted infrastructure equipment
construction and installation contracts that are not yet billed or billable,
pursuant to contract terms. Deferred revenues principally represent the value of
services to customers that have been billed as of the balance sheet date but for
which the requisite services have not yet been rendered.





Earnings Per
Share




We
calculate earnings per share in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share (“EPS”)
(“SFAS 128”). SFAS 128 requires dual presentation of basic EPS and diluted EPS
on the face of the income statement for all entities with complex capital
structures.  Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options, warrants and convertible
debentures.





The
weighted average number of common shares utilized in the earnings per share
computation for the three months ended March 31, 2009 and 2008 was 26,515,732
and 17,357,655respectively.
The weighted average number of common shares utilized in the earnings per share
computation for the nine months ended March 31, 2009 and 2008 was 26,414,181 and
17,173,742, respectively.





The
following table sets forth the computations of basic and diluted earnings per
share:


10




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)


Three
      months ended
                
                
                Nine
      months endedMarch
      31,
                
                
                March
      31,2009
                
                
                2008
                
                
                2009
                
                
                2008Basic
      earnings per share:Numerator:Net
      income (loss) allocable to common shareholders
                
                $
                (1,542
                )
                
                $
                900
                
                
                $
                (2,770
                )
                
                $
                6,385Denominator:Weighted
      average common shares outstanding
                
                
                26,516
                
                
                
                17,358
                
                
                
                26,414
                
                
                
                17,174Net
      income (loss) per share - basic
                
                $
                (0.06
                )
                
                $
                0.05
                
                
                $
                (0.10
                )
                
                $
                0.37





Three
      months ended
                    
                    
                    Nine
      months endedMarch
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Diluted
      earnings per share:Numerator:Net
      income (loss) allocable to common shareholders
                    
                    $
                    (1,542
                    )
                    
                    $
                    900
                    
                    
                    $
                    (2,770
                    )
                    
                    $
                    6,385Plus:
      Interest expense on convertible debt net of income taxes
                    
                    
                    -
                    
                    
                    
                    261
                    
                    
                    
                    -
                    
                    
                    
                    835Net
      income (loss) allocable to common shareholders
                    
                    $
                    (1,542
                    )
                    
                    $
                    1,161
                    
                    
                    $
                    (2,770
                    )
                    
                    $
                    7,220Denominator:Weighted
      average common shares outstanding
                    
                    
                    26,516
                    
                    
                    
                    17,358
                    
                    
                    
                    26,414
                    
                    
                    
                    17,174Effect
      of dilutive securities:Stock
      options
                    
                    
                    -
                    
                    
                    
                    799
                    
                    
                    
                    -
                    
                    
                    
                    581Warrants
                    
                    
                    -
                    
                    
                    
                    3,422
                    
                    
                    
                    -
                    
                    
                    
                    3,421Convertible
      Debt
                    
                    
                    -
                    
                    
                    
                    6,000
                    
                    
                    
                    -
                    
                    
                    
                    6,000Weighted
      average common shares outstanding assuming dilution
                    
                    
                    26,516
                    
                    
                    
                    27,579
                    
                    
                    
                    26,414
                    
                    
                    
                    27,176Net
      income (loss) per share - diluted
                    
                    $
                    (0.06
                    )
                    
                    $
                    0.04
                    
                    
                    $
                    (0.10
                    )
                    
                    $
                    0.27





Common
share equivalents consist of stock options and warrants (for which we used the
treasury stock method) and convertible notes payable (for which we used the “if
converted” method). For the three months ended March 31, 2008, there were 4,000
stock options excluded from the computation of diluted net income per share
because the exercise price of these was greater than the average market price of
the Company’s common stock during the period, and therefore the effect is
antidilutive.





For the
nine months ended March 31, 2008, there were 15,190 stock options excluded from
the computation of diluted net income per share because the exercise price of
these was greater than the average market price of the Company’s common stock
during the period, and therefore the effect is antidilutive.





Fair
Value of Financial Instruments





The Company adopted SFAS No. 157,
"Fair
Value Measurements"(“SFAS 157”) for cash and cash
equivalents effective July 1, 2008. This pronouncement defines fair value,
establishes a framework for measuring fair value, and requires expanded
disclosures about fair value measurements. SFAS 157 emphasizes that fair value
is a market-based measurement, not an entity-specific measurement, and defines
fair value as the price that would be received to sell an asset or transfer a
liability in an orderly transaction between market participants at the
measurement date. SFAS 157 discusses valuation techniques, such as the market
approach (comparable market prices), the income approach (present value of
future income or cash flow) and the cost approach (cost to replace the service
capacity of an asset or replacement cost), which are each based upon observable
and unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company’s market
assumptions. SFAS 157 utilizes a fair value hierarchy that prioritizes inputs to
fair value measurement techniques into three broad
levels:


11




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)


Level 1:
            Observable inputs such as quoted
      prices for identical assets or liabilities in active
      markets.





Level 2:
            Observable inputs other than
      quoted prices that are directly or indirectly observable for the asset or
      liability, including quoted prices for similar assets or liabilities in
      active markets; quoted prices for similar or identical assets or
      liabilities in markets that are not active; and model-derived valuations
      whose inputs are observable or whose significant value drivers are
      observable.





Level 3:
            Unobservable inputs that reflect
      the reporting entity’s own
assumptions.




The Company’s investment in
overnight money market institutional funds, which amounted to $2.3
million at March 31, 2009, is included in cash and cash equivalents on the
accompanying balance sheets and is classified as a Level 1 asset.





The
Company’s consolidated balance sheets include the following financial
instruments: short-term cash investments, trade accounts receivable and trade
accounts payable. The Company believes the carrying amounts in the financial
statements approximates the fair value of these financial instruments due to the
relatively short period of time between the origination of the instruments and
their expected realization or the interest rates which approximate current
market rates.





Concentration
of Credit Risk





Financial
instruments which potentially subject the Company to concentration of credit
risk consist principally of temporary cash investments and accounts receivable.
The Company does not enter into financial instruments for trading or speculative
purposes.





Stock-based
Compensation




We
elected to adopt Statement of Financial Accounting Standard No. 123 (revised
2004), Share Based
Payment (“SFAS 123R”) using a modified prospective application, whereby
the provisions of the SFAS 123R applied going forward only from the date of
adoption to new (issued subsequent to July 1, 2005) stock option awards, and for
the portion of any previously issued and outstanding stock option awards for
which the requisite service is rendered after the date of adoption. All of our
previously issued options had fully vested prior to July 1, 2005.





Compensation
expense must be recognized for any awards modified, repurchased or cancelled
after the date of adoption. Under the modified prospective application, no
restatement of previously issued results is required.




We use
the Black-Scholes Merton option-pricing model to measure fair value. This is the
same method we used in prior years for disclosure purposes.





Recently
Issued Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
157 which is intended to increase consistency and comparability in fair value
measurements by defining fair value, establishing a framework for measuring fair
value and expanding disclosures about fair value measurements. The provisions of
SFAS No. 157, which are effective for financial statements issued for the fiscal
years beginning after November 15, 2008, and interim periods within those fiscal
years except as it relates to financial assets and liabilities, which we adopted
effective July 1, 2008. The Company has determined that the impact of SFAS 157
will not have a material effect to the financial statements taken as a
whole.


12




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)


In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for
Financial Assets and Financial Liabilities("SFAS 159"). This statement
permits companies to choose to measure many financial assets and liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. We adopted SFAS 159 on July 1,
2008.  This adoption was not material to the financial statements
taken as a whole.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS
160”). This statement amends ARB No. 51 to establish accounting and reporting
standards for the noncontrolling interest (minority interest) in a subsidiary
and for the deconsolidation of a subsidiary. Upon its adoption, noncontrolling
interests will be classified as equity in our consolidated balance sheets.
Income and comprehensive income attributed to noncontrolling interests will be
included in our consolidated statements of operations and our consolidated
statements of equity. SFAS 160 is effective for fiscal years beginning after
December 15, 2008. This statement shall be applied prospectively as of the
beginning of the fiscal year in which this Statement is initially applied,
except for the presentation and disclosure requirements which must be applied
retrospectively for all periods presented.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (Revised), Business
Combinations (“SFAS 141R”). This statement provides companies with
principles and requirements on how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, liabilities assumed, and
any noncontrolling interest in the acquiree as well as the recognition and
measurement of goodwill acquired in a business combination. The statement also
requires certain disclosures to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS 141R is effective for business combinations occurring
in fiscal years beginning after December 15, 2008. Early adoption of this
statement is not permitted.





In
February 2008, the FASB issued FASB Staff Position FAS No. 142-3, Determination of the Useful Life of
Intangible Assets(“FSP FAS 142-3”). This pronouncement amends FASB
Statement No. 142, Goodwill
and Other Intangible Assets, regarding the factors that should be
considered in developing the useful lives for intangible assets with renewal or
extension provisions. FSP FAS 142-3 requires an entity to consider its own
historical experience in renewing or extending similar arrangements, regardless
of whether those arrangements have explicit renewal or extension provisions,
when determining the useful life of an intangible asset. In the absence of such
experience, an entity shall consider the assumptions that market participants
would use about renewal or extension, adjusted for entity-specific factors. FSP
FAS 142-3 also requires an entity to disclose information regarding the extent
to which the expected future cash flows associated with an intangible asset are
affected by the entity’s intent and/or ability to renew or extend the
arrangement. FSP FAS 142-3 will be effective for qualifying intangible assets
acquired by the Company on or after July 1, 2009. The application of FSP FAS
142-3 is not expected to have a material impact on the Company’s results of
operations, cash flows or financial positions; however, it could impact future
transactions entered into by the Company.





In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock(“EITF
07-5”). EITF 07-5 provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company is currently assessing the
impact, if any, on its consolidated financial position and results of
operations.





In May
2008, the FASB issued FASB Staff Position APB No. 14-1, Accounting for Convertible Debt
Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)(“FSP APB 14-1”), which applies to convertible debt that
includes a cash conversion feature. Under FSP APB 14-1, the liability and equity
components of convertible debt instruments within the scope of this
pronouncement shall be separately accounted for in a manner that will reflect
the entity’s nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008. The Company is currently assessing the impact of the
adoption of FSP APB 14-1 on the Company’s financial position or results of
operations.


13




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)




In
November 2008, the FASB ratified EITF Issue No. 08-6 “Equity Method Investment Accounting
Considerations” (“EITF 08-6”). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for fiscal years ended after December 15,
2008. The Company is currently assessing the impact of the adoption of EITF 08-6
on the Company’s financial position or results of operations.





4.
            Accounts
      Receivable and Concentration of Credit
Risk





Accounts
receivable at March 31, 2009 and June 30, 2008, consist of the
following:




March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Accounts
      receivable
                    
                    $
                    11,269
                    
                    
                    $
                    23,870Unbilled
      receivables
                    
                    
                    5,474
                    
                    
                    
                    8,14916,743
                    
                    
                    
                    32,019Allowance
      for doubtful accounts
                    
                    
                    (732
                    )
                    
                    
                    (830
                    )Total
                    
                    $
                    16,011
                    
                    
                    $
                    31,189





Unbilled
receivables principally represent the value of services rendered to customers
not billed as of the balance sheet date.  Unbilled receivables are
generally billed within three months subsequent to the provision of the
services. Unbilled receivables include deferred revenue which represent amounts
that have been billed to customers as of the balance sheet date but for which
the requisite services have not yet been rendered. The total amount of deferred
revenue included in unbilled receivables was $0.5 million and $0.8 million at
March 31, 2009 and June 30, 2008, respectively.





For the
three months ended March 31, 2009, we derived 67% of our total revenue from our
five largest customers, and these customers represented 43% of our accounts
receivable.  These five customers represented 8%, 11%, 11%, 13% and
23%, respectively of our net revenue for the period. For the three months ended
March 31, 2008, we derived 80% of our total revenue from our two largest
customers.  Of those customers, one of them individually represented
greater than 5% of net revenue for the period and the other represented greater
than 74%of net
revenue for the period.





For the
nine months ended March 31, 2009, we derived 70% of our total revenue from our
six largest customers, and these customers represented 58% of our accounts
receivable.  Of those six customers, two of them each individually
represented greater than 5%of net
revenue, and the other four represented 9%, 12%, 13% and 24%, respectively, of
our net revenue for the period. For the nine months ended March 31, 2008, we
derived 87% of our total revenue from our two largest customers.  Of
those customers, one of them represented greater than 5% of net revenue for the
period and the other represented greater than 81%of net
revenue for the period.





5.
            Inventories





Inventories
totaled approximately $1.0 million as of March 31, 2009, and June 30, 2008.
Inventories, which consist mainly of parts and raw materials, are stated at the
lower of cost or market. Cost is determined using the average cost
method.





6.
            Non-Current
      Assets





Non-current
assets include amortizable intangible assets consisting of customer
relationships and covenants not to compete. These assets, together with
goodwill, were the result of the allocation of the purchase price for the
Digitcom and Radian acquisitions. Amortization expense related to amortizable
intangible assets was $0.1 million for the three months ended March 31, 2009 and
2008, and $0.3 million for the nine months ended March 31, 2009 and
2008.


14




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)


In
November 2008, we entered into an Agreement with T3 Communications, Inc. to
purchase certain of its assets and operations. There were no tangible assets
acquired, therefore, the acquisition price of $0.2 million has been
preliminarily allocated to Goodwill.





Intangible
assets subject to amortization are amortized based upon the assets’ estimated
useful lives. Customer relationships have estimated useful lives of 70 months
and covenants not to compete have estimated useful lives of approximately 45
months. We will continue to evaluate the estimated useful lives on an ongoing
basis.





7.
            Accrued
      Liabilities




Accrued
liabilities at March 31, 2009 and June 30, 2008 consist of the
following:





March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Employee
      compensation
                    
                    $
                    1,878
                    
                    
                    $
                    2,998Construction
      costs
                    
                    
                    2,204
                    
                    
                    
                    8,107Other
                    
                    
                    413
                    
                    
                    
                    814$
                    4,495
                    
                    
                    $
                    11,919




Accrued
construction costs are reported net of amounts deferred in the calculation of
percentage of completion for our construction projects. The amount of deferred
expense included in accrued construction costs was $0.9 million and $0.8 million
at March 31, 2009 and June 30, 2008, respectively.




8.
            Income
    Taxes




We
adopted FIN 48 on July 1, 2007. We recognize interest, if any, as interest
expense, and penalties, if any, as a component of selling, general and
administrative expense in our consolidated financial statements. We file a
consolidated U.S. federal income tax return as well as income tax returns for
several state jurisdictions, of which New Jersey is the most significant. We
currently do not have any income tax returns which are under audit. Income tax
returns remain open for examination under U.S. and state statutes for years
ended June 30, 2005 and thereafter.




We
recorded an income tax benefit of $1.5 million and an income tax expense of $0.8
million for the three months ended March 31, 2009 and 2008, respectively, and an
income tax benefit of $2.1 million and an income tax expense of $4.5 million for
the nine months ended March 31, 2009 and 2008, respectively.




On
February 4, 2009, the Company closed its reorganization transaction with Old
Berliner (see Note 14).  On April 6, 2009, Old Berliner, Inc.
transferred all of its assets to the Old Berliner Liquidating Trust, completing
the final phase of the distribution for tax purposes.  As part of the
transaction, the Company received approximately $6.9 million of Old Berliner's
unused federal net operating loss carryforwards. We have preliminarily recorded
a $ 2.4 million deferred tax asset related to these carryforwards.




9.
            Line
      of Credit




PNC
Bank, National Association Facility





On April
17, 2008, our wholly owned subsidiary BCI Communications, Inc. (“BCI”), as
borrower, became obligated under a Revolving Credit and Security Agreement (the
“PNC Facility”) with PNC Bank, National Association (“PNC”) and such other
lenders as may thereafter become a party to the PNC Facility (collectively, the
“Lenders”).  Under the terms of the PNC Facility, BCI is entitled to
request that the Lenders make revolving advances to BCI from time to time in an
amount up to the lesser of (i) 85% of the value of certain receivables owned by
BCI and approved by the Lenders as collateral or (ii) a total of $15.0
million.  Such revolving advances were used by BCI to repay existing
indebtedness owed to Presidential Financial Corporation of Delaware Valley
(“Presidential”), pay fees and expenses relating to entering into the PNC
Facility and provide for BCI’s working capital needs and shall be used to assist
in the acquisition of companies engaged in the same line of business as BCI and
to provide for future working capital needs of the Company.


15




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)




Interest
on the revolving advances shall accrue (a) for domestic rate loans, at a rate
per annum equal to 2.25% plus the higher of (i) the base commercial lending rate
of PNC as publicly announced to be in effect from time to time, or (ii) the
federal funds open rate plus 1/2 of 1%, and (b) for Eurodollar rate loans, at a
rate per annum equal to 3% plus (i) the rate at which U.S. dollar deposits are
offered by leading banks in the London interbank deposit market (as displayed by
Bloomberg), divided by (ii) one minus the reserve percentage requirement as
determined by the Board of Governors of the Federal Reserve
System.  Such amounts are secured by a blanket security interest in
favor of the Lenders that covers all of BCI’s receivables, equipment, general
intangibles, inventory, investment property, certain real property, certain
leasehold interests, all subsidiary stock, records and other property and
proceeds of all of the foregoing.




The term
of the PNC Facility is three years and shall terminate on April 17,
2011.  BCI may terminate the PNC Facility at any time upon sixty (60)
days’ prior written notice and upon payment in full of the obligations owing
under the PNC Facility or any related documents.  Upon such early
termination by BCI, BCI shall pay the Lenders an early termination fee in an
amount equal to three eighths of one percent (0.375%) of $15.0 million if the
early termination occurs on or after April 17, 2009 or on or before April 16,
2010.




BCI was
not in compliance with its Fixed Charge Coverage Ratio (as that term is defined
in the PNC Facility) for its second fiscal quarter. BCI entered into an
Amendment with PNC which waived compliance with the ratio, increased the
interest rates to the amounts noted above and provided that during the term of
the PNC Facility as amended, BCI would observe the following financial
covenants:




1.
Minimum Undrawn Availability:  BCI cannot cause, suffer or permit
Undrawn Availability plus cash on deposit at PNC to be less than (1) Two Million
Two Hundred Fifty Thousand ($2,250,000) Dollars as of March 31, 2009, or (2)
Three Million Five Hundred Thousand ($3,500,000) Dollars as of June 30,
2009;




2. Fixed
Charge Coverage Ratio:  BCI must cause to be maintained at all times a
Fixed Charge Coverage Ratio of not less than (1) 1.00 to 1.00 from July 1, 2009
through September 30, 2009,  (2) 1.10 to 1.00 from October 1, 2009
through June 30, 2010, tested quarterly on a building four (4) quarter basis,
and (3) 1.10 to 1.00 thereafter, tested quarterly on a rolling four (4) quarter
basis;




3.
Minimum EBITDA:  BCI cannot cause, suffer or permit EBITDA to be less
than (1) Two Million Six Hundred Twenty-Two Thousand ($2,622,000) Dollars for
the trailing twelve months ending March 31, 2009, or (2) One Million Five
Hundred Thousand ($1,500,000) Dollars for the fiscal quarter ending June 30,
2009.




On May
14, 2009, we determined that we were not in compliance with the Minimum EBITDA
covenant for the trailing twelve months ending March 31, 2009.  A
violation of this financial covenant, unless waived by the Lenders, constitutes
an event of default under the PNC Facility, giving the Lenders the right to (i)
accelerate all of BCI’s indebtedness and any interest accrued thereon under the
PNC Facility, (ii) terminate the PNC Facility, (iii) refuse to make any
additional advances under the PNC Facility, and (iv) exercise any and all other
rights or remedies as provided for in the PNC Facility including, but not
limited to, increasing the interest rate for revolving Domestic Loans (as
defined in the PNC Facility) by two percent (2%) per annum.  While we
have been advised by the Lenders that they do not intend to immediately
terminate the PNC Facility or demand immediate repayment of the outstanding
debt, if any, as a result of the aforementioned event of default, the Lenders
have the right to do so.




BCI is in
discussion with the Lenders to waive the current non-compliance with the
financial covenant.  While BCI expects to negotiate an acceptable
resolution, there can be no assurance that BCI will be able to negotiate a
waiver or an amendment, or that such waiver or amendment will be on terms
acceptable to BCI.  If BCI is unable to obtain a waiver from or enter
into an amendment with the Lenders, it could have a material adverse effect on
our financial position and our ability to execute our growth plans.




In
connection with the closing of the PNC Facility, Berliner Communications, Inc.
became obligated under that certain Guaranty and Suretyship Agreement (the
“Guaranty”), dated April 17, 2008, in favor of the Lenders, pursuant to which we
unconditionally guaranteed and became surety for the prompt payment and
performance of all loans, advances, debts, liabilities, obligations, covenants
and duties owing by BCI to PNC as agent for the benefit of the Lenders, of any
kind or nature, present or future, whether direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, to the Lenders by BCI.  In the event BCI is unable to pay any
amounts owed to the Lenders, we would be liable, pursuant to the Guaranty, for
such amounts upon the same terms and conditions as BCI would be
liable.


16




BERLINER
COMMUNICATIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands except for share and per share amounts)




Along
with the PNC Facility, BCI entered into a Revolving Credit Note (the “PNC Note”)
with the Lenders, pursuant to which, BCI agreed to repay the Lenders the
principal amount of $15.0 million or, if different from such amount, the unpaid
balance of advances due and owing to PNC under the PNC Facility, plus interest
on the principal amount from time to time outstanding until such principal
amount is paid in full, at the applicable interest rates in accordance with the
provisions of the PNC Facility.  The PNC Note is subject to mandatory
prepayment upon default under the terms of the agreement and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the PNC
Facility.  Upon the occurrence of an event of default due to
bankruptcy or BCI’s inability to pay, the PNC Note shall immediately become due
and payable, without notice.  Other uncured defaults under the PNC
Facility or any related document shall cause the PNC Note to be declared
immediately due and payable, without notice, in accordance with the terms of the
PNC Facility.  Notwithstanding the foregoing, all outstanding
principal and interest are due and payable on April 17, 2011.  The
balance outstanding at March 31, 2009 and June 30, 2008 was $0 and $0.2 million,
respectively.





10.
            Stock-Based
      Compensation





At March
31, 2009, we sponsored two stock option plans, the 1999 Omnibus Securities Plan
(the “1999 Plan”) and the 2001 Equity Incentive Plan (the “2001 Plan”),
collectively (the “Plans”). We have elected to account for those Plans under
SFAS 123R.





The Plans
provide for the grant of incentive stock options and non-qualified stock
options. The terms of the options are set by our Board of Directors. The options
expire no later than ten years after the date the stock option is granted. The
number of shares authorized for grants under the Plans is 15% of the total
outstanding common stock as computed by the Company as fully diluted, provided
that no more than 4 million options can be “incentive” stock options. The 2001
Plan provides for the grant of a maximum of 40,000 incentive stock options that
expire no later than ten years after the date the stock option is
granted.





Our Board
of Directors, in the case of executive officer and director grants, and the
stock plan committee of our Board of Directors, in the case of other grants, is
responsible for determining the type of award, when and to whom awards are
granted, the number of shares and terms of the awards and the exercise
price.  The options are exercisable for a period not to exceed ten
years from the date of the grant, unless otherwise approved by the
committee.  Vesting periods range from immediately vesting to vesting
annually over four years.





Stock-based
compensation expense of approximately $0.2 million and $38 thousand was recorded
during the three months ended March 31, 2009, and 2008, respectively and $0.5
million and $0.1 million during the nine months ended March 31, 2009 and 2008,
respectively.  The fair value of each stock option grant is estimated
on the grant date using the Black-Scholes Merton option-pricing model with the
following assumptions: dividend yield of 0%; expected volatility of between 64%
and 68% (derived from peer company implied estimated volatility); expected term
of 6.25 years (based on our best estimate since we do not have adequate
historical data); and risk-free interest rate between 1.50% and 3.06% based on
the yield at the time of grant of a U.S. Treasury security with an equivalent
remaining term.





The
following table summarizes share-based award activity under our stock option
plans:




17


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts
in thousands except for share and per share amounts)




2001
      Plan
                          
                          
                          1999
      Plan
                          
                          
                          Non-PlanWeighted
                          
                          
                          
                          
                          
                          Weighted
                          
                          
                          
                          
                          
                          WeightedAverage
                          
                          
                          
                          
                          
                          Average
                          
                          
                          
                          
                          
                          AverageNumber
                          
                          
                          Exercise
                          
                          
                          Number
                          
                          
                          Exercise
                          
                          
                          Number
                          
                          
                          Exerciseof
      Shares
                          
                          
                          Price
                          
                          
                          of
      Shares
                          
                          
                          Price
                          
                          
                          of
      Shares
                          
                          
                          PriceBalance
      at June 30, 2008
                          
                          
                          16,891
                          
                          
                          $
                          1,387.50
                          
                          
                          
                          1,413,685
                          
                          
                          $
                          3.37
                          
                          
                          
                          18,704
                          
                          
                          $
                          6,786.00Options
      granted at fair value
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          956,326
                          
                          
                          
                          1.42
                          
                          
                          
                          -
                          
                          
                          
                          -Options
      exercised
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Options
      cancelled
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (121,861
                          )
                          
                          
                          1.11
                          
                          
                          
                          -
                          
                          
                          
                          -Outstanding
      at March 31, 2009
                          
                          
                          16,891
                          
                          
                          $
                          1,387.50
                          
                          
                          
                          2,248,150
                          
                          
                          $
                          2.66
                          
                          
                          
                          18,704
                          
                          
                          $
                          6,786.00Exercisable
      at March 31, 2009
                          
                          
                          16,891
                          
                          
                          $
                          1,387.50
                          
                          
                          
                          1,151,584
                          
                          
                          $
                          3.93
                          
                          
                          
                          18,704
                          
                          
                          $
                          6,786.00




Nonvested
options activity:


2001
      Plan
                    
                    
                    1999
      Plan
                    
                    
                    Non-PlanWeighted
                    
                    
                    WeightedAverage
                    
                    
                    AverageNumber
                    
                    
                    Number
                    
                    
                    Exercise
                    
                    
                    Fair
                    
                    
                    Numberof
      Shares
                    
                    
                    of
      Shares
                    
                    
                    Price
                    
                    
                    Value
                    
                    
                    of
      SharesBalance
      at June 30, 2008
                    
                    
                    -
                    
                    
                    
                    631,613
                    
                    
                    $
                    1.14
                    
                    
                    $
                    0.81
                    
                    
                    
                    -Options
      granted at fair value
                    
                    
                    -
                    
                    
                    
                    956,326
                    
                    
                    
                    1.42
                    
                    
                    
                    0.88
                    
                    
                    
                    -Options
      vested
                    
                    
                    -
                    
                    
                    
                    (401,363
                    )
                    
                    
                    1.27
                    
                    
                    
                    0.80
                    
                    
                    
                    -Options
      cancelled
                    
                    
                    -
                    
                    
                    
                    (90,010
                    )
                    
                    
                    1.15
                    
                    
                    
                    1.08
                    
                    
                    
                    -Outstanding
      at March 31, 2009
                    
                    
                    -
                    
                    
                    
                    1,096,566
                    
                    
                    $
                    1.33
                    
                    
                    $
                    0.85
                    
                    
                    
                    -





At March
31, 2009, the range of exercise prices, weighted average exercise price and
weighted average remaining contractual life for options outstanding are as
follows:





Options
      Outstanding and ExercisableWeightedWeighted
                        
                        AverageNumber
                        
                        
                        
                        
                        
                        Average
                        
                        Remainingof
                        
                        
                        
                        
                        
                        Exercise
                        
                        ContractualOption
      Price Range
                        
                        
                        Shares
                        
                        
                        Exercisable
                        
                        
                        Price
                        
                        Life2001
      Plan
                        
                        
                        
                        
                        $
                        1,387.50
                        
                        
                        
                        16,891
                        
                        
                        
                        16,891
                        
                        
                        $
                        1,387.50
                        
                        1.78
      Years1999
      Plan
                        
                        $
                        0.30
      to
                        
                        
                        $
                        0.81
                        
                        
                        
                        656,500
                        
                        
                        
                        646,625
                        
                        
                        $
                        0.49
                        
                        7.14
      Years$
                        0.90
      to
                        
                        
                        $
                        1.48
                        
                        
                        
                        1,587,650
                        
                        
                        
                        500,958
                        
                        
                        $
                        1.32
                        
                        8.73
      Years$
                        7.05
                        
                        
                        
                        167
                        
                        
                        
                        167
                        
                        
                        $
                        7.05
                        
                        5.30
      Years$
                        8.01
                        
                        
                        
                        250
                        
                        
                        
                        250
                        
                        
                        $
                        8.01
                        
                        4.92
      Years$
                        16.50
                        
                        
                        
                        2,417
                        
                        
                        
                        2,417
                        
                        
                        $
                        16.50
                        
                        1.28
      Years$
                        3,000.00
                        
                        
                        
                        1,167
                        
                        
                        
                        1,167
                        
                        
                        $
                        3,000.00
                        
                        0.52
      YearsNon-Plan
                        
                        
                        
                        
                        
                        $
                        3,600.00
                        
                        
                        
                        636
                        
                        
                        
                        636
                        
                        
                        $
                        3,600.00
                        
                        0.94
      Years$
                        6,900.00
                        
                        
                        
                        18,067
                        
                        
                        
                        18,067
                        
                        
                        $
                        6,900.00
                        
                        1.01
      Years




18


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts
in thousands except for share and per share amounts)





11.
            Related
      Party Transactions





Pursuant
to the provisions of the Note Purchase Agreement dated December 29, 2006 (the
“Note Purchase Agreement”) between us and Sigma Opportunity Fund, LLC (“Sigma”),
so long as Sigma beneficially owns at least 5% of our outstanding common stock,
Sigma has the right to nominate one director to our Board of Directors. On
December 29, 2006, Sigma nominated, and our Board of Directors appointed, Thom
Waye to serve as a member of our Board of Directors as a Class III director,
with his term expiring at the 2008 annual meeting. Mr. Waye was re-elected at
the 2008 annual meeting with a term expiring at the 2011 annual meeting. We are
obligated to use our best efforts to cause Mr. Waye, as well as all reasonably
suited future designees, to continue to serve on our Board of Directors. We paid
Sigma $0 and $53 thousand during the three months ended March 31, 2009 and 2008,
respectively, and $0 and $0.2 million during the nine months ended March 31,
2009 and 2008, respectively, in interest on a note payable to Sigma. We paid Mr.
Waye $2 thousand during each of the three months ended March 31, 2009 and 2008,
and $23 thousand and $15 thousand during the nine months ended March 31, 2009
and 2008, respectively, for his service as a director pursuant to our standard
non-employee director compensation program. In addition, we issued 25,000 shares
of our common stock to each of Mr. Waye and all of our outside independent
directors. The value of the stock issued to each director was $28 thousand at
the time of issuance.





On
February 15, 2007, we entered into a Joinder Agreement to the Note Purchase
Agreement with Sigma Berliner, LLC, (“Sigma Berliner”) an affiliate of Sigma and
Thom Waye, and issued a note to Sigma Berliner in the principal amount of $1.5
million (the “Sigma Berliner Note”) and a warrant to purchase 750,000 shares of
our common stock. This transaction was the result of Sigma exercising a right
that Sigma negotiated as part of a December 29, 2006 transaction, at a time when
it was not an affiliate of Berliner. During the three and nine months ended
March 31, 2009, we paid Sigma Berliner $0 in interest on the Sigma Berliner
Note. During the three and nine months ended March 31, 2008, we paid Sigma
Berliner $26 thousand and $0.1 million, respectively, in interest on the Sigma
Berliner Note.





On
September 9, 2008, we entered into an Agreement and Plan of Reorganization (the
“Plan”) consisting of a one-for-one share exchange with Old Berliner, Inc. (“Old
Berliner”), our then-largest stockholder.  For a description of this
transaction, see Note 14.





12.
            Legal
      Proceedings





We and
our subsidiaries are involved in legal proceedings from time to time, none of
which we believe, if decided adversely to us, would have a material adverse
effect on our business, financial condition or results of
operations.




13.
            Segment
      Financial Data




We
currently report our financial results on the basis of two reportable segments:
(1) infrastructure construction and technical services and (2) site acquisition
and zoning.  The segments are determined in accordance with how
management views and evaluates our business based on the aggregation criteria as
outlined in FASB Statement No. 131, “Disclosures about Segments of an
Enterprise and Related Information.”  Operating income, as presented
below, is defined as gross margin less selling, general and administrative
expenses, depreciation and amortization, and gain or loss on sale of fixed
assets.  We do not identify or allocate assets, including capital
expenditures, by operating segment.  Accordingly, assets are not
reported by segment because the information is not available and is not reviewed
in the evaluation of segment performance or in making decisions in the
allocation of resources.   Selected segment financial information
for the three and nine months ended March 31, 2009, and 2008, is presented
below:


19


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts
in thousands except for share and per share amounts)




Three Months Ended March 31,2009
                    
                    
                    2008Infrastructure
                    
                    
                    Site
                    
                    
                    
                    
                    
                    Infrastructure
                    
                    
                    SiteConstruction
                    
                    
                    Acquisition
                    
                    
                    Total
                    
                    
                    Construction
                    
                    
                    Acquisition
                    
                    
                    TotalRevenue
                    
                    $
                    8,798
                    
                    
                    $
                    2,307
                    
                    
                    $
                    11,105
                    
                    
                    $
                    21,125
                    
                    
                    $
                    7,571
                    
                    
                    $
                    28,696Cost
      of revenue
                    
                    
                    7,337
                    
                    
                    
                    1,434
                    
                    
                    
                    8,771
                    
                    
                    
                    15,133
                    
                    
                    
                    5,074
                    
                    
                    
                    20,207Gross
      margin
                    
                    
                    1,461
                    
                    
                    
                    873
                    
                    
                    
                    2,334
                    
                    
                    
                    5,992
                    
                    
                    
                    2,497
                    
                    
                    
                    8,489Selling,
      general and administrative expenses
                    
                    
                    4,115
                    
                    
                    
                    924
                    
                    
                    
                    5,039
                    
                    
                    
                    4,698
                    
                    
                    
                    1,244
                    
                    
                    
                    5,942Depreciation
      and amortization
                    
                    
                    307
                    
                    
                    
                    16
                    
                    
                    
                    323
                    
                    
                    
                    239
                    
                    
                    
                    90
                    
                    
                    
                    329(Gain)
      loss on sale of fixed assets
                    
                    
                    (4
                    )
                    
                    
                    -
                    
                    
                    
                    (4
                    )
                    
                    
                    1
                    
                    
                    
                    (1
                    )
                    
                    
                    -Operating
      (loss) income
                    
                    $
                    (2,957
                    )
                    
                    $
                    (67
                    )
                    
                    $
                    (3,024
                    )
                    
                    $
                    1,054
                    
                    
                    $
                    1,164
                    
                    
                    $
                    2,218




Nine Months ended March 31,2009
                    
                    
                    2008Infrastructure
                    
                    
                    Site
                    
                    
                    
                    
                    
                    Infrastructure
                    
                    
                    SiteConstruction
                    
                    
                    Acquisition
                    
                    
                    Total
                    
                    
                    Construction
                    
                    
                    Acquisition
                    
                    
                    TotalRevenue
                    
                    $
                    33,556
                    
                    
                    $
                    5,170
                    
                    
                    $
                    38,726
                    
                    
                    $
                    84,043
                    
                    
                    $
                    19,928
                    
                    
                    $
                    103,971Cost
      of revenue
                    
                    
                    24,871
                    
                    
                    
                    2,273
                    
                    
                    
                    27,144
                    
                    
                    
                    57,197
                    
                    
                    
                    14,058
                    
                    
                    
                    71,255Gross
      margin
                    
                    
                    8,685
                    
                    
                    
                    2,897
                    
                    
                    
                    11,582
                    
                    
                    
                    26,846
                    
                    
                    
                    5,870
                    
                    
                    
                    32,716Selling,
      general and administrative expenses
                    
                    
                    13,735
                    
                    
                    
                    1,947
                    
                    
                    
                    15,682
                    
                    
                    
                    15,747
                    
                    
                    
                    3,269
                    
                    
                    
                    19,016Depreciation
      and amortization
                    
                    
                    920
                    
                    
                    
                    31
                    
                    
                    
                    951
                    
                    
                    
                    656
                    
                    
                    
                    185
                    
                    
                    
                    841(Gain)
      loss on sale of fixed assets
                    
                    
                    (9
                    )
                    
                    
                    -
                    
                    
                    
                    (9
                    )
                    
                    
                    7
                    
                    
                    
                    1
                    
                    
                    
                    8Operating
      (loss) income
                    
                    $
                    (5,961
                    )
                    
                    $
                    919
                    
                    
                    $
                    (5,042
                    )
                    
                    $
                    10,436
                    
                    
                    $
                    2,415
                    
                    
                    $
                    12,851





14.
            Reorganization
      of Old Berliner, Inc.





Reorganization
of Old Berliner, Inc.





On
February 4, 2009 (the “Closing Date”), pursuant to the Agreement and Plan of
Reorganization, dated September 9, 2008 (the “Agreement”), between the Company
and Old Berliner, the Company completed its exchange of 13,104,644 newly issued
shares of the Company’s common stock (the “Issued Shares”) for substantially all
the assets of Old Berliner, which consist of 13,104,644 shares of common stock
of the Company.  From and after the Closing Date, Old Berliner did not
engage in any business, and promptly liquidated and dissolved as a corporation
on March 26, 2009 and distributed all of its assets and liabilities to the Old
Berliner Liquidating Trust (the “Trust”).  The Trust will distribute
the assets to the beneficiaries of the Trust, the former shareholders of Old
Berliner, as soon as practicable.





Pursuant
to the Agreement, the Company did not assume any liabilities or obligations of
Old Berliner, but each of the Company and Old Berliner (each, in such capacity,
the “Indemnifying Party”) has agreed to indemnify the other party and its
successors and assigns (collectively, the “Indemnified Party”) against losses
and damages incurred by any such Indemnified Party for any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in the Agreement.


20


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts
in thousands except for share and per share amounts)





Prior to
the completion of the transactions contemplated by the Agreement, Old Berliner
owned common stock representing approximately 49.4% of the voting power of the
Company’s capital stock.  Mr. Richard Berliner, the Company’s Chief
Executive Officer, was deemed to beneficially own the shares of the common stock
held by Old Berliner as a result of Mr. Berliner’s positions as President, Chief
Executive Officer and Chairman of the Board of Old Berliner, a corporation of
which Mr. Berliner was also approximately a 57.4% equity owner and a
director.  After the transfer of shares to the Trust, Mr. Berliner
will continue to be deemed to beneficially own these shares as a result of his
position as holder of a majority ownership of the Trust.  Upon the
completion of all of the transactions contemplated by the Agreement and a
distribution of the assets of the Trust, Mr. Berliner beneficially owns
approximately 28.5% of the outstanding common stock of the Company.





The
transactions contemplated by the Agreement are intended to qualify as a
“reorganization” within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended, and all of the Issued Shares are intended to
constitute consideration issued in connection with a
reorganization.


21




Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations





Cautionary
Statement for the Purposes of the “Safe Harbor” Provisions of the Private
Securities Litigation Reform Act of 1995




Certain
information included in this Quarterly Report on Form 10-Q (the “Quarterly
Report”) and in our other reports, SEC filings, statements and presentations is
forward-looking within the meaning of the Private Securities Litigation Reform
Act of 1995, including, but not limited to, statements concerning our
anticipated operating results, financial resources, growth and expansion and the
ability to obtain new contracts.  Such forward-looking information
involves important risks and uncertainties that could significantly affect
actual results and cause them to differ materially from expectations expressed
herein and in other reports, SEC filings, statements and
presentations.   Therefore, this Quarterly Report should only be
read in context described under “Forward-Looking Statements” and “Risk Factors”
below.





Forward-Looking
Statements





The SEC
encourages companies to disclose forward-looking information so that investors
and stockholders can better understand a company’s future prospects and make
investment decisions.  “Forward-looking” statements appear throughout
this Quarterly Report.  We have based these forward-looking statements
on our current expectations and projections about future events.  We
have attempted, wherever possible, to identify such statements by using words
such as 
“anticipates,”
“estimates,”“expects,”
“projects,” “intends,” “plans,” “believes” and words and terms of similar
substance in connection with any discussions of future operating or financial
performance.




The
important factors listed in Part II, Item 1A of this Quarterly Report and in our
Annual Report on Form 10-K for our fiscal year ended June 30, 2008 (the “Annual
Report”) under the heading entitled “Risk Factors,” as well as all other
cautionary language in this Quarterly Report, provide examples of risks,
uncertainties and events that may cause actual results to differ materially from
the expectations described in these “forward-looking” statements.  It
is important to note that the occurrence of the events described in these
considerations and elsewhere in this Quarterly Report and our Annual Report
could have an adverse effect on our business, results of operations or financial
condition.




Forward-looking
statements in this Quarterly Report include, without limitation, statements
concerning:




·
            our
      ability to generate future revenue;


§
            our
      financial condition and strategic
direction;


§
            our
      future capital requirements and our ability to satisfy our capital
      needs;


§
            our
      ability to adequately staff our service
  offerings;


§
            the
      potential for cost overruns and costs incurred upon failing to meet agreed
      standards;


§
            opportunities
      for us from new and emerging wireless
  technologies;


§
            our
      ability to obtain additional
financing;


§
            our
      growth strategy;


§
            trends
      in the wireless telecommunications
industry;


§
            our
      competitive position; and


§
            other
      statements that contain words like“believe,”
      “anticipate,” “expect” and similar expressions are also used to identify
      forward-looking statements.





It is
important to note that all of our forward-looking statements are subject to a
number of risks, assumptions and uncertainties, such as (and in no particular
order):





·
            risks
      that we will not be able to generate positive cash
  flow;


·
            risks
      related to our ability to remain in compliance with our credit facility
      with PNC Bank;


§
            risks
      related to the market for our
shares;


§
            risks
      related to disruptions in the global capital
  markets;


§
            risks
      related to a concentration of revenue from a small number of
      customers;


§
            risks
      associated with competition in the wireless telecommunications
      industry;


§
            risks
      that we may not be able to obtain additional
  financing;


§
            risks
      that we will not be able to take advantage of new and emerging wireless
      technologies; and


§
            risks
      that we will be unable to adequately staff our service
      offerings.


22





This list
is only an example of the risks that may affect the forward-looking statements.
If any of these risks or uncertainties materialize (or if they fail to
materialize), or if the underlying assumptions are incorrect, then actual
results may differ materially from those projected in the forward-looking
statements.




Additional
factors that could cause actual results to differ materially from those
reflected in the forward-looking statements include, without limitation, those
discussed elsewhere in this Quarterly Report.  It is important not to
place undue reliance on these forward-looking statements, which reflect our
analysis, judgment, belief or expectation only as of the date of this Quarterly
Report. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date of this
Quarterly Report.





Summary of Operating
Results





The
following table presents consolidated selected financial information. The
statement of operations data for the three and nine months ended March 31, 2009,
and 2008, has been derived from our unaudited consolidated financial statements
that, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary to state fairly the data for such
period.  We operate in two reportable segments: (1) infrastructure
construction and technical services, and (2) site acquisition and zoning to
wireless communications carriers.





All
amounts presented herein are expressed in thousands, except share and per-share
data, unless otherwise specifically noted.





Three months ended
                          
                          
                          Nine months endedMarch 31,
                          
                          
                          March 31,2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008Statement of Operations
      Data:Revenue
                          
                          $
                          11,105
                          
                          
                          $
                          28,696
                          
                          
                          $
                          38,726
                          
                          
                          $
                          103,971Gross
      margin
                          
                          
                          2,334
                          
                          
                          
                          8,489
                          
                          
                          
                          11,582
                          
                          
                          
                          32,716Operating
      income (loss)
                          
                          
                          (3,024
                          )
                          
                          
                          2,218
                          
                          
                          
                          (5,042
                          )
                          
                          
                          12,851Net
      income (loss)
                          
                          
                          (1,542
                          )
                          
                          
                          900
                          
                          
                          
                          (2,770
                          )
                          
                          
                          6,385Net
      income (loss) per shareBasic
                          
                          $
                          (0.06
                          )
                          
                          $
                          0.05
                          
                          
                          $
                          (0.10
                          )
                          
                          $
                          0.37Diluted
                          
                          $
                          (0.06
                          )
                          
                          $
                          0.04
                          
                          
                          $
                          (0.10
                          )
                          
                          $
                          0.27





March 31,
                      
                      
                      June 30,2009
                      
                      
                      2008Balance
      Sheet Data:Current
      assets
                      
                      $
                      23,880
                      
                      
                      $
                      36,672Total
      assets
                      
                      
                      32,142
                      
                      
                      
                      43,269Current
      liabilities
                      
                      
                      9,192
                      
                      
                      
                      20,056Long-term
      debt, net of debtdiscount
      and current portion
                      
                      
                      245
                      
                      
                      
                      772Shareholders'
      equity
                      
                      
                      22,595
                      
                      
                      
                      22,337


23





Three
months ended March 31, 2009, compared to three months ended March 31,
2008


(Amounts
in Thousands Unless Otherwise Stated)





Revenue





Three months endedMarch 31,2009
                    
                    2008
                    
                    (Decrease)Infrastructure
      construction and technical services
                    
                    $
                    8,798
                    
                    
                    $
                    21,125
                    
                    
                    $
                    (12,327
                    )Site
      acquisition and zoning
                    
                    
                    2,307
                    
                    
                    
                    7,571
                    
                    
                    
                    (5,264
                    )Total
                    
                    
                    11,105
                    
                    
                    
                    28,696
                    
                    
                    
                    (17,591
                    )





We had
revenue of $11.1million for the three
months ended March 31, 2009, versus $28.7 million for the three months ended
March 31, 2008.  This represents a decrease of $17.6 million, or 61%.
Revenue from infrastructure construction and technical services decreased $12.3
million from $21.1 million, or 58% for the three months ended March 31, 2009 as
compared to the three months ended March 31, 2008. Revenue from site acquisition
and zoning decreased $5.3 million from $7.6 million, or 70%, for the three
months ended March 31, 2009 as compared to the three months ended March 31,
2008. This decrease in revenue is related to several factors:




·
            Our
      largest customer during fiscal 2008, Sprint Nextel, cancelled purchase
      orders beginning in the fourth quarter of fiscal 2008 for work previously
      awarded to us, and asked us to delay the completion of other purchase
      orders.  These cancellations and delays were related to Sprint’s
      sale of its fourth generation, or 4G, WiMax networks business to Clearwire
      Communications (“Clearwire”), and were unrelated to our performance on
      these projects. This significantly impacted our financial results in the
      quarters ended September 30 and December 31, 2008 and it has continued to
      negatively impact financial results for the quarter ended March 31,
      2009.  We have actively sought to replace this work with
      additional projects from Clearwire and other customers, and
      have  received a number of purchase orders related to the
      continuation of this work, primarily in the site acquisition and zoning
      segment of our business. As of March 31, 2009, our backlog was
      approximately $22.7 million as compared to $15.2 million as of June
      30, 2008 and $9.7 million as of December 31, 2008.  We believe
      substantially all of our backlog at March 31, 2009 will be filled before
      the end of our first quarter of fiscal 2010. We believe the prospects for
      resumption of the 4G network build-out by Clearwire will present an
      important opportunity for new business in the fourth quarter of fiscal
      2009 and the entire fiscal year
2010.





·
            Our
      fiscal third quarter was a period of transition for some of our customers
      and their projects, and this had a negative impact on our revenue for the
      quarter.  Several of our customers are just beginning
      large-scale build-outs for new networks, including Clearwire and the
      development of its 4G network, and other customers, such as Verizon, that
      are beginning work on new LTE (or Long-Term Evolution)
      networks.  While we are involved with these initiatives, and we
      have devoted significant time and resources to position ourselves to
      support these projects, they have not yet begun in earnest.  In
      addition, some of our other customers completed projects during the third
      quarter in some markets, and while we continue to work for these
      customers, we saw a decline in business from them immediately after the
      completion of these market
launches.




Going
forward, the general downturn in national and global economic conditions may
impact us and possibly our customers, subcontractors, vendors and suppliers, but
we cannot predict the extent of this impact at this time.  We continue
to see pricing pressure in some of our service lines, and we believe this is
attributable to a shift in our customer base and to a lesser extent general
economic conditions.  In addition, bidding for some new projects has
become more competitive.  Therefore, while we do not expect our fourth
quarter fiscal 2009 revenue  to match our revenue for the same period
of fiscal 2008, we do expect it to increase compared to our fiscal 2009 third
quarter revenue  because of the new business we have been
awarded.





Historically
we win and begin projects on an irregular basis, and, therefore, we have seen in
normal economic conditions considerable variability in our historic quarterly
results.  In light of this, and the broad-based uncertainty
surrounding general economic conditions, we expect to continue to see
significant quarterly variability.  We expect our fiscal 2009 annual
results to be substantially lower than our fiscal 2008 financial results,
primarily because of the factors we discuss above.  However, we
believe our overall financial position is strong, our customer base is diverse
and has growth potential, and our backlog of business has grown significantly
since December 31, 2008. Our objective is to maintain and support the national
platform we have developed so that we can take advantage of  growth
opportunities as they present themselves.


24


We
recognize revenues using the percentage-of-completion method of
accounting.




Cost
of Revenue




Three months endedMarch 31,2009
                    
                    2008
                    
                    (Decrease)Infrastructure
      construction and technical services
                    
                    $
                    7,337
                    
                    
                    $
                    15,133
                    
                    
                    $
                    (7,796
                    )Site
      acquisition and zoning
                    
                    
                    1,434
                    
                    
                    
                    5,074
                    
                    
                    
                    (3,640
                    )Total
                    
                    $
                    8,771
                    
                    
                    $
                    20,207
                    
                    
                    $
                    (11,436
                    )





Our cost
of revenue was $8.8million and $20.2
million for the three months ended March 31, 2009 and 2008,
respectively.  This represents a decrease of $11.4 million, or 57%,
during a period when revenue decreased 61%. These amounts represent 79% and 70%
of total revenue for the three months ended March 31, 2009 and 2008,
respectively.




Cost of
revenue for infrastructure construction and technical services decreased $7.8
million from $15.1 million for the three months ended March 31, 2008 to $7.3
million for the three months ended March 31, 2009. This represents a decrease of
51% during a period when corresponding revenue decreased 58%.




Cost of
revenue for site acquisition and zoning decreased $3.6 million from $5.1 million
for the three months ended March 31, 2008 to $1.4 million for the three months
ended March 31, 2009. This represents a decrease of 72% during a period when
corresponding revenue decreased 70%.




Gross
Margin




Three months endedMarch 31,2009
                  
                  2008
                  
                  (Decrease)Infrastructure
      construction and technical services
                  
                  $
                  1,461
                  
                  
                  $
                  5,992
                  
                  
                  $
                  (4,531
                  )Site
      acquisition and zoning
                  
                  
                  873
                  
                  
                  
                  2,497
                  
                  
                  
                  (1,624
                  )Total
                  
                  $
                  2,334
                  
                  
                  $
                  8,489
                  
                  
                  $
                  (6,155
                  )





Our gross
margin for the three months ended March 31, 2009, was $2.3 million as compared
to $8.5million for
the three months ended March 31, 2008.  Our gross margin as a
percentage of revenue was approximately 21% for the three months ended March 31,
2009, as compared to 30% for the three months ended March 31, 2008.




In light
of the current telecommunications market and economic conditions in general, we
have decided to bid our services more aggressively than we have in the past.
Competition has increased and many of our customers are exploring ways to reduce
costs, which could impact pricing for some services. In addition, we have been
awarded a significant amount of work from OEMs and other project management
companies that do work for the carriers, which is at a lower profit margin than
the work we do directly for our carrier customers. This has led to a decrease in
our gross profit margins, which we believe will continue to be lower than our
historic margins at least through the end of fiscal 2009.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the three months ended March 31, 2009
were $5.0 million as compared to $5.9 million for the three months ended March
31, 2008. This represents an overall decrease of $0.9 million, or 15%, which
consists primarily of decreases in insurance and professional fees of $0.5
million, rent and other occupancy costs of $0.4 million and payroll related
expenses of $0.1 million.


25




Depreciation
and Amortization





Depreciation
recorded on fixed assets during both of the three months ended March 31, 2009
and 2008 totaled approximately $0.2 million, respectively. Amortization of
intangible assets acquired as a result of the Digitcom and Radian acquisitions
resulted in amortization expense of approximately $0.1 million in both of the
three months ended March 31, 2009 and 2008, respectively.





Interest
Expense





We
recognized $57 thousand in interest expense during the three months ended March
31, 2009 as compared to $0.3 million during the three months ended March 31,
2008.  This 78% decrease was primarily caused by the conversion in
June 2008 of our 7% Subordinated Convertible Note with Sigma and the other
participating noteholders and the reduced usage of our line of credit with
PNC.





Amortization
of Deferred Financing Fees and Accretion of Debt Discount





We
recognized $15 thousand and $0.4 million in amortization of deferred financing
fees and interest accretion caused by the issuance of warrants related to our
financing transactions with Sigma and the other participating noteholders during
the three months ended March 31, 2009 and 2008, respectively.





Income
Taxes




We
recorded income tax benefit of $1.5 million and income tax expense of $0.8
million for the three months ended March 31, 2009 and 2008, respectively. The
effective income tax rate for the three months ended March 31, 2009 was 50% as
compared to 46% for the three months ended March 31, 2008.  The
Company recorded an additional $0.2 million of income tax benefit during both of
the three months ended March 31, 2009 and 2008 related to a true-up of the
previous fiscal year end 2008 income tax accrual.




At June
30, 2008, we had net operating loss carryforwards for federal and state income
tax purposes of approximately $1.2 million expiring in 2026, which may be
applied against future taxable income.  We can only utilize certain
NOL’s of approximately $64 thousand per year due to limitations as a result of
certain Acquisitions (see Note 1 of our Consolidated Financial
Statements).





Nine
months ended March 31, 2009, compared to nine months ended March 31,
2008


(Amounts
in Thousands Unless Otherwise Stated)





Revenue


Nine months endedMarch 31,2009
                    
                    2008
                    
                    (Decrease)Infrastructure
      construction and technical services
                    
                    $
                    33,556
                    
                    
                    $
                    84,043
                    
                    
                    $
                    (50,487
                    )Site
      acquisition and zoning
                    
                    
                    5,170
                    
                    
                    
                    19,928
                    
                    
                    
                    (14,758
                    )Total
                    
                    $
                    38,726
                    
                    
                    $
                    103,971
                    
                    
                    $
                    (65,245
                    )





We had
revenue of $38.7million for the nine
months ended March 31, 2009, versus $104.0 million for the nine months ended
March 31, 2008.  This represents a decrease of $65.2 million, or 63%.
Revenue from infrastructure construction and technical services decreased $50.5
million from $84.0 million, or 60% for the nine months ended March 31, 2009 as
compared to the nine months ended March 31, 2008. Revenue from site acquisition
and zoning decreased $14.8 million from $19.9 million, or 74%, for the nine
months ended March 31, 2009 as compared to the nine months ended March 31,
2008.




This
decrease in revenue is related in large part to the cancellation of a
substantial number of purchase orders by Sprint Nextel starting in the fourth
quarter of our 2008 fiscal year in connection with Sprint’s sale of the 4G WiMax
network business to Clearwire. The timing for Clearwire’s resumption of the
buildout for the 4G network adversely affected our revenue during the nine month
period.  See the discussion above under the heading “Revenue” for the
third quarters of 2009 and 2008 for a more detailed description of the same
factors as applied to those periods.


26


We
recognize revenues using the percentage-of-completion method of
accounting.




Cost
of Revenue




Nine months endedMarch 31,2009
                    
                    2008
                    
                    (Decrease)Infrastructure
      construction and technical services
                    
                    $
                    24,871
                    
                    
                    $
                    57,197
                    
                    
                    $
                    (32,326
                    )Site
      acquisition and zoning
                    
                    
                    2,273
                    
                    
                    
                    14,058
                    
                    
                    
                    (11,785
                    )Total
                    
                    $
                    27,144
                    
                    
                    $
                    71,255
                    
                    
                    $
                    (44,111
                    )





Our cost
of revenue was $27.1million and $71.3
million for the nine months ended March 31, 2009 and 2008,
respectively.  This represents a decrease of $44.1 million, or 62%,
during a period when revenue decreased 63%. These amounts represent 70% and 69%
of total revenue for the nine months ended March 31, 2009 and 2008,
respectively.




Cost of
revenue for infrastructure construction and technical services decreased $32.3
million from $57.2 million for the nine months ended March 31, 2008 to $24.9
million for the nine months ended March 31, 2009. This represents a decrease of
57% during a period when corresponding revenue decreased 60%.




Cost of
revenue for site acquisition and zoning decreased $11.8 million from $14.1
million for the nine months ended March 31, 2008 to $2.3 million for the nine
months ended March 31, 2009. This represents a decrease of 84% during a period
when corresponding revenue decreased 74%.




Gross
Margin




Nine months endedMarch 31,2009
                  
                  2008
                  
                  (Decrease)Infrastructure
      construction and technical services
                  
                  $
                  8,685
                  
                  
                  $
                  26,846
                  
                  
                  $
                  (18,161
                  )Site
      acquisition and zoning
                  
                  
                  2,897
                  
                  
                  
                  5,870
                  
                  
                  
                  (2,973
                  )Total
                  
                  $
                  11,582
                  
                  
                  $
                  32,716
                  
                  
                  $
                  (21,134
                  )





Our gross
margin for the nine months ended March 31, 2009 decreased 65% to $11.6 million
as compared to $32.7million for the nine
months ended March 31, 2008.  Our gross margin as a percentage of
revenue was approximately 30% for the nine months ended March 31, 2009, as
compared to 31% for the nine months ended March 31, 2008.




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the nine months ended March 31, 2009
were $15.7 million as compared to $19.0 million for the nine months ended March
31, 2008. This represents an overall decrease of $3.3 million, or 18%, which
consists primarily of decreases in insurance expense of $0.5 million,
professional fees of $0.6 million, rent and other occupancy costs of $0.8
million and payroll related expenses of $1.3 million. The nine months ended
March 31, 2008 included a charge of $0.2 million to increase our estimated
reserve for an assessment by a state department of revenue.





Depreciation
and Amortization





Depreciation
recorded on fixed assets during the nine months ended March 31, 2009 totaled
approximately $0.7 million as compared to $0.6 million for the nine months ended
March 31, 2008. Amortization of intangible assets acquired as a result of the
Digitcom and Radian acquisitions resulted in amortization expense of
approximately $0.3 million in both of the nine months ended March 31, 2008 and
2008, respectively.


27





Interest
Expense





We
recognized $0.2 million in interest expense during the nine months ended March
31, 2009 as compared to $1.0 million during the nine months ended March 31,
2008.  This 83% decrease was primarily caused by the conversion in
June 2008 of our 7% Subordinated Convertible Note with Sigma and the other
participating noteholders and the reduced usage of our line of credit with
PNC.





Amortization
of Deferred Financing Fees and Accretion of Debt Discount





We
recognized $45 thousand and $1.1 million in amortization of deferred financing
fees and interest accretion caused by the issuance of warrants related to our
financing transactions with Sigma and the other participating noteholders during
the nine months ended March 31, 2009 and 2008, respectively.





Income
Taxes




We
recorded an income tax benefit of $2.1 million and an income tax expense of $4.5
million for the nine months ended March 31, 2009 and 2008, respectively. The
effective income tax rate for the nine months ended March 31, 2009 was 43% as
compared to 41% for the nine months ended March 31, 2008.  The Company
recorded an additional $0.2 million of income tax benefit during both of the
nine months ended March 31, 2008 and 2009 related to a true-up of the previous
fiscal year end 2008 income tax accrual.




Liquidity
and Capital Resources





At March
31, 2009, we had consolidated current assets of approximately $23.9
 million, including cash and cash equivalents of approximately $3.1 million
and net working capital of approximately
$14.7 million.  Historically, we have funded our operations
primarily through operating cash flow and borrowings under loan arrangements.
The principal use of cash during the nine months ended March 31, 2009 was to pay
income taxes related to fiscal 2008 and to fund the payments in accounts payable
and accrued expenses.





On April
17, 2008, we entered into a revolving line of credit with PNC Bank, National
Association as lead lender, which provides for revolving loan advances from time
to time in an amount up to the lesser of: (i) 85% of the value of certain of our
receivables approved by the Lenders as collateral; or (ii)  $15.0
million.  Outstanding borrowings are secured by a blanket security
interest in favor of the lender that covers all of our receivables, equipment,
general intangibles, inventory, investment property, certain real property,
certain leasehold interests, all subsidiary stock, records and other
property.  The loan terms have covenants and conditions which include
financial tests for minimum undrawn loan availability, minimum Fixed Charge
Coverage Ratios (as that term is defined in the PNC Facility), and minimum
EBITDA levels, all generally measured on quarterly basis.




BCI was
not in compliance with its Fixed Charge Coverage Ratio for its second fiscal
quarter.  BCI entered into an Amendment with PNC which waived
compliance with the ratio, increased the interest rates and provided that during
the term of the PNC Facility as amended, BCI would observe the following
financial covenants:




1.
Minimum Undrawn Availability:  BCI cannot cause, suffer or permit
Undrawn Availability plus cash on deposit at PNC to be less than (1) Two Million
Two Hundred Fifty Thousand ($2,250,000) Dollars as of March 31, 2009, or (2)
Three Million Five Hundred Thousand ($3,500,000) Dollars as of June 30,
2009;




2. Fixed
Charge Coverage Ratio:  BCI must cause to be maintained at all times a
Fixed Charge Coverage Ratio of not less than (1) 1.00 to 1.00 from July 1, 2009
through September 30, 2009,  (2) 1.10 to 1.00 from October 1, 2009
through June 30, 2010, tested quarterly on a building four (4) quarter basis,
and (3) 1.10 to 1.00 thereafter, tested quarterly on a rolling four (4) quarter
basis;




3.
Minimum EBITDA:  BCI cannot cause, suffer or permit EBITDA to be less
than (1) Two Million Six Hundred Twenty- Two Thousand ($2,622,000) Dollars for
the trailing twelve months ending March 31, 2009, or (2) One Million Five
Hundred Thousand ($1,500,000) Dollars for the fiscal quarter ending June 30,
2009.


28


On May
14, 2009, we determined that we were not in compliance with the Minimum EBITDA
covenant for the trailing twelve months ending March 31, 2009.  A
violation of this financial covenant, unless waived by the Lenders, constitutes
an event of default under the PNC Facility, giving the Lenders the right to (i)
accelerate all of BCI’s indebtedness and any interest accrued thereon under the
PNC Facility, (ii) terminate the PNC Facility, (iii) refuse to make any
additional advances under the PNC Facility, and (iv) exercise any and all other
rights or remedies as provided for in the PNC Facility including, but not
limited to, increasing the interest rate for revolving Domestic Loans (as
defined in the PNC Facility) by two percent (2%) per annum.  While we
have been advised by the Lenders that they do not intend to immediately
terminate the PNC Facility or demand immediate repayment of the outstanding
debt, if any, as a result of the aforementioned event of default, the Lenders
have the right to do so.




BCI is in
discussion with the Lenders to waive the current non-compliance with the
financial covenant.  While BCI expects to negotiate an acceptable
resolution, there can be no assurance that BCI will be able to negotiate a
waiver or an amendment, or that such waiver or amendment will be on terms
acceptable to BCI.  If BCI is unable to obtain a waiver from or enter
into an amendment with the Lenders, it could have a material adverse effect on
our liquidity, financial position and our ability to fund our operations and
execute our growth plans.




On
February 28, 2007, in connection with the Asset Purchase Agreement with
Digitcom, J&J Leasing Partnership and the shareholders of Digitcom for the
purchase of certain of the assets of Digitcom, we issued a promissory note to
J&J Leasing Partnership (the“J&J Note”) in the
amount of $1.75 million. The principal amount and any accrued and unpaid
interest thereon is due and payable quarterly for a three year period ending on
March 1, 2010. The outstanding principal amount of the J&J Note bears
interest at the rate of 8.25% per year. The J&J Note is secured by certain
land and buildings sold to us by J&J Leasing Partnership. The balance
outstanding at March 31, 2009 was $0.6 million.





Our
ability to satisfy our current obligations is dependent upon our cash on hand,
borrowings under our credit facility with PNC, and the operations of BCI. Our
current obligations consist of capital expenditures, debt service and funding
working capital. In the event we do not generate positive cash flow, or if we
incur unanticipated expenses for operations and are unable to acquire additional
capital or financing, or we are unable to maintain compliance with the financial
covenants and our other obligations under the PNC Facility, we will likely have
to reassess our strategic direction, make significant changes to our business
operations and substantially reduce our expenses until such time as we achieve
positive cash flow. Our ability to raise additional capital or financing, if
necessary, may be negatively impacted by recent downturns in the capital markets
and the U.S. economy in general. In addition, the cancellation and/or deferral
of a number of projects from our largest customer may have a material impact on
our ability to generate sufficient cash flow in future periods. Cost saving
strategies may be necessary if we do not obtain orders from other customers
sufficient to replace these projects.





Backlog





Our
backlog represents our projected revenue from work we have been awarded by our
customers. These awards are generally cancellable at the option of the customer,
which is normal in the industry and, therefore, may not result in actual receipt
of revenue.  We define backlog as the value of work-in-hand to be
provided for customers as of a specific date where the following conditions are
met: a) the price of the work to be done is fixed; b) the scope of the work to
be done is fixed, both in definition and amount; and c) there is a written
contract, purchase order, agreement or other documentary evidence which
represents a firm commitment by the customer to pay us for the work to be
performed. As of March 31, 2009, our backlog was approximately
$22.7 million as compared to $15.2 million as of June 30, 2008 and $9.7
million as of December 31, 2008.  This increase is primarily
attributable to the receipt of a significant amount of new work on 4G, or WiMax,
projects in several markets across the country, and the award of new work from
new customers.  This backlog is primarily related to our site
acquisition and zoning segment, and historically this work has led to our
customers awarding us additional construction projects for the sites we have
prepared for construction during the site acquisition process.  We
believe substantially all of our backlog at March 31, 2009 will be filled before
the end of our first quarter of fiscal 2010.





The net
cash provided by (used in)operating, investing
and financing activities for the nine months ended March 31, 2009 and 2008, is
summarized below:


29





Nine months endedMarch 31,2009
                  
                  2008Net
      cash provided by operating activities
                  
                  $
                  1,642
                  
                  
                  $
                  3,214Net
      cash used in investing activities
                  
                  
                  (531
                  )
                  
                  
                  (900
                  )Net
      cash used in financing activities
                  
                  
                  (1,217
                  )
                  
                  
                  (3,550
                  )




Cash
provided by operating activities.




Net cash
provided by operating activities in the nine months ended March 31, 2009 and
2008 was approximately $1.7 million and $3.2 million,
respectively.   During the nine months ended March 31, 2009, cash
flow used in operating activities primarily resulted from operating loss, net of
non-cash charges, of approximately $3.2 million, which represents a decrease of
$11.2 million from the nine months ended March 31, 2008. This decrease was
primarily caused by net loss of $2.8 million as compared to net income of $6.4
million. We also realized a decrease in accounts receivable of approximately
$14.9 million due to increased collections and decreased revenue during the
nine months ended March 31, 2009. These were partly offset by decreases in
accounts payable of approximately $1.3 million and accrued liabilities of
approximately $7.4 million.In the nine months
ended March 31, 2008, cash used in operating activities primarily resulted from
operating income, net of non-cash charges, of $8.1 million, an increase in
accounts receivable of $17.3 million which were partly offset by increases in
accounts payable of $1.7 million and accrued liabilities of $9.5
million.




Cash
used in investing activities.




Net cash
used in investing activities decreased 41% to approximately $0.5 million from
$0.9 million in the nine months ended March 31, 2009 and 2008, respectively.
During the nine months ended March 31, 2009, cash used in investing activities
was primarily used for the purchase of fixed assets and the acquisition of
certain assets and operations of T3 Communications, Inc.  During the
nine months ended March 31, 2008, cash used in investing activities was
primarily used for the purchase of fixed assets.




Cash
used in financing activities.




Net cash
used in financing activities in the nine months ended March 31, 2009 and 2008
was approximately $1.2 million and $3.6 million, respectively.  During
the nine months ended March 31, 2009, net cash used in financing activities
consisted primarily of repayment of long-term debt related to the Digitcom
acquisition and other short-term financing of $0.9 million and repayment of our
line of credit of $0.2 million. During the nine months ended March 31, 2008, net
cash used in financing activities consisted primarily of net repayments against
our credit facility of $2.9 million and reductions of other debt obligations of
approximately $0.6 million.




We
believe our existing cash and cash equivalents and our line of credit (assuming
we are successful in negotiating a waiver of a covenant default with our lender)
will be sufficient to meet our cash requirements in the near term. Our future
capital requirements will depend on many factors, including our rate of revenue
growth, the timing and extent of capital expenditures to support our contracts
and expansion of sales and marketing. We cannot assure that additional equity or
debt financing will be available on acceptable terms, or at all. We expect our
sources of liquidity beyond twelve months will be our then current cash
balances, funds from operations, if any, our then current PNC credit facility
and any additional equity or credit facilities we can arrange.





Item
      3.
            Quantitative
      and Qualitative Disclosures About Market
Risk





Not
applicable.


30


Item
      4T.
            Controls
      and Procedures




Our
Principal Executive Officer and Principal Financial Officer have evaluated the
effectiveness of our and BCI’s disclosure controls and procedures as defined in
Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of
1934.  Based upon that evaluation, such officers have concluded that
our disclosure controls and procedures are effective, as of the end of the
period covered by this report, in timely alerting them to material information
relating to us (including our consolidated subsidiaries) required to be included
in this Quarterly Report.  There have been no significant changes in
our internal controls over financial reporting or in other factors, which could
significantly affect such internal controls, subsequent to the date that we
carried out our evaluation.




PART
II:  OTHER INFORMATION




Item
      1.
            Legal
      Proceedings





We and
our subsidiaries are involved in legal proceedings from time to time, none of
which we believe, if decided adversely to us or our subsidiaries, would have a
material adverse effect on our business, financial condition or results of
operations.




Item
      1A.
            Risk
      Factors




Our
revenue has declined significantly, and if we are not able to grow our revenue
as expected, we will need to cut costs dramatically to maintain
profitability.





We had
revenue of $38.7 million for the nine months ended March 31, 2009, versus $104.0
million for the nine months ended March 31, 2008. The loss of substantial
revenue from our major customer, the quarterly variability of our business and
the poor economic conditions in general make it difficult to predict when or if
future revenue growth will begin.   If we are not able to grow our
revenues over time, we will need to cut costs dramatically to restore
profitability, which could result in delays in implementing our business
plans.   If revenue declines further, or if our expected growth does
not occur soon enough, we may not be able to restore profitability at
all.





We generate a substantial portion of
our revenue from a limited number of customers, and if our relationships
with such customers were harmed, our business would
suffer.




For the
nine months ended March 31, 2009, we derived 70% of our total revenue from our
six largest customers, and these customers represented 58% of our accounts
receivable.  Of those six customers, two of them each individually
represented greater than 5%of net revenue, and the
other four represented 9%, 12%, 13% and 24%, respectively, of our net revenue
for the period. For the nine months ended March 31, 2008, we derived 87% of our
total revenue from our two largest customers.  Of those customers, one
of them represented greater than 5% of net revenue for the period and the other
represented greater than 81%of net revenue for the
period.





As of and
for the year ended June 30, 2008, we derived 84% of our total revenues from our
two largest customers, and those customers represented 62% of our accounts
receivable.  During the year ended June 30, 2008, Sprint Nextel
Corporation represented 77% and Metro PCS represented 7% of our total
revenues.  While we have diversified our customer base significantly,
beginning in the fourth quarter of fiscal 2008, Sprint Nextel cancelled and
postponed existing purchase orders associated with its sale of its fourth
generation, or 4G, Wimax network business to Clearwire Communications, which
have significantly reduced our revenue in the first three quarters of fiscal
2009. We may not be able to replace this revenue going forward.





We
believe that a limited number of clients will continue to be the source of a
substantial portion of our revenue for the foreseeable future.  Key
factors in maintaining our relationships with such customers include, without
limitation, our performance on individual contracts and the strength of our
professional reputation.  To the extent that our performance does not
meet client expectations, or our reputation or relationships with one or more
key customers are impaired, this could cause a significant decrease in our
revenue, which would negatively impact our ability to generate
income.  In addition, our key customers could slow or stop spending on
initiatives related to projects we are performing for them, which could be
impacted by the increased difficulty in the credit markets as a result of the
recent economic crisis, and this, while outside our control, could materially
impair our operating results.


31




We may experience significant
fluctuations in our quarterly results as a result of uncertainties relating to our
ability to generate additional revenue, manage expenditures and other factors, some
of which are outside of our control.




Our
operating results have varied considerably in the past, and may continue to do
so, due to a number of factors. Many of these factors are outside our control
and include, without limitation, the following:




·
            financing provided to customers
      and potential customers, particularly in light of tight credit markets and
      other factors associated with current economic
      conditions;




·
            the commencement, progress,
      completion or termination of contracts during any particular quarter, for
      example, the cancellation of purchase orders by our largest customer
      significantly impacted our financial results for the first nine months of
      fiscal 2009;




·
            the availability of equipment to
      deploy new technologies, such as 4G and
  broadband;




·
            the growth rate of wireless
      subscribers, which has a direct impact on the rate at which new cell sites
      are developed and built; and




·
            telecommunications market
      conditions and economic conditions
  generally.




Due to
these factors, our results for a particular quarter, and therefore, our combined
results for that same period, may not meet the expectations of investors, which
could cause the price of our common stock to decline
significantly.




We
are in default under our credit facility with PNC Bank, and this could severely
impact our ability to grow our business and execute our business plan should we
be unable to obtain a waiver of this default.




On March
31, 2009, we entered into an agreement amending our revolving line of credit
with PNC. Pursuant to the terms of the Amendment, PNC waived compliance by BCI
with the Fixed Charge Coverage Ratio covenant for the second quarter of fiscal
2009, deleted that covenant from the PNC Facility, and replaced it with the
following three new financial covenants:




1.
Minimum Undrawn Availability:  BCI cannot cause, suffer or permit
Undrawn Availability plus cash on deposit at PNC to be less than (1) Two Million
Two Hundred Fifty Thousand ($2,250,000) Dollars as of March 31, 2009, or (2)
Three Million Five Hundred Thousand ($3,500,000) Dollars as of June 30,
2009;




2. Fixed
Charge Coverage Ratio:  BCI must cause to be maintained at all times a
Fixed Charge Coverage Ratio of not less than (1) 1.00 to 1.00 from July 1, 2009
through September 30, 2009,  (2) 1.10 to 1.00 from October 1, 2009
through June 30, 2010, tested quarterly on a building four (4) quarter basis,
and (3) 1.10 to 1.00 thereafter, tested quarterly on a rolling four (4) quarter
basis;




3.
Minimum EBITDA:  BCI cannot cause, suffer or permit EBITDA to be less
than (1) Two Million Six Hundred Twenty-Two Thousand ($2,622,000) Dollars for
the trailing twelve months ending March 31, 2009, or (2) One Million Five
Hundred Thousand ($1,500,000) Dollars for the fiscal quarter ending June 30,
2009.





As a
result of our operating results in the third fiscal quarter, we breached the
minimum EBITDA requirement for the trailing twelve month period ended March 31,
2009. As a result, the Lenders under the PNC Facility have the right to (i)
accelerate payment of all of BCI’s outstanding indebtedness under the PNC
Facility, (ii) terminate the PNC Facility, (iii) refuse to make any additional
advances under the PNC Facility, and (iv) exercise any and all other rights or
remedies as provided for in the PNC Facility including, but not limited to,
increasing the interest rates by two percent (2%) per annum. The Lenders have
not exercised these remedies and we are in negotiations seeking a waiver of the
defaults. There can be no assurance that the Lenders will agree to such a
waiver, impose tighter credit terms, fees or penalties or other restrictive
terms and conditions in consideration for a waiver. If the Lenders choose to
exercise legal remedies, it would severely impact our liquidity to fund existing
operations and our ability to take advantage of opportunities to grow our
business.


32




Item
      2.
            Unregistered
      Sale of Equity Securities and Use of
Proceeds





None.





Item
      3.
            Defaults
      Upon Senior Securities





We have a
senior secured revolving line of credit with PNC Bank, National Association in
the maximum amount which is the lesser of: (i) 85% of accounts receivable the
lender deems acceptable as collateral, and (ii) $15 million.  We are
in default of the minimum EBITDA requirement in the loan agreement for the
trailing twelve month period ended  March 31, 2009.  As a
result of the default, the Lenders under the PNC Facility have the right to (i)
accelerate payment of all of BCI’s outstanding indebtedness under the PNC
Facility (if any), (ii) terminate the PNC Facility, (iii) refuse to make any
additional advances under the PNC Facility, and (iv) exercise any and all other
rights or remedies as provided for in the PNC Facility including, but not
limited to, increasing the interest rates by two percent (2%) per annum. The
Lenders have not exercised these remedies and we are in negotiations seeking a
waiver of the default.  There can be no assurance that the Lenders
will agree to such a waiver, impose tighter credit terms, fees or penalties or
other restrictive terms and conditions in consideration for a
waiver.  If the Lenders choose to exercise legal
remedies,  the loss of the line of credit could severely impact our
ability to fund existing operations and to take advantage of opportunities to
grow our business.





Item
      4.
            Submission
      of Matters to a Vote of Security
Holders





None.





Item
      5.
            Other
      Information





None





Item
      6.
            Exhibits





(a)
            Exhibits





10.1
                      First
      Amendment to Revolving Credit and Security Agreement dated as of March 31,
      2009 between BCI Communications, Inc. and PNC Bank, National Association,
      which is incorporated herein by reference to Exhibit 10.1 to the Company’s
      Current Report on Form 8-K filed with the Commission on April 3,
      2009.
 
 31.1
                      Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002. *
 
 31.2
                      Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002. *
 
 32.1
                      Certification
      of our Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002. *


* Filed
herewith.


33





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, Berliner
Communications, Inc. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





BERLINER
COMMUNICATIONS, INC.





Date:
      May 14, 2009
            By:
            /s/ Richard B. BerlinerRichard
      B. BerlinerChief
      Executive Officer(Principal
      Executive Officer)





Date:
      May 14, 2009
            By:
            /s/ Raymond A. Cardonne,
Jr.Raymond
      A. Cardonne, Jr.Chief
      Financial Officer and Treasurer(Principal
      Financial Officer)





34