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 July 3, 2010
 
 OR
 
 o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
 
 For the
transition period from _____________ to ______________
 
 
 COMMISSION
FILE NUMBER 0-28579
 
 UNITEK
GLOBAL SERVICES, 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.)
  1777
Sentry Parkway West
 Blue
Bell, Pennsylvania 19422
 (Address
of Principal Executive Offices)
 
 (267)
464-1700
 (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 xNo o
 
 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 oNo o
 
 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 “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
  Larger
      accelerated filer o
                  Accelerated
      filer oNon-accelerated
      filer o
                  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 oNo x
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
 
 On August
13, 2010, 136,778,330 shares of the registrant's common stock, $0.00002 par
value per share, were outstanding.
  
  UNITEK
      GLOBAL SERVICES, INC. AND SUBSIDIARIESQUARTERLY
      REPORT ON FORM 10-QINDEXPAGE
      NO.PART
      I:
                                  FINANCIAL
      INFORMATIONItem
      1.
                                  Financial
      StatementsCondensed
      Consolidated Balance Sheets (Unaudited) as of July 3, 2010 and
      December 31, 2009
                                  
                                  3Condensed
      Consolidated Statements of Operations (Unaudited) for the three and
      six months ended July 3, 2010 and July 4, 2009
                                  
                                  4Condensed
      Consolidated Statements of Cash Flows (Unaudited) for the six months ended
      July 3, 2010 and July 4, 2009
                                  
                                  5Notes
      to Condensed Consolidated Financial Statements
                                  
                                  7Item
      2.
                                  Management's
      Discussion and Analysis of Financial Condition and Results
      of
    Operations
                                  
                                  21Item
      4T.
                                  Controls
      and Procedures
                                  
                                  34PART
      II:
                                  OTHER
      INFORMATIONItem
      1.
                                  Legal
      Proceedings
                                  
                                  35Item
      1A.
                                  Risk
      Factors
                                  
                                  35Item
      2.
                                  Unregistered
      Sale of Equity Securities and Use of Proceeds
                                  
                                  44Item
      3.
                                  Defaults
      Upon Senior Securities
                                  
                                  44Item
      4.
                                  (Removed
      and Reserved)
                                  
                                  44Item
      5.
                                  Other
      Information
                                  
                                  44Item
      6.
                                  Exhibits
                                  
                                  44SIGNATURES
                                  
                                  45
  2
  UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Amounts
in thousands)
 (Unaudited)
 July
      3,
                                                        
                                                        
                                                        December
      31,2010
                                                        
                                                        
                                                        2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                                        
                                                        $
                                                        1,998
                                                        
                                                        
                                                        $
                                                        2,263Restricted
      cash
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        133Accounts
      receivable and unbilled revenue, net of allowances
                                                        
                                                        
                                                        67,546
                                                        
                                                        
                                                        
                                                        24,680Inventories
                                                        
                                                        
                                                        10,451
                                                        
                                                        
                                                        
                                                        8,326Prepaid
      expenses and other current assets
                                                        
                                                        
                                                        4,422
                                                        
                                                        
                                                        
                                                        3,804Total
      current assets
                                                        
                                                        
                                                        84,417
                                                        
                                                        
                                                        
                                                        39,206Property
      and equipment, net
                                                        
                                                        
                                                        19,465
                                                        
                                                        
                                                        
                                                        20,665Customer
      contracts, net
                                                        
                                                        
                                                        22,805
                                                        
                                                        
                                                        
                                                        26,564Amortizable
      intangible assets, net
                                                        
                                                        
                                                        576
                                                        
                                                        
                                                        
                                                        377Goodwill
                                                        
                                                        
                                                        141,768
                                                        
                                                        
                                                        
                                                        137,827Other
      assets
                                                        
                                                        
                                                        7,463
                                                        
                                                        
                                                        
                                                        7,202Total
    assets
                                                        
                                                        $
                                                        276,494
                                                        
                                                        
                                                        $
                                                        231,841
 LIABILITIES,
      CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                                
                                                $
                                                34,902
                                                
                                                
                                                $
                                                19,302Accrued
      liabilities
                                                
                                                
                                                30,342
                                                
                                                
                                                
                                                23,329Current
      portion of long-term debt
                                                
                                                
                                                32,052
                                                
                                                
                                                
                                                33,006Current
      income taxes
                                                
                                                
                                                290
                                                
                                                
                                                
                                                187Current
      portion of capital lease obligations
                                                
                                                
                                                5,278
                                                
                                                
                                                
                                                5,097Total
      current liabilities
                                                
                                                
                                                102,864
                                                
                                                
                                                
                                                80,921Long-term
      debt, net of current portion
                                                
                                                
                                                132,493
                                                
                                                
                                                
                                                127,163Long-term
      capital lease obligations, net of current portion
                                                
                                                
                                                2,029
                                                
                                                
                                                
                                                4,244Total
      liabilities
                                                
                                                
                                                237,386
                                                
                                                
                                                
                                                212,328Series
      B Convertible Preferred Stock (liquidation value of $25,634 at July
      3,  2010)
                                                
                                                
                                                12,817
                                                
                                                
                                                
                                                -STOCKHOLDERS'
      EQUITYSeries
      A Convertible Preferred Stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Common
      Stock
                                                
                                                
                                                3
                                                
                                                
                                                
                                                1,091Additional
      paid-in capital
                                                
                                                
                                                135,290
                                                
                                                
                                                
                                                112,747Accumulated
      other comprehensive income (loss)
                                                
                                                
                                                (35
                                                )
                                                
                                                
                                                60Accumulated
      deficit
                                                
                                                
                                                (108,967
                                                )
                                                
                                                
                                                (94,385
                                                )Total
      stockholders' equity
                                                
                                                
                                                26,291
                                                
                                                
                                                
                                                19,513Total
      liabilities, convertible preferred stock, and stockholders'
      equity
                                                
                                                $
                                                276,494
                                                
                                                
                                                $
                                                231,841
   The
accompanying notes are an integral part of these unaudited financial
statements.
  3
  UNITEK
      GLOBAL SERVICES, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts
      in thousands, except per share data)(Unaudited)  Three
      Months Ended
                                                                    
                                                                    
                                                                    Six
      Months EndedJuly
      3, 2010
                                                                    
                                                                    
                                                                    July
      4, 2009
                                                                    
                                                                    
                                                                    July
      3, 2010
                                                                    
                                                                    
                                                                    July
      4, 2009Revenues
                                                                    
                                                                    $
                                                                    105,839
                                                                    
                                                                    
                                                                    $
                                                                    69,247
                                                                    
                                                                    
                                                                    $
                                                                    194,807
                                                                    
                                                                    
                                                                    $
                                                                    137,912Costs
      of revenues
                                                                    
                                                                    
                                                                    89,558
                                                                    
                                                                    
                                                                    
                                                                    60,117
                                                                    
                                                                    
                                                                    
                                                                    165,837
                                                                    
                                                                    
                                                                    
                                                                    120,061Gross
      profit
                                                                    
                                                                    
                                                                    16,281
                                                                    
                                                                    
                                                                    
                                                                    9,130
                                                                    
                                                                    
                                                                    
                                                                    28,970
                                                                    
                                                                    
                                                                    
                                                                    17,851Selling,
      general and administrative expenses
                                                                    
                                                                    
                                                                    8,687
                                                                    
                                                                    
                                                                    
                                                                    6,089
                                                                    
                                                                    
                                                                    
                                                                    17,719
                                                                    
                                                                    
                                                                    
                                                                    12,796Depreciation
      and amortization
                                                                    
                                                                    
                                                                    7,141
                                                                    
                                                                    
                                                                    
                                                                    7,160
                                                                    
                                                                    
                                                                    
                                                                    13,713
                                                                    
                                                                    
                                                                    
                                                                    13,433Operating
      income (loss)
                                                                    
                                                                    
                                                                    453
                                                                    
                                                                    
                                                                    
                                                                    (4,119
                                                                    )
                                                                    
                                                                    
                                                                    (2,462
                                                                    )
                                                                    
                                                                    
                                                                    (8,378
                                                                    )Interest
      expense
                                                                    
                                                                    
                                                                    6,241
                                                                    
                                                                    
                                                                    
                                                                    4,341
                                                                    
                                                                    
                                                                    
                                                                    11,413
                                                                    
                                                                    
                                                                    
                                                                    8,306Other
      expense, net
                                                                    
                                                                    
                                                                    146
                                                                    
                                                                    
                                                                    
                                                                    21
                                                                    
                                                                    
                                                                    
                                                                    146
                                                                    
                                                                    
                                                                    
                                                                    45Loss
      from continuing operations before income taxes
                                                                    
                                                                    
                                                                    (5,934
                                                                    )
                                                                    
                                                                    
                                                                    (8,481
                                                                    )
                                                                    
                                                                    
                                                                    (14,021
                                                                    )
                                                                    
                                                                    
                                                                    (16,729
                                                                    )Income
      tax expense
                                                                    
                                                                    
                                                                    (34
                                                                    )
                                                                    
                                                                    
                                                                    (390
                                                                    )
                                                                    
                                                                    
                                                                    (102
                                                                    )
                                                                    
                                                                    
                                                                    (769
                                                                    )Loss
      from continuing operations
                                                                    
                                                                    
                                                                    (5,968
                                                                    )
                                                                    
                                                                    
                                                                    (8,871
                                                                    )
                                                                    
                                                                    
                                                                    (14,123
                                                                    )
                                                                    
                                                                    
                                                                    (17,498
                                                                    )Income
      (loss) from discontinued operations
                                                                    
                                                                    
                                                                    (175
                                                                    )
                                                                    
                                                                    
                                                                    (283
                                                                    )
                                                                    
                                                                    
                                                                    (459
                                                                    )
                                                                    
                                                                    
                                                                    775Net
      loss
                                                                    
                                                                    $
                                                                    (6,143
                                                                    )
                                                                    
                                                                    $
                                                                    (9,154
                                                                    )
                                                                    
                                                                    $
                                                                    (14,582
                                                                    )
                                                                    
                                                                    $
                                                                    (16,723
                                                                    )Net
      loss per share - basic:Continuing
      operations
                                                                    
                                                                    $
                                                                    (0.04
                                                                    )
                                                                    
                                                                    $
                                                                    (0.08
                                                                    )
                                                                    
                                                                    $
                                                                    (0.11
                                                                    )
                                                                    
                                                                    $
                                                                    (0.16
                                                                    )Discontinued
      operations
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.01Net
      loss
                                                                    
                                                                    $
                                                                    (0.04
                                                                    )
                                                                    
                                                                    $
                                                                    (0.08
                                                                    )
                                                                    
                                                                    $
                                                                    (0.11
                                                                    )
                                                                    
                                                                    $
                                                                    (0.15
                                                                    )Net
      loss per share - diluted:Continuing
      operations
                                                                    
                                                                    $
                                                                    (0.04
                                                                    )
                                                                    
                                                                    $
                                                                    (0.08
                                                                    )
                                                                    
                                                                    $
                                                                    (0.11
                                                                    )
                                                                    
                                                                    $
                                                                    (0.16
                                                                    )Discontinued
      operations
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.00
                                                                    
                                                                    
                                                                    
                                                                    0.01Net
      loss
                                                                    
                                                                    $
                                                                    (0.04
                                                                    )
                                                                    
                                                                    $
                                                                    (0.08
                                                                    )
                                                                    
                                                                    $
                                                                    (0.11
                                                                    )
                                                                    
                                                                    $
                                                                    (0.15
                                                                    )Weighted
      average shares of common stock outstanding:Basic
                                                                    
                                                                    
                                                                    136,758
                                                                    
                                                                    
                                                                    
                                                                    109,100
                                                                    
                                                                    
                                                                    
                                                                    132,600
                                                                    
                                                                    
                                                                    
                                                                    109,097Diluted
                                                                    
                                                                    
                                                                    136,758
                                                                    
                                                                    
                                                                    
                                                                    109,100
                                                                    
                                                                    
                                                                    
                                                                    132,600
                                                                    
                                                                    
                                                                    
                                                                    109,097
   The
accompanying notes are an integral part of these unaudited financial
statements.
  4
  UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
 (Unaudited)
 Six
      Months EndedJuly 3,
                                            
                                            
                                            July 4,2010
                                            
                                            
                                            2009Cash
      flows from operating activities:Net
      loss
                                            
                                            $
                                            (14,582
                                            )
                                            
                                            $
                                            (16,723
                                            )Adjustments to
      reconcile net loss to net cash
      used in  operating
    activities:Loss
      (income) from discontinued operations
                                            
                                            
                                            459
                                            
                                            
                                            
                                            (775
                                            )Provision
      for doubtful accounts
                                            
                                            
                                            (305
                                            )
                                            
                                            
                                            967Depreciation
      and amortization
                                            
                                            
                                            13,713
                                            
                                            
                                            
                                            13,433Amortization
      of deferred financing fees
                                            
                                            
                                            1,588
                                            
                                            
                                            
                                            1,039Accrued
      interest expense on collar
                                            
                                            
                                            184
                                            
                                            
                                            
                                            55Stock-based
      compensation
                                            
                                            
                                            821
                                            
                                            
                                            
                                            946Interest
      added to debt principal
                                            
                                            
                                            1,807
                                            
                                            
                                            
                                            972Refundable
      deposits
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (111
                                            )Loss
      on sale of fixed assets
                                            
                                            
                                            83
                                            
                                            
                                            
                                            61Deferred
      tax assets, net
                                            
                                            
                                            212
                                            
                                            
                                            
                                            848Changes
      in assets and liabilities:Accounts
      receivable and unbilled revenue
                                            
                                            
                                            (15,371
                                            )
                                            
                                            
                                            (10,104
                                            )Inventories
                                            
                                            
                                            (1,227
                                            )
                                            
                                            
                                            455Prepaid
      expenses and other current assets
                                            
                                            
                                            2,095
                                            
                                            
                                            
                                            (1,699
                                            )Accounts
      payable and accrued liabilities
                                            
                                            
                                            7,668
                                            
                                            
                                            
                                            3,830Net
      cash used in operating activities – continuing operations
                                            
                                            
                                            (2,855
                                            )
                                            
                                            
                                            (6,806
                                            )Net
      cash provided by (used in) operating activities – discontinued
      operations
                                            
                                            
                                            (352
                                            )
                                            
                                            
                                            1,263Net
      cash used in operating activities
                                            
                                            
                                            (3,207
                                            )
                                            
                                            
                                            (5,543
                                            )Cash
      flows from investing activities:Acquisition
      of property and equipment
                                            
                                            
                                            (1,805
                                            )
                                            
                                            
                                            (1,376
                                            )Proceeds
      from sale of property and equipment
                                            
                                            
                                            118
                                            
                                            
                                            
                                            258Cash
      restricted for acquisition of business
                                            
                                            
                                            133
                                            
                                            
                                            
                                            -Cash
      paid for acquisition of business
                                            
                                            
                                            (35
                                            )
                                            
                                            
                                            (922
                                            )Net
      cash used in investing activities
                                            
                                            
                                            (1,589
                                            )
                                            
                                            
                                            (2,040
                                            )Cash
      flows from financing activities:Proceeds
      from issuance of common shares
                                            
                                            
                                            420
                                            
                                            
                                            
                                            50Proceeds
      from issuance of preferred shares
                                            
                                            
                                            12,500
                                            
                                            
                                            
                                            -Proceeds
      from revolving credit facilities, net
                                            
                                            
                                            6,500
                                            
                                            
                                            
                                            6,500Repayment
      of capital leases
                                            
                                            
                                            (2,768
                                            )
                                            
                                            
                                            (591
                                            )Repayment
      of  long term debt
                                            
                                            
                                            (3,170
                                            )
                                            
                                            
                                            (780
                                            )Repayment
      of acquired debt, net of cash  acquired
                                            
                                            
                                            (7,246
                                            )
                                            
                                            
                                            -Financing
      fees
                                            
                                            
                                            (1,598
                                            )
                                            
                                            
                                            (1,450
                                            )Net
      cash provided by financing activities
                                            
                                            
                                            4,638
                                            
                                            
                                            
                                            3,729Effect
      of exchange rate on cash and cash equivalents
                                            
                                            
                                            (107
                                            )
                                            
                                            
                                            171Net
      decrease in cash and cash equivalents
                                            
                                            
                                            (265
                                            )
                                            
                                            
                                            (3,683
                                            )Cash
      and cash equivalents at beginning of period
                                            
                                            
                                            2,263
                                            
                                            
                                            
                                            5,348Cash
      and cash equivalents at end of period
                                            
                                            $
                                            1,998
                                            
                                            
                                            $
                                            1,665
   The
accompanying notes are an integral part of these unaudited financial
statements.
  5
  UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
 (Unaudited)
 Six
      Months EndedJuly
      3,
                                            
                                            
                                            July
      4,2010
                                            
                                            
                                            2009Supplemental
      cash flow information:Interest
      paid
                                            
                                            $
                                            8,673
                                            
                                            
                                            $
                                            6,252Income
      taxes paid
                                            
                                            $
                                            88
                                            
                                            
                                            $
                                            249Significant
      noncash  items:Fair
      value of equity paid for acquisition
                                            
                                            $
                                            19,927
                                            
                                            
                                            $
                                            -Acquisition
      of property and equipment financed  by capital
    lease
                                            
                                            $
                                            154
                                            
                                            
                                            $
                                            610Credit
      support fee paid in shares of Series B Convertible Preferred
      Stock
                                            
                                            $
                                            317
                                            
                                            
                                            $
                                            -
   The
accompanying notes are an integral part of these unaudited financial
statements.
  6
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 1.         Business
 
 UniTek
Global Services, Inc. (“UniTek,” “Company”, “we,” “our,” or “us”) is a premier
provider of high-quality, specialized infrastructure services including
engineering, construction management and installation fulfillment services to
the wired and wireless telecommunications, broadband cable and satellite
television industries.  UniTek has created a scalable platform through
which it can rapidly deploy a highly skilled workforce of over 5,200 through 102
field offices across the United States and Canada, delivering a comprehensive
end-to-end suite of permanently outsourced infrastructure
services.  The Company operates in two business segments: (1)
fulfillment, which includes fulfillment work for the pay television industry
(both satellite and broadband cable) and (2) engineering and construction, which
include both wireless and wired telecommunications.
 
 On
January 27, 2010, Berliner Communications Inc. (“Berliner”), BCI East, Inc., a
Delaware corporation and a wholly owned subsidiary of Berliner (“Merger Sub”),
and UniTek Holdings, Inc., a Delaware corporation (“Holdings”), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger
Sub merged (the “Merger”) with and into Holdings and Holdings became a wholly
owned subsidiary of Berliner.  The time on January 27, 2010 at which
the Merger became effective is referred to herein as the “Effective Time.”
Following the Merger, Berliner did business as UniTek Global Services, Inc. and
officially changed its name to UniTek Global Services, Inc. effective on June 4,
2010.
  2. Basis
of Presentation
 
 The
accompanying unaudited condensed consolidated financial statements as of July 3,
2010, and for the three and six months ended July 3, 2010 and July 4, 2009, have
been prepared by us in accordance with accounting standards generally accepted
in the United States for interim financial statements and pursuant to the rules
and regulations of the United States Securities and Exchange Commission (“SEC”).
In our opinion, the accompanying unaudited condensed 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.  Certain prior period amounts have been reclassified to conform
to the current presentation.
  The
accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in the Company’s Transition Report on Form 10-K for the fiscal year ended
December 31, 2009 filed with the SEC on March 31, 2010, and in its Current
Report on Form 8-K filed with the SEC on August 13, 2010.
  In the
Merger of Berliner and Holdings, Holdings is the accounting acquirer with
Berliner the legal acquirer and registrant.  Upon the completion of
the Merger, Berliner changed its fiscal year end from June 30 to December
31.  Berliner filed a transition report on Form 10-K on March 31,
2010.  As the accounting acquirer, Holdings’ historical results are
presented for comparison purposes with results of Berliner included in the
consolidated results of the Company after the Effective Time.
 
 3.Accounting
Policies
  Use of Estimates
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of certain assets and liabilities, amounts
contained in certain of the notes to the consolidated financial statements, and
the revenues and expenses reported for the periods covered by the financial
statements. Although such assumptions are based on management’s best knowledge
of current events and actions the Company may undertake in the future, actual
results could differ significantly from those estimates and assumptions. The
Company’s more significant estimates relate to revenue recognition, allowances
for bad debts, and valuation of goodwill and intangible assets.
  7
 UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 In the
ordinary course of accounting for items discussed above, the Company makes
changes in estimates as appropriate and as the Company becomes aware of
circumstances surrounding those estimates. Such changes in estimates are
reflected in reported results of operations in the period in which the changes
are made and, if material, their effects are disclosed in the notes to the
consolidated financial statements.
 
 Principles
of Consolidation
 
 The
consolidated financial statements include the accounts of UniTek and the
accounts of its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
 
 Cash
and Cash Equivalents
 
 Cash and
cash equivalents include instruments with original maturities of three months or
less.
 
 Accounts
Receivable and Allowance for Doubtful Accounts
 
 Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the Company’s best estimate of
the amount of probable credit losses in its existing accounts receivable. A
specific reserve for bad debts is recorded for known or suspected doubtful
accounts receivable. For all other accounts, the Company recognizes a general
reserve for bad debts based on the length of time receivables are past due and
historical write-off experience. Account balances are charged off against the
allowance when the Company believes it is probable that the receivable will not
be recovered.
 
 Inventories
 
 Inventories
consist primarily of materials and supplies purchased from the customer and
other suppliers used for installation fulfillment services and wireless
construction. Inventories are stated at the lower of cost or market, as
determined by the first-in, first out method for the fulfillment segment and
average cost for the engineering and construction segment.
 
 Prepaid
Expenses and Other Assets
 
 Prepaid
and other current assets consist primarily of prepaid insurance, taxes and
expenses. These costs are expensed ratably over the related periods of
benefit.
 
 Property
and Equipment
 
 Property
and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, which
principally range from three to seven years for computers, construction
equipment, furniture, vehicles, and equipment. The useful life of leasehold
improvements is based on the shorter of the term of the lease or five years.
Assets under capital leases are amortized over the lesser of the lease term or
the asset’s estimated useful life. When assets are retired or disposed of, the
cost and accumulated depreciation thereon are removed and any resultant gains or
losses are recognized.
 
 Goodwill
and Other Intangible Assets
 
 Goodwill
is subject to an assessment for impairment using a two-step, fair value-based
test with the first step performed at least annually, or more frequently if
events or circumstances exist that indicate that goodwill may be impaired. The
Company completes an annual analysis of the reporting units at the beginning of
the fourth quarter of each fiscal year. The first step compares the fair value
of a reporting unit to its carrying amount, including goodwill. If the carrying
amount of the reporting unit exceeds its fair value, an impairment test is
performed to determine the implied value of goodwill for that reporting unit. If
the implied value is less than the carrying amount of goodwill for that
reporting unit, an impairment loss is recognized for that reporting
unit.
 
 The
Company amortizes intangible assets, consisting of customer contracts and
non-compete agreements from acquired businesses, on a straight-line basis over
the 12- to 84-month lives of those agreements.
  8
 UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 Other
Long-Term Assets
 
 Costs
associated with obtaining long-term debt are deferred and amortized to interest
expense on a straight-line basis, which approximates the effective interest
method, over the term of the related debt (see Note 7).  At July
3, 2010 and December 31, 2009, $6.6 million (net) is included in other
long-term assets related to deferred financing fees.
 
 Derivative
Financial Instruments
 
 The
Company utilizes derivative financial instruments to reduce interest rate risks.
The Company does not hold derivative financial instruments for trading purposes.
All derivatives are accounted for at fair value. Changes in the fair value of
derivatives are recorded in earnings or other comprehensive income, based on
whether the instrument is designated as part of a hedge transaction and, if so,
the type of hedge transaction.
 
 Revenue
Recognition
  Revenues
from fulfillment services provided to the pay television industry are recognized
as the services are rendered. The Company recognizes revenue from fulfillment
services net of equipment because the Company has determined that it acts as an
agent.
   The
Company also enters into contracts that require the installation or construction
of specified units within an infrastructure system. Under these contracts,
revenue is recognized at the contractually agreed price per unit as the units
are completed. Unbilled revenues represent amounts earned and recognized in the
period for which customer billings are issued in a subsequent period per the
contract terms.  In the wireless portion of the engineering and
construction segment, revenue is primarily recorded on percentage of completion
basis either based on direct costs incurred or on milestones
completed.  Losses are recognized when such losses become
known.
  Net Loss per
Share
  Basic net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the periods presented. Diluted net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the periods plus the dilution that
would occur upon the exercise or conversion of any instruments convertible to
common stock, such as preferred stock, stock options or
warrants.  Options to purchase 18.1 million shares of common stock and
warrants to purchase 5.7 million shares of common stock were excluded from the
computation because the Company reported a net loss for each of those
periods.  Any outstanding stock options, warrants, or other
instruments that are convertible to common stock could potentially be dilutive
should the Company report net income in a future period.  The weighted
average number of common shares outstanding used to calculate the net loss per
common shares includes the automatic conversion of the Series A Convertible
Preferred Stock (see Note 9) to common stock since the Effective Time as the
Company believed the automatic conversion to be perfunctory.
  The
Company has determined that the Series B Preferred Stock is a participating
security under ASC 260. Under ASC 260, a security is considered a participating
security if the security may participate in undistributed earnings with common
stock, whether that participation is conditioned upon the occurrence of a
specified event or not. In accordance with ASC 260, a company is required to use
the two-class method when computing EPS when a company has a security that
qualifies as a “participating security.” The two-class method is an earnings
allocation formula that determines EPS for each class of common stock and
participating security according to dividends declared (or accumulated) and
participation rights in undistributed earnings. A participating security is
included in the computation of basic EPS using the two-class method. Under the
two-class method, basic EPS for the Company’s Common Stock is computed by
dividing net income applicable to common stock by the weighted-average common
shares outstanding during the period. Diluted EPS for the Company’s Common Stock
is computed using the more dilutive of the two-class method or the if-converted
method.
 However,
since the Company reported a loss for the quarter and six months ended July 3,
2010, it was required by the ASC 260 to use basic weighted-average common shares
outstanding, rather than diluted weighted-average common shares outstanding,
when calculating diluted EPS for the quarter and six months ended July 3, 2010.
In addition, since the Company reported a loss from operations for the quarter
and six months ended July 3, 2010, the Series B Preferred Stock was not deemed
to be a participating security for the quarter and six months ended July 3, 2010
pursuant to ASC 260.
 Fair
Value of Financial Instruments
 
 The
carrying values of cash and cash equivalents, accounts receivable, other current
assets, accounts payable, accrued liabilities and other current liabilities
approximate fair value due to the short-term nature of those instruments. The
carrying value of the capital lease obligations approximates fair value because
they bear interest at rates currently available to the Company for debt with
similar terms and remaining maturities. The fair values of debt and derivative
instruments are discussed in Notes 7 and 8, respectively.
 
 Income
Taxes
 
 The
Company follows the asset and liability method of accounting for income taxes.
Income taxes consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of assets and liabilities for
financial and income tax reporting. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be deductible or taxable when the assets and liabilities are recovered or
settled. Deferred taxes are also recognized for operating losses that are
available to offset future taxable income. Deferred tax assets and liabilities
are reflected at income tax rates applicable to the period in which the deferred
tax assets and liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. A valuation allowance is recorded
against a deferred tax asset when it is determined to be more-likely-than-not
that the asset will not be realized.
  9
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 The
Company provides an intra-period tax allocation of the income tax expense or
benefit for the year among continuing operations and discontinued
operations.
  The
Company recorded income tax expense of $34 thousand and $0.4 million for three
months ended July 3, 2010 and July 4, 2009,
respectively.    For the six months ended July 3, 2010 and
July 4, 2009, the Company recorded income tax expense of $0.1 million and $0.8
million, respectively. The 2010 tax expense represents the estimated tax expense
from the Company’s Canadian operations.  The 2009 tax expense is due
to differences between book and tax amortization of intangible
assets.
  Leases
 
 The
Company leases vehicles primarily for performing fulfillment services to the pay
television industry. Leases are accounted for either as operating or capital
depending on the terms of the lease. Each lease is reviewed as to the terms and
a determination is made whether the vehicle is an operating or capital lease.
Operating lease payments are expensed as incurred.  Capital leases are
included on the consolidated balance sheet as a property and equipment and
capital lease obligations and depreciated over the expected useful
lives.
 
 Stock-Based
Compensation
 
 The
Company measures and recognizes compensation expense for all share-based awards
made to employees and directors including employee stock options based on
estimated fair values.
 
 The
consolidated financial statements as of July 3, 2010 and for the three and six
months ended July 3, 2010 and July 4, 2009 include stock option expense as
compensation expense. Pretax stock-based compensation expense recognized for the
three months ended July 3, 2010 and July 4, 2009 was $0.4 million and $0.5
million, respectively. Pretax stock-based compensation expense recognized for
the six months ended July 3, 2010 and July 4, 2009 was $0.8 million and $0.9
million, respectively. For the three and six months ended July 3, 2010 and July
4, 2009, all stock-based compensation expense was included in selling, general,
and administrative expenses in the condensed consolidated statements of
operations.
 
 Stock-based
compensation expense is based on the fair value of awards ultimately expected to
vest, net of estimated forfeitures. The Company estimates the fair value of
stock-based awards on the date of grant the Black-Scholes option-pricing model
and recognizes compensation expense on a straight-line basis over the requisite
service periods. Stock-based compensation expense recognized during the current
period is based on the value of the portion of stock-based awards that is
ultimately expected to vest. The Company estimates forfeitures at the time of
grant in order to estimate the amount of stock-based awards that will ultimately
vest. Limited historical forfeiture data is available. As such, management has
based the estimated forfeiture rate on expected employee turnover. The Company
records the cash flows resulting from the tax deductions in excess of the
compensation cost recognized for those options (excess tax benefit) as financing
cash flows.
 
 Comprehensive
Loss
 
 Comprehensive
loss is a measure of net loss and all other changes in equity that result from
transactions other than those with shareholders.  Comprehensive loss
consists of net loss and foreign currency translation adjustments.
 
 Comprehensive
loss consisted of the following:
 
 Three
      Months Ended
                      
                      
                      Six
      Month EndedJuly
      3, 2010
                      
                      
                      July
      4, 2009
                      
                      
                      July
      3, 2010
                      
                      
                      July
      4, 2009Net
      loss
                      
                      $
                      (6,143
                      )
                      
                      $
                      (9,154
                      )
                      
                      $
                      (14,582
                      )
                      
                      $
                      (16,723
                      )Foreign
      currency translation (loss) gain
                      
                      
                      (159
                      )
                      
                      
                      48
                      
                      
                      
                      (96
                      )
                      
                      
                      83Comprehensive
      loss
                      
                      
                      (6,302
                      )
                      
                      
                      (9,106
                      )
                      
                      
                      (14,678
                      )
                      
                      
                      (16,640
                      )
  10
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 Recent
Accounting Pronouncements
 
 In
January 2010, an amendment to the Financial Accounting Standards Board (“FASB”)
fair value guidance was issued. This amendment requires disclosures of transfers
into and out of Levels 1 and 2, more detailed roll forward reconciliations of
Level 3 recurring fair value measurements on a gross basis, fair value
information by class of assets and liabilities, and descriptions of valuation
techniques and inputs for Level 2 and 3 measurements. The Company adopted this
amendment during the quarter ended April 3, 2010.
 
 In
October 2009, the FASB issued new standards for revenue recognition
with multiple deliverables. These new standards impact the determination of when
the individual deliverables included in a multiple-element arrangement may be
treated as separate units for accounting purposes. Additionally, these new
standards modify the manner in which the arrangement consideration is allocated
across the separately identified deliverables by no longer permitting the
residual method of allocating arrangement consideration. These new standards are
required to be adopted in the first quarter of 2011, however, early adoption is
permitted.  The Company does not expect these new standards to
significantly impact its consolidated financial statements.
  4.           Berliner-UniTek
Holdings Merger
 
 On
January 27, 2010, Berliner and Holdings entered into the Merger
Agreement.  Pursuant to the terms and conditions of the Merger
Agreement, at the Effective Time, each outstanding share of common stock of
Holdings (the “Holdings Common Stock”) was converted into the right to receive
0.012 shares of series A preferred stock of Berliner (the “Berliner Series A
Preferred Stock”) and 0.40 shares of common stock of Berliner (the “Berliner
Common Stock”), and each share of series A preferred stock of Holdings (the
“Holdings Preferred Stock”) was converted into the right to receive 0.02 shares
of series B preferred stock of Berliner (the “Berliner Series B Preferred
Stock”). The terms of the Berliner Series A Preferred Stock and the Berliner
Series B Preferred Stock are summarized in Item 5.03 in the Form 8-K filed with
the SEC on January 27, 2010.  The Merger expanded Holdings presence in
the wireless telecommunications market in the site acquisition and construction
of wireless cell towers and related services.
 
 Based on
the number of shares of Holdings capital stock and Berliner capital stock
outstanding as of January 27, 2010, the stockholders of Holdings immediately
prior to the Effective Time held more than 80% of the voting capital stock of
Berliner outstanding immediately following the Merger.
 
 The total
fair value, including assumption of debt, was approximately $27.5
million.  For purposes of allocating fair value, the following is a
preliminary allocation of the assets acquired and the liabilities
assumed:
  Cash
                      
                      $
                      336Accounts
      receivable
                      
                      
                      27,190Inventories
                      
                      
                      898Prepaid
      expenses and other current assets
                      
                      
                      2,686Property
      and equipment
                      
                      
                      2,649Non
      compete agreements
                      
                      
                      408Customer
      contracts and backlog
                      
                      
                      4,250Goodwill
                      
                      
                      4,001Other
      assets
                      
                      
                      289Accounts
      payable and accrued expenses
                      
                      
                      (14,053
                      )Other
      liabilities
                      
                      
                      (534
                      )Capital
      lease obligations
                      
                      
                      (611
                      )Total
      fair value of net assets acquired
                      
                      $
                      27,509
  11
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 The
results of the Merger are included in the consolidated results of the Company
effective January 27, 2010 in the engineering and construction
segment.  During the three- and six-month periods ended July 3, 2010,
the Merger contributed revenue of approximately $25.4 million and $42.7 million
and operating loss of $34 thousand and $0.5 million, respectively. The $4.0
million of goodwill associated with the Merger is included in the engineering
and construction segment’s assets.
 
 The
following pro forma data presents revenue and loss from continuing operations as
if the Merger had occurred at the beginning of the periods
presented:
 
 Three
      Months Ended
                      
                      
                      Six
      Months EndedJuly
      3, 2010
                      
                      
                      July
      4, 2009
                      
                      
                      July
      3, 2010
                      
                      
                      July
      3, 2009Revenue
                      
                      $
                      105,839
                      
                      
                      $
                      85,012
                      
                      
                      $
                      201,208
                      
                      
                      $
                      164,782Loss
      from continuing operations
                      
                      
                      (5,968
                      )
                      
                      
                      (10,922
                      )
                      
                      
                      (16,606
                      )
                      
                      
                      (23,431
                      )
  5.           Accounts
Receivable and Concentration of Credit Risk
 
 Accounts
receivable and unbilled revenue, net of allowances, at July 3, 2010, and
December 31, 2009, consist of the following:
  July
      3,
                      
                      
                      December
      31,2010
                      
                      
                      2009Accounts
      receivable
                      
                      $
                      43,353
                      
                      
                      $
                      19,584Unbilled
      revenue
                      
                      
                      25,961
                      
                      
                      
                      6,42569,314
                      
                      
                      
                      26,009Allowance
      for doubtful accounts
                      
                      
                      (1,768
                      )
                      
                      
                      (1,329
                      )Total
                      
                      $
                      67,546
                      
                      
                      $
                      24,680
 Unbilled
revenue principally represents the value of services rendered to customers not
billed as of the balance sheet date.  Unbilled revenue is generally
billed within three months subsequent to the provision of the
services.
 
 Credit
risk with respect to accounts receivable was concentrated with two customers at
July 3, 2010.  These customers accounted for approximately $27.6
million (39%) of the accounts receivable at July 3, 2010.  For the
three and six months ended July 3, 2010, the Company derived approximately $61.7
million (58%) and $116.3 million (60%), respectively, of its total revenue from
its two largest customers.  Each of these customers represented in
excess of 10% of the Company’s total net revenue. For the three and six months
ended July 4, 2009, the Company derived $57.9 million (84%)
and  $128.7 million (93%), respectively of its total revenue from its
three largest customers.  These revenues were reported as a component
of the Fulfillment segment revenues.
  6.           Goodwill
andIntangible
Assets
 
 The
following table summarizes the changes in the carrying amount of the Company’s
goodwill for the six months ended July 3, 2010:
  Beginning
      balance, December 31, 2009
                    
                    $
                    137,827Goodwill
      associated with Merger
                    
                    
                    4,001Other
      adjustments
                    
                    
                    (60
                    )Ending
      balance, July 3, 2010
                    
                    $
                    141,768
  12
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 Other
intangible assets consisted of the following:
  July
      3,
                  
                  
                  December
      31,2010
                  
                  
                  2009Intangible
      assets:Customer
      contracts and lists
                  
                  $
                  74,727
                  
                  
                  $
                  70,468Noncompete
      agreements
                  
                  
                  1,433
                  
                  
                  
                  1,025Total
      intangible assets
                  
                  
                  76,160
                  
                  
                  
                  71,493Accumulated
      amortization:Customer
      contracts and lists
                  
                  
                  51,922
                  
                  
                  
                  43,904Noncompete
      agreements
                  
                  
                  857
                  
                  
                  
                  648Total
      accumulated amortization
                  
                  
                  52,779
                  
                  
                  
                  44,552Intangible
      assets, net
                  
                  $
                  23,381
                  
                  
                  $
                  26,941
 
 The
estimated amortization expense for the six months ending December 31, 2010, each
of the following three years, and thereafter is as follows:
  Six
      months ending December 31, 2010
                    
                    $
                    6,9062011
                    
                    
                    7,9982012
                    
                    
                    6,2522013
                    
                    
                    1,049Thereafter
                    
                    
                    1,176Total
                    
                    $
                    23,381
  7.           Long-Term
Debt
 
 Long-term
debt consisted of the following:
  July
      3,
                    
                    
                    December
      31,2010
                    
                    
                    2009First
      Lien Credit Agreement:Revolving
      Credit Facility
                    
                    $
                    18,000
                    
                    
                    $
                    11,500Term
      B Credit Facility
                    
                    
                    72,333
                    
                    
                    
                    75,503Term
      C Credit Facility
                    
                    
                    19,500
                    
                    
                    
                    19,500109,833
                    
                    
                    
                    106,503Second
      Lien Credit Agreement:Term
      Facility
                    
                    
                    25,000
                    
                    
                    
                    25,000Loan
      Authorization AgreementHoldings
      Revolving Facility
                    
                    
                    29,712
                    
                    
                    
                    28,666Total
      debt
                    
                    
                    164,545
                    
                    
                    
                    160,169Less
      current portion
                    
                    
                    32,052
                    
                    
                    
                    33,006Long-term
      debt, net of current portion
                    
                    $
                    132,493
                    
                    
                    $
                    127,163
  13
 UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 Future
maturities of long-term debt are as follows:
  Six
      months ending December 31, 2010
                    
                    $
                    30,8822011
                    
                    
                    2,3402012
                    
                    
                    131,323Total
                    
                    $
                    164,545
  First
Lien Credit Agreement
  The
Company is party to the First Lien Credit Agreement, dated September 27, 2007
(the “First Lien Credit Agreement”), which provides for a First Lien Revolving
Credit Facility (the “Revolving Credit Facility”), a First Lien Term B Credit
Facility (the “Term B Credit Facility”) and a First Lien Term C Credit Facility
(the “Term C Credit Facility”). The Company entered into two amendments with the
lenders under the First Lien Credit Agreement in 2009. The first amendment, in
June 2009, modified certain covenants in return for a 1% fee and an
increase in the interest rate. The second amendment, in December 2009,
provided retroactive covenant relief for certain matters as of December 31,
2008, modified certain financial covenants through September 2012 pending
meeting the required terms for closing the amendment and provided forbearance
through February 15, 2010 until certain terms were met. These terms were
met with an infusion of equity and the closing of the Merger in
January 2010.
  The
Revolving Credit Facility provides loans in a maximum amount of $20 million and
matures on September 27, 2012. In connection with the closing of an
amendment in January 2010, the interest rate is, at the Company’s option, either
a rate of one-half of 1% per annum above the Federal Funds Rate plus 5.0% for
base rate advances or the Eurodollar rate plus 6% provided that the rate will
increase 75 basis points if the Company’s Leverage Ratio (as defined in the
First Lien Credit Agreement) exceeds a certain level. Unused borrowings under
the Revolving Credit Facility are subject to a 1% commitment fee per annum. As
of July 3, 2010, the Company had drawn $18.0 million on the Revolving Credit
Facility. At July 3, 2010 and December 31, 2009, borrowings under the Revolving
Credit Facility are classified as long-term debt based on the Company’s intent
and ability to refinance the borrowing on a long-term basis. Borrowings on the
Revolving Credit Facility are secured by the assets of the Company.
  The Term
B Credit Facility as amended provides for borrowings up to $78
million.  As of July 3, 2010, $72.3 million was outstanding under the
Term B Credit Facility. The term loan provides for interest, depending on the
Company’s election, with interest at a rate of one-half of 1% per annum above
the Federal Funds Rate plus 5.5% or Eurodollar plus 6.5%. At December 31,
2009, in connection with the closing of an amendment in January 2010, the
interest rate increases by 75 basis points if the Company’s Leverage Ratio
exceeds a certain level. The loan under the Term B Credit Facility is to be
amortized from December 31, 2007 until maturity. The Term B Credit Facility
is secured by substantially all of the assets of the Company.
  The Term
C Credit Facility is for $19.5 million which is the outstanding balance as of
July 3, 2010. The interest rate was amended to 16.25% on $8.0 million of the
Term C Credit Facility for the period from April 1, 2009 to
December 31, 2009 in connection with the December 2009 amendment and 13.08%
on the remaining $11.5 million.  Effective January 1, 2010, the
interest rate on the $8.0 million increased to 16.5%.
  The First
Lien Credit Agreement, as amended, includes various financial covenants, the
most significant of which requires that the Company maintain certain quarterly
financial ratios and limit annual capital expenditures. On June 16, 2010, the
Company entered into an amendment with the First Lien Debt Holders to amend
certain of these financial covenants.  The required quarterly
financial ratios become more restrictive to the Company over time. The Company’s
future compliance with quarterly financial ratios is dependent on the Company’s
ability to generate profits in excess of required amounts, which is subject to
the risks and uncertainties surrounding the Company’s
business.   The Company was in compliance with all covenants at
July 3, 2010.
  14
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 Letter
of Credit Transaction
 
 On March
31, 2010, we entered into a Senior Secured Letter of Credit Facility arrangement
(the “LOC Facility”), via an amendment to the First Lien Credit Agreement (the
“Amendment”), by and among UniTek Acquisition, Inc., a Delaware company and
indirect wholly owned subsidiary of the Company (“Acquisition”), UniTek Midco,
Inc., a Delaware company and indirect wholly owned subsidiary of the Company
(“Midco”), certain subsidiaries of Acquisition as guarantors, the initial
lenders under the LOC Facility, and Royal Bank of Canada, as administrative
agent and collateral agent for the lenders.  The Amendment establishes
an incremental $12 million revolving tranche (the “Incremental Tranche”) added
to the credit facilities established by the First Lien Credit
Agreement.  The full amount of Incremental Tranche is solely available
to Acquisition for the issuance of letters of credit in support of Acquisition’s
obligations under certain insurance policies and other general corporate
purposes.  The LOC Facility charges a 1.3333% per month cash fee
payable on issued but unfunded letters of credit and a 1.0% per annum cash fee
on the daily average unfunded amount of the LOC Facility.  Funded
letters of credit will carry an interest rate of LIBOR plus 6.75% per annum with
a 2.5% LIBOR floor.  There was $6.0 million in letters of credit
issued against the LOC Facility as of July 3, 2010.
  Second
Lien Credit Agreement
  The
Company is party to the Second Lien  Credit Agreement, dated September
27, 2007 (the “Second Lien Credit Agreement”), which provides for a $25 million
term facility that matures on September 27, 2012 and is repayable in full
at that date. The Company entered into two amendments with the lenders under the
Second Lien Credit Agreement in 2009. The first amendment, in May 2009,
modified certain covenants in return for a 1% fee and an increase in the
interest rate. The second amendment, in December 2009, modified certain
financial covenants through September 2012 pending meeting the required
terms for closing the amendment. These terms were met with an infusion of equity
and the closing of the Merger.  The interest rate at December 31,
2009 was the greater of 15.0% per annum and the Eurodollar rate plus 7.25%. The
second amendment included a change in the interest rate to the current rate,
which is the greater of 15.75% per annum and the Eurodollar rate plus 7.25%.
Interest is due quarterly beginning on December 31, 2007 until maturity.
The Second Lien Credit Agreement is secured by substantially all of the assets
of the Company.  The Second Lien Credit Agreement includes various
covenants, the most significant of which requires the Company to maintain
certain quarterly financial ratios and limits capital expenditures. The required
quarterly financial ratios become more restrictive to the Company over time. The
Company’s future compliance with quarterly financial ratios is dependent on its
ability to generate profits in excess of required amounts, which is subject to
the risks and uncertainties surrounding the Company’s
business.   The Company was in compliance with all covenants at
July 3, 2010.
  Loan
Authorization Agreement
  Holdings
entered into a Loan Authorization Agreement dated as of September 25, 2007 (the
“Loan Authorization Agreement”), with BMO Capital Markets Financing, Inc.
(“BMO”).  The Loan Authorization Agreement established an $18 million
revolving credit facility (the “Holdings Revolving Facility”), and amounts
borrowed against the Holdings Revolving Facility are evidenced by a promissory
note.  Interest is calculated based on the prime commercial rate, as
defined in the Holdings Revolving Facility.  The average interest
rates during the three and six months ended July 3, 2010 and July 4, 2009, were
7.25% and 5.5%, respectively. Interest on the borrowings are payable quarterly,
at the option of the Company, in cash or by adding such interest to the unpaid
principal balance of the Holdings Revolving Facility. All interest incurred to
date has been added to the principal balance of the Holdings Revolving
Facility.  Accrued and unpaid interest was $4.7 million and $3.7
million at July 3, 2010 and December 31, 2009, respectively.  The
outstanding principal of the Loan Authorization Agreement and any unpaid
interest accumulated to date are payable and mature on demand of
BMO.  On March 24, 2008 and September 15, 2009, Holdings entered into
amendments to the Loan Authorization Agreement that increased the amount of
maximum credit under the Holdings Revolving Facility to $28 million and $35
million, respectively.  The obligations under the Loan Authorization
Agreement are guaranteed by two funds of HM Capital.  There are no
financial covenants included in the Loan Authorization
Agreement.   The Loan Authorization Agreement is not secured or
guaranteed by any assets of the Company and its subsidiaries.
  15
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 8.           Derivative
Financial Instruments
 
 The
Company manages interest rate exposure by using derivative instruments to reduce
the variability of interest payments for variable-rate debt. The Company is also
required to maintain interest rate hedge agreements covering a notional amount
of not less than 50% of the debt outstanding under the First Lien Credit
Agreement.
 
 On
November 29, 2007, the Company entered into an interest rate collar
agreement with an aggregate notional principal amount of $65 million and a
maturity date of November 30, 2010. The collar is used to hedge the
required portion of the Company’s First Lien Credit Agreement and consists of a
cap and a floor with a strike of 5.50% and 2.98%, respectively. The strike is
indexed to three-month LIBOR. The change in the fair value of the derivative is
reported as a component of interest expense. The amount of interest expense
recorded for the interest rate collar for the three months ended July 3, 2010
and July 4, 2009 was $0.3 million and $0.3 million, respectively, which includes
changes in the fair value of the collar liability. The amount of interest
expense recorded for the interest rate collar for the six months ended July 3,
2010 and July 4, 2009 was $0.1 million and $0.5 million, respectively, which
includes changes in the fair value of the collar liability.  The fair
value of the interest rate collar liability was $0.7 million and $1.5 million at
July 3, 2010 and December 31, 2009, respectively, and is recorded as a
component of accrued expenses in the condensed consolidated balance
sheets.
 
 9.           Stockholders’
Equity
 
 The
Company is authorized to issue 220 million shares, consisting of  (i)
200 million shares of common stock, par value $0.00002 per share and 20 million
shares of preferred stock, par value $0.00002 per share.  At the
Effective Time, each outstanding share of Holdings Common Stock was converted to
the right to receive 0.012 shares of Berliner Series A Preferred Stock, in
addition to 0.4 shares of Berliner Common Stock.  On June 4, 2010,
each share of Berliner Series A Preferred Stock was automatically converted into
50 shares of UniTek Common Stock upon the filing and effectiveness of an
amendment to the Company’s certificate of incorporation.
  In
conjunction with the Merger, Berliner designated approximately 0.7 million
shares of Berliner Series B Preferred Stock.  At the Effective Time, each
share of Holdings Preferred Stock was converted to the right to receive 0.02
shares of Berliner Series B Preferred Stock.  The Holdings Preferred Stock
was issued in January 2010, prior to the Merger, in an amount of $12.5 million
for 12.5 million shares.  The Berliner Series B Preferred Stock ranks
senior to all existing classes of capital stock of Berliner.  The Berliner
Series B Preferred Stock has an optional conversion feature to UniTek Common
Stock, such that the actual conversion ratio would currently be 50 shares of
UniTek Common Stock for each share of Berliner Series B Preferred Stock, subject
to standard anti-dilution adjustments for stock splits, dividends and similar
events.  In addition, in the event of liquidation, dissolution or winding
up of UniTek, the Berliner Series B Preferred Stock has a liquidation
preference.   As there are certain events that are considered “deemed
liquidation” events, such as a merger or consolidation or similar transaction
resulting in a change of control (as more fully defined in the Certificate of
Designation, Preferences and Rights of Series B Convertible Preferred Stock
filed with the Company’s Form 8-K on January 27, 2010) which can be influenced
by the holders of the Berliner Series B Preferred Stock, the Berliner Series B
Preferred Stock has been reflected as mezzanine equity on the accompanying
consolidated balance sheet.  At July 3, 2010, there were approximately 0.26
million shares of Berliner Series B Preferred Stock outstanding with a
liquidation value of approximately $25.6 million.
  10.         Warrants
 
 At July
3, 2010, the Company had issued warrants to purchase up to approximately 5.7
million shares of its common stock. The warrants exercise prices range from
$0.55 to $2.50 per share and expire from June 21, 2011 to September 27,
2017.
 
 16
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 11.           Stock
Options
 
 At July
3, 2010, the Company had issued stock options to employees to purchase up to
approximately 18.1 million shares of its common stock.  The stock
option exercise prices range from $0.30 to $1,387 per share and expire from July
4, 2010 to April 1, 2018.
  12.           Related Party
Transactions
 
 The
Company maintains certain policies and procedures for the review, approval, and
ratification of related-party transactions to ensure that all transactions with
selected parties are fair, reasonable and in the Company’s best interest. All
significant relationships and transactions are separately identified by
management if they meet the definition of a related party or a related-party
transaction. Related-party transactions include transactions that occurred
during the year, or are currently proposed, in which the Company was or will be
a participant and in which any related person had or will have a direct or
indirect material interest. All related-party transactions are reviewed,
approved and documented by the appropriate level of the Company’s management and
if necessary, the Board of Directors or a committee thereof, in accordance with
these policies and procedures.
 
 In
connection with the Merger, on January 27, 2010, the Company entered into an
Amended and Restated Monitoring and Oversight Agreement (the “M&O
Agreement”) with HM Capital Partners LP (“HM LP”).    Pursuant to the
M&O Agreement, the Company will pay HM LP an annual fee of $0.7 million in
calendar year 2010, $0.7 million in calendar year 2011 and $0.8 million in
calendar year 2012 and for each calendar year thereafter, in consideration for
HM LP’s provision of financial oversight and monitoring services to the Company
as they may be requested from time to time.  Each annual fee mentioned
above will be payable in equal quarterly installments on March 31, June 30,
September 30 and December 31 of the applicable year; provided, that such payment
will not be paid unless the Total Leverage Ratio is below 3.50:1.00 at the end
of the applicable quarter, and if not paid, each such payment will accrue until
the Total Leverage Ratio is below 3.50:1.00 at any subsequent quarter at which
time all accrued and unpaid payments will become due and
payable.
  In
conjunction with the Merger, the Company entered into a Credit and Support
Agreement with two funds of HM LP that are parties to the guaranty of the
Holdings Revolving Facility.  The Credit and Support Agreement
provides for the payment of a credit support fee for the continued guaranty of
the Company’s performance under the Holdings Revolving Facility.  The
credit support fee is equal to 6% (or the maximum contract rate of interest
permitted by law if less than 6%) on the aggregate of the outstanding principal
and accrued interest added to the principal.  The credit support fee
is payable quarterly in cash or, at the Company’s option in shares of Series B
Convertible Preferred Stock.  For the three and six months ended July
3, 2010, the Company recorded $0.4 million and $0.8 million, respectively, for
the credit support fee that is included in interest expense.  The
corresponding related party liability is included with accrued liabilities at
July 3, 2010 and subsequently paid with the issuance of Series B Convertible
Preferred Stock.
 
 13.           Legal
Proceedings
 
 From time
to time, the Company is a party to various lawsuits, claims, or other legal
proceedings and is subject, due to the nature of its business, to governmental
agency oversight, audits, investigations and review. Such actions may seek,
among other things, compensation for alleged personal injury, breach of
contract, property damage, punitive damages, civil penalties or other losses, or
injunctive or declaratory relief. Under such governmental audits and
investigations, the Company may become subject to fines and penalties or other
monetary damages. With respect to such lawsuits, claims, proceedings and
governmental investigations and audits, the Company accrues reserves when it is
probable a liability has been incurred and the amount of loss can be reasonably
estimated. The Company does not believe any of the pending proceedings,
individually or in the aggregate, will have a material adverse effect on its
consolidated results of operations, cash flows or financial
condition.
  17
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 14.           Fair
Value Measurements
 
 FASB
accounting guidance defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the related
disclosures. In determining fair value we use quoted prices and observable
inputs. Observable inputs are inputs that market participants would use in
pricing the asset or liability based on market data obtained from sources
independent of us. The fair value hierarchy is broken down into three levels
based on the source of inputs as follows:
  o
              Level 1—Valuations
      based on unadjusted quoted prices in active markets for identical assets
      or liabilities.
 
 o
              Level 2—Valuations
      based on observable inputs and quoted prices in active markets for similar
      assets and liabilities.
 
 o
              Level 3—Valuations
      based on inputs that are unobservable and models that are significant to
      the overall fair value measurement.
 
 
 The
following table summarizes our financial assets and liabilities measured at fair
value on a recurring basis as of July 3, 2010:
  Fair
      Value Measurements at July 3, 2010Fair
      Value at July 3, 2010
                  
                  
                  Quoted
      Prices in Active Markets (Level 1)
                  
                  
                  Significant
      Other Observable Inputs (Level 2)
                  
                  
                  Significant
      Unobservable Inputs (Level 3)AssetsCash
      and cash equivalents
                  
                  $
                  1,998
                  
                  
                  $
                  1,998
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  $
                  1,998
                  
                  
                  $
                  1,998
                  
                  
                  $
                  -
                  
                  
                  $
                  -LiabilitiesInterest-rate
      collar
                  
                  $
                  715
                  
                  
                  $
                  -
                  
                  
                  $
                  715
                  
                  
                  $
                  -Total
                  
                  $
                  715
                  
                  
                  $
                  -
                  
                  
                  $
                  715
                  
                  
                  $
                  -
  Derivatives
  On
November 29, 2007, the Company entered into an interest-rate collar
agreement with an aggregate notional principal amount of $65 million. The collar
is used to hedge the required portion of the First Lien Credit Agreement. The
fair value of the interest-rate collar liability was $0.7 million and $1.5
million at July 3, 2010 and December 31, 2009, respectively. The Company
utilized a present value technique to fair value each derivative contract. The
Company calculated the present value of future expected cash flows using a
discount rate commensurate with the underlying risk of the debtor.
  15.           Discontinued
Operations
  Discontinued
operations consist of the satellite markets provided to DIRECTV as part of the
market swaps and cable markets that were exited in 2009 and 2010 for various
operations reasons. The following table summarizes the results for the Company’s
discontinued operations for the three and six months ended July 3, 2010 and July
4, 2009:
  Three
      Months ended
                  
                  
                  Six
      Months endedJuly
      3,
                  
                  
                  July
      3,
                  
                  
                  July
      3,
                  
                  
                  July
      4,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Revenues
                  
                  $
                  -
                  
                  
                  $
                  297
                  
                  
                  $
                  253
                  
                  
                  $
                  11,235Cost
      of revenues
                  
                  
                  175
                  
                  
                  
                  557
                  
                  
                  
                  680
                  
                  
                  
                  10,002Gross
      margin
                  
                  
                  (175
                  )
                  
                  
                  (260
                  )
                  
                  
                  (427
                  )
                  
                  
                  1,233Depreciation
      and amortization
                  
                  
                  -
                  
                  
                  
                  23
                  
                  
                  
                  32
                  
                  
                  
                  569Operating
      income (loss)
                  
                  
                  (175
                  )
                  
                  
                  (283
                  )
                  
                  
                  (459
                  )
                  
                  
                  664Gain
      on sale of assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (111
                  )Income
      (loss) from discontinued operations before income taxes
                  
                  
                  (175
                  )
                  
                  
                  (283
                  )
                  
                  
                  (459
                  )
                  
                  
                  775Tax
      benefit from discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) from discontinued operations
                  
                  $
                  (175
                  )
                  
                  $
                  (283
                  )
                  
                  $
                  (459
                  )
                  
                  $
                  775
  18
  UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 16.           Segment
Reporting
  The Company reports its financial
results on the basis of two reportable segments: (1) fulfillment and (2)
engineering and construction.The segments are determined in
accordance with how management views and evaluates our business. Selected segment financial information
for the three and six months ended July 3, 2010 and July 4, 2009, is presented
below:
  Three
      Months EndedJuly
      3, 2010
                                                                                                                    
                                                                                                                    
                                                                                                                    July
      4, 2009Fulfillment
                                                                                                                    
                                                                                                                    
                                                                                                                    Engineering
      & Construction
                                                                                                                    
                                                                                                                    
                                                                                                                    Total
                                                                                                                    
                                                                                                                    
                                                                                                                    Fulfillment
                                                                                                                    
                                                                                                                    
                                                                                                                    Engineering
      & Construction
                                                                                                                    
                                                                                                                    
                                                                                                                    TotalRevenue
                                                                                                                    
                                                                                                                    $
                                                                                                                    66,640
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    39,199
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    105,839
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    56,167
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    13,080
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    69,247Cost
      of revenue
                                                                                                                    
                                                                                                                    
                                                                                                                    54,075
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    35,483
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    89,558
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    49,133
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    10,984
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    60,117Gross
      profit
                                                                                                                    
                                                                                                                    
                                                                                                                    12,565
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    3,716
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    16,281
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    7,034
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,096
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    9,130Selling,
      general and administrative expenses
                                                                                                                    
                                                                                                                    
                                                                                                                    5,244
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    3,443
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    8,687
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,305
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,784
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    6,089Depreciation
      and amortization
                                                                                                                    
                                                                                                                    
                                                                                                                    5,749
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,392
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    7,141
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,011
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    3,149
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    7,160Operating
      income (loss)
                                                                                                                    
                                                                                                                    $
                                                                                                                    1,572
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (1,119
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    453
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (1,
      282
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    (2,837
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    (4,119
                                                                                                                    )Interest
      expense
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    6,241
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,341Other
      expense, net
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    146
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    21Loss
      from continuing operations before income taxes
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (5,934
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (8,481
                                                                                                                    )
   Six
      Months EndedJuly
      3, 2010
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    July
      4, 2009Fulfillment
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Engineering
      & Construction
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Total
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Fulfillment
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Engineering
      & Construction
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    TotalRevenue
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    128,210
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    66,597
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    194,807
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    114,457
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    23,455
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    137,912Cost
      of revenue
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    105,503
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    60,334
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    165,837
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    98,961
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    21,100
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    120,061Gross
      profit
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    22,707
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    6,263
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    28,970
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    15,496
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2,355
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    17,851Selling,
      general and administrative expenses
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    10,573
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    7,146
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    17,719
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    9,813
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2,983
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    12,796Depreciation
      and amortization
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    11,298
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2,415
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    13,713
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    7,324
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    6,109
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    13,433Operating
      income (loss)
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    836
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (3,298
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (2,462
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (1,641
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (6,737
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (8,378
                                                                                                                                    )Interest
      expense
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    11,413
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8,306Other
      expense, net
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    146
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    45Loss
      from continuing operations before income taxes
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (14,021
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (16,729
                                                                                                                                    )
  19
 UniTek
Global Services, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)
 At the
quarter ending July 3, 2010, the total assets of the fulfillment segment were
$179.1 million and the engineering and construction segment were $97.4
million.  This compares to $174.4 million and $57.4 million at
December 31, 2009 for the fulfillment segment and the engineering and
construction segment, respectively.  The increase of $4.7 million in
the assets of the fulfillment segment was primarily from higher working
capital.  The increase of $40.0 million in the engineering and
construction assets compared to December 31, 2009 is primarily the $43.4 million
of assets from the operations of Berliner which have been included in our
consolidated results since the date of the Merger, offset by changes in working
capital.
 
 17.           Subsequent
Events
  The
Company evaluated all subsequent events through the date that the condensed
consolidated financial statements were issued.
 
 On July 16, 2010, the Company amended
its existing Term B Credit Facility to provide a Third Incremental Term B
Facility of up to $20.0
million.Upon closing of the amendment$15.0 millionof the facility was made available to
the Company.The additional $5.0 millionof the facility shall be available to
the Company as early as November upon the achievement of certain EBITDA levels
and covenant compliance as defined in the amendment.  The proceeds
were used to reduce the existing balance on the Revolving Credit Facility to
support future working capital needs.  The Third Incremental Term B
Facility currently bears interest at the same rate as the prior Term B
facility.  Pursuant to the terms of the amendment, the Third
Incremental Term B Lenders receivedwarrantsto purchase an aggregate of
3,000,000shares of common stock of the
Company.  Thewarrantshave an exercise price of $0.01 per
share, vested 25% upon issuance, and the remainingwarrantsvest ratably throughSeptember 1, 2012.  Thewarrantscontain a cashless exercise provision
and provide for anti-dilution adjustments in the case of reclassifications,
consolidations, mergers or sales that impact the Company’s common
stock.
 
 OnAugust 6, 2010, the Company filed an information
statement stating that the substantial majority of its shareholders have
approved a reverse split of the Company’s common stock at a ratio not less than
one-to-eight and not greater than one-to-thirty, with the exact ratio to be set
at the discretion of the Board, provided that the Board ultimately determines to
effect the reverse split.  As of the filing date of these financial
statements, no reverse split has yet occurred.
 
 OnAugust 16, 2010, the Company filed a preliminary Form
S-1 for the purpose of raising additional capital.  The Company may
not sell securities until the registration statement is
effective.  The Company intends to use the net proceeds from the sale
ofcommon stockto repay certain of its indebtedness
and the remainder for working capital and other general corporate
purposes.
  20
  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 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 report should only be read
in context described under the section entitled “Note Regarding Forward-Looking
Statements” below.
 
 Note
Regarding 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 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
on Form 10-Q under the heading entitled “Risk Factors,” as well as all other
cautionary language in this 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 in
the Risk Factors section in this report  could have an adverse effect on
our business, results of operations or financial condition.
  Forward-looking
statements in this report include, without limitation, statements
concerning:
  §
              our
      financial condition and strategic
direction;
 §
              our
      future capital requirements and our ability to satisfy our capital
      needs;
 §
              the
      potential generation of future revenue and or
  earnings;
 §
              our
      ability to adequately staff our service
  offerings;
 §
              opportunities
      for us from new and emerging technologies in our
    industries;
 §
              our
      ability to obtain additional
financing;
 §
              our
      growth strategy;
 §
              trends
      in the telecommunications, satellite and cable
  industries;
 §
              key
      drivers of change in our business;
 §
              our
      competitive position and the competitive landscape;
  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
      related to the market for our
shares;
 §
              risks
      related to a concentration of revenue from a small number of
      customers;
 §
              risks
      associated with competition in the telecommunications, satellite and cable
      industries;
 §
              risks
      that we will not be able to generate positive cash
  flow;
 §
              risks
      that we may not be able to obtain additional financing;
  and
 §
              risks
      that we will be unable to adequately staff our service
      offerings.
 
 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.
  21
  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 report and the Transition 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 report.  We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date of this report.
 
 Summary of Operating
Results
 
 The
following table presents consolidated selected financial information. The
statement of operations data for the three and six months ended July 3, 2010,
and July 4, 2009, has been derived from our unaudited condensed 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)Fulfillmentand (2)Engineering and Construction.
 
 In the
Merger, Holdings is the accounting acquirer with Berliner the legal acquirer and
registrant.  Upon the completion of the Merger, Berliner changed its
fiscal year end from June 30 to December 31.  Berliner filed a
Transition Report on Form 10-K on March 31, 2010.  As the accounting
acquirer, Holdings’ prior year results are presented for comparison
purposes.  The results for the three and six months ending July 3,
2010 include the results of Holdings for the entire periods and the results of
Berliner after the January 27, 2010 Merger date.  The results for the
three and six months ended July 4, 2009 include only the results of
Holdings.
 
 Results
of Operations – Three Months Ended July 3, 2010 Compared to Three Months Ended
July 4, 2009
 
 The
following table presents, for the periods indicated, a summary of our condensed
consolidated statement of operations information.
 
 Three
      Months EndedJuly
      3, 2010
                  
                  
                  July
      4, 2009(in
      thousands, except per share data)
                  
                  (unaudited)
                  
                  
                  (unaudited)Revenues
                  
                  $
                  105,839
                  
                  
                  $
                  69,247Cost
      of revenues
                  
                  
                  89,558
                  
                  
                  
                  60,117Gross
      profit
                  
                  
                  16,281
                  
                  
                  
                  9,130Selling,
      general and administrative expenses
                  
                  
                  8,687
                  
                  
                  
                  6,089Depreciation
      and amortization
                  
                  
                  7,141
                  
                  
                  
                  7,160Operating
      income (loss)
                  
                  
                  453
                  
                  
                  
                  (4,119
                  )Interest
      expense
                  
                  
                  6,241
                  
                  
                  
                  4,341Other
      expense, net
                  
                  
                  146
                  
                  
                  
                  21Loss
      from continuing operations before income taxes
                  
                  
                  (5,934
                  )
                  
                  
                  (8,481
                  )Income
      tax expense
                  
                  
                  (34
                  )
                  
                  
                  (390
                  )Loss
      from continuing operations
                  
                  
                  (5,968
                  )
                  
                  
                  (8,871
                  )Income
      from discontinued operations
                  
                  
                  (175
                  )
                  
                  
                  (283
                  )Net
      loss
                  
                  $
                  (6,143
                  )
                  
                  $
                  (9,154
                  )Net
      loss per share- basic and diluted:Continuing
      operations
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.08
                  )Discontinued
      operations
                  
                  $
                  0.00
                  
                  
                  $
                  0.00Weighted
      average shares of common stock outstanding (basic and
    diluted)
                  
                  
                  136,758
                  
                  
                  
                  109,100Adjusted
      EBITDA (1)
                  
                  $
                  7,954
                  
                  
                  $
                  3,524
 
 (1) See
description of “Adjusted EBITDA” below.
  22
  The
following table presents, for the periods indicated, a summary of our condensed
consolidated balance sheet information.
 
 (in
      thousands)
                      
                      July
      3,
                          2010
                      
                      
                      December
      31,
                          2009Current
      assets
                      
                      $
                      84,417
                      
                      
                      $
                      39,206Total
      assets
                      
                      
                      276,494
                      
                      
                      
                      231,841Current
      liabilities
                      
                      
                      102,864
                      
                      
                      
                      80,921Long-term
      debt, net of current portion
                      
                      
                      132,493
                      
                      
                      
                      127,163Series
      B Convertible Preferred Stock
                      
                      
                      12,817
                      
                      
                      
                      -Stockholders’
      equity
                      
                      
                      26,291
                      
                      
                      
                      19,513
  Revenues
  The
following table sets forth information regarding our revenues by segment for the
three months ended July 3, 2010 and July 4, 2009.
  Three
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                66,640
                
                
                
                63
                %
                
                $
                56,167
                
                
                
                81
                %
                
                $
                10,473Engineering
      and Construction
                
                
                39,199
                
                
                
                37
                %
                
                
                13,080
                
                
                
                19
                %
                
                
                26,119Total
                
                $
                105,839
                
                
                
                100
                %
                
                $
                69,247
                
                
                
                100
                %
                
                $
                36,592
  We had
revenue of $105.8million
for the three months ended July 3, 2010, compared to $69.2 million for the three
months ended July 4, 2009.  This represents an increase of $36.6
million, or 53%. Of the revenue gain, $25.4 million reflects the operations of
Berliner which have been included in our consolidated results since the date of
the Merger and is included in the engineering and construction
segment.
  Revenue
for fulfillment services increased by $10.5 million, or 19%, from $56.2 million
for the three months ended July 4, 2009 to $66.6 million for the three months
ended July 3, 2010. Revenue from the broadband cable acquisitions we completed
in the fourth quarter of fiscal 2009 accounted for $3.7 million of this
additional revenue.  The remaining portion of the increase is
attributable to growth in our existing fulfillment services
businesses.
  Revenue
for the engineering and construction segment increased $26.1 million, or 200%,
from $13.1 million for the three months ended July 4, 2009 to $39.2 million for
the three months ended July 3, 2010.  The increase is primarily
related to the operations of Berliner which have been included in our
consolidated results since the date of the Merger.
  Cost
of Revenues
  The
following table sets forth information regarding our cost of revenues by segment
for the three months ended July 3, 2010 and July 4, 2009.
  23
  Three
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                54,075
                
                
                
                81
                %
                
                $
                49,133
                
                
                
                87
                %
                
                $
                4,942Engineering
      and Construction
                
                
                35,483
                
                
                
                91
                %
                
                
                10,984
                
                
                
                84
                %
                
                
                24,499Total
                
                $
                89,558
                
                
                
                85
                %
                
                $
                60,117
                
                
                
                87
                %
                
                $
                29,441
  Our cost
of revenue was $89.6million
and $60.1 million for the three months ended July 3, 2010 and July 4, 2009,
respectively.  This represents an increase of $29.4 million, or 49%,
during a period when sales increased 53%. Cost of revenue represents 85% and 87%
of total revenue for the three months ended July 3, 2010 and July 4, 2009,
respectively. Of the cost of revenue increase, $23.1 million is related to the
operations of Berliner which have been included in our consolidated results
since the date of the Merger and is included in the engineering and construction
segment.
  Cost of
revenue for fulfillment services increased $4.9 million from $49.1 million for
the three months ended July 4, 2009 to $54.1 million for the three months ended
July 3, 2010. This represents an increase of 10% during a period when revenue
increased by 19% representing operational improvements made in the fulfillment
segment.
  Cost of
revenue for the engineering and construction segment increased $24.5 million
from $11.0 million for the three months ended July 4, 2009 to $35.5 million for
the three months ended July 3, 2010.  The increase is related
primarily to the operations of Berliner which have been included in our
consolidated results since the date of the Merger.
  Gross
Profit
 
 The
following table sets forth information regarding our gross profit by segment for
the three months ended July 3, 2010 and July 4, 2009.
  Three
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                12,565
                
                
                
                19
                %
                
                $
                7,034
                
                
                
                13
                %
                
                $
                5,531Engineering
      and Construction
                
                
                3,716
                
                
                
                9
                %
                
                
                2,096
                
                
                
                16
                %
                
                $
                1,620Total
                
                $
                16,281
                
                
                
                15
                %
                
                $
                9,130
                
                
                
                13
                %
                
                $
                7,151
 
 Our gross
profit for the three months ended July 3, 2010 was $16.3 million compared to
$9.1million
for the three months ended July 4, 2009, representing an increase of $7.2
million, or 78%.  Of the gross profit increase, $2.3 million is
attributable to the operations of Berliner which have been included in our
consolidated results since the date of the Merger and is included in the
engineering and construction segment.  Our gross profit as a
percentage of revenue was approximately 15% for the three months ended July 3,
2010, as compared to 13% for the three months ended July 4, 2009.
  For the
fulfillment segment, gross margin increased from 13% for the three months ended
July 4, 2009 to 19% for the three months ended July 3, 2010.  The
increase is primarily related to the operational improvements in various
fulfillment markets and profitability improvements from the use of field
technology, dispatch cost reduction programs and other cost savings
initiatives.
  For the
engineering and construction segment, gross margin decreased from 16% to
9%.  The decrease is primarily attributed to the addition of Berliner
combined with the effects of a change in the mix of work within some of our
existing engineering and construction markets.
  24
 
 Selling,
General and Administrative Expenses
 
 Selling,
general and administrative expenses (“SG&A”) for the three months ended July
3, 2010 were $8.7 million as compared to $6.1 million for the three months ended
July 4, 2009. This represents an overall increase of $2.6 million.  A
portion of the increase ($1.4 million) is from the merger of Berliner which has
been included in our consolidated results since the date of the
Merger.  The remaining increase in SG&A costs of $1.2 million is
attributable primarily to integration and transaction expenses related to the
Merger ($0.2 million), increased expenses related to the startup of our Canadian
operations ($0.3 million) and timing of insurance costs ($0.7
million).
 
 Adjusted
Pro Forma EBITDA
 
 Earnings
before interest, taxes, depreciation and amortization, or EBITDA, is a key
indicator used by our management to evaluate operating performance of our
company. While the adjusted EBITDA is not intended to replace any presentation
included in these consolidated financial statements under generally accepted
accounting principles, or GAAP, and should not be considered an alternative to
operating performance or an alternative to cash flow as a measure of liquidity,
we believe this measure is useful to investors in assessing our performance in
comparison with other companies in our industry. This calculation may differ in
method of calculation from similarly titled measures used by other companies. We
compensate for these limitations by relying primarily on our GAAP results and
using Adjusted EBITDA only as supplemental information.
 
 A
reconciliation of net loss to adjusted EBITDA is as follows for the three months
ended July 3, 2010 and July 4, 2009 (amounts in thousands):
  Pro
      FormaThree
      Months Ended
                                              
                                              
                                              Three
      Months EndedJuly
      3, 2010
                                              
                                              
                                              July
      4, 2009
                                              
                                              
                                              July
      3, 2010
                                              
                                              
                                              July
      4, 2009Net
      loss
                                              
                                              $
                                              (6,143
                                              )
                                              
                                              $
                                              (9,154
                                              )
                                              
                                              $
                                              (6,206
                                              )
                                              
                                              $
                                              (9,154
                                              )Berliner
      pro forma net loss (1)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (2,051
                                              )Loss
      from discontinued operations
                                              
                                              
                                              175
                                              
                                              
                                              
                                              283
                                              
                                              
                                              
                                              175
                                              
                                              
                                              
                                              283Income
      tax expense
                                              
                                              
                                              34
                                              
                                              
                                              
                                              390
                                              
                                              
                                              
                                              34
                                              
                                              
                                              
                                              390Interest
      expense
                                              
                                              
                                              6,241
                                              
                                              
                                              
                                              4,341
                                              
                                              
                                              
                                              6,241
                                              
                                              
                                              
                                              4,922Stock
      compensation expense
                                              
                                              
                                              423
                                              
                                              
                                              
                                              473
                                              
                                              
                                              
                                              423
                                              
                                              
                                              
                                              573Other
      expense, non cash
                                              
                                              
                                              146
                                              
                                              
                                              
                                              21
                                              
                                              
                                              
                                              146
                                              
                                              
                                              
                                              13Depreciation
      and amortization
                                              
                                              
                                              7,141
                                              
                                              
                                              
                                              7,160
                                              
                                              
                                              
                                              7,141
                                              
                                              
                                              
                                              7,869Merger
      transaction costs
                                              
                                              
                                              (63
                                              )
                                              
                                              
                                              10
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              10Adjusted
      EBITDA/Adjusted pro forma EBITDA
                                              
                                              $
                                              7,954
                                              
                                              
                                              $
                                              3,524
                                              
                                              
                                              $
                                              7,954
                                              
                                              
                                              $
                                              2,855
 (1) Berliner pro
      forma net loss includes additional interest and amortization resulting
      from the Merger as if the Merger occurred at the beginning of the periods
      presented.
  Adjusted
EBITDA increased by 126% to $8.0 million for the three months ended July 3, 2010
from $3.5 million for the three months ended July 4, 2009.  The
fulfillment segment’s year over year improvement of $5.5 million in gross profit
was the main contributor to this increase.  The EBITDA improvement
also includes $0.9 million of EBITDA attributable to the acquisition of Berliner
which is included in our consolidated results since the date of the
Merger.  These increases in EBITDA were partially offset by higher
SG&A expenses to support both the combined businesses and the increased
revenue.
 
 Depreciation
and Amortization
 
 Depreciation
on fixed assets totaled approximately $2.9 million for the three months ended
July 3, 2010 compared to $1.4 million for the three months ended July 4,
2009.  The increase in depreciation is attributed to the Merger ($0.3
million) and depreciation from the 2009 conversion of a portion of our fleet
from operating leases to capital leases.
 
 Amortization
of intangible assets acquired as a result of acquisitions resulted in
amortization expense of approximately $4.2 million for the three months ended
July 3, 2010 compared to $5.8 million for the three months ended July 4,
2009.  The decrease is related to the impairment of the wireline
telecommunications reporting unit in 2009 that resulted in a write-down of the
customer contracts in the fourth quarter of fiscal 2009, partially offset by
increased amortization resulting from the merger with Berliner.
  25
  Interest
Expense
 
 We
recognized $6.2 million and $4.3 million in interest expense during the three
months ended July 3, 2010 and July 4, 2009, respectively.  The
increase of $1.9 million was primarily due to the higher debt levels in the
second quarter of 2010 compared to the second quarter of 2009, an increase in
interest rates from the 2009 amendments to the debt agreements, the credit
support fee on the Holdings Revolving Facility entered into during January 2010
and additional interest relating to the Letter of Credit Facility entered into
on March 31, 2010.
 
 Income
Taxes
  We
recorded income tax expense of $34 thousand for three months ended July 3, 2010
and $0.4 million for the three months ended July 4,
2009.    The 2010 tax expense represents the estimated tax
expense from our Canadian operations.  The 2009 tax expense is due to
differences between book and tax amortization of intangible assets.
  At July
3, 2010, we had net operating loss carry forwards for federal and state income
tax purposes of approximately $33 million which begin to expire in 2014 and
will fully expire by 2029.  Because the Company has not yet achieved
profitable operations, management believes the potential tax benefits from the
deferred tax assets do not satisfy the realization criteria set forth in FASB
ASC 740, and accordingly, has recorded a valuation allowance of the entire net
deferred tax asset.
 
 Net
Loss
 
 We had a net loss of $6.1 million for
the three months ended July 3, 2010, compared to a net loss of $9.2 million for
three months ended July 4, 2009.  These net losses include losses from
discontinued operations of $0.2 million and $0.3 million for the three months
ended July 3, 2010 and July 4, 2009, respectively.  The losses from
discontinued operations are the result of the closure of certain cable
installation locations.
  26
  Results of Operations – Six Months
Ended July 3, 2010 Compared to Six Months Ended July 4, 2009
 
 The
following table presents, for the periods indicated, a summary of our condensed
consolidated statement of operations information.
 
 Six
      Months EndedJuly
      3, 2010
                  
                  
                  July
      4, 2009(in
      thousands, except per share data)
                  
                  (unaudited)
                  
                  
                  (unaudited)Revenues
                  
                  $
                  194,807
                  
                  
                  $
                  137,912Cost
      of revenues
                  
                  
                  165,837
                  
                  
                  
                  120,061Gross
      profit
                  
                  
                  28,970
                  
                  
                  
                  17,851Selling,
      general and administrative expenses
                  
                  
                  17,719
                  
                  
                  
                  12,796Depreciation
      and amortization
                  
                  
                  13,713
                  
                  
                  
                  13,433Operating
      loss
                  
                  
                  (2,462
                  )
                  
                  
                  (8,378
                  )Interest
      expense
                  
                  
                  11,413
                  
                  
                  
                  8,306Other
      expense, net
                  
                  
                  146
                  
                  
                  
                  45Loss
      from continuing operations before income taxes
                  
                  
                  (14,021
                  )
                  
                  
                  (16,729
                  )Income
      tax expense
                  
                  
                  (102
                  )
                  
                  
                  (769
                  )Loss
      from continuing operations
                  
                  
                  (14,123
                  )
                  
                  
                  (17,498
                  )Income
      (loss) from discontinued operations
                  
                  
                  (459
                  )
                  
                  
                  775Net
      loss
                  
                  $
                  (14,582
                  )
                  
                  $
                  (16,723
                  )Net
      loss per share- basic and diluted:Continuing
      operations
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.16
                  )Discontinued
      operations
                  
                  $
                  0.00
                  
                  
                  $
                  0.01Weighted
      average shares of common stock outstanding (basic and
    diluted)
                  
                  
                  132,600
                  
                  
                  
                  109,097Adjusted
      EBITDA (1)
                  
                  $
                  13,429
                  
                  
                  $
                  7,104(1) See description
      of “Adjusted EBITDA” below.
 Revenues
  The
following table sets forth information regarding our revenues by segment for the
six months ended July 3, 2010 and July 4, 2009.
  Six
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                128,210
                
                
                
                66
                %
                
                $
                114,457
                
                
                
                83
                %
                
                $
                13,753Engineering
      and Construction
                
                
                66,597
                
                
                
                34
                %
                
                
                23,455
                
                
                
                17
                %
                
                
                43,142Total
                
                $
                194,807
                
                
                
                100
                %
                
                $
                137,912
                
                
                
                100
                %
                
                $
                56,895
 
 
 We had
revenue of $194.8million
for the six months ended July 3, 2010, compared to $137.9 million for the six
months ended July 4, 2009.  This represents an increase of $56.9
million, or 41%. Of the revenue gain, $42.7 million reflects the operations of
Berliner which have been included in our consolidated results since the date of
the Merger and are included in the engineering and construction
segment.
  Revenue
for fulfillment services increased by $13.8 million, or 12%, from $114.5 million
for the six months ended July 4, 2009 to $128.2 million for the six months ended
July 3, 2010. Revenue from the broadband cable acquisitions we completed in the
fourth quarter of fiscal 2009 accounted for $8.4 million in additional revenue
and the timing impact of the 2009 DIRECTV market swap added $2.8 million for the
six months ended July 3, 2010.  The remaining portion of this increase
is attributable to growth in our existing fulfillment services business. These
gains were partially offset by weather issues in the first quarter of fiscal
2010 in the Northeast and Midwest portion of the United States and lower
customer promotions in the first quarter of 2010 as compared to
2009.  The net impact of these items is estimated at
approximately $2.6 million.
  27
  Revenue
for the engineering and construction segment increased $43.1 million, or 184%,
from $23.5 million for the six months ended July 4, 2009 as compared to $66.6
million for the six months ended July 3, 2010.  The increase is
primarily related to the operations of Berliner which have been included in our
consolidated results since the date of the Merger.
  Cost
of Revenues
  The
following table sets forth information regarding our cost of revenues by segment
for the six months ended July 3, 2010 and July 4, 2009.
  Six
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                105,503
                
                
                
                82
                %
                
                $
                98,961
                
                
                
                86
                %
                
                $
                6,542Engineering
      and Construction
                
                
                60,334
                
                
                
                91
                %
                
                
                21,100
                
                
                
                90
                %
                
                
                39,234Total
                
                $
                165,837
                
                
                
                85
                %
                
                $
                120,061
                
                
                
                87
                %
                
                $
                45,776
  Our cost
of revenue was $165.8million
and $120.1 million for the six months ended July 3, 2010 and July 4, 2009,
respectively.  This represents an increase of $45.8 million, or 38%,
during a period when sales increased 41%. Cost of revenues represents 85% and
87% of total revenue for the three months ended July 3, 2010 and July 4, 2009,
respectively.  Of the cost of revenue increase, $38.4 million is
related to the operations of Berliner which have been included in our
consolidated results since the date of the Merger and is included in the
engineering and construction segment.
  Cost of
revenue for fulfillment services increased $6.5 million from $99.0 million for
the six months ended July 4, 2009 to $105.5 million for the six months ended
July 3, 2010. This represents an increase of 7% during a period when revenue
increased by 12% representing operational improvements made in the fulfillment
segment.
  Cost of
revenue for the engineering and construction segment increased $39.2 million
from $21.1 million for the six months ended July 4, 2009 to $60.3 million for
the six months ended July 3, 2010.  The increase is related primarily
to the operations of Berliner which have been included in our consolidated
results since the date of the Merger.
  Gross
Profit
 
 The
following table sets forth information regarding our gross profit by segment for
the six months ended July 3, 2010 and July 4, 2009.
  Six
      Months Ended (unaudited)(Amounts
      in thousands)
                
                July
      3, 2010
                
                
                July
      4, 2009Amount
                
                
                %
      of Revenues
                
                
                Amount
                
                
                %
      of Revenues
                
                
                IncreaseFulfillment
                
                $
                22,707
                
                
                
                18
                %
                
                $
                15,496
                
                
                
                14
                %
                
                $
                7,211Engineering
      and Construction
                
                
                6,263
                
                
                
                9
                %
                
                
                2,355
                
                
                
                10
                %
                
                $
                3,908Total
                
                $
                28,970
                
                
                
                15
                %
                
                $
                17,851
                
                
                
                13
                %
                
                $
                11,119
  28
  Our gross
profit for the six months ended July 3, 2010 was $29.0 million compared to
$17.9million
for the six months ended July 4, 2009, representing an increase of $11.1
million, or 62%.  Of the gross profit increase, $4.1 million is
attributable to the operations of Berliner which have been included in our
consolidated results since the date of the Merger and is included in the
engineering and construction segment.  Our gross profit as a
percentage of revenue was approximately 15% for the six months ended July 3,
2010, as compared to 13% for the six months ended July 4, 2009.
  For the
fulfillment segment, gross margin increased from 14% for the six months ended
July 4, 2009 to 18% for the six months ended July 3, 2010.  The
increase is primarily related to the operational improvements in various
fulfillment markets and profitability improvements from the use of field
technology, dispatch cost reduction programs and other cost savings
initiatives.
  For the
engineering and construction segment, gross margin decreased from 10% to
9%.  The decrease is primarily attributed to the addition of Berliner
combined with the effects of a change in the mix of work within some of our
existing engineering and construction markets.
 
 Selling,
General and Administrative Expenses
 
 SG&A
for the six months ended July 3, 2010 were $17.7 million as compared to $12.8
million for the six months ended July 4, 2009. This represents an overall
increase of $4.9 million. The merger of Berliner, which has been included in our
consolidated results since the date of the Merger, contributed an additional
$3.0 million of expense.  We also incurred approximately $1.4 million
in merger transaction costs relating to the Berliner merger during the six
months ended July 3, 2010.
  Adjusted
Pro Forma EBITDA
  
 A
reconciliation of net loss to adjusted EBITDA is as follows for the six months
ended July 3, 2010 and July 4, 2009 (amounts in thousands):
  Six
      Months Ended
                                            
                                            
                                            Pro
      Forma
                                              Six
      Months EndedJuly
      3, 2010
                                            
                                            
                                            July
      4, 2009
                                            
                                            
                                            July
      3, 2010
                                            
                                            
                                            July
      4, 2009Net
      loss
                                            
                                            $
                                            (14,582
                                            )
                                            
                                            $
                                            (16,723
                                            )
                                            
                                            $
                                            (13,225
                                            )
                                            
                                            $
                                            (16,723
                                            )Berliner
      pro forma net loss(1)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (1,308
                                            )
                                            
                                            
                                            (5,933
                                            )(Income)
      loss from discontinued operations
                                            
                                            
                                            459
                                            
                                            
                                            
                                            (775
                                            )
                                            
                                            
                                            459
                                            
                                            
                                            
                                            (775
                                            )Income
      tax expense
                                            
                                            
                                            102
                                            
                                            
                                            
                                            769
                                            
                                            
                                            
                                            102
                                            
                                            
                                            
                                            769Interest
      expense
                                            
                                            
                                            11,413
                                            
                                            
                                            
                                            8,306
                                            
                                            
                                            
                                            11,695
                                            
                                            
                                            
                                            9,479Depreciation
      and amortization
                                            
                                            
                                            13,713
                                            
                                            
                                            
                                            13,433
                                            
                                            
                                            
                                            13,947
                                            
                                            
                                            
                                            14,841Stock
      compensation expense
                                            
                                            
                                            821
                                            
                                            
                                            
                                            946
                                            
                                            
                                            
                                            903
                                            
                                            
                                            
                                            1,144Other
      expense, non cash
                                            
                                            
                                            146
                                            
                                            
                                            
                                            45
                                            
                                            
                                            
                                            146
                                            
                                            
                                            
                                            27Merger
      transaction costs
                                            
                                            
                                            1,357
                                            
                                            
                                            
                                            10
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            10Pro
      forma EBITDA from market swap(2)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,093
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,093Adjusted
      EBITDA/Adjusted Pro Forma EBITDA
                                            
                                            $
                                            13,429
                                            
                                            
                                            $
                                            7,104
                                            
                                            
                                            $
                                            12,719
                                            
                                            
                                            $
                                            3,932
 
 (1)Berliner
      pro forma net loss includes additional interest and amortization resulting
      from the Merger as if the Merger had occurred at the beginning of the
      periods presented.(2)This
      adjustment reflects the EBITDA impact for the fulfillment sites received
      from DIRECTV as part of the market swap had the transaction been completed
      on January 1, 2009.
 Adjusted
EBITDA increased by 90% to $13.5 million for the six months ended July 3, 2010
from $7.1 million for the three months ended July 4, 2009.  Of this
increase $7.2 million is attributable to higher gross profit within our
fulfillment services segment due to improved profitability from the used of
field technology and other operational improvements.  The EBITDA
improvement also includes $1.5 million of EBITDA attributable to the acquisition
of Berliner which is included in our consolidated results since the date of the
Merger.  These increases in EBITDA were partially offset by higher
SG&A expenses to support both the combined businesses and the increased
revenue.
 
 Depreciation
and Amortization
 
 Depreciation
on fixed assets totaled approximately $5.6 million for the six months ended July
3, 2010 compared to $2.1 million for the six months ended July 4,
2009.  The increase in depreciation is attributed to the Merger ($0.5
million) and depreciation from the 2009 conversion of a portion of our fleet
from operating leases to capital leases.
  29
 
 Amortization
of intangible assets acquired as a result of acquisitions resulted in
amortization expense of approximately $8.2 million for the six months ended July
3, 2010 compared to $11.3 million for the six months ended July 4,
2009.  The decrease is related to the asset impairment of the wireline
telecommunications reporting unit in 2009 that resulted in a write-down of the
customer contracts in the fourth quarter of fiscal 2009, offset by increased
amortization resulting from the merger with Berliner.
 
 Interest
Expense
 
 We
recognized $11.4 million and $8.3 million in interest expense during the six
months ended July 3, 2010 and July 4, 2009, respectively.  The
increase of $3.1 million was primarily due to the higher debt levels in 2010 as
compared to the second quarter of 2009 as a result of the Merger and working
capital requirements and an increase in interest rates from the 2009 amendments
to the debt agreements, the guaranty fee on the Holdings Revolving Facility
entered into during January 2010 and additional interest relating to the Letter
of Credit Facility entered into on March 31, 2010.
 
 Income
Taxes
  We
recorded income tax expense of $0.1 million for six months ended July 3, 2010
and $0.8 million for the six months ended July 4, 2009.  The 2010 tax
expense represents the estimated tax expense from our Canadian
operations.  The 2009 tax expense is due to differences between book
and tax amortization of intangible assets.
  At July
3, 2010, we had net operating loss carry forwards for federal and state income
tax purposes of approximately $33 million which begin to expire in 2014 and
will fully expire by 2029.  Because the Company has not yet achieved
profitable operations, management believes the potential tax benefits from the
deferred tax assets do not satisfy the realization criteria set forth in FASB
ASC 740, and accordingly, has recorded a valuation allowance of the entire net
deferred tax asset.
 
 Net
Loss
 
 We had a
net loss of $14.6 million for the six months ended July 3, 2010, compared to a
net loss of $16.7 million for six months ended July 4, 2009.  These
net losses include a loss from discontinued operations of $0.5 million for the
six months ended July 3, 2010 and income from discontinued operations of $0.8
million for the six months ended July 4, 2009.  The losses from
discontinued operations are the result of the closure of certain cable
installation locations  and the impact of the DIRECTV market swap completed
in the first quarter of 2009.
 
 30
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 At July
3, 2010, we had consolidated current assets of approximately $84.4 million,
including cash and cash equivalents of approximately $2.0
million.  Historically, we have funded our operations primarily
through operating cash flow and borrowings under loan arrangements. Our primary
liquidity needs are for working capital, debt service, insurance collateral in
the form of cash and letters of credit and capital expenditures.  In
the past we have also used our capital resources to fund our growth through
strategic mergers and acquisitions. The principal use of cash during the six
months ended July 3, 2010 was to fund the Merger and for working capital
purposes.
 
 We
believe that our cash, cash equivalents and availability under our existing
Revolving Credit Facility will be sufficient to meet our anticipated cash
requirements for at least the next 12 months. If our available cash and cash
equivalents are insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or obtain an additional credit
facility. The sale of additional equity and debt securities may result in
additional dilution to our stockholders. If we raise additional funds through
the issuance of debt securities or preferred stock, these securities could have
rights senior to those of our common stock and could contain covenants that
would restrict our operations. We may require additional capital beyond our
currently forecast amounts. Any such required additional capital may not be
available on reasonable terms, if at all. If we are unable to obtain additional
financing, we may be required to reduce the scope of, delay or eliminate some or
all of our planned development and operations, which could harm our
business.
 
 Below is
a summary of our debt agreements that is relevant to an understanding of our
liquidity and capital resources:
 
 First
Lien Credit Agreement and Second Lien Credit Agreement
  General
  On
September 27, 2007, Acquisition entered into (1) the First Lien Credit
Agreement, by and among Acquisition, Midco, certain subsidiaries of Acquisition
as guarantors, the initial lenders, Royal Bank of Canada, as administrative
agent and collateral agent for the lenders and RBC Capital Markets, as lead
arranger and book-runner and (2) the Second Lien Credit Agreement, by and among
Acquisition, Midco, certain subsidiaries of Acquisition as guarantors, the
initial lenders, Royal Bank of Canada, as administrative agent and collateral
agent for the lenders and RBC Capital Markets, as lead arranger and
book-runner.
 
 Availability
and Term
  The
credit facilities under the First Lien Credit Agreement are (1) the Term B
Credit Facility, (2) the Term C Credit Facility and (3) the Revolving
Credit Facility, with a portion of such Revolving Credit Facility available as a
swing line facility and a portion available as a letter of credit
facility.  The Term B Credit Facility and the Revolving Credit
Facility, including the swing line loan facility and the letter of credit
facility, mature on September 27, 2012.  The Term C Credit Facility
matures on the earlier of (1) three months after the maturity date of the
Term B Credit Facility and (2) December 31, 2013.  As of July 3,
2010, the Term B Credit Facility and the Term C Credit Facility are fully drawn
at $91.8 million, and approximately $18.0 million of principal is outstanding
under the Revolving Credit Facility.
 
 The
credit facility under the Second Lien Credit Agreement is a $25
million second lien term loan facility.  As of July 3, 2010, the
Second Lien Credit Agreement is fully drawn.  The Second Lien Credit
Agreement matures on the earlier of (1) three months after the maturity
date of the Term B Credit Facility and (2) December 31, 2013.
  Interest
Rate and Fees
  The Term
B Credit Facility currently bears interest at a rate per annum equal to 5.5% for
base rate advances and 6.5% of Eurodollar advanced (subject to 2.50% floor)
provided that the applicable margin shall be increased for each period in which
the Leverage Ratio is greater than 3.00:1.00 to 6.25% per annum for base rate
advances and 7.25% per annum for Eurodollar rate advances (subject to 2.5%
floor).  The Term C Credit Facility currently bears interest at a rate
of 16.50% on $8 million of the debt and $13.08% on the remaining $11.5 million
of the debt.  The Second Lien Credit Facility currently bears interest
at a rate per annum equal to the greater of (1) 15.75% and (2) the
Eurodollar rate plus a margin of 7.25%.  The Revolving Credit Facility
interest rate margin is 5.0% for base rate advances and 6% of Eurodollar
advances (subject to 2.50% floor) provided that the applicable margin for the
Revolving Credit Facility shall be increased for periods in which the Leverage
Ratio is greater than 3.00:1.00 to 5.75% per annum for base rate advances and
6.75% per annum for Eurodollar rate advances (subject to 2.50%
floor).
  31
  Guaranties
and Security
 
 The
obligations under the First Lien Credit Agreement are guaranteed by Midco and
certain subsidiaries of Midco (collectively, the “Guarantors”) and are secured
by a first priority lien on substantially all of the assets and property of the
Company and the Guarantors, including a pledge of all equity interests in Unitek
Acquisition and the Guarantors, other than Midco.
 
 The
obligations under the Second Lien Credit Agreement are guaranteed by the
Guarantors and are secured by a second priority lien on substantially all of the
assets and property of the Company and the Guarantors, including a pledge of all
equity interests in Acquisition and the Guarantors, other than
Midco.
 
 The First
Lien Credit Agreement and the Second Lien Credit Agreement contain
representations and warranties and affirmative and negative covenants that are
customary for debt facilities of this type.  In addition, the First
Lien Credit Agreement contains certain financial covenants, including, among
other things, a maximum total leverage ratio, a maximum first lien leverage
ratio, a minimum fixed charge coverage ratio, a minimum interest coverage ratio
and minimum liquidity requirements.  The Second Lien Credit Agreement
also contains total leverage ratio, maximum fixed charge coverage ratio and
minimum interest coverage ratio covenants, although in some cases the covenants
contained in the First Lien Credit Agreement are more restrictive.
 
 The First
Lien Credit Agreement and the Second Lien Credit Agreement also include events
of default that are customary for debt facilities of this type, subject to
significant threshold amounts and cure periods.  These events of
default include, among other things, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults to certain
indebtedness and bankruptcy.
 
 On July 16, 2010, we amended ourexisting Term B Credit
Facility to provide a Third Incremental Term B Facility of up to $20.0 million.  Upon closing of
the amendment, $15.0 millionof the facility was made available tous.  The
additional $5.0 millionof
the facility shall be available tousas early as November upon the
achievement of certain EBITDA levels and covenant compliance as defined in the
amendment.  The proceeds were used to reduce the existing balance on
the Revolving Credit Facility to support future working capital
needs.  The Third Incremental Term B Facility currently bears interest
at the same rate as the prior Term B facility.  Pursuant to the terms
of the amendment, the Third Incremental Term B Lenders receivedwarrantsto purchase an aggregate of 3,000,000
shares ofour common
stock.  Thewarrantshave an exercise price of $0.01 per
share, vested 25% upon issuance, and the remainingwarrantsvest ratably throughSeptember 1, 2012.  Thewarrantscontain a cashless exercise provision
and provide for anti-dilution adjustments in the case of reclassifications,
consolidations, mergers or sales that impactourcommon stock.
 
 Letter
of Credit Transaction
 
 On March
31, 2010, we entered into the LOC Facility, via the Amendment, by and among
Acquisition, Midco, certain subsidiaries of Acquisition as guarantors, the
initial lenders under the LOC Facility, and Royal Bank of Canada, as
administrative agent and collateral agent for the lenders.  The
Amendment establishes the “Incremental Tranche added to the credit facilities
established by the First Lien Credit Agreement.  The full amount of
Incremental Tranche is solely available to Acquisition for the issuance of
letters of credit in support of Acquisition’s obligations under certain
insurance policies and other general corporate purposes.  The LOC
Facility charges a 1.3333% per month cash fee payable on issued but unfunded
letters of credit and a 1.0% per annum cash fee on the daily average unfunded
amount of the LOC Facility.  Funded letters of credit will carry an
interest rate of LIBOR plus 6.75% per annum with a 2.5% LIBOR
floor.  As of July 3, 2010, there were $6.0 million in letters of
credit issued under the LOC Facility.
 
 Loan
Authorization Agreement
  Availability
and Term
 
 Holdings
entered into the Loan Authorization Agreement among Holdings and
BMO.
  32
  The Loan
Authorization Agreement established the Holdings Revolving Facility and is
evidenced by a demand note.  The Holdings Revolving Facility is
payable and matures on demand of BMO.  As of July 3, 2010, approximately
$25 million of principal plus approximately $4.7 million in interest (calculated
at a per annum rate of 7.25%) is outstanding under the Holdings Revolving
Facility.  The lender under the Holdings Revolving Facility has the
right to terminate the Holdings Revolving Facility at any time upon
demand.
 
 Guaranties
 
 The
obligations under the Loan Authorization Agreement are guaranteed severally, but
not jointly, by Sector Performance Fund, LP and SPF SBS LP, who are affiliates
of HM Capital Partners LLC.
  Summary of Cash
Flows
  The
following table summarizes our cash flows for the six months ended July 3, 2010
and July 4, 2009:
  For
      the Six Months Ended(in
      thousands)
                  
                  July
      3, 2010
                  
                  
                  July
      4, 2009Net
      cash used in operating
      activities
                  
                  $
                  (3,207
                  )
                  
                  $
                  (5,543
                  )Net
      cash used in investing
      activities
                  
                  $
                  (1,589
                  )
                  
                  $
                  (2,040
                  )Net
      cash provided by financing activities
                  
                  $
                  4,638
                  
                  
                  $
                  3,729
  Net
cash used in operating activities.
  Net cash
used in operating activities for the six months ended July 3, 2010 and July 4,
2009 was approximately $3.2 million and $5.5 million, respectively. During the
six months ended July 3, 2010, cash flow used in operating activities primarily
resulted from an increase in our working capital due to the addition of Berliner
and increase in our revenues.   Accounts receivable increased by
approximately $15.4million and accounts
payable and accrued expenses increased by approximately $7.7 million due to
increased revenue during the six months ended July 3, 2010.  For the
six months ended July 4, 2010, cash used in operating activities from
discontinued operations was approximately $0.4 million.
 
 For the
six months ended July 4, 2009, our accounts receivable increased by $10.1
million, offset by an increase in accounts payable and accrued expenses of $3.8
million.  For the six months ended July 4, 2009, cash provided by
discontinued operations was approximately $1.3 million.
  Net
cash used in investing activities.
  Net cash
used in investing activities for the six months ended July 3, 2010 and July 4,
2009 was approximately $1.6 million and $2.0 million,
respectively.    Cash used for the purchase of fixed assets
was $1.8 million and $1.4 million for the six months ended July 3, 2010 and July
4, 2009, respectively. We received $0.1 million and $0.3 million in cash
proceeds from the sale of property and equipment during the six months ended
July 3, 2010 and July 4, 2009, respectively.  During the six months
ended July 4, 2009 we also used approximately $0.9 million of cash for the
acquisition of businesses.
  Net
cash provided by financing activities.
  Net cash
provided by financing activities for the six months ended July 3, 2010 and July
4, 2009 was approximately $4.6 million and $3.7 million,
respectively.   During the six months ended July 3, 2010, net
cash provided by financing activities consisted primarily of $12.5 million from
issuance of preferred stock.  As part of the Merger, existing Berliner
debt of $7.2 million was paid and $2.0 million was paid on the Term B Credit
Facility.  During the six months ended July 3, 2010 we also borrowed
$6.5 million from the revolving credit facility.  Cash used for the
repayment of our capital leases and long-term debt for the six months ended July
3, 2010 was $3.9 million, excluding the payment made in conjunction with the
Merger. During the six months ended July 3, 2010, we also used $1.6 million of
cash for deferred financing fees related to our term debt and revolving credit
facilities.
  33
  During
the six months ended July 4, 2009, net cash provided by financing activities
consisted primarily of borrowing $6.5 million under our revolving line of
credit, offset by $1.4 million in repayments of our long-term debt and capital
leases. During the six months ended July 4, 2009, we also used $1.5 million of
cash for deferred financing fees related to our term debt and revolving credit
facilities.
  Off-Balance
Sheet Arrangements
 
 We
provide letters of credit to secure our obligations primarily related to our
insurance arrangements.  Total letters of credit issued as of August
16, 2010 was $7.3 million.
 
 Effect
of Inflation
 
 We do not believe that the businesses
are impacted by inflation to a significantly different extent than the general
economy.  However, there can be no assurance that inflation will not
have a material effect on the operations in the future.
 
 Our
ability to satisfy our current obligations is dependent upon our cash on hand,
borrowings under our credit facilities, and the operations of our subsidiaries.
Our current obligations consist primarily of capital expenditures, debt service
and funding working capital. In the event we are not able to generate positive
cash flow in the future, or if we incur unanticipated expenses for operations
and are unable to acquire additional capital or financing, 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. The cancellation and/or deferral of a number of projects
from our largest customers may have a material impact on our ability to generate
sufficient cash flow in future periods.
  Item
4T.     Controls and Procedures
  Our
management, with the participation of our Principal Executive Officer and
Principal Financial Officer have evaluated the effectiveness of our disclosure
controls and procedures as defined in Rule 13a-15(e) and 15(d)-15(e) of the
Securities Exchange Act of 1934, as amended.  Based upon that
evaluation, such officers have concluded that our disclosure controls and
procedures were effective, as of the end of the period covered by this report,
to provide reasonable assurance that the information required to be disclosed by
us in reports filed under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that information required to be disclosed by
us in the reports we file or submit under the Securities Exchange Act of 1934,
as amended, is accumulated and communicated to our management, including our
principal executive and financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
 
 Changes
in Internal Control Over Financial Reporting
 
 During
the three and six months ended July 3, 2010, we completed the implementation of
a new Oracle enterprise resource planning software system to replace our various
legacy systems. We have modified the design and documentation of internal
control processes and procedures relating to the new system. We believe that the
new system has and will continue to strengthen our internal control over
financial reporting, and we intend to continue to add upgrades and enhancements
as needed to improve the system.  This implementation was done to increase
the efficiency of our systems and to accommodate future growth and not as a
result of any deficiencies identified in the evaluation of our controls and
procedures.  We believe these changes have not materially affected,
and are not reasonably likely to materially affect, our internal control over
financial reporting.
 
 In
addition, we do not believe there were any other changes in internal control
over financial reporting that occurred during the most recent fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting. There are, however, inherent
risks in implementing any new system that could impact our financial reporting.
 In the event that issues arise, we have procedures in place which would
facilitate our continued recording and reporting of results from the new system.
 We will continue to monitor, test and appraise the impact and effect of
the new system on our internal controls and procedures as additional phases and
features of the system are implemented.
 
 34
  PART
II:  OTHER INFORMATION
  Item
1.   Legal Proceedings
 
 We are
subject to various litigation claims that occur in the ordinary course of
business, which the Company believes, even if decided adversely to us, would not
have a material adverse effect on our business, financial condition and results
of operations.  As a result of the Merger, we became responsible for
certain legacy Holdings litigation matters, including the following:
 Gerald
Farmer, et al. v. Direct Sat USA, LLC
 
 On June
11, 2008, three named plaintiffs, who were formerly employed as technicians by
Direct Sat USA, LLC, a Holdings subsidiary (“Direct Sat”), filed a claim in the
United States District Court for the Northern District of Illinois, alleging
violations of the Illinois Wage and Hour Laws and the Fair Labor Standards Act
(“FLSA”). These allegations related to the payment of overtime. The plaintiffs
have sought and have been granted class certification for the state law
claims.  They are demanding $7.4 million in damages related to these
claims.  We do not believe these claims have merit, and we believe the
damages claim is grossly above any potential exposure we may face in this
case.
 
 On
February 9, 2010, plaintiffs’ counsel filed a companion case, Lashon
Jacks  v. Direct Sat et al., in the Cook County, Illinois Circuit
Court, seeking to expand the class in the Farmer case to include all technicians
in Illinois that worked with Direct Sat after June 10, 2008.  No
additional damages claims have been made.  We intend to defend this
case, along with the Farmer case, vigorously.
 
 Monroe
et al. v. FTS USA, LLC and UniTek USA, LLC
 
 On
February 15, 2008, plaintiffs, former employees of FTS USA, a Holdings
subsidiary, filed a class action in the United States District Court for the
Western District of Tennessee, alleging violations of the FLSA related to
overtime payments.  Conditional class certification was granted, and
plaintiffs have made a claim for damages of $3.2 million.  We do not
believe these claims have merit, and we believe the damages claim is grossly
above any potential exposure we may face in this case.  We intend to
defend the case vigorously.
 
 Item
1A.  Risk Factors
 
 The risk
factors set forth in this Item 1A update the Risk Factors set forth in Item 1A
of our Transition Report on Form 10-K for the period July 1, 2009 to December
31, 2009 in order to conform the risk factors to those reflected in our
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on August 16, 2010.
 
 We
have had a history of losses.
 
 We
experienced net losses of $23.2 million in 2008 and $65.6 million in 2009 and,
giving effect to the merger with Berliner, a pro forma loss of $77.1 million
from continuing operations in 2009. We cannot predict if we will ever achieve
profitability, and if we do, be able to sustain such profitability. Further, we
may incur significant losses in the future for a number of reasons, including
due to the other risks described in this prospectus, and we may encounter
unforeseen expenses, difficulties, complications and delays and other unknown
events. Accordingly, we may not be able to achieve profitability.
 
 Our
substantial indebtedness could adversely affect our financial
health.
  As of
August 4, 2010, we and our subsidiaries have total indebtedness of approximately
$169.9 million (not including intercompany indebtedness but including capital
leases).
  35
  Our
substantial indebtedness could have important consequences to our
stockholders.  For example, it could:
 
 ·
              require
      us to dedicate a substantial portion of our cash flow from operations to
      payments on our indebtedness, thereby reducing the availability of our
      cash flow to fund acquisitions, working capital, capital expenditures,
      research and development efforts and other general corporate
      purposes;·
              increase
      our vulnerability to and limit our flexibility in planning for, or
      reacting to, changes in our business and the industry in which we
      operate;·
              place
      us at a competitive disadvantage compared to our competitors that have
      less debt;·
              limit
      our ability to borrow additional funds; and·
              could
      make us more vulnerable to a general economic downturn than a company that
      is less leveraged.
 
 Additionally,
the terms governing our debt facilities limit our ability, among other things,
to:
 
 ·
              incur
      additional indebtedness;·
              prepay
      indebtedness;·
              sell
      assets, including capital stock of restricted
  subsidiaries;·
              agree
      to payment restrictions affecting our restricted
    subsidiaries;·
              consolidate,
      merge, sell or otherwise dispose of all or substantially all of our
      assets;·
              enter
      into transactions with our affiliates;·
              incur
      liens;·
              guarantee
      the obligations or liabilities of others; and·
              designate
      any of our subsidiaries as unrestricted subsidiaries or form additional
      subsidiaries that are unrestricted subsidiaries
  .
  These
facilities are secured by a blanket security interest that covers substantially
all of our assets. An event of default with respect to these facilities could
result in, among other things, the acceleration and demand for payment of all
the principal and interest due and the foreclosure on the collateral. As a
result of such a default or action against collateral, we may be forced into
bankruptcy, which may result in a loss of your investment.
 
 Competition
in the industries we serve could reduce our market share and impact operating
results.
 
 We serve
markets that are highly competitive and fragmented and in which a large number
of multinational companies compete for large, national projects, and an even
greater number of small, local businesses compete for smaller, one-time
projects.  Many of our competitors are well-established and have larger and
better developed networks and systems, longer-standing relationships with
customers and suppliers, greater name recognition and greater financial,
technical and marketing resources than we have. These competitors can often
subsidize competing services with revenues from other sources and may be able to
offer their services at lower prices. These or other competitors may also reduce
the prices of their services significantly or may offer backhaul connectivity
with other services, which could make their services more attractive to
customers.  Competition may place downward pressure on contract prices and
profit margins.  Intense competition is expected to continue in these
markets and, if we are unable to meet these competitive challenges, we could
lose market share to our competitors and experience an overall reduction in our
operating performance and financial results.
 
 We
are vulnerable to the cyclical nature of the telecommunications industry and,
specifically, the capital expenditures of the major telecommunications
providers.
 
 The
demand for our outsourced infrastructure services is dependent upon the
existence of projects with engineering, procurement, construction and management
needs.  The wireless telecommunications market, which is one of the
industries in which we compete, is particularly cyclical in nature and
vulnerable to downturns in the telecommunications industry.  During times
of economic slowdown, some of our customers reduce their capital
expenditures.  Further, customers, primarily in our wired and wireless
communications subsidiaries, sometimes defer or cancel pending projects. 
As a result, demand for our services may decline during periods of economic
downturns and could adversely affect our operations and financial
performance.
  36
  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.
  During
the year ended December 31, 2009, our four largest customers, as a percentage of
total revenue, were DIRECTV (64%), Comcast (13%), Verizon Communications (8%)
and Rogers Cable (5%).   During the six months ended July 3, 2010, our
four largest customers, as a percentage of total revenue, were DIRECTV (46%),
Comcast (14%), Verizon Communications (9%) and Clearwire Communications
(7%).
  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.  A key
factor in maintaining relationships with such customers is 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 due to
another reason, we may lose future business with such clients, and as a result,
our ability to generate income would be adversely impacted.  In addition,
key customers could slow or stop spending on initiatives related to projects we
are performing for them, due to increased difficulty in the credit markets as a
result of the recent economic crisis or other reasons.  Since many of our
customer contracts allow our customers to terminate the contract without cause,
our customers may terminate their contracts with us at will and materially
impair our operating results.
 
 We
maintain a workforce based upon current and anticipated workloads.  If we
do not receive future contract awards or if these awards are delayed, we may
incur significant costs in adjusting our workforce demands.
 
 Our
estimates of future performance depend on, among other matters, whether and when
we will receive certain new contract awards.  While our estimates are based
upon good faith judgment, they can be unreliable and may frequently change based
on newly available information.  In the case of larger projects, where
timing is often uncertain, it is particularly difficult to project whether and
when we will receive a contract award.  The uncertainty of contract award
timing can present difficulties in matching workforce size with contractual
needs.  If an expected contract award is delayed or not received, we could
incur significant costs resulting from retaining more staff than is necessary or
redundancy of facilities.  Similarly, if we underestimate the workforce
necessary for a contract, we may not perform at the level expected by the client
and harm our reputation with the client.  Each of these may negatively
impact our operating performance and financial results.
 
 We
recognize revenue for fixed price construction contracts using the
percentage-of-completion method; therefore, variations of actual results from
our assumptions may reduce our profitability.
 
 We
recognize revenue and profit on our construction contracts as the work
progresses using the percentage-of-completion method of accounting.  Under
this method of accounting, contracts in progress are valued at cost plus accrued
profits less paid revenue and progress payments made on uncompleted
projects.  This method relies on estimates of total expected contract
revenue and costs.
 
 Contract
revenue and total cost estimates are reviewed and revised monthly by management
as the work progresses, such that adjustments to profit resulting from revisions
are made cumulative to the date of revision.  Adjustments are reflected for
the fiscal period affected by such revisions.  If estimates of costs to
complete long-term projects indicate a loss, we immediately recognize the full
amount of the estimated loss.  Such adjustments and accrued losses may
negatively impact our operating results .
 
 If
our customers perform more tasks themselves, our business will
suffer.
 
 Our success also depends
upon the continued trend by our customers to outsource their network design,
deployment and project management needs. If this trend does not continue or is
reversed and telecommunication service providers and network equipment vendors
elect to perform more of these tasks themselves, our operating results may be
adversely affected due to the decline in the demand for our
services.
 
 We
have a lack of liquidity and will require additional capital to fund our
operations and obligations.
 
 As of
July 30, 2010, we had cash balances and availability under existing credit
facilities of approximately $14.0 million.  Because we are only minimally
capitalized, we expect to experience a lack of liquidity for the foreseeable
future in our proposed operations. We will adjust our expenses as necessary to
prevent cash flow or liquidity problems. We may need to raise additional funds
to continue to fund our operations and obligations as well as to fund potential
acquisitions.  Our capital requirements will depend on several factors,
including:
  37
 
 ·
              our
      ability to enter into new agreements with customers or to extend the terms
      of our existing agreements with customers, and the terms of such
      agreements;·
              the
      success rate of our sales efforts;·
              costs
      of recruiting and retaining qualified personnel;·
              expenditures
      and investments to implement our business strategy; and·
              the
      identification and successful completion of
  acquisitions.
 
 We may
seek additional funds through public and private securities offerings and/or
borrowings under lines of credit or other sources.  Our inability to raise
adequate funds to support the growth of our business would materially adversely
affect our business.  If we cannot raise additional capital, we may have to
implement one or more of the following remedies:
 
 ·
              curtail
      internal growth initiatives;·
              forgo
      the pursuit of acquisitions; and/or·
              reduce
      capital expenditures.
 
 We do not
know whether additional financing will be available on commercially acceptable
terms when needed, if at all.  If adequate funds are not available or are
not available on commercially acceptable terms, our ability to fund our
operations or otherwise respond to competitive pressures could be significantly
delayed or limited.
 
 If we
raise additional funds by issuing equity securities, further dilution to our
stockholders could result, and new investors could have rights superior to those
of our existing stockholders. Any equity securities issued also may provide for
rights, preferences or privileges senior to those of holders of our common
stock. If we raise additional funds by issuing debt securities, these debt
securities would have rights, preferences and privileges senior to those of
holders of our common stock, and the terms of the debt securities issued could
impose significant restrictions on our operations.
 
 If
we experience material delays and/or defaults in customer payments, we may be
unable to cover all expenditures related to such customer’s
projects.
 
 Because
of the nature of some of our contracts, we commit resources to projects prior to
receiving payments from our customers in amounts sufficient to cover
expenditures as they are incurred.  Delays in customer payments may require
us to make a working capital investment or obtain advances from our line of
credit.  If a customer defaults in making its payments on a project or
projects to which we have devoted significant resources, it could have a
material negative effect on our results of operations and negatively impact the
financial covenants with our lenders.
 
  The nature of our construction businesses exposes us to potential
liability claims and contract disputes that may negatively affect our results of
operations.
 
 We engage
in construction activities, including engineering and oversight of engineering
firms.  Design, construction or systems failures can result in substantial
injury or damage to third parties.  Any liability in excess of insurance
limits at locations constructed by us could result in significant liability
claims against us, which claims may negatively affect our results of
operations.  In addition, if there is a customer dispute regarding
performance of project services, the customer may decide to delay or withhold
payment to us.  If we are ultimately unable to collect on these payments,
our results of operations would be negatively impacted.
 
 We
may experience significant fluctuations in our quarterly results relating to our
ability to generate additional revenue and manage expenditures and other
factors, some of which are outside of our control, which could cause rapid
declines in our stock price.
  Our
quarterly 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 of our control and include, without limitation, the
following:
  38
  ·
              our
      ability to attract new customers, retain existing customers and increase
      sales to such customers;·
              the
      commencement, progress, completion or termination of contracts during any
      particular quarter;·
              the
      cyclical nature of the telecommunications industry;·
              the
      cost of raw materials we require for our projects; and·
              satellite,
      cable and telecommunications market conditions and economic conditions
      generally.
 
 Due to
these factors and others, our results for a particular quarter, and therefore,
our combined results for the affected year, may not meet the expectations of
investors, which could cause the price of our common stock to decline
significantly.
 
 Our
backlog is subject to reduction and potential cancellation.
  Our
backlog consists of uncompleted portions of services to be performed under
job-specific contracts and the estimated value of future services that we expect
to provide under master service agreements and other long-term contracts. 
Many of our contracts are multi-year agreements. We include in our backlog the
amount of services projected to be performed over the terms of the contracts,
where applicable, or based on our historical experience with customers and our
experience in procurements of this type.  In many instances, our customers
are not contractually committed to procure specific volumes of services under a
contract.  Our estimates of backlog and a customer’s requirements
during a particular future period may not prove to be accurate, particularly in
light of the turbulent current economic conditions.  If our estimated
backlog is significantly inaccurate, this could adversely affect our financial
results and the price of our common stock.
  The failure to successfully identify
or integrate acquisitions could result in a reduction
of our operating results, cash flows and
liquidity.
  We have
made, and in the future may continue to make, strategic acquisitions. 
Acquisitions may expose us to operational challenges and risks,
including:
  ·
              the
      ability to profitably manage additional businesses or successfully
      integrate acquired business operations and financial reporting and
      accounting control systems into our business;·
              increased
      indebtedness and contingent purchase price obligations associated with an
      acquisition;·
              the
      ability to fund cash flow shortages that may occur if anticipated revenue
      is not realized or is delayed, whether by general economic or market
      conditions, or unforeseen internal difficulties;·
              the
      availability of funding sufficient to meet increased capital needs;
      and·
              diversion
      of management’s attention.
 
 We may
not successfully identify suitable acquisitions in the future , and in the event
we do commence such a transaction, the f ailure to successfully consummate the
acquisition or manage the operational challenges and risks associated with the
acquisition following the consummation could adversely affect our results of
operations, cash flows and liquidity.
  If
we do not successfully integrate our business operations with those of Berliner,
our business will be adversely affected.
 
 We will
need to successfully integrate our business operations with those of Berliner in
order to obtain the benefits we expect from the Merger. Integrating these
operations is a complex and time-consuming process. There may be substantial
difficulties, costs and delays involved in any integration of the businesses.
These may include:
 
 ·
              distracting
      management from day-to-day operations;·
              potential
      incompatibility of corporate cultures;·
              an
      inability to achieve synergies as planned;·
              costs
      and delays in implementing common systems and
  procedures;·
              retaining
      existing customers and attracting new customers;·
              retaining
      key employees;·
              identifying
      and eliminating redundant and underperforming operations and
      assets;·
              managing
      tax costs or inefficiencies associated with integrating the operations of
      the combined company; and·
              making
      any necessary modifications to operating control standards to comply with
      the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
      thereunder.
  39
  The
failure to integrate our business operations with those of Berliner successfully
could have a material adverse effect on our business, financial condition and
results of operations.
  We
may incur goodwill and other intangible impairment charges which could reduce
our profitability.
  Pursuant
to accounting principles generally accepted in the United States, we are
required to annually assess our goodwill and indefinite-lived intangibles
to determine if they are impaired.  In addition, interim reviews must be
performed whenever events or changes in circumstances indicate that impairment
may have occurred.  If the testing performed indicates that impairment has
occurred, we are required to record a non-cash impairment charge for the
difference between the carrying value of the goodwill or other intangible assets
and the implied fair value of the goodwill or other intangible assets in the
period the determination is made.  Disruptions to our business, end market
conditions, protracted economic weakness and unexpected significant declines in
operating results may result in charges for goodwill and other asset
impairments.  We assess the potential impairment of goodwill on an annual
basis, as well as when interim events or changes in circumstances indicate that
the carrying value may not be recoverable.  We assess definite-lived
intangible assets when events or changes in circumstances indicate that the
carrying value may not be recoverable. We performed our required annual goodwill
impairment test as of October 3, 2009 and determined that the carrying value of
the telecommunications reporting unit exceeded its fair value and was therefore
impaired.  We also completed an impairment test of our long-lived assets at
that date for the telecommunications reporting unit.  The results of the
impairment testing caused us to recognize a non-cash asset impairment charge of
$38.4 million. Future impairments could further reduce our
profitability.
  Legal
proceedings and other claims could reduce our profitability, cash flows and
liquidity.
  We are
subject to various claims, lawsuits and proceedings which arise in the ordinary
course of business.  These actions may seek, among other things,
compensation for alleged personal injury, workers ’ compensation, employment
discrimination, wage and hour disputes, breach of contract, property damage,
consequential and punitive damages, civil penalties, or injunctive or
declaratory relief.  In addition, we generally indemnif y our customers for
claims related to the services we provide. Claimants may seek large damage
awards.  Defending these claims can involve significant legal costs. 
When appropriate, we establish reserves against litigation and claims that we
believe to be adequate in light of current information, legal advice and
professional indemnity insurance coverage, and we adjust such reserves from time
to time according to developments.  If reserves are inadequate, insurance
coverage proves to be inadequate or unavailable, or there is an increase in
liabilities for which we self-insure, we could experience a reduction in our
profitability and liquidity.  An adverse determination on any such claim or
lawsuit could have a material adverse effect on our business, financial
condition and results of operations.  Separately, claims and lawsuits
alleging wrongdoing or negligence by us may harm its reputation or divert
management resources away from operating our business.
 
 Government regulations may adversely affect our
business.
  Our
customers are subject to various regulations of the FCC and other international
regulations. These regulations require that these networks meet certain radio
frequency emission standards and not cause interference to other services, and
in some cases accept interference from other services.  FCC regulations
could cause our customers to slow down or delay development and deployment plans
for network build outs, which could impact our financial results.
  We
maintain a high-deductible liability insurance program , which exposes us to a
substantial portion of the costs of claims and lawsuits.
  Although
we maintain insurance policies with respect to automobile liability, general
liability, workers ’ compensation and employee group health claims, those
policies are subject to high deductibles.  Because most claims against us
do not exceed the deductibles under its insurance policies, we are effectively
self-insured for substantially all claims.  We determine any liabilities
for unpaid claims and associated expenses, including incurred but not reported
losses, and reflect the present value of those liabilities in our balance sheet
as other current and non-current liabilities.  The determination of such
claims and expenses and the appropriateness of the related liability is reviewed
and updated quarterly. However, insurance liabilities are difficult to assess
and estimate due to the many relevant factors, including the severity of an
injury or legitimacy of a claim and the determination of our liability in
proportion to other parties.  If our insurance claims increase or costs
exceed our estimates of insurance liabilities, we may experience a decline in
operating results and liquidity.
  40
  Increases
in our insurance premiums or collateral requirements could significantly reduce
our profitability, liquidity and availability under our credit facilities
..
  Because
of factors such as increases in claims, projected significant increases in
medical costs and wages, lost compensation and reductions in coverage, insurance
carriers may be unwilling to continue to provide us with our current levels of
coverage without a significant increase in insurance premiums or collateral
requirements to cover our deductible obligations. An increase in premiums or
collateral requirements could significantly reduce our profitability and
liquidity as well as reduce availability under our   credit facilities
..
 
 Our
operating results can be negatively affected by weather conditions.
 
 We
perform most of our services outdoors.  Adverse weather conditions may
affect productivity in performing services or may temporarily prevent us from
performing services for our customers.  The affect of weather delays on
projects that are under fixed price arrangements may be greater if we are unable
to adjust the project schedule for such delays.  A reduction in
productivity in any given period or our inability to meet guaranteed schedules
may adversely affect the profitability of our projects.
 
 We
bear the risk of cost overruns in some of our contracts.
 
 We
conduct our business under varying contractual arrangements, some of which are
long-term and generate recurring revenue at agreed upon pricing.  Certain
of our contracts have prices that are established, in part, on cost and
scheduling estimates which are based on a number of assumptions, including,
without limitation, assumptions about future economic conditions, prices and
availability of labor, prices of equipment and materials and other
variables.  These assumptions are made more difficult to ascertain by the
current uncertainty in the capital markets and the wide fluctuation in prices
for equipment, fuel and other costs associated with our services. 
Specifically, we are affected by the cost of crude oil used for fuel. 
Crude oil prices have historically been volatile.  We do not enter into
hedge transactions to reduce our exposure to price risks and cannot assure you
that we will be successful in passing on these attendant costs if these risks
were to materialize. If cost assumptions prove inaccurate or circumstances
change, cost overruns may occur and, as a result, we may experience reduced
profits or, in some cases, a loss for those projects affected.
 
 If we are unable to recruit and retain key managers and
employees, our business may be adversely affected.
 
 We depend
on the services of our executive officers and the senior management of our
subsidiaries.  Our management team has an average of approximately 19 years
of experience in our industry; the loss of any of them could negatively affect
our ability to execute our business strategy.  Although we have entered
into employment agreements with our executive officers and certain other key
employees, we cannot guarantee that any key management personnel will remain
employed by us. The loss of key management could adversely affect the management
of our operations.
 
 In
addition, the services we deliver to our clients could be delayed or interrupted
if we are unable to attract, train and retain highly skilled employees,
particularly, installation technicians. Competition for these employees is
intense. Because of the complex and technical nature of some of our services,
any failure to attract and retain a sufficient number of qualified employees
could materially harm our business.
 
 We
have in the past and may in the future experience deficiencies, including
material weaknesses, in internal control over financial reporting. Our business
and our share price may be adversely affected if we do not remediate these
material weaknesses or if we have other weaknesses in our internal
controls.
 
 With
respect to fiscal year 2008, Holdings identified control deficiencies, including
a material weakness, in its internal control over financial reporting in which
unbilled accounts receivable and the related revenue were
misstated. Beginning in early 2009, we have remediated the material
weakness and improved the accounting system and internal processes. While we
have made efforts to improve our accounting policies and procedures, additional
deficiencies and weaknesses may be identified. If material weaknesses or
deficiencies in our internal controls exist and go undetected, our financial
statements could contain material misstatements that, when discovered in the
future, could cause us to fail to meet our future reporting obligations and
cause the price of our common stock to decline.
  41
  In
addition, in mid-2010, we identified a mathematical error within cash provided
from operations on the Consolidated Statements of Cash Flows of Holdings for the
years ended December 31, 2008 and 2009. As a result of the error, discontinued
operations amounts were inadvertently characterized as loss rather than
income.  As a result of the discovery of the error, management has
taken steps to evaluate internal controls and has concluded their design is
appropriate. Management believes that future occurrences of mathematical errors
of this type or a similar type will be prevented as a result of proper execution
of existing controls.
  Risks
Related to our Company and our Common Stock
 
 Our
historic stock price has been volatile and purchasers of our common stock could
incur substantial losses.
 
 Historically,
our stock price has been volatile.  The stock market in general,
particularly recently, has experienced extreme volatility that has often been
unrelated to the operating performance of particular companies.  As a
result of this volatility, investors may not be able to sell our common stock at
or above their respective purchase prices.  The market price for our common
stock may be influenced by many factors, including, but not limited to,
variations in our financial results or those of companies that are perceived to
be similar to us, investors’ perceptions of us, the number of our shares
available in the market, future sales of our common stock and securities
convertible into our common stock, and general economic, industry and market
conditions. In addition, in the past two years, the stock market has experienced
significant price and volume fluctuations.  This volatility has had a
significant impact on the market price of securities issued by many companies,
including companies in our industry.  The changes frequently appear to
occur without regard to the operating performance of the affected
companies.  Hence, the price of our common stock could fluctuate based upon
factors that have little or nothing to do with our Company, and these
fluctuations could materially reduce our share price and cause you to lose all
or part of your investment.  Further, in the past, market fluctuations and
price declines in a company’s stock have led to securities class action
litigations.  If such a suit were to arise, it could have a substantial
cost and divert our resources regardless of the outcome.
 
 There
is a lack of a public market for our shares, which limits our stockholders’
ability to sell their shares.
 
 Our
common stock is currently quoted on the OTCBB, which is a decentralized market
regulated by the Financial Industry Regulatory Authority in which securities are
traded via an electronic quotation system that serves more than 3,000
companies.  On the OTCBB, securities are traded by a network of brokers or
dealers who carry inventories of securities to facilitate the buy and sell
orders of investors, rather than providing the order matchmaking service seen in
specialist exchanges.  Trading of our common stock on such exchange has
been light and sporadic.
 
 Although
we are applying to have our common stock listed on the NASDAQ Global Market upon
the consummation of our currently contemplated public offering of common stock,
we can make no representation nor provide any assurance that our common stock
will be able to meet the initial listing standards of this or any other stock
exchange.  If our common stock does not become listed on the NASDAQ Global
Market, the trading market for our common stock may remain generally illiquid.
Even if our common stock becomes listed on the NASDAQ Global Market, we can
provide no assurances that an active market for our common stock will ever
develop or that we will be able to maintain the listing standards of the
exchange.
 
 A
small number of existing stockholder s have the ability to influence major
corporate decisions.
 
 Through
their ownership of our common stock and Series B Preferred, HM Capital Partners,
LLC , or HM LLC, and its affiliates beneficially owned approximately 79% of the
outstanding shares of our common stock as of August 4, 2010 . Accordingly, they
are in a position to influence:
 
 ·
              the
      vote of most matters submitted to our stockholders, including any
      merger, consolidation or sale of all or substantially all of our
      assets;·
              the
      nomination of individuals to our board of directors;
and·
              a
      change in our control.
  42
  The
interests of HM LLC and its affiliates could conflict with yours. In addition,
HM LLC or its affiliates may in the future own businesses that directly compete
with ours. These factors may also discourage, delay or prevent a takeover
attempt that other stockholder s might consider in their best
interest.
  We
do not intend to pay dividends for the foreseeable future.
  We have
never declared or paid any cash dividends on our common stock and do not intend
to pay any cash dividends in the foreseeable future. We anticipate that we will
retain all of our future earnings for use in the development of our business and
for general corporate purposes. Any determination to pay dividends in the future
will be at the discretion of our board of directors. Accordingly, investors must
rely on sales of their common stock after price appreciation, which may never
occur, as the only way to realize any future gains on their
investments.
 
 Provisions of our certificate of incorporation and bylaws and
Delaware law might discourage, delay or prevent a change of control of our
Company or changes in our management and, as a result, depress the trading price
of our common stock.
 
 Our
Charter and our amended and restated bylaws, or Bylaws, contain provisions that
could discourage, delay or prevent a change in control of our Company or changes
in our management that the stockholders of our Company may deem advantageous.
These provisions:
 
 ·
              establish
      a classified board of directors so that not all members of our board are
      elected at one time;·
              require
      prior approval by a special committee of our board of directors, or the
      Special Committee, of any action which would amend or in any way modify
      our Charter or Bylaws, among other actions;·
              authorize
      the issuance of “blank check” preferred stock that our board of directors
      could issue to increase the number of outstanding shares and to discourage
      a takeover attempt;·
              provide
      that the board of directors is expressly authorized to adopt, or to alter
      or repeal our bylaws; and·
              establish
      advance notice requirements for nominations for election to our board of
      directors or for proposing matters that can be acted upon by stockholders
      at stockholder meetings.
 
 In
addition, we are subject to Section 203 of the Delaware General Corporation Law,
or DGCL, which, subject to some exceptions, prohibits “business combinations”
between a Delaware corporation and an “interested stockholder,” which is
generally defined as a stockholder who becomes a beneficial owner of 15% or more
of a Delaware corporation’s voting stock, for a three-year period following the
date that the stockholder became an interested stockholder. Section 203 could
have the effect of delaying, deferring or preventing a change in control that
our stockholders might consider to be in their best interests.
 
 These
anti-takeover defenses could discourage, delay or prevent a transaction
involving a change in control of our Company. These provisions could also
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors of your choosing and cause us to take corporate
actions other than those you desire.
 
 Future
sales of our common stock in the public market could lower our share price, and
any additional capital raised by us through the sale of equity or convertible
debt securities may dilute your ownership in us and may adversely affect the
market price of our common stock.
 
 We and
substantially all of our stockholders may sell shares of common stock in public
offerings. We may also issue additional shares of common stock or convertible
debt securities to finance future acquisitions. We cannot predict the size of
future issuances of our common stock or the effect, if any, that future
issuances and sales of our common stock will have on the market price of our
common stock. Sales of substantial amounts of our common stock (including shares
issued in connection with an acquisition), or the perception that such sales
could occur, may adversely affect prevailing market prices for our common
stock.
 
 43
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 On July
16, 2010, we amended our existing Term B Credit Facility to provide a Third
Incremental Term B Facility of up to $20.0 million. Upon closing of the
amendment, $15.0 million of the facility was made available to us. The
additional $5.0 million of the facility shall be available to us as early as
November upon the achievement of certain EBITDA levels and covenant compliance
as defined in the amendment. The proceeds were used to reduce the existing
balance on the Revolving Credit Facility to support future working capital
needs. The Third Incremental Term B Facility currently bears interest at the
same rate as the prior Term B Credit Facility. Pursuant to the terms of the
amendment, the lenders under the Third Incremental Term B Facility received
warrants to purchase an aggregate of 3,000,000 shares of our common stock. The
warrants have an exercise price of $0.01 per share, vested 25% upon issuance,
and the remaining warrants vest ratably through September 1, 2012. The warrants
contain a cashless exercise provision and provide for anti-dilution adjustments
in the case of reclassifications, consolidations, mergers or sales that impact
our common stock. The offer and sale of these warrants were made in reliance on
an exemption
 from
registration under the Securities Act, pursuant to Section 4(2)
thereof.
 
 Item
3.  Defaults Upon Senior Securities
 
 None.
 
 Item
4.  (Removed and Reserved)
 
 Item
5.  Other Information
 
 None
 
 Item
6.  Exhibits
 
 (a) Exhibits
 #10.36
                    
                    Amendment
      No. 2 to Employment Agreement, dated as of July 8, 2010, by and between
      UniTek Global Services, Inc. and Michael S. Guerriero (Incorporated by
      reference from the Company's Current Report on Form 8-K filed on July 12,
      2010)*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.
 #
Management contract or compensation agreement
 * Filed
herewith.
 **
Furnished herewith.
  44
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
   UNITEK
GLOBAL SERVICES, INC.
   Date:  August
      17, 2010
                        By:
                        /s/
      C. Scott HiseyC.
      Scott Hisey
                          Chief
      Executive Officer
                          (Principal
      Executive Officer)
   Date:  August
      17, 2010
                          By:
                          /s/
      Ronald J. LejmanRonald
      J. Lejman
                            Chief
      Financial Officer and Treasurer
                            (Principal
      Financial and Accounting Officer)
  45