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 April 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





BERLINER
COMMUNICATIONS, INC.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware                                                 75-2233445


(State or
Other Jurisdiction of
Incorporation)         (I.R.S.
Employer Identification No.)





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 x   No  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 o No 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 o  No  x





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





On May
12, 2010, 70,898,230 shares of the registrant's common stock, $0.00002 par value
per share, were outstanding.








BERLINER
      COMMUNICATIONS, INC. AND SUBSIDIARIESQUARTERLY
      REPORT ON FORM 10-QINDEXPAGE
      NO.PART
      I:
            FINANCIAL
      INFORMATIONItem
      1.
            Financial
      StatementsConsolidated
      Balance Sheets as of April 3, 2010 (Unaudited)and
      December 31, 2009
            3Consolidated
      Statements of Operations (Unaudited) for the three months
      endedApril
      3, 2010 and April 4, 2009
            4Consolidated
      Statements of Cash Flows (Unaudited) for the three months
      endedApril
      3, 2010 and April 4, 2009
            5Notes
      to Consolidated Financial Statements
            7Item
      2.
            Management's
      Discussion and Analysis of Financial Condition andResults
      of Operations
            21Item
      4T.
            Controls
      and Procedures
            27PART
      II:
            OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            28Item
      2.
            Unregistered
      Sale of Equity Securities and Use of Proceeds
            29Item
      3.
            Defaults
      Upon Senior Securities
            29Item
      4.
            (Removed
      and Reserved)
            29Item
      5.
            Other
      Information
            29Item
      6.
            Exhibits
            29SIGNATURES
            
            33




2




BERLINER
      COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Amounts
      in thousands)
              (Unaudited)


April
      3,
              
              
              December
      31,2010
              
              
              2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              414
              
              
              $
              2,263Restricted
      cash
              
              
              -
              
              
              
              133Accounts
      receivable and unbilled revenue, net of allowances
              
              
              57,040
              
              
              
              24,680Inventories
              
              
              10,709
              
              
              
              8,326Prepaid
      expenses and other current assets
              
              
              4,656
              
              
              
              3,80472,819
              
              
              
              39,206Property
      and equipment, net
              
              
              21,416
              
              
              
              20,665Customer
      contracts, net
              
              
              26,933
              
              
              
              26,564Amortizable
      intangible assets, net
              
              
              684
              
              
              
              377Goodwill
              
              
              142,010
              
              
              
              137,827Other
      assets
              
              
              7,890
              
              
              
              7,202Total
      assets
              
              $
              271,752
              
              
              $
              231,841LIABILITIES,
      CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
              
              $
              31,435
              
              
              $
              19,302Accrued
      liabilities
              
              
              25,597
              
              
              
              23,329Current
      portion of long-term debt
              
              
              31,825
              
              
              
              33,006Current
      income taxes
              
              
              187
              
              
              
              187Current
      portion of capital lease obligations
              
              
              5,179
              
              
              
              5,09794,223
              
              
              
              80,921Long-term
      debt, net of current portion
              
              
              129,577
              
              
              
              127,163Long-term
      capital lease obligations, net of current portion
              
              
              3,354
              
              
              
              4,244Deferred
      income taxes
              
              
              215
              
              
              
              -Total
      liabilities
              
              
              227,369
              
              
              
              212,328Series
      B Convertible Preferred Stock (liquidation value of $25,000 at April 3,
      2010)
              
              
              12,500
              
              
              
              -STOCKHOLDERS'
      EQUITYSeries
      A Convertible Preferred Stock
              
              
              -
              
              
              
              -Common
      stock
              
              
              2
              
              
              
              1,091Additional
      paid-in capital
              
              
              134,581
              
              
              
              112,747Accumulated
      other comprehensive income
              
              
              124
              
              
              
              60Accumulated
      deficit
              
              
              (102,824
              )
              
              
              (94,385
              )Total
      stockholders' equity
              
              
              31,883
              
              
              
              19,513Total
      liabilities, convertible preferred stock, and stockholders'
      equity
              
              $
              271,752
              
              
              $
              231,841


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





3





BERLINER
      COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(Amounts
      in thousands, except per share data)(Unaudited)


Three
      Months EndedApril
      3,
              
              
              April
      4,2010
              
              
              2009Revenues
              
              $
              88,968
              
              
              $
              68,665Costs
      of revenues
              
              
              76,279
              
              
              
              59,944Gross
      profit
              
              
              12,689
              
              
              
              8,721Selling,
      general and administrative expenses
              
              
              9,032
              
              
              
              6,731Depreciation
      and amortization
              
              
              6,572
              
              
              
              6,273Operating
      loss
              
              
              (2,915
              )
              
              
              (4,283
              )Interest
      expense
              
              
              5,172
              
              
              
              3,965Loss
      from continuing operations before income taxes
              
              
              (8,087
              )
              
              
              (8,248
              )Income
      tax expense
              
              
              69
              
              
              
              379Loss
      from continuing operations
              
              
              (8,156
              )
              
              
              (8,627
              )(Loss)
      income from discontinued operations
              
              
              (284
              )
              
              
              1,058Net
      loss
              
              $
              (8,440
              )
              
              $
              (7,569
              )Net
      loss per share - basic:Continuing
      operations
              
              $
              (0.07
              )
              
              $
              (0.08
              )Discontinued
      operations
              
              
              0.00
              
              
              
              0.01Net
      loss
              
              $
              (0.07
              )
              
              $
              (0.07
              )Net
      loss per share - diluted:Continuing
      operations
              
              $
              (0.07
              )
              
              $
              (0.08
              )Discontinued
      operations
              
              
              0.00
              
              
              
              0.01Net
      loss
              
              $
              (0.07
              )
              
              $
              (0.07
              )Weighted
      average number of shares of common stock outstanding:Basic
              
              
              128,576
              
              
              
              109,093Diluted
              
              
              128,576
              
              
              
              109,093The
      accompanying notes are an integral part of these financial
      statements.





4


BERLINER
      COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Amounts
      in thousands)(Unaudited)Three
      Months EndedApril
      3,
                  
                  
                  April
      4,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (8,440
                  )
                  
                  $
                  (7,569
                  )Adjustments
      to reconcile net loss to netcash
      (used in) operating activities-continuing operations:Loss
      (income) from discontinued operations
                  
                  
                  284
                  
                  
                  
                  (1,058
                  )Provision
      for doubtful accounts
                  
                  
                  52
                  
                  
                  
                  519Depreciation
      and amortization
                  
                  
                  6,572
                  
                  
                  
                  6,273Amortization
      of deferred financing fees
                  
                  
                  788
                  
                  
                  
                  488Accrued
      interest expense on collar
                  
                  
                  (153
                  )
                  
                  
                  (11
                  )Stock-based
      compensation
                  
                  
                  399
                  
                  
                  
                  473Interest
      added to debt principal
                  
                  
                  819
                  
                  
                  
                  479Refundable
      deposits
                  
                  
                  -
                  
                  
                  
                  (28
                  )Loss
      on sale of fixed assets
                  
                  
                  2
                  
                  
                  
                  -Deferred
      tax assets, net
                  
                  
                  69
                  
                  
                  
                  379Changes
      in operating assets and liabilities:Accounts
      receivable and unbilled revenue
                  
                  
                  (5,222
                  )
                  
                  
                  (4,711
                  )Inventories
                  
                  
                  (1,486
                  )
                  
                  
                  2,804Prepaid
      expenses and other current assets
                  
                  
                  1,834
                  
                  
                  
                  (4,436
                  )Accounts
      payable and accrued expenses
                  
                  
                  44
                  
                  
                  
                  5,095Net
      cash (used in) operating activities – continuing
operations
                  
                  
                  (4,438
                  )
                  
                  
                  (1,303
                  )Net
      cash (used in) provided by operating activities – discontinued
      operations
                  
                  
                  (252
                  )
                  
                  
                  1,687Net
      cash (used in) provided by operating activities
                  
                  
                  (4,690
                  )
                  
                  
                  384Cash
      flows from investing activities:Acquisition
      of property and equipment
                  
                  
                  (648
                  )
                  
                  
                  (384
                  )Proceeds
      from sale of property and equipment
                  
                  
                  23
                  
                  
                  
                  210Cash
      restricted for acquisition of business
                  
                  
                  133
                  
                  
                  
                  -Cash
      paid for acquisition of business
                  
                  
                  (35
                  )
                  
                  
                  (410
                  )Net
      cash used in investing activities
                  
                  
                  (527
                  )
                  
                  
                  (584
                  )Cash
      flows from financing activities:Proceeds
      from issuance of common shares
                  
                  
                  420
                  
                  
                  
                  50Proceeds
      from issuance of preferred shares
                  
                  
                  12,500
                  
                  
                  
                  -Proceeds
      from (repayments of) revolving credit facilities, net
                  
                  
                  3,000
                  
                  
                  
                  (1,500
                  )Repayment
      of capital leases
                  
                  
                  (1,509
                  )
                  
                  
                  (298
                  )Repayment
      of long term debt
                  
                  
                  (2,585
                  )
                  
                  
                  (390
                  )Repayment
      of acquired debt, net of cash acquired
                  
                  
                  (7,246
                  )
                  
                  
                  -Payment
      of financing fees
                  
                  
                  (1,187
                  )
                  
                  
                  -Net
      cash provided by (used in) financing activities
                  
                  
                  3,393
                  
                  
                  
                  (2,138
                  )Effect
      of exchange rate on cash and cash equivalents
                  
                  
                  (25
                  )
                  
                  
                  24Net
      decrease in cash and cash equivalents
                  
                  
                  (1,849
                  )
                  
                  
                  (2,314
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  2,263
                  
                  
                  
                  5,348Cash
      and cash equivalents at end of period
                  
                  $
                  414
                  
                  
                  $
                  3,034The
      accompanying notes are an integral part of these financial
      statements.





5





BERLINER
      COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Amounts
      in thousands)(Unaudited)Three
      Months EndedApril
      3,
                  
                  April
      4,2010
                  
                  2009Supplemental
      cash flow information:Interest
      paid
                  
                  $
                  4,680
                  
                  
                  $
                  3,385Income
      taxes paid
                  
                  $
                  70
                  
                  
                  $
                  18Significant
      noncash items:Fair
      value of equity paid for acquisition
                  
                  $
                  19,927
                  
                  
                  $
                  -Acquisition
      of property and equipment financed by capital lease
                  
                  $
                  119
                  
                  
                  $
                  -The
      accompanying notes are an integral part of these financial
      statements.





6


Berliner
Communications, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements
 (Amounts
in thousands, except per share amounts)
 (unaudited)


1.
            Business





Headquartered
in Blue Bell, Pennsylvania, Berliner Communications, Inc. (“Berliner,”
“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.  Berliner has created a scalable platform through which it
can rapidly deploy a highly skilled workforce of over 5,400 through 111 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 reportable 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, 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 is now doing business as UniTek Global Services, Inc.





In 2009,
Holdings purchased the assets of AMBB, LLC, Metro Cable Services, Inc. and
C&C Communications, Inc to expand its broadband cable
presence.  In addition, Holdings completed a market swap with
DirecTV.





2.
            Basis
      of Presentation





The
accompanying unaudited consolidated financial statements as of April 3, 2010,
and for the three months ended April 3, 2010 and April 4, 2009, respectively,
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 consolidated
financial statements include all adjustments necessary to present fairly the
results of our operations and cash flows at the dates and for the periods
indicated.  The results of operations for the interim periods are not
necessarily indicative of the results for the full fiscal year.  The
accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in our
Transition Report on Form 10-K for the fiscal year ended December 31, 2009 and
in our Current Report on Form 8-K/A filed with the SEC on April 12,
2010.




With 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.  This quarterly report on Form 10-Q is the first filing of the
combined entity.  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
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (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 our accounts and the accounts of our
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 customers 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.





8


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (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 8). At April 3, 2010
and December 31, 2009, $7.0 million and $6.6 million (net), respectively,
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 Attributable to Common
Shares




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.  At
April 3, 2010 and April 4, 2009, no additional shares were dilutive to 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
attributable to the common shares assumes that the automatic conversion of the
Berliner Series A Preferred Stock (see Note 10) to Berliner Common Stock
occurred as of the Effective Time as the Company believed the automatic
conversion 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 ended April 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 ended April 3, 2010.  In addition, since
the Company reported a loss from operations for the quarter ended April 3, 2010,
the Series B Preferred Stock was not deemed to be a participating security for
the quarter ended April 3, 2010 pursuant to ASC 260.




9
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)
   The
following table sets forth the computations of basic and diluted loss per
share:





Three
      Months EndedApril
      3,
            
            
            April
      4,2010
            
            
            2009Basic
      loss per share:Numerator:Net
      loss allocable to common shareholders
            
            $
            (8,440
            )
            
            $
            (7,569
            )Denominator:Weighted
      average common shares outstanding
            
            
            128,576
            
            
            
            109,093Net
      loss per share - basic
            
            $
            (0.07
            )
            
            $
            (0.07
            )


Three
      Months EndedApril
      3,
            
            
            April
      4,2010
            
            
            2009Diluted
      loss per share:Numerator:Net
      loss allocable to common shareholders
            
            $
            (8,440
            )
            
            $
            (7,569
            )Denominator:Weighted
      average common shares outstandingEffect
      of dilutive securities:
            
            
            128,576
            
            
            
            109,093Stock
      options
            
            
            -
            
            
            
            -Warrants
            
            
            -
            
            
            
            -Weighted
      average common shares outstandingassuming
      dilution
            
            
            128,576
            
            
            
            109,093Net
      loss per share - diluted
            
            $
            (0.07
            )
            
            $
            (0.07
            )





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 8 and 9, respectively.





10


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


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.





The
Company provides an intra-period tax allocation of the income tax expense or
benefit for the year among continuing operations and discontinued
operations.





Leases





The
Company leases vehicles 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 April 3, 2010 and for the three months
ended April 3, 2010 and April 4, 2009 include stock option expense as
compensation expense. Pretax stock-based compensation expense recognized for the
three months ended April 3, 2010 and April 4, 2009 was $0.4 million and $0.5
million, respectively. For the three months ended April 3, 2010 and April 4,
2009, all stock-based compensation expense was included in selling, general, and
administrative expenses in the 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 using 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 are 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.





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 (see Note 15).





11
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


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 assets
              
              
              2,686Property
      and equipment
              
              
              2,649Non
      compete agreements
              
              
              408Customer
      contracts and backlog
              
              
              4,250Goodwill
              
              
              4,147Other
      assets
              
              
              289Accounts
      payable and accrued expenses
              
              
              (14,053
              )Other
      liabilities
              
              
              (534
              )Deferred
      tax liability
              
              
              (146
              )Capital
      lease obligations
              
              
              (611
              )Total
      fair value of net assets acquired
              
              $
              27,509





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 period ended April 3, 2010, the Merger
contributed revenue of approximately $17.1 million and operating loss of $0.4
million, including depreciation and amortization.  The $4.1 million of
goodwill associated with the Merger is included in the engineering and
construction segment’s assets.





The
following unaudited pro forma data presents revenue and results of operations as
if the Merger had occurred at the beginning of the period
presented:





Three
      Months EndedApril
      3,
                          
                          
                          April
      4,2010
                          
                          
                          2009Revenue
                          
                          $
                          95,369
                          
                          
                          $
                          79,770Loss
      from continuing operations
                          
                          
                          (10,339
                          )
                          
                          
                          (10,169
                          )Loss
      from continuing operations per share
                          
                          $
                          (0.08
                          )
                          
                          $
                          (0.09
                          )




12


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


5.
            Accounts
      Receivable and Concentration of Credit
Risk





Accounts
receivable at April 3, 2010, and December 31, 2009, consist of the
following:




April
      3,
            
            
            December
      31,2010
            
            
            2009Accounts
      receivable
            
            $
            38,504
            
            
            $
            19,584Unbilled
      receivables
            
            
            20,386
            
            
            
            6,42558,890
            
            
            
            26,009Allowance
      for doubtful accounts
            
            
            (1,850
            )
            
            
            (1,329
            )Total
            
            $
            57,040
            
            
            $
            24,680







Unbilled
receivables principally represent the value of services rendered to customers
not billed as of the balance sheet date.  Unbilled receivables are
generally billed within three months subsequent to the provision of the
services. Unbilled receivables are net of deferred revenue which represent
amounts that have been billed to customers as of the balance sheet date but for
which the requisite services have not yet been rendered. The total amount of
deferred revenue included in unbilled receivables was $0.8 million at April 3,
2010 and zero at December 31, 2009.





For the
three months ended April 3, 2010, we derived approximately 60% of our total
revenue from our two largest customers, and these customers represented 42% of
our accounts receivable. Each of these customers represented in excess of 10% of
our total net revenue. For the three months ended April 4, 2009, we derived 85%
of our total revenue from our three largest customers.





6.
            Inventories





Inventories
totaled approximately $10.7 million and $8.3 million as of April 3, 2010, and
December 31, 2009, respectively. Inventories consist of materials and supplies
primarily purchased from the customer and used for installation fulfillment
services.  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.





7.
            Goodwill
      andIntangible
      Assets





The
following table summarizes the changes in the carrying amount of the Company’s
goodwill for the three months ended April 3, 2010:




Beginning
      balance
            
            $
            137,827Goodwill
      associated with Merger
            
            
            4,147Revision
      of purchase price allocations
            
            
            36Ending
      balance
            
            $
            142,010








Other
intangible assets consisted of the following:




April
      3,
            
            
            December 31,2010
            
            
            2009Intangible
      assets:Customer
      contracts and backlog
            
            $
            74,718
            
            
            $
            70,468Noncompete
      agreements
            
            
            1,433
            
            
            
            1,025Total
      intangible assets
            
            
            76,151
            
            
            
            71,493Accumulated
      amortization:Customer
      contracts and lists
            
            
            47,785
            
            
            
            43,904Noncompete
      agreements
            
            
            749
            
            
            
            648Total
      accumulated amortization
            
            
            48,534
            
            
            
            44,552Intangible
      assets, net
            
            $
            27,617
            
            
            $
            26,941





13


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


The
estimated amortization expense for the nine months ending December 31, 2010 and
for each of the following four years is as follows:




Nine
      Months ending December 31, 2010
            
            $
            11,1092011
            
            
            7,9982012
            
            
            6,2362013
            
            
            1,049Thereafter
            
            
            1,225Total
            
            $
            27,617








8.
            Long
      Term Debt





Long-term
debt consisted of the following:




April
      3,
            
            
            December
      31,2010
            
            
            2009First
      Lien Credit Agreement:Revolving
      Credit Facility
            
            $
            14,500
            
            
            $
            11,500Term
      B Credit Facility
            
            
            72,917
            
            
            
            75,503Term
      C Credit Facility
            
            
            19,500
            
            
            
            19,500106,917
            
            
            
            106,503Second
      Lien Credit Agreement:Term
      facility
            
            
            25,000
            
            
            
            25,000Holdings
      revolving facility
            
            
            29,485
            
            
            
            28,666Total
      debt
            
            
            161,402
            
            
            
            160,169Less
      current portion
            
            
            31,825
            
            
            
            33,006Long-term
      debt, net of current portion
            
            $
            129,577
            
            
            $
            127,163





Maturities
of long-term debt are as follows:




Period
      ended December 31,Nine
      months ending 2010
            
            $
            31,2402011
            
            
            2,3402012
            
            
            127,822Total
            
            $
            161,402







Term
Loan (First Lien)




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.




14
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


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 April 3, 2010, the Company had drawn $14.5 million on the Revolving Credit
Facility. 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 April 3, 2010, $72.9 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
April 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 limits annual 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 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
April 3, 2010.




Term
Loan (Second Lien)




The
Company is party to the Second Lien  Term Loan Agreement, dated
September 27, 2007 (the “Second Lien Credit Facility”), 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 Facility 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
a rate of 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 Facility is secured by substantially all of the assets of
the Company.  The Second Lien Credit Facility includes various
covenants, the most significant of which requires the Company to maintain
certain quarterly financial ratios and limits capital expenditures. With the
closing of the December 2009 amendment in January 2010, the Company
was in compliance with all covenants at December 31, 2009 and April 3,
2010.




15
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)
  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 “BMO Revolving Facility”), and amounts borrowed
against the BMO Revolving Facility are evidenced by a promissory
note.  Interest is calculated based on the prime commercial rate, as
defined in the BMO Revolving Facility.  The average interest rates
during 2009 and 2008 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 BMO Revolving
Facility. All interest incurred to date has been added to the principal balance
of the BMO Revolving Facility.  Accrued and unpaid interest was $4.5
million and $3.7 million at April 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 BMO 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.




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 April 3, 2010.





9.
            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 April 3, 2010
and April 4, 2009 was $(0.4) million and $0.1 million, respectively, which
includes changes in the fair value of the collar liability. The fair value of
the interest rate collar liability was $1.1 million and $1.5 million at April 3,
2010 and December 31, 2009, respectively, and is recorded as a component of
accrued expenses in the consolidated balance sheets.





10.
            Shareholders’
      Equity





The
Company is authorized to issue 102 million shares, consisting of  (i)
100 million shares of common stock, par value $0.00002 per share and 2 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.  Each share of
Berliner Series A Preferred Stock will automatically convert into 50 shares of
Berliner Common Stock upon the filing and effectiveness of an amendment to the
Company’s certificate of incorporation, which amendment will be filed by the
Company on or around June 4, 2010.  The holders of Berliner Series A
Preferred Stock have the same rights as holders of Berliner Common
Stock.  At April 3, 2010, there were approximately 1.3 million shares
of Series A Preferred outstanding.




16
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


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 Berliner Common
Stock, such that the actual conversion ratio would currently be 50 shares of
Berliner 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 Berliner, 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 April 3, 2010, there were approximately
0.25 million shares of Berliner Series B Preferred Stock outstanding with a
liquidation value of $25 million.







11.
            Warrants





At April
3, 2010, the Company had issued warrants to purchase up to approximately 5.7
million shares of our 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.





12.
            Stock
      Options





At April
3, 2010, the Company had issued stock options to employees to purchase up to
approximately 17.9 million shares of our common stock.  The stock
option exercise prices range from $0.30 to $6,900 per share and expire from
April 4, 2010 to April 1, 2018.







13.
            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.




17
 
 Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


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 BMO
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 BMO 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 Berliner Series B Convertible
Preferred Stock.  For the quarter ended April 3, 2010, the Company
recorded $0.3 million for the credit support fee that is included in interest
expense.  The corresponding related party liability is included with
accrued liabilities at April 3, 2010 and subsequently paid with the issuance of
Series B Preferred Stock.





14.
            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.




15.
            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.





18


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


The
following table summarizes our financial assets and liabilities measured at fair
value on a recurring basis as of April 3, 2010:




Fair
      Value Measurements at April 3, 2010Fair
      Value at April 3, 2010
                            
                            
                            Quoted
      Prices in Active Markets (Level 1)
                            
                            
                            Significant
      Other Observable Inputs (Level 2)
                            
                            
                            Significant
      Unobservable Inputs (Level 3)AssetsCash
                            
                            $
                            414
                            
                            
                            $
                            414
                            
                            
                            $
                            -
                            
                            
                            $
                            -Total
                            
                            $
                            414
                            
                            
                            $
                            414
                            
                            
                            $
                            -
                            
                            
                            $
                            -LiabilitiesInterest-rate
      collar
                            
                            $
                            1,135
                            
                            
                            $
                            -
                            
                            
                            $
                            1,135
                            
                            
                            $
                            -Total
                            
                            $
                            1,135
                            
                            
                            $
                            -
                            
                            
                            $
                            1,135
                            
                            
                            $
                            -








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 $1.1 million and $1.5
million at April 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.




16.
            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 our
discontinued operations for the three months ended April 3, 2010 and April 4,
2009:




Three
      months endedApril
      3,
            
            
            April
      4,2010
            
            
            2009Contract
      revenues
            
            $
            252
            
            
            $
            10,939Cost
      of revenues
            
            
            504
            
            
            
            9,446Gross
      margin
            
            
            (252
            )
            
            
            1,493Depreciation
      and amortization
            
            
            32
            
            
            
            546Operating
      income (loss)
            
            
            (284
            )
            
            
            947(Gain)
      loss on sale of assets
            
            
            -
            
            
            
            (111
            )Income
      (loss) from discontinued operations before income taxes
            
            
            (284
            )
            
            
            1,058Tax
      benefit from discontinued operations
            
            
            -
            
            
            
            -(Loss)
      income from discontinued operations
            
            $
            (284
            )
            
            $
            1,058





19


Berliner
Communications, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements - continued
 (Amounts
in thousands, except per share amounts)
 (unaudited)


17.
            Segment
      Reporting




We report
our 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 based on the
aggregation criteria as outlined in ASC Codification Topic 280 “Segment
Reporting”. Operating income, as presented below, is defined as gross margin
less selling, general and administrative expenses, depreciation and
amortization, and loss on sale of fixed assets.  Selected segment
financial information for the three months ended April 3, 2010 and April 4,
2009, is presented below:




Three
      Months EndedApril
      3, 2010
                
                
                April
      4, 2009Fulfillment
                
                Engineering
      & Construction
                
                Total
                
                Fulfillment
                
                Engineering
      & Construction
                
                TotalRevenue
                $
                61,570
                
                27,398
                
                $
                88,968
                
                $
                58,290
                
                10,375
                
                $
                68,665Cost
      of revenue
                
                51,427
                
                24,852
                
                
                76,279
                
                
                49,828
                
                10,116
                
                
                59,944Gross
      margin
                
                10,143
                
                2,546
                
                
                12,689
                
                
                8,462
                
                259
                
                
                8,721Selling,
      general and administrative expenses
                
                5,331
                
                3,701
                
                
                9,032
                
                
                5,505
                
                1,226
                
                
                6,731Depreciation
      and amortization
                
                5,550
                
                1,022
                
                
                6,572
                
                
                3,313
                
                2,960
                
                
                6,273Operating
      income
                $
                (738)
                
                (2,177)
                
                $
                (2,915)
                
                $
                (356)
                
                (3,927)
                
                $
                (4,283)





At April
3, 2010, the total assets of the fulfillment segment were $180.9 million and the
engineering and construction segment were $90.9 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 $7 million in the assets of the
fulfillment segment was primarily from higher working capital.  The
increase of $33.5 million in the engineering and construction assets compared to
December 31, 2009 is primarily the $35 million of assets from the operations of
Berliner which have been included in our consolidated results since the
Effective Time.




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 our Transition Report on Form 10-K for the period
ended December 31, 2009 (the “Transition Report”) 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 elsewhere in this report and our
Transition 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 months ended April 3, 2010, and April
4, 2009, has been derived from our unaudited consolidated financial statements
that, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary to state fairly the data for such
period.  We operate in two reportable segments: (1) Fulfillment and
(2) Engineering and Construction.





As a
result of our merger with UniTek Holdings, Inc. (“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.  This Quarterly
Report on Form 10-Q is the first filing of the combined entity.  As
the accounting acquirer, Holdings’ prior year results are presented for
comparison purposes.  The results for the quarter ending April 3, 2010
are Holdings for the entire period and the combined entity after the January 27,
2010 merger date (“Effective
Time”).  The
results for the quarter ended April 4, 2009 include only the results of
Holdings.





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




Three Months
      EndedApril
      3,
                  
                  
                  April
      4,2010
                  
                  
                  2009Statement
      of Operations Data:Revenue
                  
                  $
                  88,968
                  
                  
                  $
                  68,665Gross
    margin
                  
                  
                  12,689
                  
                  
                  
                  8,721Operating
    loss
                  
                  
                  (2,915
                  )
                  
                  
                  (4,283
                  )Net loss
                  
                  
                  (8,440
                  )
                  
                  
                  (7,569
                  )Net income (loss) allocable to
      commonshareholders per
      share:Basic
                  
                  $
                  (0.07
                  )
                  
                  $
                  (0.07
                  )Diluted
                  
                  $
                  (0.07
                  )
                  
                  $
                  (0.07
                  )Weighted average
      number of shares outstanding:Basic
                  
                  
                  128,576
                  
                  
                  
                  109,093Diluted
                  
                  
                  128,576
                  
                  
                  
                  109,093April
      3,
                  
                  
                  December
      31,2010
                  
                  
                  2009Balance
      Sheet Data:Current
    assets
                  
                  $
                  72,819
                  
                  
                  $
                  39,206Total
    assets
                  
                  
                  271,752
                  
                  
                  
                  231,841Current
      liabilities
                  
                  
                  94,223
                  
                  
                  
                  80,921Long-term debt, net of current
      portion
                  
                  
                  132,931
                  
                  
                  
                  131,407Stockholders’
      equity
                  
                  
                  31,883
                  
                  
                  
                  19,513





22


Three
months ended April 3, 2010, compared to three months ended April 4,
2009





Revenue


Three
      Months EndedApril
      3,
                
                April
      4,(Amounts
      in thousands)
                2010
                
                2009
                
                IncreaseFulfillment
                
                $
                61,570
                
                
                $
                58,290
                
                
                $
                3,280Engineering and Construction
                
                
                27,398
                
                
                
                10,375
                
                
                
                17,023Total
                
                $
                88,968
                
                
                $
                68,665
                
                
                $
                20,303





We had
revenue of $89.0million for the three
months ended April 3, 2010, compared to $68.7 million for the three months ended
April 4, 2009.  This represents an increase of $20.3 million, or 30%.
Of the revenue gain, $17.1 million reflects the operations of Berliner which
have been included in our consolidated results since the Effective Time and is
included in the engineering and construction segment.




Revenue
for fulfillment services increased $3.3 million from $58.3 million, or 6% for
the three months ended April 3, 2010 as compared to the three months ended April
4, 2009. Revenue from the broadband cable acquisitions we completed in the
fourth quarter of fiscal 2009 accounted for $4.4 million in additional revenue
and the full quarter impact of the 2009 DirecTV market swap added $2.8
million.  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 impact of these items is estimated at approximately $4.0
million.




Revenue
for the engineering and construction segment increased $17.0 million from $10.4
million, or 164% for the three months ended April 3, 2010 as compared to the
three months ended April 4, 2009.  The increase is related to the
operations of Berliner which have been included in our consolidated results
since the Effective Time.




Cost
of Revenue


Three
      Months Ended(Amounts
      in thousands)
                April
      3,
                
                April
      4,2010
                
                2009
                
                IncreaseFulfillment
                
                $
                51,427
                
                
                $
                49,828
                
                
                $
                1,599Engineering and Construction
                
                
                24,852
                
                
                
                10,116
                
                
                
                14,736Total
                
                $
                76,279
                
                
                $
                59,944
                
                
                $
                16,335





Our cost
of revenue was $76.3million and $59.9
million for the three months ended April 3, 2010 and April 4, 2009,
respectively.  This represents an increase of $16.3 million, or 27%,
during a period when sales increased 30%. Of the cost of revenue increase, $15.3
million is related to the operations of Berliner which have been included in our
consolidated results since the Effective Time and is included in the engineering
and construction segment.  These amounts represent 86% and 87% of
total revenue for the three months ended April 3, 2010 and April 4, 2009,
respectively.




Cost of
revenue for fulfillment services increased $1.6 million from $49.8 million for
the three months ended April 4, 2009 to $51.4 million for the three months ended
April 3, 2010. This represents an increase of 3% during a period when revenue
increased 6% representing operational improvements made in the fulfillment
segment.




Cost of
revenue for the engineering and construction segment increased $14.7 million
from $10.1 million for the three months ended April 4, 2009 to $24.8 million for
the three months ended April 3, 2010.  The increase is primarily
related to the operations of Berliner which have been included in our
consolidated results since the Effective Time.




23


Gross
Profit




Three
      Months Ended(Amounts
      in thousands)
                April
      3,
                
                April
      4,2010
                
                2009
                
                IncreaseFulfillment
                
                $
                10,143
                
                
                $
                8,462
                
                
                $
                1,681Engineering and Construction
                
                
                2,546
                
                
                
                259
                
                
                
                2,287Total
                
                $
                12,689
                
                
                $
                8,721
                
                
                $
                3,968





Our gross
profit for the three months ended April 3, 2010 was $12.7 million compared to
$8.7million for
the three months ended April 4, 2009.  This represents an increase of
$4 million, or 46%.  Of the gross profit increase, $1.8 million is
from the operations of Berliner which have been included in our consolidated
results since the Effective Time and is included in the engineering and
construction segment.  Our gross profit as a percentage of revenue was
approximately 14.3% for the three months ended April 3, 2010, as compared to
12.7% for the three months ended April 4, 2009.




For the
fulfillment segment, gross margin increased from 14.5% for the three months
ended April 4, 2009 to 16.5% for the three months ended April 3,
2010.  The increase is primarily related to the operational
improvements in various fulfillment markets, overall
profitability improvements from use of field technology and dispatch cost
reduction programs.




For the
engineering and construction segment, gross margin increased from 2.5% to
9.3%.  The increase is primarily attributed to a combination of
operating efficiencies and the introduction of the higher margin wireless
business.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses (“SG&A”) for the three months ended
April 3, 2010 were $9.0 million as compared to $6.7 million for the three months
ended April 4, 2009. This represents an overall increase of $2.3 million. A
portion of the increase ($1.7 million) is from the merger of Berliner which has
been included in our consolidated results since the Effective
Time.  The remaining increase in SG&A cost ($1.4 million) is
primarily integration and transaction expenses related to the merger incurred in
the period ended April 3, 2010.





Depreciation
and Amortization





Depreciation
on fixed assets totaled approximately $2.7 million for the three months ended
April 3, 2010 compared to $0.8 million for the three months ended April 4,
2009.  The increase in depreciation is attributed to the merger ($0.2
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 $3.9 million for the three months ended
April 3, 2010 compared to $5.5 million for the three months ended April 4,
2009.  The decrease is related to the asset impairment of the wired
telecommunications reporting unit in 2009 that resulted in a write-down of the
customer contracts in the fourth quarter of fiscal 2009.





Interest
Expense





We
recognized $5.2 million and $4.0 million in interest expense during the three
months ended April 3, 2010 and April 4, 2009, respectively.  The
increase of $1.2 million was primarily due to the higher debt levels in the
first quarter of 2010 compared to the first quarter of 2009, an increase in
interest rates from the 2009 amendments to the debt agreements and the guaranty
fee on the BMO Revolving Facility entered into during January 2010.





Income
Taxes




We
recorded income tax expense of $0.1 and $0.4 million for three months ended
April 3, 2010 and April 4, 2009, respectively.  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 April
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.





24


LIQUIDITY
AND CAPITAL RESOURCES





At April
3, 2010, we had consolidated current assets of approximately $72.8 million,
including cash and cash equivalents of approximately $0.4
million.  Historically, we have funded our operations primarily
through operating cash flow and borrowings under loan arrangements. The
principal use of cash during the three months ended April 3, 2010 was to fund
the Merger.





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, UniTek Acquisition, Inc. (“Acquisition”) entered into (1)
the First Lien Credit Agreement, by and among Acquisition, UniTek Midco, Inc.
(“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 April 3,
2010, the Term B Credit Facility and the Term C Credit Facility are fully drawn
at $93 million, and approximately $14.5 million of principal is outstanding
under the Revolving Credit Facility.





The
credit facility under the Second Lien Credit Facility is a $25
million second lien term loan facility.  As of April 3, 2010, the
Second Lien Credit Facility is fully drawn.  The Second Lien 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.








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 advances (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).





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
Acquisition and the Guarantors, other than Midco.





25


The
obligations under the Second Lien Credit Facility 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 Facility 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 Facility
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 Facility 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.





Loan
Authorization Agreement




Availability
and Term





Holdings
entered into the Loan Authorization Agreement among Holdings and
BMO.





The Loan
Authorization Agreement established the BMO Revolving Facility and is evidenced
by a demand note.  The BMO Revolving Facility is payable and matures
on demand of BMO.  As of April 3, 2010, approximately $25 million of
principal plus approximately $4.5 million in interest (calculated at a per annum
rate of 7.25%) is outstanding under the BMO Revolving Facility.  The
lender under the BMO Revolving Facility has the right to terminate the BMO
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.





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
the 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 April 3, 2010, there were $6.0 million in letters of
credit issued under the LOC Facility.








The net
cash flows for the Company for the three months ended April 3, 2010 and April 4,
2009 are as follows:








For
      the three months endedApril
      3,
            
            April
      4,2010
            
            2009Net
      cash (used in) provided by operating activities
            
            $
            (4,690
            )
            
            
            384Net
      cash used in investing activities
            
            
            (527
            )
            
            
            (584
            )Net
      cash (used in) provided by financing activities
            
            
            3,393
            
            
            
            (2,138
            )




26


Cash
(used in) provided by operating activities.




Net cash
used in operating activities in the three months ended April 3, 2010 was
approximately $4.7 million and net cash provided by operating activities was
$0.4 million in the three months ended April 4, 2009.   During
the three months ended April 3, 2010, cash flow used in operating activities
primarily resulted from our operating income, net of non-cash charges, of
approximately $0.4 million, which represents an increase of $0.3 million
compared to the three months ended April 4, 2009. Accounts receivable increased
by approximately $5.2 million due to increased revenue during the three
months ended April 3, 2010.





In the
three months ended April 4, 2009, cash provided by operating activities
primarily resulted from the results of discontinued operations.  For
the period ended April 4, 2009, working capital increased by approximately $1.2
million which was primarily from an increase in accounts
receivable.




Cash
used in investing activities.




Net cash
used in investing activities was approximately $0.5 million and $0.6 million in
the three months ended April 3, 2010 and April 4, 2009,
respectively.  Cash used for the purchase of fixed assets was $0.6
million and $0.5 million for the three months ended April 3, 2010 and April 4,
2009, respectively.






Cash
(used in) provided by financing activities.




Net cash
provided by financing activities was approximately $3.4 million in the three
months ended April 3, 2010 as compared to cash used of $2.1 million in the three
months ended April 4, 2009.  During the three months ended April 3,
2010, net cash provided by financing activities consisted primarily of $12.5
million from issuance of preferred stock contributions and $0.4 million from
issuance of common stock. As part of the Merger, existing Berliner debt of $7.2
million was paid, net of cash acquired, and $2.6 million was paid on the
Term B Credit Facility.




During
the three months ended April 4, 2009, net cash used in financing activities
consisted primarily of repayment of revolver and long-term debt of $1.9 million.
In addition, payments on capital leases were $1.5 million and $0.3 million for
the period ended April 3, 2010 and April 4, 2009, respectively.




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 April 3,
2010 was $6 million.  All outstanding letters of credit were issued
under the LOC Facility.





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
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.  Based upon that evaluation, such officers have concluded that
our disclosure controls and procedures are effective, as of the end of the
period covered by this report, in timely alerting them to material information
relating to us (including our consolidated subsidiaries) required to be included
in this report.  There have been no significant changes in our
internal controls over financial reporting or in other factors, which could
significantly affect such internal controls, subsequent to the date that we
carried out our evaluation.




27


Changes
in Internal Control Over Financial Reporting





During
the first quarter of 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 controls 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 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.
There were no changes in internal controls 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.







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.





28


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





None.





Item
3.  Defaults Upon Senior Securities





None.





Item
4.(Removed
and Reserved)





Item
5.  Other Information





None





Item
6.  Exhibits





(a)
            Exhibits


2.1
            
            Agreement
      and Plan of Merger, dated as of January 27, 2010, by and among Berliner
      Communications, Inc., BCI East, Inc., Rich Berliner (as Parent
      Representative), HM Capital Partners LLC (as Company Representative) and
      Unitek Holdings, Inc. (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)3.1
            
            Form
      of Amended and Restated Articles of Incorporation of Berliner
      Communications, Inc. (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)3.2
            
            Certificate
      of Designation for the Berliner Series A Preferred Stock of Berliner
      Communications, Inc. (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)3.3
            
            Certificate
      of Designation for the Berliner Series B Preferred Stock of Berliner
      Communications, Inc. (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)3.4
            
            Amended
      and Restated Bylaws of Berliner Communications, Inc. (Incorporated herein
      by reference from Company’s Current Report on Form 8-K filed on January
      27, 2010)4.1
            
            Registration
      Rights Agreement, dated as of January 27, 2010, by and between Berliner
      Communications, Inc. and those holders of capital stock of Berliner listed
      on Exhibit A thereto (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)4.2
            
            Voting
      Agreement, dated as of January 27, 2010, by and among Berliner
      Communications, Inc., HM Capital Partners, LLC, and those holders of
      capital stock of Berliner listed on Exhibit A thereto (Incorporated herein
      by reference from Company’s Current Report on Form 8-K filed on January
      27, 2010)4.3
            
            Form
      of Substitute Option (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)4.4
            
            Form
      of Substitute Warrant (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)10.1
            
            Credit
      Support Agreement, dated as of January 27, 2010, by and among Sector
      Performance Fund, LP, SPF SBS LP, Unitek Holdings, Inc. and Berliner
      Communications, Inc. (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27, 2010)#10.2.1
            
            Employment
      Agreement, dated as of July 5, 2009, by and between Unitek USA, LLC and
      Peter Giacalone (Incorporated herein by reference from Company’s Current
      Report on Form 8-K filed on January 27,
2010)




29


#10.2.2
            
            Amendment
      to Employment Agreement, dated as of December 23, 2009, by and between
      Unitek USA, LLC and Peter Giacalone (Incorporated herein by reference from
      Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.3.1
            
            Employment
      Agreement, dated as of July 5, 2009, by and between Unitek USA, LLC and C.
      Scott Hisey (Incorporated herein by reference from Company’s Current
      Report on Form 8-K filed on January 27, 2010)#10.3.2
            
            Amendment
      to Employment Agreement, dated as of December 23, 2009, by and between
      Unitek USA, LLC and C. Scott Hisey (Incorporated herein by reference from
      Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.4.1
            
            Employment
      Agreement, dated as of July 5, 2009, by and between Unitek USA, LLC and
      Ronald Lejman (Incorporated herein by reference from Company’s Current
      Report on Form 8-K filed on January 27, 2010)#10.4.2
            
            Amendment
      to Employment Agreement, dated as of December 23, 2009, by and between
      Unitek USA, LLC and Ronald Lejman (Incorporated herein by reference from
      Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.5
            
            Amendment
      to Employment Agreement, dated as of January 27, 2010, by and between
      Berliner Communications, Inc. and Rich Berliner (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.6
            
            Amendment
      to Employment Agreement, dated as of January 27, 2010, by and between
      Berliner Communications, Inc. and Robert Bradley (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.7
            
            Amendment
      to Employment Agreement, dated as of January 27, 2010, by and between
      Berliner Communications, Inc. and Michael S. Guerriero (Incorporated
      herein by reference from Company’s Current Report on Form 8-K filed on
      January 27, 2010)#10.8
            
            Amendment
      to Employment Agreement, dated as of January 27, 2010, by and between
      Berliner Communications, Inc. and Nicholas Day (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on January 27,
      2010)#10.9
            
            Amendment
      to Employment Agreement, dated as of January 27, 2010, by and between
      Berliner Communications, Inc. and Raymond A. Cardonne, Jr. (Incorporated
      herein by reference from Company’s Current Report on Form 8-K filed on
      January 27, 2010)*#10.10
            
            Assignment
      of Employment Agreement dates April 27, 2010, by and between UniTek
      USA  LLC and Berliner Communications, Inc. and consented to by
      Peter Giacalone*#10.11
            
            Assignment
      of Employment Agreement dates April 27, 2010, by and between UniTek
      USA  LLC and Berliner Communications, Inc. and consented to by
      C. Scott Hisey*#10.12
            
            Assignment
      of Employment Agreement dates April 27, 2010, by and between UniTek USA
      LLC and Berliner Communications, Inc. and consented to by Ronald J.
      Lejman10.13
            
            Form
      of D&O Indemnification Agreement (Incorporated herein by reference
      from Company’s Current Report on Form 8-K filed on January 27,
      2010)10.14
            
            Indemnification
      Priority Agreement, dated as of January 27, 2010, by and among HM Capital
      Partners LLC, Berliner Communications, Inc., BCI Communications, Inc.,
      Unitek USA, LLC, Unitek Holdings, Inc., Unitek Midco, Inc. and Unitek
      Acquisition, Inc. (Incorporated herein by reference from Company’s Current
      Report on Form 8-K filed on January 27, 2010)10.15
            
            Amended
      and Restated Monitoring and Oversight Agreement, dated as of January 27,
      2010, by and among BCI Communications, Inc., Unitek USA, LLC, Unitek
      Holdings, Inc., Unitek Midco, Inc., Unitek Acquisition, Inc. and HM
      Capital Partners I LP (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on January 27,
  2010)




30


10.16
            
            Unitek
      Holdings, Inc. 2007 Equity Incentive Plan (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on January 27,
      2010)10.17
            
            First
      Lien Credit Agreement, dated September 27, 2007 among Unitek Acquisition,
      Inc., Unitek Midco, Inc., certain subsidiaries of Unitek Acquisition, Inc.
      as guarantors, the initial lenders, Royal Bank of Canada and RBC Capital
      Markets. (Incorporated herein by reference from Company’s Current Report
      on Form 8-K filed on February 2, 2010)10.18
            
            Amendment
      No. 1 to the First Lien Credit Agreement, dated as of December 5, 2007,
      among Unitek Acquisition, Inc., the other lenders parties to the First
      Lien Credit Agreement referred to therein and Royal Bank of Canada
      (Incorporated herein by reference from Company’s Current Report on Form
      8-K filed on February 2, 2010)10.19
            
            Amendment
      No. 2 to the First Lien Credit Agreement, dated as of March 26, 2008,
      among Unitek Acquisition, Inc., the other lenders parties to the First
      Lien Credit Agreement referred to therein and Royal Bank of Canada
      (Incorporated herein by reference from Company’s Current Report on Form
      8-K filed on February 2, 2010)10.20
            
            Amendment
      No. 3 to the First Lien Credit Agreement, dated as of June 23, 2009, among
      Unitek Acquisition, Inc., Unitek Midco, Inc., certain subsidiaries of
      Unitek Acquisition, Inc. as guarantors, the other lenders parties to the
      First Lien Credit Agreement referred to therein and Royal Bank of Canada
      (Incorporated herein by reference from Company’s Current Report on Form
      8-K filed on February 2, 2010)10.21
            
            Amendment
      No. 4 to the First Lien Credit Agreement, dated as of December 17, 2009,
      among Unitek Acquisition, Inc., Unitek Midco, Inc., certain subsidiaries
      of Unitek Acquisition, Inc. as guarantors, the other lenders parties to
      the First Lien Credit Agreement referred to therein and Royal Bank of
      Canada (Incorporated herein by reference from Company’s Current Report on
      Form 8-K filed on February 2, 2010)10.22
            
            Incremental
      Term B Facility Amendment, dated as of December 21, 2007, among Unitek
      Acquisition, Inc., the Incremental Term B Lender (as defined therein) and
      Royal Bank of Canada (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on February 2, 2010)10.23
            
            Second
      Incremental Term B Facility Amendment, dated as of July 2, 2008, among
      Unitek Acquisition, Inc., the Incremental Term B Lender (as defined
      therein) and Royal Bank of Canada (Incorporated herein by reference from
      Company’s Current Report on Form 8-K filed on February 2,
      2010)10.24
            
            Incremental
      Term C Facility Amendment, dated as of December 21, 2007, among Unitek
      Acquisition, Inc., the Incremental Term C Lenders (as defined therein) and
      Royal Bank of Canada (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on February 2, 2010)10.25
            
            Second
      Incremental Term C Facility Amendment, dated as of September 30, 2008,
      among Unitek Acquisition, Inc., the Second Incremental Term C Lenders (as
      defined therein) and Royal Bank of Canada (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on February 2,
      2010)10.26
            
            Amendment
      No. 1 to Second Incremental Term C Facility Amendment, dated as of May 15,
      2009, among Unitek Acquisition, Inc., the Second Incremental Term C
      Lenders (as defined therein) and Royal Bank of Canada (Incorporated herein
      by reference from Company’s Current Report on Form 8-K filed on February
      2, 2010)10.27
            
            Amendment
      No. 2 to Second Incremental Term C Facility Amendment, dated as of
      December 17, 2009, among Unitek Acquisition, Inc., the Second Incremental
      Term C Lenders (as defined therein) and Royal Bank of Canada (Incorporated
      herein by reference from Company’s Current Report on Form 8-K filed on
      February 2, 2010)




31


10.28
            
            Second
      Lien Term Loan Agreement, dated September 27, 2007, among Unitek
      Acquisition, Inc., Unitek Midco, Inc., certain subsidiaries of Unitek
      Acquisition, Inc. as guarantors, the initial lenders, Royal Bank of Canada
      and RBC Capital Markets (Incorporated herein by reference from Company’s
      Current Report on Form 8-K filed on February 2, 2010)10.29
            
            Amendment
      No. 1 to the Second Lien Term Loan Agreement, dated as of May 15, 2009,
      among Unitek Acquisition, Inc., Unitek Midco, Inc., certain subsidiaries
      of Unitek Acquisition, Inc. as guarantors, the financial institutions and
      other lenders parties to the Second Lien Credit Agreement referred to
      therein and Royal Bank of Canada (Incorporated herein by reference from
      Company’s Current Report on Form 8-K filed on February 2,
      2010)10.30
            
            Amendment
      No. 2 to the Second Lien Term Loan Agreement, dated as of December 17,
      2009, among Unitek Acquisition, Inc., Unitek Midco, Inc., certain
      subsidiaries of Unitek Acquisition, Inc. as guarantors, the financial
      institutions and other lenders parties to the Second Lien Credit Agreement
      referred to therein and Royal Bank of Canada (Incorporated herein by
      reference from Company’s Current Report on Form 8-K filed on February 2,
      2010)10.31
            
            Loan
      Authorization Agreement, dated as of September 25, 2007, among Unitek
      Holdings, Inc. and BMO Capital Markets Financing, Inc. (Incorporated
      herein by reference from Company’s Current Report on Form 8-K filed on
      February 2, 2010)10.32
            
            First
      Amendment to Loan Authorization Agreement, dated as of March 24, 2008,
      among Unitek Holdings, Inc. and BMO Capital Markets Financing, Inc.
      (Incorporated herein by reference from Company’s Current Report on Form
      8-K filed on February 2, 2010)10.33
            
            Second
      Amendment to Loan Authorization Agreement, dated as of September 15, 2009,
      among Unitek Holdings, Inc. and BMO Capital Markets Financing, Inc.
      (Incorporated herein by reference from Company’s Current Report on Form
      8-K filed on February 2, 2010)*10.34
            
            First
      Incremental Revolving Credit Agreement, dated as of March 30, 2010, by and
      among Unitek Acquisition, Inc., Unitek Midco, Inc., certain subsidiaries
      as subsidiary guarantors, Maxam Opportunities Fund LP and Maxam
      Opportunities Fund (International) LP, and Royal Bank of Canada, as
      Administrative Agent and Collateral Agent*31.1
            
            Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
      of our Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.


*
      Filed herewith.


#
      Management contract or compensatory plan or
  arrangement.




32


SIGNATURES





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






BERLINER
      COMMUNICATIONS, INC.Date:  May
      18, 2010
            By:
            /s/ C. Scott
      HiseyC. Scott
    HiseyChief Executive
      Officer(Principal Executive
      Officer)Date:  May
      18, 2010
            By:
            /s/ Ronald J.
      LejmanRonald J.
      LejmanChief Financial
      Officer and Treasurer(Principal Financial
      Officer)




33