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 October 2, 2010


OR





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


SECURITIES
EXCHANGE ACT OF 1934





For the
transition period from _____________ to ______________





COMMISSION
FILE NUMBER 0-28579





UNITEK
GLOBAL SERVICES, INC.


(Exact
Name of Registrant as Specified in Its Charter)




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




1777
Sentry Parkway West


Blue
Bell, Pennsylvania 19422


(Address
of Principal Executive Offices)





(267)
464-1700


(Registrant’s
Telephone Number, Including Area Code)





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





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





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




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




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





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





On
November 16, 2010, 29,857,065 shares of the registrant's common stock, $0.00002
par value per share, were outstanding including the 19,000,000 shares from the
equity offering closed on November 16, 2010 and 5,972,125 shares resulting from
the conversion of the Series B Preferred stock in connection with the equity
offering.  These shares reflect the one-for-28 reverse stock-split effected
on November 9, 2010, but does not take into account the additional one-for-two
reverse stock-split that has
been approved and is expected to conclude in December
2010.





UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES





QUARTERLY
REPORT ON FORM 10-Q


INDEX




PAGE
                  NO.PART
      I:
                FINANCIAL
      INFORMATIONItem
      1.
                Financial
      StatementsCondensed
      Consolidated Balance Sheets (Unaudited) as of October 2, 2010  and
      December 31, 2009
                
                3Condensed
      Consolidated Statements of Operations (Unaudited) for the three and nine
      months ended October 2, 2010 and October 3, 2009
                
                4Condensed
      Consolidated Statements of Cash Flows (Unaudited) for the nine months
      ended October 2, 2010 and October 3, 2009
                
                5Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                
                7Item
      2.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                22Item
      4T.
                Controls
      and Procedures
                
                35PART
      II:
                OTHER
      INFORMATIONItem
      1.
                Legal
      Proceedings
                
                36Item
      1A.
                Risk
      Factors
                
                36Item
      2.
                Unregistered
      Sale of Equity Securities and Use of Proceeds
                
                37Item
      3.
                Defaults
      Upon Senior Securities
                
                37Item
      4.
                (Removed
      and Reserved)
                
                37Item
      5.
                Other
      Information
                
                37Item
      6.
                Exhibits
                
                37SIGNATURES
                
                39


2


UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Amounts
in thousands)


(Unaudited)




October 2,
                      
                      
                      December 31,2010
                      
                      
                      2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                      
                      $
                      1,688
                      
                      
                      $
                      2,263Restricted
      cash
                      
                      
                      -
                      
                      
                      
                      133Accounts
      receivable and unbilled revenue, net of allowances
                      
                      
                      66,933
                      
                      
                      
                      24,680Inventories
                      
                      
                      11,205
                      
                      
                      
                      8,326Prepaid
      expenses and other current assets
                      
                      
                      5,584
                      
                      
                      
                      3,804Total
      current assets
                      
                      
                      85,410
                      
                      
                      
                      39,206Property
      and equipment, net
                      
                      
                      17,463
                      
                      
                      
                      20,665Amortizable
      intangible assets, net
                      
                      
                      19,936
                      
                      
                      
                      26,941Goodwill
                      
                      
                      143,475
                      
                      
                      
                      137,827Deferred
      tax assets, net
                      
                      
                      109
                      
                      
                      
                      109Other
      assets
                      
                      
                      7,958
                      
                      
                      
                      7,093Total
      assets
                      
                      $
                      274,351
                      
                      
                      $
                      231,841LIABILITIES,
      CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                      
                      $
                      31,936
                      
                      
                      $
                      19,302Accrued
      liabilities
                      
                      
                      31,030
                      
                      
                      
                      23,329Current
      portion of long-term debt
                      
                      
                      33,048
                      
                      
                      
                      33,006Current
      income taxes
                      
                      
                      103
                      
                      
                      
                      187Current
      portion of capital lease obligations
                      
                      
                      5,203
                      
                      
                      
                      5,097Total
      current liabilities
                      
                      
                      101,320
                      
                      
                      
                      80,921Long-term
      debt, net of current portion
                      
                      
                      132,498
                      
                      
                      
                      127,163Long-term
      capital lease obligations, net of current portion
                      
                      
                      814
                      
                      
                      
                      4,244Other
      long-term liabilities
                      
                      
                      3,186
                      
                      
                      
                      -Total
      liabilities
                      
                      
                      237,818
                      
                      
                      
                      212,328Series
      B Convertible Preferred Stock (liquidation value of $26,528 at October
      2,  2010)
                      
                      
                      13,265
                      
                      
                      
                      -STOCKHOLDERS'
      EQUITYSeries
      A Convertible Preferred Stock
                      
                      
                      -
                      
                      
                      
                      -Common
      Stock
                      
                      
                      3
                      
                      
                      
                      1,091Additional
      paid-in capital
                      
                      
                      136,080
                      
                      
                      
                      112,747Accumulated
      other comprehensive income (loss)
                      
                      
                      89
                      
                      
                      
                      60Accumulated
      deficit
                      
                      
                      (112,904
                      )
                      
                      
                      (94,385
                      )Total
      stockholders' equity
                      
                      
                      23,268
                      
                      
                      
                      19,513Total
      liabilities, convertible preferred stock, and stockholders'
      equity
                      
                      $
                      274,351
                      
                      
                      $
                      231,841





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


3


UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts
in thousands, except per share data)


(Unaudited)




Three Months Ended
                  
                  
                  Nine Months EndedOctober 2,
                    2010
                  
                  
                  October 3,
                    2009
                  
                  
                  October 2,
                    2010
                  
                  
                  October 3,
                    2009Revenues
                  
                  $
                  110,121
                  
                  
                  $
                  72,579
                  
                  
                  $
                  304,928
                  
                  
                  $
                  210,491Costs
      of revenues
                  
                  
                  91,933
                  
                  
                  
                  61,327
                  
                  
                  
                  257,770
                  
                  
                  
                  181,388Gross
      profit
                  
                  
                  18,188
                  
                  
                  
                  11,252
                  
                  
                  
                  47,158
                  
                  
                  
                  29,103Selling,
      general and administrative expenses
                  
                  
                  9,813
                  
                  
                  
                  5,410
                  
                  
                  
                  27,532
                  
                  
                  
                  18,206Depreciation
      and amortization
                  
                  
                  6,199
                  
                  
                  
                  7,351
                  
                  
                  
                  19,912
                  
                  
                  
                  20,784Operating
      income (loss)
                  
                  
                  2,176
                  
                  
                  
                  (1,509
                  )
                  
                  
                  (286
                  )
                  
                  
                  (9,887
                  )Interest
      expense
                  
                  
                  5,972
                  
                  
                  
                  4,897
                  
                  
                  
                  17,385
                  
                  
                  
                  13,202Other
      expense, net
                  
                  
                  29
                  
                  
                  
                  59
                  
                  
                  
                  175
                  
                  
                  
                  104Loss
      from continuing operations before income taxes
                  
                  
                  (3,825
                  )
                  
                  
                  (6,465
                  )
                  
                  
                  (17,846
                  )
                  
                  
                  (23,193
                  )Income
      tax expense
                  
                  
                  (48
                  )
                  
                  
                  (297
                  )
                  
                  
                  (151
                  )
                  
                  
                  (1,067
                  )Loss
      from continuing operations
                  
                  
                  (3,873
                  )
                  
                  
                  (6,762
                  )
                  
                  
                  (17,997
                  )
                  
                  
                  (24,260
                  )(Loss) income
      from discontinued operations
                  
                  
                  (2
                  )
                  
                  
                  (220
                  )
                  
                  
                  (461
                  )
                  
                  
                  555Net
      loss
                  
                  $
                  (3,875
                  )
                  
                  $
                  (6,982
                  )
                  
                  $
                  (18,458
                  )
                  
                  $
                  (23,705
                  )Net
      income (loss) per share - basic:Continuing
      operations
                  
                  $
                  (0.79
                  )
                  
                  $
                  (1.73
                  )
                  
                  $
                  (3.76
                  )
                  
                  $
                  (6.23
                  )Discontinued
      operations
                  
                  
                  0.00
                  
                  
                  
                  (0.06
                  )
                  
                  
                  (0.10
                  )
                  
                  
                  0.14Net
      loss
                  
                  $
                  (0.79
                  )
                  
                  $
                  (1.79
                  )
                  
                  $
                  (3.86
                  )
                  
                  $
                  (6.09
                  )Net
      income (loss) per share - diluted:Continuing
      operations
                  
                  $
                  (0.79
                  )
                  
                  $
                  (1.73
                  )
                  
                  $
                  (3.76
                  )
                  
                  $
                  (6.23
                  )Discontinued
      operations
                  
                  
                  0.00
                  
                  
                  
                  (0.06
                  )
                  
                  
                  (0.10
                  )
                  
                  
                  0.14Net
      loss
                  
                  $
                  (0.79
                  )
                  
                  $
                  (1.79
                  )
                  
                  $
                  (3.86
                  )
                  
                  $
                  (6.09
                  )Weighted
      average shares of common stock outstanding:Basic
                  
                  
                  4,885
                  
                  
                  
                  3,896
                  
                  
                  
                  4,785
                  
                  
                  
                  3,896Diluted
                  
                  
                  4,885
                  
                  
                  
                  3,896
                  
                  
                  
                  4,785
                  
                  
                  
                  3,896




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


4


UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)




Nine Months EndedOctober 2,
                      
                      
                      October 3,2010
                      
                      
                      2009Cash
      flows from operating activities:Net
      loss
                      
                      $
                      (18,458
                      )
                      
                      $
                      (23,705
                      )Adjustments
      to reconcile net loss to net cash used in  operating
      activities:Loss
      (income) from discontinued operations
                      
                      
                      461
                      
                      
                      
                      (555
                      )Provision
      for doubtful accounts
                      
                      
                      664
                      
                      
                      
                      1,252Depreciation
      and amortization
                      
                      
                      19,912
                      
                      
                      
                      20,784Amortization
      of deferred financing fees
                      
                      
                      2,486
                      
                      
                      
                      1,635Accrued
      interest expense (income) on collar
                      
                      
                      248
                      
                      
                      
                      (17)Accretion
      of debt discount
                      
                      
                      306
                      
                      
                      
                      -Stock-based
      compensation
                      
                      
                      1,228
                      
                      
                      
                      1,419Interest
      added to debt principal
                      
                      
                      2,806
                      
                      
                      
                      1,498Refundable
      deposits
                      
                      
                      (389
                      )
                      
                      
                      (107
                      )Loss
      on sale of fixed assets
                      
                      
                      116
                      
                      
                      
                      133Deferred
      tax assets, net
                      
                      
                      25
                      
                      
                      
                      1,146Changes
      in assets and liabilities:Accounts
      receivable and unbilled revenue
                      
                      
                      (16,953
                      )
                      
                      
                      (6,261
                      )Inventories
                      
                      
                      (1,981
                      )
                      
                      
                      3,610Prepaid
      expenses and other assets
                      
                      
                      912
                      
                      
                      
                      (3,545
                      )Accounts
      payable and accrued liabilities
                      
                      
                      5,176
                      
                      
                      
                      1,717Net
      cash used in operating activities – continuing operations
                      
                      
                      (3,441
                      )
                      
                      
                      (996
                      )Net
      cash (used in) provided by operating activities – discontinued
      operations
                      
                      
                      (358
                      )
                      
                      
                      1,092Net
      cash (used in) provided by operating activities
                      
                      
                      (3,799
                      )
                      
                      
                      96Cash
      flows from investing activities:Acquisition
      of property and equipment
                      
                      
                      (2,656
                      )
                      
                      
                      (2,289
                      )Proceeds
      from sale of property and equipment
                      
                      
                      241
                      
                      
                      
                      486Cash
      restricted for acquisition of business
                      
                      
                      133
                      
                      
                      
                      317Cash
      paid for acquisition of business
                      
                      
                      (35
                      )
                      
                      
                      (4,893
                      )Net
      cash used in investing activities
                      
                      
                      (2,317
                      )
                      
                      
                      (6,379
                      )Cash
      flows from financing activities:Proceeds
      from issuance of common shares
                      
                      
                      420
                      
                      
                      
                      50Proceeds
      from issuance of preferred shares
                      
                      
                      12,500
                      
                      
                      
                      -Proceeds
      from (repayment of) revolving credit facilities, net
                      
                      
                      (4,500
                      )
                      
                      
                      7,500Repayment
      of capital leases
                      
                      
                      (4,059
                      )
                      
                      
                      (1,456
                      )Repayment
      of  long term debt
                      
                      
                      (3,868
                      )
                      
                      
                      (1,170
                      )Proceeds
      from issuance of long term debt
                      
                      
                      15,000
                      
                      
                      
                      -Repayment
      of acquired debt, net of cash  acquired
                      
                      
                      (7,246
                      )
                      
                      
                      -Financing
      fees
                      
                      
                      (2,136
                      )
                      
                      
                      (1,673
                      )Payment
      of costs associated with equity offering
                      
                      
                      (520
                      )
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      5,591
                      
                      
                      
                      3,251Effect
      of exchange rate on cash and cash equivalents
                      
                      
                      (50
                      )
                      
                      
                      165Net
      decrease in cash and cash equivalents
                      
                      
                      (575
                      )
                      
                      
                      (2,867
                      )Cash
      and cash equivalents at beginning of period
                      
                      
                      2,263
                      
                      
                      
                      5,348Cash
      and cash equivalents at end of period
                      
                      $
                      1,688
                      
                      
                      $
                      2,481




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


5


UNITEK
GLOBAL SERVICES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)




Nine months EndedOctober 2,
                  
                  
                  October 3,2010
                  
                  
                  2009Supplemental
      cash flow information:Interest
      paid
                  
                  $
                  13,421
                  
                  
                  $
                  10,121Income
      taxes paid
                  
                  $
                  366
                  
                  
                  $
                  253Significant
      noncash  items:Fair
      value of equity paid for acquisition
                  
                  $
                  19,927
                  
                  
                  $
                  -Acquisition
      of property and equipment financed  by capital
    lease
                  
                  $
                  154
                  
                  
                  $
                  3,029Credit
      support fee paid in shares of Series B Convertible Preferred
      Stock
                  
                  $
                  765
                  
                  
                  $
                  -





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


6


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





1. 
       Business





UniTek
Global Services, Inc. (“UniTek,” “Company”, “we,” “our,” or “us”) is a premier
provider of high-quality, specialized infrastructure services including
engineering, construction management and installation fulfillment services to
the wired and wireless telecommunications, broadband cable and satellite
television industries.  UniTek has created a scalable platform through
which it can rapidly deploy a highly skilled workforce of over 5,200 through 102
field offices across the United States and Canada, delivering a comprehensive
end-to-end suite of permanently outsourced infrastructure services.  The
Company operates in two business segments: (1) fulfillment, which includes
fulfillment work for the pay television industry (both satellite and broadband
cable), and (2) engineering and construction, which include both wireless and
wired telecommunications.





On
January 27, 2010, Berliner Communications Inc. (“Berliner”), BCI East, Inc., a
Delaware corporation and a wholly owned subsidiary of Berliner (“Merger Sub”),
and UniTek Holdings, Inc., a Delaware corporation (“Holdings”), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger
Sub merged (the “Merger”) with and into Holdings and Holdings became a wholly
owned subsidiary of Berliner.  The time on January 27, 2010 at which the
Merger became effective is referred to herein as the “Effective Time.” Following
the Merger, Berliner did business as UniTek Global Services, Inc. and officially
changed its name to UniTek Global Services, Inc. effective on June 4,
2010.




2. Basis of
Presentation





The
accompanying unaudited condensed consolidated financial statements as of October
2, 2010, and for the three and nine months ended October 2, 2010 and October 3,
2009, have been prepared by us in accordance with accounting standards generally
accepted in the United States for interim financial statements and pursuant to
the rules and regulations of the United States Securities and Exchange
Commission (“SEC”). In the Company’s opinion, the accompanying unaudited
condensed consolidated financial statements include all adjustments, which are
of a normal and recurring nature except for the purchase accounting adjustments
as described in Note 4, necessary to present fairly the results of its
operations and cash flows at the dates and for the periods indicated.  The
results of operations for the interim periods are not necessarily indicative of
the results for the full fiscal year.  Certain prior period amounts have
been reclassified to conform to the current presentation.




The
accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in the Company’s Transition Report on Form 10-K for the fiscal year ended
December 31, 2009 filed with the SEC on March 31, 2010, and in its Current
Report on Form 8-K filed with the SEC on August 13, 2010.




In the
Merger of Berliner and Holdings, Holdings is the accounting acquirer with
Berliner the legal acquirer and registrant.  Upon the completion of the
Merger, Berliner changed its fiscal year end from June 30 to December 31. 
Berliner filed a transition report on Form 10-K on March 31, 2010.  As the
accounting acquirer, Holdings’ historical results are presented for comparison
purposes with results of Berliner included in the consolidated results of the
Company after the Effective Time.





On August
6, 2010,  a requisite majority of the Company’s stockholders approved
a reverse split of the Company’s common stock at a ratio not less than
one-to-eight and not more than one-to-30.  The Board approved a
one-to-28 reverse stock split in conjunction with the equity offering discussed
in Note 17.  The number of shares and earnings per share included in this
Form 10-Q have been retrospectively adjusted to reflect this reverse split that
occurred on November 9, 2010 in conjunction with the closing of the equity
offering.





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, accruals for legal obligations, medical insurance and workers
compensation insurance and valuation of goodwill and intangible
assets.


7


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





In the
ordinary course of accounting for items discussed above, the Company makes
changes in estimates as appropriate and as the Company becomes aware of
circumstances surrounding those estimates. Such changes in estimates are
reflected in reported results of operations in the period in which the changes
are made and, if material, their effects are disclosed in the notes to the
consolidated financial statements.





Principles
of Consolidation





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





Cash
and Cash Equivalents





Cash and
cash equivalents include instruments with original maturities of three months or
less.





Accounts
Receivable and Allowance for Doubtful Accounts





Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the Company’s best estimate of
the amount of probable credit losses in its existing accounts receivable. A
specific reserve for bad debts is recorded for known or suspected doubtful
accounts receivable. For all other accounts, the Company recognizes a general
reserve for bad debts based on the length of time receivables are past due and
historical write-off experience. Account balances are charged off against the
allowance when the Company believes it is probable that the receivable will not
be recovered.





Inventories





Inventories
consist primarily of materials and supplies purchased from the customer and
other suppliers used for installation fulfillment services and wireless
construction. Inventories are stated at the lower of cost or market, as
determined by the first-in, first out method for the fulfillment segment and
average cost for the engineering and construction segment.





Prepaid
Expenses and Other Current 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.  All depreciation of property and equipment is
included in the condensed consolidated statements of operations in Depreciation
and Amortization.





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


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





The
Company amortizes intangible assets, consisting of customer contracts, customer
relationships and non-compete agreements from acquired businesses, on a
straight-line basis over the 12- to 84-month lives of those agreements. 
All amortization of amortizable intangible assets is included in the condensed
consolidated statements of operations in Depreciation and
Amortization.




Other
Long-Term Assets





Costs
associated with obtaining long-term debt are deferred and amortized to interest
expense on a straight-line basis, which approximates the effective interest
method, over the term of the related debt (see Note 7).  At October 2,
2010 and December 31, 2009, $6.7 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 the percentage of
completion basis either based on direct costs incurred or on milestones
completed.  Losses are recognized when such losses become
known.




Net
Loss per Share




Basic net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the periods presented. Diluted net
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the periods plus the dilution that
would occur upon the exercise or conversion of any instruments convertible to
common stock, such as preferred stock, stock options or warrants.  Options
to purchase 0.6 million shares of common stock and warrants to purchase 0.3
million shares of common stock were excluded from the computation because the
Company reported a loss from continuing operations for each of those
periods.  Any outstanding stock options, warrants, or other instruments
that are convertible to common stock could potentially be dilutive should the
Company report net income in a future period.  The weighted average number
of common shares outstanding used to calculate the net loss per common shares
includes the automatic conversion of the Series A Convertible Preferred Stock
(see Note 9) to common stock since the Effective Time as the Company believed
the automatic conversion to be perfunctory.  This conversion was completed
on June 4, 2010, upon the filing and effectiveness of an amendment to the
Company’s certificate of incorporation.




The
Company has determined that the Series B Preferred Stock is a participating
security under Accounting Standards Codification (“ASC”) 260. Under ASC 260, a
security is considered a participating security if the security may participate
in undistributed earnings with common stock, whether that participation is
conditioned upon the occurrence of a specified event or not. In accordance with
ASC 260, a company is required to use the two-class method when computing EPS
when a company has a security that qualifies as a “participating security.” The
two-class method is an earnings allocation formula that determines EPS for each
class of common stock and participating security according to dividends declared
(or accumulated) and participation rights in undistributed earnings. A
participating security is included in the computation of basic EPS using the
two-class method. Under the two-class method, basic EPS for the Company’s Common
Stock is computed by dividing net income applicable to common stock by the
weighted-average common shares outstanding during the period. Diluted EPS for
the Company’s Common Stock is computed using the more dilutive of the two-class
method or the if-converted method.




However,
since the Company reported a loss for the quarter and nine months ended October
2, 2010, it was required by the ASC 260 to use basic weighted-average common
shares outstanding, rather than diluted weighted-average common shares
outstanding, when calculating diluted EPS for the quarter and nine months ended
October 2, 2010. In addition, since the Company reported a loss from continuing
operations for the quarter and nine months ended October 2, 2010, the Series B
Preferred Stock was not deemed to be a participating security for the quarter
and nine months ended October 2, 2010 pursuant to ASC 260, since the holders of
the Series B Preferred Stock do not have a contractual obligation to share in
the losses from continuing operations of the Company.


9


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





Fair
Value of Financial Instruments





The
carrying values of cash and cash equivalents, accounts receivable, other current
assets, accounts payable and accrued liabilities approximate fair value due to
the short-term nature of those instruments. The carrying value of the capital
lease obligations approximates fair value because they bear interest at rates
currently available to the Company for debt with similar terms and remaining
maturities. The fair values of debt and derivative instruments are discussed in
Notes 7 and 8, respectively.





Income
Taxes





The
Company follows the asset and liability method of accounting for income taxes.
Income taxes consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of assets and liabilities for
financial and income tax reporting. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be deductible or taxable when the assets and liabilities are recovered or
settled. Deferred taxes are also recognized for operating losses that are
available to offset future taxable income. Deferred tax assets and liabilities
are reflected at income tax rates applicable to the period in which the deferred
tax assets and liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. A valuation allowance is recorded
against a deferred tax asset when it is determined to be more-likely-than-not
that the asset will not be realized.




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




The
Company recorded income tax expense of $48 thousand and $0.3 million for the
three months ended October 2, 2010 and October 3, 2009, respectively. 
  For the nine months ended October 2, 2010 and October 3, 2009, the
Company recorded income tax expense of $0.2 million and $1.1 million,
respectively. The 2010 tax expense represents the estimated tax expense from the
Company’s Canadian operations.  The 2009 tax expense is due to differences
between book and tax amortization of intangible assets.




At
October 2, 2010, the Company had net operating loss carry forwards for U.S.
federal and state income tax purposes of approximately $43 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 U.S. deferred tax assets do not satisfy the realization
criteria set forth in ASC 740, and accordingly, has recorded a valuation
allowance for the entire net U.S. deferred tax asset.





Leases





The
Company leases vehicles primarily for performing fulfillment services to the pay
television industry. Leases are accounted for either as operating or capital
depending on the terms of the lease. Each lease is reviewed as to the terms and
a determination is made whether the vehicle is an operating or capital lease.
Operating lease payments are expensed as incurred.  Capital leases are
included on the consolidated balance sheets as 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 October 2, 2010 and for the three and
nine months ended October 2, 2010 and October 3, 2009 include stock option
expense as compensation expense. Pretax stock-based compensation expense
recognized for the three months ended October 2, 2010 and October 3, 2009 was
$0.4 million and $0.5 million, respectively. Pretax stock-based compensation
expense recognized for the nine months ended October 2, 2010 and October 3, 2009
was $1.2 million and $1.4 million, respectively. For the three and nine months
ended October 2, 2010 and October 3, 2009, all stock-based compensation expense
was included in selling, general, and administrative expenses in the condensed
consolidated statements of operations.


10


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





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 primarily 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 is ultimately expected to vest. The Company estimates
forfeitures at the time of grant in order to estimate the amount of stock-based
awards that will ultimately vest. Limited historical forfeiture data is
available. As such, management has based the estimated forfeiture rate on
expected employee turnover. The Company records the cash flows resulting from
the tax deductions in excess of the compensation cost recognized for those
options (excess tax benefit) as financing cash flows.





Comprehensive
Loss





Comprehensive
loss is a measure of net loss and all other changes in equity that result from
transactions other than those with shareholders.  Comprehensive loss
consists of net loss and foreign currency translation adjustments.





Comprehensive
loss consisted of the following (in thousands):





Three Months Ended
                  
                  
                  Nine Month EndedOctober 2,
                    2010
                  
                  
                  October 3,
                    2009
                  
                  
                  October 2,
                    2010
                  
                  
                  October 3,
                    2009Net
      loss
                  
                  $
                  (3,875
                  )
                  
                  $
                  (6,982
                  )
                  
                  $
                  (18,458
                  )
                  
                  $
                  (23,705
                  )Foreign
      currency translation (loss) gain
                  
                  
                  124
                  
                  
                  
                  90
                  
                  
                  
                  28
                  
                  
                  
                  173Comprehensive
      loss
                  
                  
                  (3,751
                  )
                  
                  
                  (6,892
                  )
                  
                  
                  (18,430
                  )
                  
                  
                  (23,532
                  )





Recent
Accounting Pronouncements





In
January 2010, an amendment to the Financial Accounting Standards Board (“FASB”)
fair value guidance was issued. This amendment requires disclosures of transfers
into and out of Levels 1 and 2, more detailed roll forward reconciliations of
Level 3 recurring fair value measurements on a gross basis, fair value
information by class of assets and liabilities, and descriptions of valuation
techniques and inputs for Level 2 and 3 measurements. The Company adopted this
amendment during the quarter ended April 3, 2010.





In
October 2009, the FASB issued new guidance for revenue recognition
with multiple deliverables. This new guidance impacts the determination of when
the individual deliverables included in a multiple-element arrangement may be
treated as separate units for accounting purposes. Additionally, this new
guidance modifies the manner in which the arrangement consideration is allocated
across the separately identified deliverables by no longer permitting the
residual method of allocating arrangement consideration. This new guidance is
required to be adopted in the first quarter of 2011; however, early adoption is
permitted.  The Company does not expect this new guidance to significantly
impact its consolidated financial statements.





In July 2010, the FASB
issued Accounting Standards Update (“ASU”) No. 2010-20, "Disclosures about
the Credit Quality of Financing Receivables and the Allowance for Credit Losses"
an update to Accounting Standards Codification (“ASC”) 310. This update enhances
the disclosure requirements of ASC 310 regarding the credit quality of financing
receivables and the allowance for credit losses and requires entities to provide
a greater level of disaggregated information about the credit quality of
financing receivables and the allowance for credit losses. In addition, ASU
No. 2010-20 requires disclosure of credit quality indicators, past due
information, and modifications of its financing receivables. For public
entities, the end of period disclosure requirements of ASU No. 2010-20 are
effective for interim and annual reporting periods ending on or after
December 15, 2010. The disclosures about activity that occurs during a
reporting period are effective for interim and annual reporting periods
beginning on or after December 15, 2010.The Company does not expect
these new standards to significantly impact its consolidated financial
statements.





4. 
       Berliner-UniTek Holdings
Merger





On
January 27, 2010, Berliner and Holdings entered into the Merger Agreement. 
Pursuant to the terms and conditions of the Merger Agreement, at the Effective
Time, each outstanding share of common stock of Holdings (the “Holdings Common
Stock”) (prior to adjusting for the one-for-28 reverse stock-split effected on
November 9, 2010) 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 of 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.


11


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





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 of the consideration paid for Berliner was $27.5 million, including
$19.9 million of equity and the assumption of debt with a fair value of $7.6
million.  The fair value of the equity was determined based upon the
underlying value of the Unitek stock as determined by a third-party valuation
and the exchange rate established in the Merger agreement.  The following
allocation of the purchase price to the fair value of tangible and intangible
assets, and the useful lives of these assets, remains preliminary as the Company
continues to assess the valuation of acquired assets and liabilities and any
adjustments to the purchase price based on the final net working capital. 
The following table summarizes the estimated fair value of the consideration
paid for Berliner and the preliminary allocation of the purchase price to the
fair value of assets acquired and liabilities assumed at the date of acquisition
(in thousands):





Cash
                    
                    $
                    336Accounts
      receivable
                    
                    
                    25,964Inventories
                    
                    
                    898Prepaid
      expenses and other current assets
                    
                    
                    2,686Property
      and equipment
                    
                    
                    2,649Amortizable
      intangible assets
                    
                    
                    4,658Goodwill
                    
                    
                    5,675Other
      assets
                    
                    
                    289Accounts
      payable and accrued expenses
                    
                    
                    (
      14,501
                    )Other
      liabilities
                    
                    
                    (534
                    )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 three- and nine-month periods ended October 2, 2010, the Merger
contributed revenue of approximately $23.5 million and $66.1 million and
operating income of $0.4 million and $0.0 million, respectively.  The
Company has recognized goodwill of $5.7 million, which is not
tax-deductible, arising from the acquisition representing the value of the
existing workforce as well expected synergies from the combination of
operations.  The goodwill associated with the Merger is included in the
engineering and construction segment’s assets.





The
following pro forma data presents revenue and loss from continuing operations as
if the Merger had occurred at the beginning of the respective annual reporting
periods (in thousands):





Three Months Ended
                  
                  
                  Nine months EndedOctober 2, 2010
                  
                  
                  October 3,
                    2009
                  
                  
                  October 2,
                    2010
                  
                  
                  October 3,
                    2009Revenue
                  
                  $
                  110,121
                  
                  
                  $
                  90,294
                  
                  
                  $
                  311,329
                  
                  
                  $
                  255,076Loss
      from continuing operations
                  
                  
                  (3,402
                  )
                  
                  
                  (8,132
                  )
                  
                  
                  (17,497
                  )
                  
                  
                  (31,563
                  )




5. 
       Accounts Receivable and Concentration
of Credit Risk





Accounts
receivable and unbilled revenue, net of allowances, at October 2, 2010 and
December 31, 2009, consist of the following (in thousands):




October 2,
                  
                  
                  December 31,2010
                  
                  
                  2009Accounts
      receivable
                  
                  $
                  45,283
                  
                  
                  $
                  19,584Unbilled
      revenue
                  
                  
                  23,225
                  
                  
                  
                  6,42568,508
                  
                  
                  
                  26,009Allowance
      for doubtful accounts
                  
                  
                  (1,575
                  )
                  
                  
                  (1,329
                  )Total
                  
                  $
                  66,933
                  
                  
                  $
                  24,680


12


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





Unbilled
revenue principally represents the value of services rendered to customers not
billed as of the balance sheet date.  Unbilled revenue is generally billed
within three months subsequent to the provision of the services.





Credit
risk with respect to accounts receivable was concentrated with three customers
at October 2, 2010.  These customers accounted for approximately $34.2
million (51%) of the accounts receivable at October 2, 2010.  For the three
and nine months ended October 2, 2010, the Company derived approximately $69.2
million (63%) and $187.2 million (61%), respectively, of its total revenue from
its two largest customers.  Each of these customers represented in excess
of 10% of the Company’s total net revenue. For the three and nine months ended
October 3, 2009, the Company derived $57.6 million (79%) and $171.5 million
(82%), respectively of its total revenue from its three largest customers. 
These revenues were reported as a component of the Fulfillment segment
revenues.




6. 
       Goodwill and Intangible
Assets





The
following table summarizes the changes in the carrying amount of the Company’s
goodwill for the nine months ended October 2, 2010 (in thousands):




Beginning
      balance, December 31, 2009
                  
                  $
                  137,827Goodwill
      associated with Merger
                  
                  
                  5,675Other
      adjustments
                  
                  
                  (27
                  )Ending
      balance, October 2, 2010
                  
                  $
                  143,475




Other
intangible assets consisted of the following (in thousands):




October 2,
                  
                  
                  December 31,2010
                  
                  
                  2009Amortizable
      intangible assets:Customer
      relationships
                  
                  $
                  74,727
                  
                  
                  $
                  70,468Non-compete
      agreements
                  
                  
                  1,433
                  
                  
                  
                  1,025Total
      amortizable intangible assets
                  
                  
                  76,160
                  
                  
                  
                  71,493Accumulated
      amortization:Customer
      relationships
                  
                  
                  55,268
                  
                  
                  
                  43,904Non-compete
      agreements
                  
                  
                  956
                  
                  
                  
                  648Total
      accumulated amortization
                  
                  
                  56,224
                  
                  
                  
                  44,552Amortizable
      intangible assets, net
                  
                  $
                  19,936
                  
                  
                  $
                  26,941





The
estimated amortization expense for the three months ending December 31, 2010,
each of the following three years, and thereafter is as follows (in
thousands):




Three
      months ending December 31, 2010
                        
                        $
                        3,4622011
                        
                        
                        7,9982012
                        
                        
                        6,2522013
                        
                        
                        1,049Thereafter
                        
                        
                        1,175Total
                        
                        $
                        19,936


13


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)




7. 
       Long-Term Debt





Long-term
debt consisted of the following (face value approximates fair value) (in
thousands):




October 2,
                  
                  
                  December 31,2010
                  
                  
                  2009First
      Lien Credit Agreement:Revolving
      Credit Facility
                  
                  $
                  7,000
                  
                  
                  $
                  11,500Term
      B Credit Facility, net of debt discount of $2,847
                  
                  
                  83,788
                  
                  
                  
                  75,503Term
      C Credit Facility
                  
                  
                  19,500
                  
                  
                  
                  19,500110,288
                  
                  
                  
                  106,503Second
      Lien Credit Agreement:Term
      Facility
                  
                  
                  25,000
                  
                  
                  
                  25,000Loan
      Authorization AgreementHoldings
      Revolving Facility
                  
                  
                  30,258
                  
                  
                  
                  28,666Total
      debt
                  
                  
                  165,546
                  
                  
                  
                  160,169Less
      current portion
                  
                  
                  33,048
                  
                  
                  
                  33,006Long-term
      debt, net of current portion
                  
                  $
                  132,498
                  
                  
                  $
                  127,163




Future
maturities of long-term debt, including $2,847 of debt discount, are as
follows (in thousands):




Three
      months ending December 31, 2010
                    
                    $
                    30,9562011
                    
                    
                    2,7902012
                    
                    
                    134,647Total
                    
                    $
                    168,393




First
Lien Credit Agreement




The
Company is party to the First Lien Credit Agreement, dated September 27, 2007
(the “First Lien Credit Agreement”), which provides for a First Lien Revolving
Credit Facility (the “Revolving Credit Facility”), a First Lien Term B Credit
Facility (the “Term B Credit Facility”) and a First Lien Term C Credit Facility
(the “Term C Credit Facility”). The Company entered into two amendments with the
lenders under the First Lien Credit Agreement in 2009. The first amendment, in
June 2009, modified certain covenants in return for a 1% fee and an
increase in the interest rate. The second amendment, in December 2009,
provided retroactive covenant relief for certain matters as of December 31,
2008, modified certain financial covenants through September 2012 pending
meeting the required terms for closing the amendment and provided forbearance
through February 15, 2010 until certain terms were met. These terms were
met with an infusion of equity and the closing of the Merger in
January 2010.




The
Revolving Credit Facility provides loans in a maximum amount of $20 million and
matures on September 27, 2012. In connection with the closing of an
amendment in January 2010, the interest rate is, at the Company’s option, either
a rate of one-half of 1% per annum above the Federal Funds Rate plus 5.0% for
base rate advances or the Eurodollar rate plus 6% provided that the rate will
increase 75 basis points if the Company’s Leverage Ratio (as defined in the
First Lien Credit Agreement) exceeds a certain level. Unused borrowings under
the Revolving Credit Facility are subject to a 1% commitment fee per annum. As
of October 2, 2010, the Company had drawn $7.0 million on the Revolving Credit
Facility. At October 2, 2010 and December 31, 2009, $7.0 million and $11.5
million, respectively, of borrowings under the Revolving Credit Facility are
classified as long-term debt because the Company intends that such amounts would
remain outstanding under this agreement for an uninterrupted period extending
beyond one year from the balance sheet date.  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 $93 million,
including the Third Incremental Term B Facility described below.  As of
October 2, 2010, $86.6 million (including the debt discount of $2,847) 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.


14


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





On July
16, 2010, the Company amended its existing Term B Credit Facility to provide a
Third Incremental Term B Facility of up to $20.0 million.  Upon closing of
the amendment, $15.0 million of the facility was made available to the
Company.  The additional $5.0 million of the facility shall be available to
the Company as early as November upon the achievement of certain EBITDA levels
and covenant compliance as defined in the amendment.  The proceeds were
used to reduce the existing balance on the Revolving Credit Facility to support
future working capital needs.  The Third Incremental Term B Facility
currently bears interest at the same rate as the prior Term B facility. 
Pursuant to the terms of the amendment, the Third Incremental Term B Lenders
received warrants to purchase an aggregate of three million shares of common
stock of the Company.  The warrants have an exercise price of $0.01 per
share, vested 25% upon issuance, and the remaining warrants vest ratably through
September 1, 2012.  The warrants contain a cashless exercise provision and
provide for anti-dilution adjustments in the case of reclassifications,
consolidations, mergers or sales that impact the Company’s common stock. 
The Company also agreed to pay to the Third Incremental Term B Lenders a
deferred fee in cash up to a maximum of $3.5 million, which will be earned by
the lenders through July 12, 2012 and is payable on March 26, 2013, or earlier
under certain circumstances contained in the amendment.  The deferred fee
payable in cash will be reduced by an amount calculated based on value realized
by or ascribed to the exercise of the warrants described above. 
Additionally, payment of the deferred fee in cash will result in the termination
of the related warrants.  As a result of the contractual relationship
between the exercise of the warrants and the payment of the deferred fee, the
Company considers them to be separate financial instruments that should be
measured at fair value and recorded as a discount to the debt issued under the
amendment, and classified as liabilities in the accompanying condensed
consolidated balance sheet.  The estimated fair value of this instrument is
$3.2 million, which was calculated using probability-weighted discounted cash
flows for the deferred fee and the fair value of the related warrants based on
the likelihood of satisfying the ultimate liability in either cash or shares of
common stock, or a combination of both.   During the three months
ended October 2, 2010, the Company recognized additional interest expense of
$0.3 million related to the accretion of both the debt, net of discount, and the
deferred fee liability to their estimated maturity values.




The Term
C Credit Facility is for $19.5 million which is the outstanding balance as of
October 2, 2010 and December 31, 2009. The interest rate was amended to 16.25%
on $8.0 million of the Term C Credit Facility for the period from April 1,
2009 to December 31, 2009 in connection with the December 2009 amendment
and 13.08% on the remaining $11.5 million.  Effective January 1, 2010,
the interest rate on the $8.0 million increased to 16.5%.




The First
Lien Credit Agreement, as amended, includes various financial covenants, the
most significant of which requires that the Company maintain certain quarterly
financial ratios and limit annual capital expenditures. On June 16, 2010, the
Company entered into an amendment with the First Lien Debt Holders to amend
certain of these financial covenants.  The required quarterly financial
ratios become more restrictive to the Company over time. The Company’s future
compliance with quarterly financial ratios is dependent on the Company’s ability
to generate profits in excess of required amounts, which is subject to the risks
and uncertainties surrounding the Company’s business.   The Company
was in compliance with all covenants at October 2, 2010.




Letter
of Credit Transaction





On March
31, 2010, the Company 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 October 2, 2010.


15


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





Second
Lien Credit Agreement




The
Company is party to the Second Lien  Credit Agreement, dated September
27, 2007 (the “Second Lien Credit Agreement”), which provides for a $25 million
term facility that matures on September 27, 2012 and is repayable in full
at that date. The Company entered into two amendments with the lenders under the
Second Lien Credit Agreement in 2009. The first amendment, in May 2009,
modified certain covenants in return for a 1% fee and an increase in the
interest rate. The second amendment, in December 2009, modified certain
financial covenants through September 2012 pending meeting the required
terms for closing the amendment. These terms were met with an infusion of equity
and the closing of the Merger.  The interest rate at December 31, 2009
was the greater of 15.0% per annum and the Eurodollar rate plus 7.25%. The
second amendment included a change in the interest rate to the current rate,
which is the greater of 15.75% per annum and the Eurodollar rate plus 7.25%.
Interest is due quarterly beginning on December 31, 2007 until maturity.
The Second Lien Credit Agreement is secured by substantially all of the assets
of the Company.  The Second Lien Credit Agreement includes various
covenants, the most significant of which requires the Company to maintain
certain quarterly financial ratios and limits capital expenditures. The required
quarterly financial ratios become more restrictive to the Company over time. The
Company’s future compliance with quarterly financial ratios is dependent on its
ability to generate profits in excess of required amounts, which is subject to
the risks and uncertainties surrounding the Company’s business.   The
Company was in compliance with all covenants at October 2, 2010.




Loan
Authorization Agreement




Holdings
entered into a Loan Authorization Agreement dated as of September 25, 2007 (the
“Loan Authorization Agreement”), with BMO Capital Markets Financing, Inc.
(“BMO”).  The Loan Authorization Agreement established an $18 million
revolving credit facility (the “Holdings Revolving Facility”), and amounts
borrowed against the Holdings Revolving Facility are evidenced by a promissory
note.  Interest is calculated based on the prime commercial rate, as
defined in the Holdings Revolving Facility.  The average interest rates
during the three and nine months ended October 2, 2010 and October 3, 2009, were
7.25% and 5.5%, respectively. Interest on the borrowings are payable quarterly,
at the option of the Company, in cash or by adding such interest to the unpaid
principal balance of the Holdings Revolving Facility. All interest incurred to
date has been added to the principal balance of the Holdings Revolving
Facility.  Accrued and unpaid interest was $5.3 million and $3.7 million at
October 2, 2010 and December 31, 2009, respectively.  The outstanding
principal of the Loan Authorization Agreement and any unpaid interest
accumulated to date are payable and mature on demand of BMO.  On March 24,
2008 and September 15, 2009, Holdings entered into amendments to the Loan
Authorization Agreement that increased the amount of maximum credit under the
Holdings Revolving Facility to $28 million and $35 million, respectively. 
The obligations under the Loan Authorization Agreement are guaranteed by two
funds of HM Capital Partners LP (“HM LP”) (see Note 12).  There are no
financial covenants included in the Loan Authorization Agreement. 
 Borrowings under the Loan Authorization Agreement are not secured or
guaranteed by any assets of the Company and its subsidiaries.





8. 
      Derivative Financial
Instruments





The
Company manages interest rate exposure by using derivative instruments to reduce
the variability of interest payments for variable-rate debt. The Company is also
required to maintain interest rate hedge agreements covering a notional amount
of not less than 50% of the debt outstanding under the First Lien Credit
Agreement for the first three years of the 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 October 2, 2010
and October 3, 2009 was $(0.1) million and $0.3 million, respectively,
which includes changes in the fair value of the collar liability. The amount of
interest expense recorded for the interest rate collar for the nine months ended
October 2, 2010 and October 3, 2009 was $(1) thousand and $0.8 million,
respectively, which includes changes in the fair value of the collar
liability.  The fair value of the interest rate collar liability was $0.3
million and $1.5 million at October 2, 2010 and December 31, 2009,
respectively, and is recorded as a component of accrued expenses in the
condensed consolidated balance sheets.





9. 
       Stockholders’ Equity





The
Company is authorized to issue 220 million shares, consisting of  (i)
200 million shares of common stock, par value $0.00002 per share and (ii) 20
million shares of preferred stock, par value $0.00002 per share.  At the
Effective Time, each outstanding share of Holdings Common Stock (prior to
adjusting for the one-for-28 reverse stock-split effected on November 9, 2010)
was converted to the right to receive 0.012 shares of Berliner Series A
Preferred Stock, in addition to 0.4 shares of Berliner Common Stock.  On
June 4, 2010, each share of Berliner Series A Preferred Stock was automatically
converted into 50 shares of UniTek Common Stock upon the filing and
effectiveness of an amendment to the Company’s certificate of
incorporation.


16


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(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 UniTek Common
Stock, such that the actual conversion ratio would currently be 50 shares of
UniTek Common Stock for each share of Berliner Series B Preferred Stock, subject
to standard anti-dilution adjustments for stock splits, dividends and similar
events.  In addition, in the event of liquidation, dissolution or winding
up of UniTek, the Berliner Series B Preferred Stock has a liquidation
preference.   As there are certain events that are considered “deemed
liquidation” events, such as a merger or consolidation or similar transaction
resulting in a change of control (as more fully defined in the Certificate of
Designation, Preferences and Rights of Series B Convertible Preferred Stock
filed with the Company’s Form 8-K on January 27, 2010) which can be influenced
by the holders of the Berliner Series B Preferred Stock, the Berliner Series B
Preferred Stock has been reflected as mezzanine equity on the accompanying
consolidated balance sheet.  At October 2, 2010, there were approximately
0.27 million shares of Berliner Series B Preferred Stock outstanding with a
liquidation value of approximately $26.5 million.




On August
6, 2010, a requisite majority of the Company’s stockholders approved a reverse
split of the Company’s common stock at a ratio not less than one-to-eight and
not more than one-to-30.  The Board approved a one-to-28 split in
conjunction with the equity offering discussed in Note 17.  The number of
shares and earnings per share included in this Form 10-Q have been adjusted to
reflect this reverse split that occurred on November 9, 2010 in conjunction with
the closing of the equity offering.





10. 
     Warrants





At
October 2, 2010, the Company had outstanding warrants to purchase up to
approximately 0.3 million shares of its common stock. The warrants exercise
prices range from $0.28 to $70.00 per share and expire from June 21, 2011 to
July 16, 2020.  The weighted average price is $41.91 per
share.




11. 
     Stock Options





At
October 2, 2010, the Company had outstanding stock options to employees to
purchase up to approximately 0.6 million shares of its common stock.  The
stock option exercise prices range from $8.40 to $38,836 per share and expire
from October 3, 2010 to January 4, 2020.  The weighted average exercise
price per share is $64.76 per share.





12. 
     Related Party Transactions





The
Company maintains certain policies and procedures for the review, approval, and
ratification of related-party transactions to ensure that all transactions with
selected parties are fair, reasonable and in the Company’s best interest. All
significant relationships and transactions are separately identified by
management if they meet the definition of a related party or a related-party
transaction. Related-party transactions include transactions that occurred
during the year, or are currently proposed, in which the Company was or will be
a participant and in which any related person had or will have a direct or
indirect material interest. All related-party transactions are reviewed,
approved and documented by the appropriate level of the Company’s management and
if necessary, the Board of Directors or a committee thereof, in accordance with
these policies and procedures.





In
connection with the Merger, on January 27, 2010, the Company entered into an
Amended and Restated Monitoring and Oversight Agreement (the “M&O
Agreement”) with HM LP.    Pursuant to the M&O Agreement, the
Company will pay HM LP an annual fee of $0.7 million in calendar year 2010, $0.7
million in calendar year 2011 and $0.8 million in calendar year 2012 and for
each calendar year thereafter, in consideration for HM LP’s provision of
financial oversight and monitoring services to the Company as they may be
requested from time to time.  Each annual fee mentioned above will be
payable in equal quarterly installments on March 31, June 30, September 30 and
December 31 of the applicable year; provided, that such payment will not be paid
unless the Total Leverage Ratio is below 3.50:1.00 at the end of the applicable
quarter, and if not paid, each such payment will accrue until the Total Leverage
Ratio is below 3.50:1.00 at any subsequent quarter at which time all accrued and
unpaid payments will become due and payable.





In
conjunction with the Merger, the Company entered into a Credit and Support
Agreement with two funds of HM LP that are parties to the guaranty of the
Holdings Revolving Facility.  The Credit and Support Agreement provides for
the payment of a credit support fee for the continued guaranty of the Company’s
performance under the Holdings Revolving Facility.  The credit support fee
is equal to 6% (or the maximum contract rate of interest permitted by law if
less than 6%) on the aggregate of the outstanding principal and accrued interest
added to the principal.  The credit support fee is payable quarterly in
cash or, at the Company’s option in shares of Series B Convertible Preferred
Stock.  For the three and nine months ended October 2, 2010, the Company
recorded $0.4 million and $1.2 million, respectively, for the credit support fee
that is included in interest expense.  The corresponding related party
liability is included with accrued liabilities at October 2, 2010 and will
subsequently be paid in cash with proceeds from the equity offering (See Note
17).


17


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)





13. 
     Legal Proceedings





From time
to time, the Company is a party to various lawsuits, claims, or other legal
proceedings and is subject, due to the nature of its business, to governmental
agency oversight, audits, investigations and review. Such actions may seek,
among other things, compensation for alleged personal injury, breach of
contract, property damage, punitive damages, civil penalties or other losses, or
injunctive or declaratory relief. Under such governmental audits and
investigations, the Company may become subject to fines and penalties or other
monetary damages. With respect to such lawsuits, claims, proceedings and
governmental investigations and audits, the Company accrues reserves when it is
probable a liability has been incurred and the amount of loss can be reasonably
estimated. The Company does not believe any of the pending proceedings,
individually or in the aggregate, will have a material adverse effect on its
consolidated results of operations, cash flows or financial
condition.




14. 
     Fair Value Measurements





FASB
accounting guidance defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the related
disclosures. In determining fair value we use quoted prices and observable
inputs. Observable inputs are inputs that market participants would use in
pricing the asset or liability based on market data obtained from sources
independent of us. The fair value hierarchy is broken down into three levels
based on the source of inputs as follows:




o
            Level 1—Valuations based on
      unadjusted quoted prices in active markets for identical assets or
      liabilities.





o
            Level 2—Valuations based on
      observable inputs and quoted prices in active markets for similar assets
      and liabilities.





o
            Level 3—Valuations based on
      inputs that are unobservable and models that are significant to the
      overall fair value
measurement.





The
following table summarizes our financial assets and liabilities measured at fair
value on a recurring basis as of October 2, 2010 and December 31, 2009 (in
thousands):




Fair Value Measurements at October 2, 2010Fair Value at
                    October 2,
                    2010
                  
                  
                  Quoted Prices
                    inActive
                    Markets
                    (Level 1)
                  
                  
                  Significant Other
                    Observable Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable Inputs
                    (Level 3)AssetsCash
      and cash equivalents
                  
                  $
                  1,688
                  
                  
                  $
                  1,688
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  $
                  1,688
                  
                  
                  $
                  1,688
                  
                  
                  $
                  -
                  
                  
                  $
                  -LiabilitiesInterest-rate
      collar
                  
                  $
                  322
                  
                  
                  $
                  -
                  
                  
                  $
                  322
                  
                  
                  $
                  -Total
                  
                  $
                  322
                  
                  
                  $
                  -
                  
                  
                  $
                  322
                  
                  
                  $
                  -


18


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)




Fair Value Measurements at December 31, 2009Fair Value at
                      December 31,
                      2009
                    
                    
                    Quoted Prices
                      in Active
                      Markets
                      (Level 1)
                    
                    
                    Significant Other
                      Observable Inputs
                      (Level 2)
                    
                    
                    Significant
                      Unobservable Inputs
                      (Level 3)AssetsCash
      and cash equivalents
                    
                    $
                    2,263
                    
                    
                    $
                    2,263
                    
                    
                    $
                    -
                    
                    
                    $
                    -Total
                    
                    $
                    2,263
                    
                    
                    $
                    2,263
                    
                    
                    $
                    -
                    
                    
                    $
                    -LiabilitiesInterest-rate collar
                    
                    $
                    1,548
                    
                    
                    $
                    -
                    
                    
                    $
                    1,548
                    
                    
                    $
                    -Total
                    
                    $
                    1,548
                    
                    
                    $
                    -
                    
                    
                    $
                    1,548
                    
                    
                    $
                    -




Derivatives




On
November 29, 2007, the Company entered into an interest-rate collar
agreement with an aggregate notional principal amount of $65 million. The collar
is used to hedge the required portion of the First Lien Credit Agreement. The
fair value of the interest-rate collar liability was $0.3 million and $1.5
million at October 2, 2010 and December 31, 2009, respectively. The Company
utilized a present value technique to fair value each derivative contract. The
Company calculated the present value of future expected cash flows using a
discount rate commensurate with the underlying risk of the debtor.




15. 
     Discontinued Operations




Discontinued
operations consist of the satellite markets provided to DIRECTV as part of the
market swaps, cable and wireless markets that were exited in 2009 and 2010 for
various operations reasons. The following table summarizes the results for the
Company’s discontinued operations for the three and nine months ended October 2,
2010 and October 3, 2009 (in thousands):




Three Months Ended
                    
                    
                    Nine Months EndedOctober 2,
                    
                    
                    October 3,
                    
                    
                    October 2,
                    
                    
                    October 3,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenues
                    
                    $
                    -
                    
                    
                    $
                    532
                    
                    
                    $
                    253
                    
                    
                    $
                    11,767Cost
      of revenues
                    
                    
                    2
                    
                    
                    
                    690
                    
                    
                    
                    682
                    
                    
                    
                    10,692Gross
      margin
                    
                    
                    (2
                    )
                    
                    
                    (158
                    )
                    
                    
                    (429
                    )
                    
                    
                    1,075Depreciation
      and amortization
                    
                    
                    -
                    
                    
                    
                    62
                    
                    
                    
                    32
                    
                    
                    
                    631Operating
      income (loss)
                    
                    
                    (2
                    )
                    
                    
                    (220
                    )
                    
                    
                    (461
                    )
                    
                    
                    444Gain
      on sale of assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (111
                    )Income
      (loss) from discontinued operations before income taxes
                    
                    
                    (2
                    )
                    
                    
                    (220
                    )
                    
                    
                    (461
                    )
                    
                    
                    555Tax
      benefit from discontinued operations
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Income
      (loss) from discontinued operations
                    
                    $
                    (2
                    )
                    
                    $
                    (220
                    )
                    
                    $
                    (461
                    )
                    
                    $
                    555


19


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)




16. 
     Segment Reporting




The
Company reports its financial results on the basis of two reportable segments:
(1) fulfillment and (2) engineering and construction.  The segments are
determined in accordance with how management views and evaluates our business.
Selected segment financial information for the three and nine months ended
October 2, 2010 and October 3, 2009, is presented below (in
thousands):




Three Months EndedOctober 2, 2010
                  
                  
                  October 3, 2009Fulfillment
                  
                  
                  Engineering &
                    Construction
                  
                  
                  Total
                  
                  
                  Fulfillment
                  
                  
                  Engineering &
                    Construction
                  
                  
                  TotalRevenue
                  
                  $
                  73,758
                  
                  
                  $
                  36,363
                  
                  
                  $
                  110,121
                  
                  
                  $
                  63,426
                  
                  
                  $
                  9,153
                  
                  
                  $
                  72,579Cost
      of revenue
                  
                  
                  59,562
                  
                  
                  
                  32,371
                  
                  
                  
                  91,933
                  
                  
                  
                  52,643
                  
                  
                  
                  8,684
                  
                  
                  
                  61,327Gross
      profit
                  
                  
                  14,196
                  
                  
                  
                  3,992
                  
                  
                  
                  18,188
                  
                  
                  
                  10,783
                  
                  
                  
                  469
                  
                  
                  
                  11,252Selling,
      general and administrative expenses
                  
                  
                  6,229
                  
                  
                  
                  3,584
                  
                  
                  
                  9,813
                  
                  
                  
                  4,249
                  
                  
                  
                  1,161
                  
                  
                  
                  5,410Depreciation
      and amortization
                  
                  
                  4,887
                  
                  
                  
                  1,312
                  
                  
                  
                  6,199
                  
                  
                  
                  4,291
                  
                  
                  
                  3,060
                  
                  
                  
                  7,351Operating
      income (loss)
                  
                  $
                  3,080
                  
                  
                  $
                  (904
                  )
                  
                  $
                  2,176
                  
                  
                  $
                  2,243
                  
                  
                  $
                  (3,752
                  )
                  
                  $
                  (1,509
                  )Interest
      expense
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,972
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  4,897Other
      expense, net
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  29
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  59Loss
      from continuing operations before income taxes
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (3,825
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (6,465
                  )




Nine months EndedOctober 2, 2010
                  
                  
                  October 3, 2009Fulfillment
                  
                  
                  Engineering &
                    Construction
                  
                  
                  Total
                  
                  
                  Fulfillment
                  
                  
                  Engineering&
                    Construction
                  
                  
                  TotalRevenue
                  
                  $
                  201,969
                  
                  
                  $
                  102,959
                  
                  
                  $
                  304,928
                  
                  
                  $
                  177,883
                  
                  
                  $
                  32,608
                  
                  
                  $
                  210,491Cost
      of revenue
                  
                  
                  165,066
                  
                  
                  
                  92,704
                  
                  
                  
                  257,770
                  
                  
                  
                  151,605
                  
                  
                  
                  29,783
                  
                  
                  
                  181,388Gross
      profit
                  
                  
                  36,903
                  
                  
                  
                  10,255
                  
                  
                  
                  47,158
                  
                  
                  
                  26,278
                  
                  
                  
                  2,825
                  
                  
                  
                  29,103Selling,
      general and administrative expenses
                  
                  
                  16,828
                  
                  
                  
                  10,704
                  
                  
                  
                  27,532
                  
                  
                  
                  14,038
                  
                  
                  
                  4,168
                  
                  
                  
                  18,206Depreciation
      and amortization
                  
                  
                  16,189
                  
                  
                  
                  3,723
                  
                  
                  
                  19,912
                  
                  
                  
                  11,628
                  
                  
                  
                  9,156
                  
                  
                  
                  20,784Operating
      income (loss)
                  
                  $
                  3,886
                  
                  
                  $
                  (4,172
                  )
                  
                  $
                  (286
                  )
                  
                  $
                  612
                  
                  
                  $
                  (10,499
                  )
                  
                  $
                  (9,887
                  )Interest
      expense
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  17,385
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  13,202Other
      expense, net
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  175
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  104Loss
      from continuing operations before income taxes
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (17,846
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (23,193
                  )




20


UniTek
Global Services, Inc. and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Unaudited)


At the
quarter ended October 2, 2010, the total assets of the fulfillment segment were
$175.6 million and the engineering and construction segment were $98.8
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 $1.2 million in the assets of the
fulfillment segment was primarily from higher working capital.  The
increase of $41.4 million in the engineering and construction assets compared to
December 31, 2009 is primarily the $45.1 million of assets from the operations
of Berliner which have been included in the Company’s consolidated results since
the date of the Merger, offset by changes in working capital.





17. 
     Subsequent Events




The
Company evaluated all subsequent events through the date that the condensed
consolidated financial statements were issued.





On
October 29, 2010, the Company filed an information statement stating that a
requisite majority of its stockholders have approved a reverse split of the
Company’s common stock at a ratio of one-to-two.  The Company expects this
reverse split to become effective in the fourth quarter of 2010.  As of the
filing date of these financial statements, this reverse split has not
occurred.





On
November 10, 2010, the Company’s Registration Statement on Form S-1, filed with
the SEC on August 16, 2010, and as amended on October 28, 2010, for the purpose
of raising additional capital was declared effective by the SEC.   On
November 16, 2010, the Company completed an underwritten public offering of
19,000,000 shares of common stock at a price of $4.75 per share.  After
deducting underwriting fees and estimated offering costs, the Company generated
net proceeds of approximately $82.6 million.  The Company expects to use
the net proceeds from the offering to repay approximately $61.9 million of
indebtedness, with the remaining net proceeds to be used for general corporate
purposes, including for working capital to support the execution of the
Company’s backlog.  The
amounts outstanding under the Holdings Revolving Facility will be paid in full
terminating the Loan Authorization Agreement and the related Credit and Support
Agreement.


Costs
directly associated with the offering were capitalized and recorded as deferred
offering costs in other assets prior to the closing of the offering.  We
filed our initial Registration Statement on Form S-1 with the SEC on August 16,
2010, which was declared effective on November 10, 2010.  Deferred offering
costs were approximately $0.5 million as of October 2, 1010, which will be
reclassified to additional paid-in capital upon the closing of the
offering.





In
connection with the closing of the offering on November 16, 2010 and as amended
on October 28, 2010, the parties to the M&O Agreement have agreed to
terminate the M&O Agreement and the Company has agreed to pay a termination
fee of $4.3 million (payable in cash or stock at the Company’s discretion) that
would only become payable upon certain conditions being met as outlined in the
agreement.  As of the date of this filing, these conditions have not been
met.





Also in
connection with the offerings, the Company issued 5,972,125 shares of common
stock in exchange for all of the outstanding shares of Series B.  The
number of shares considered the two-for-one liquidation preference attributable
to the Series B Convertible Preferred Stock as well a price per share of
common stock equal to a 6.5% discount to the $4.75 offering
price.


21




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





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




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





Note
Regarding Forward-Looking Statements





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




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




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




§
            our financial condition and
      strategic direction;


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


§
            the potential generation of
      future revenue and or
earnings;


§
            our ability to adequately staff
      our service offerings;


§
            opportunities for us from new and
      emerging technologies in our
industries;


§
            our ability to obtain additional
      financing;


§
            our growth
      strategy;


§
            trends in the telecommunications,
      satellite and cable
industries;


§
            key drivers of change in our
      business;


§
            our competitive position and the
      competitive landscape; and


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





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





§
            risks related to the market for
      our shares;


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


§
            risks associated with competition
      in the telecommunications, satellite and cable
      industries;


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


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


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




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




22




Summary
of Operating Results





The
following table presents consolidated selected financial information. The
statement of operations data for the three and nine months ended October 2,
2010, and October 3, 2009, has been derived from our unaudited condensed
consolidated financial statements that, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary to
state fairly the data for such period.  We operate in two reportable
segments: (1) Fulfillment and (2) Engineering and Construction.





In the
Merger, Holdings is the accounting acquirer with Berliner the legal acquirer and
registrant.  Upon the completion of the Merger, Berliner changed its fiscal
year end from June 30 to December 31.  Berliner filed a Transition Report
on Form 10-K on March 31, 2010.  As the accounting acquirer, Holdings’
prior year results are presented for comparison purposes.  The results for
the three and nine months ending October 2, 2010 include the results of Holdings
for the entire periods and the results of Berliner after the January 27, 2010
Merger date.  The results for the three and nine months ended October 3,
2009 include only the results of Holdings.





Results
of Operations – Three Months Ended October 2, 2010 Compared to Three Months
Ended October 3, 2009





The
following table presents, for the periods indicated, a summary of our condensed
consolidated statement of operations information.





Three Months EndedOctober 2, 2010
                
                
                October 3, 2009(in thousands, except per share
      data)
                
                (unaudited)
                
                
                (unaudited)Revenues
                
                $
                110,121
                
                
                $
                72,579Cost
      of revenues
                
                
                91,933
                
                
                
                61,327Gross
      profit
                
                
                18,188
                
                
                
                11,252Selling,
      general and administrative expenses
                
                
                9,813
                
                
                
                5,410Depreciation
      and amortization
                
                
                6,199
                
                
                
                7,351Operating
      income (loss)
                
                
                2,176
                
                
                
                (1,509
                )Interest
      expense
                
                
                5,972
                
                
                
                4,897Other
      expense, net
                
                
                29
                
                
                
                59Loss
      from continuing operations before income taxes
                
                
                (3,825
                )
                
                
                (6,465
                )Income
      tax expense
                
                
                (48
                )
                
                
                (297
                )Loss
      from continuing operations
                
                
                (3,873
                )
                
                
                (6,762
                )Loss
      from discontinued operations
                
                
                (2
                )
                
                
                (220
                )Net
      loss
                
                $
                (3,875
                )
                
                $
                (6,982
                )Net
      loss per share- basic and diluted:Continuing
      operations
                
                $
                (0.79
                )
                
                $
                (1.73
                )Discontinued
      operations
                
                $
                0.00
                
                
                $
                (0.06
                )Weighted
      average shares of common stock outstanding (basic and
    diluted)
                
                
                4,885
                
                
                
                3,896Adjusted
      EBITDA (1)
                
                $
                9,254
                
                
                $
                6,479





(1) 
See description of “Adjusted EBITDA” and “Adjusted Pro Forma EBITDA”
below.





23




The
following table presents, for the dates indicated, a summary of our condensed
consolidated balance sheet information.





(in thousands)
                
                October 2,
                  2010
                
                
                December 31,
                  2009Current
      assets
                
                $
                85,410
                
                
                $
                39,206Total
      assets
                
                
                274,351
                
                
                
                231,841Current
      liabilities
                
                
                101,320
                
                
                
                80,921Long-term
      debt and capital lease obligations, net of current portion and debt
      discount
                
                
                133,312
                
                
                
                131,407Series
      B Convertible Preferred Stock
                
                
                13,265
                
                
                
                -Stockholders’
      equity
                
                
                23,268
                
                
                
                19,513




Revenues




The
following table sets forth information regarding our revenues by segment for the
three months ended October 2, 2010 and October 3, 2009.




Three Months Ended
    (unaudited)(Amounts
      in thousands)
                
                October 2, 2010
                
                
                October 3, 2009Amount
                
                
                % of Revenues
                
                
                Amount
                
                
                % of Revenues
                
                
                IncreaseFulfillment
                
                $
                73,758
                
                
                
                67.0
                %
                
                $
                63,426
                
                
                
                87.4
                %
                
                $
                10,332Engineering
      and Construction
                
                
                36,363
                
                
                
                33.0
                %
                
                
                9,153
                
                
                
                12.6
                %
                
                
                27,210Total
                
                $
                110,121
                
                
                
                100
                %
                
                $
                72,579
                
                
                
                100
                %
                
                $
                37,542




We had
revenue of $110.1 million for the three months ended October 2, 2010, compared
to $72.6 million for the three months ended October 3, 2009.  This
represents an increase of $37.5 million, or 51.7%. Of the revenue gain, $23.5
million reflects the operations of Berliner which have been included in our
consolidated results since the date of the Merger and is included in the
engineering and construction segment.




Revenue
for the fulfillment segment increased by $10.3 million, or 16.3%, from $63.4
million for the three months ended October 3, 2009 to $73.7 million for the
three months ended October 2, 2010. Revenue from the broadband cable
acquisitions we completed in the fourth quarter of fiscal 2009 accounted for
$6.1 million of this additional revenue.  The remaining portion of the
increase is attributable to growth in our existing fulfillment services
businesses.




Revenue
for the engineering and construction segment increased $27.2 million, or 297.3%,
from $9.2 million for the three months ended October 3, 2009 to $36.4 million
for the three months ended October 2, 2010.  The increase is primarily
related to the operations of Berliner which have been included in our
consolidated results since the date of the Merger.




Cost
of Revenues




The
following table sets forth information regarding our cost of revenues by segment
for the three months ended October 2, 2010 and October 3, 2009.





Three Months Ended
    (unaudited)(Amounts
      in thousands)
                
                October 2, 2010
                
                
                October 3, 2009Amount
                
                
                % of Revenues
                
                
                Amount
                
                
                % of Revenues
                
                
                IncreaseFulfillment
                
                $
                59,562
                
                
                
                80.8
                %
                
                $
                52,643
                
                
                
                83.0
                %
                
                $
                6,919Engineering
      and Construction
                
                
                32,371
                
                
                
                89.0
                %
                
                
                8,684
                
                
                
                94.9
                %
                
                
                23,687Total
                
                $
                91,933
                
                
                
                83.5
                %
                
                $
                61,327
                
                
                
                84.5
                %
                
                $
                30,606




Our cost
of revenue was $91.9 million and $61.3 million for the three months ended
October 2, 2010 and October 3, 2009, respectively.  This represents an
increase of $30.6 million, or 49.9%, during a period when sales increased 51.7%.
Cost of revenue represents 83.5% and 84.5% of total revenue for the three months
ended October 2, 2010 and October 3, 2009, respectively. Of the cost of revenue
increase, $20.8 million is related to the operations of Berliner which have been
included in our consolidated results since the date of the Merger and is
included in the engineering and construction segment.





24




Cost of
revenue for the fulfillment segment increased $6.9 million from $52.6 million
for the three months ended October 3, 2009 to $59.5 million for the three months
ended October 2, 2010. This represents an increase of 13.1% during a period when
revenue increased by 16.3% representing operational improvements made in the
fulfillment segment, as well as the impact of volume leverage.




Cost of
revenue for the engineering and construction segment increased $23.7 million
from $8.7 million for the three months ended October 3, 2009 to $32.4 million
for the three months ended October 2, 2010.  The increase is related
primarily to the operations of Berliner which have been included in our
consolidated results since the date of the Merger, combined with an increase in
volume within the wireline portion of our engineering and construction
businesses.




Gross
Profit





The
following table sets forth information regarding our gross profit by segment for
the three months ended October 2, 2010 and October 3, 2009.




Three Months Ended
    (unaudited)(Amounts
      in thousands)
                
                October 2, 2010
                
                
                October 3, 2009Amount
                
                
                % of Revenues
                
                
                Amount
                
                
                % of Revenues
                
                
                IncreaseFulfillment
                
                $
                14,196
                
                
                
                19.3
                %
                
                $
                10,783
                
                
                
                17.0
                %
                
                $
                3,413Engineering
      and Construction
                
                
                3,992
                
                
                
                11.0
                %
                
                
                469
                
                
                
                5.1
                %
                
                $
                3,523Total
                
                $
                18,188
                
                
                
                16.5
                %
                
                $
                11,252
                
                
                
                15.5
                %
                
                $
                6,936





Our gross
profit for the three months ended October 2, 2010 was $18.2 million compared to
$11.3 million for the three months ended October 3, 2009, representing an
increase of $6.9 million, or 61.6%.  Of the gross profit increase, $2.7
million is attributable to the operations of Berliner which have been included
in our consolidated results since the date of the Merger and is included in the
engineering and construction segment.  Our gross profit as a percentage of
revenue was approximately 16.5% for the three months ended October 2, 2010, as
compared to 15.5% for the three months ended October 3, 2009.




For the
fulfillment segment, gross margin increased from 17.0% for the three months
ended October 3, 2009 to 19.3% for the three months ended October 2, 2010. 
The increase is primarily related to the operational improvements in various
fulfillment markets and profitability improvements from the use of technology in
the field, dispatch cost reduction programs and other cost savings
initiatives.




For the
engineering and construction segment, gross margin increased from 5.1% to
11.0%.  The increase is primarily attributed to the addition of the
wireless business combined with operational improvements in both the wireline
and wireless portions of the engineering and construction segment.




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses (“SG&A”) for the three months ended
October 2, 2010 were $9.8 million as compared to $5.4 million for the three
months ended October 3, 2009. This represents an overall increase of $4.4
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 date of
the Merger.  The remaining increase in SG&A costs of $2.7 million is
attributable primarily to additional salary and personnel costs ($0.5
million), integration and transaction expenses related to the Merger ($0.5
million), an increase in our reserve for legal claims ($0.7 million) and
increased expenses related to the startup of our Canadian engineering and
construction segment operations ($0.3 million).





Adjusted
EBITDA, Adjusted Pro Forma EBITDA and Net income (loss) after certain non-cash
adjustments





Earnings
before interest, taxes, depreciation and amortization, or EBITDA, is a key
indicator used by our management to evaluate operating performance of our
company. While the adjusted EBITDA is not intended to replace any presentation
included in the consolidated financial statements under generally accepted
accounting principles, or GAAP, and should not be considered an alternative to
operating performance, we believe this measure is useful to investors in
assessing our performance in comparison with other companies in our industry.
This calculation may differ in method of calculation from similarly titled
measures used by other companies. We compensate for these limitations by relying
primarily on our GAAP results and using Adjusted EBITDA only as supplemental
information.





25




Net
income (loss) after certain non-cash adjustments is a key indicator used by our
management to evaluate operating performance of our company.  While
the net (loss) after certain non-cash adjustments is not intended to replace any
presentation included in the consolidated financial statements under generally
accepted accounting principles, or GAAP, and should not be considered an
alternative to operating performance, we believe this measure is useful to
investors in assessing our performance in comparison with other companies in our
industry. Specifically,
(i) non-cash compensation expense may vary due to factors influencing the
estimated fair value of performance based rewards, estimated forfeiture rates
and amounts granted, (ii) non-cash interest expense varies depending on the
timing of amendments to our debt and changes to the debt structure and (iii)
amortization of intangible assets is impacted by the Company’s acquisition
strategy and timing of acquisitions.
 
 A
reconciliation of adjusted pro forma EBITDA and net income (loss) after certain
non-cash adjustments to net loss for the three month periods is as follows
(amounts in thousands):
 
 Pro
      FormaThree
      Months Ended
                
                
                Three
      Months EndedOctober
      2, 2010
                
                
                October
      3, 2009
                
                
                October
      2, 2010
                
                
                October
      3, 2009Net
      loss
                
                $
                (3,875
                )
                
                $
                (6,982
                )
                
                $
                (3,404
                )
                
                $
                (6,982
                )Berliner
      pro forma net loss (a)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,370
                )Non-cash
      stock based compensation
                
                
                408
                
                
                
                473
                
                
                
                408
                
                
                
                497Non-cash
      interest expense
                
                
                2,144
                
                
                
                1,117
                
                
                
                2,144
                
                
                
                1,642Non-cash
      amortization
                
                
                3,369
                
                
                
                5,475
                
                
                
                3,369
                
                
                
                5,475Net
      income (loss) after certain non-cash adjustments
                
                $
                2,046
                
                
                $
                83
                
                
                $
                2,517
                
                
                $
                (738)Loss
      from discontinued operations
                
                
                2
                
                
                
                220
                
                
                
                2
                
                
                
                220Income
      tax expense
                
                
                48
                
                
                
                297
                
                
                
                48
                
                
                
                (15
                )Cash
      interest expense
                
                
                3,828
                
                
                
                3,780
                
                
                
                3,828
                
                
                
                3,880Other
      expense, non cash
                
                
                29
                
                
                
                59
                
                
                
                29
                
                
                
                39Depreciation
                
                
                2,830
                
                
                
                1,876
                
                
                
                2,830
                
                
                
                2,560Merger
      transaction costs
                
                
                471
                
                
                
                164
                
                
                
                -
                
                
                
                164Adjusted
      EBITDA/Adjusted pro forma EBITDA
                
                $
                9,254
                
                
                $
                6,479
                
                
                $
                9,254
                
                
                $
                6,110
  (a)
              Berliner
      pro forma net loss includes additional interest and amortization resulting
      from the Merger as if the Merger had occurred at the beginning of the
      periods presented.




Adjusted
pro forma EBITDA increased by 51.5% to $9.3 million for the three months ended
October 2, 2010 from $6.1 million for the three months ended October 3,
2009.  The fulfillment segment’s year over year improvement of $3.4 million
in gross profit was the main contributor to this increase.  The
adjusted pro forma EBITDA improvement also includes an additional $1.9
million of year over year adjusted pro forma EBITDA growth attributable to the
wireless business.  These increases in adjusted pro forma EBITDA were
partially offset by higher SG&A expenses to support both the combined
businesses and the increased revenue.





Depreciation
and Amortization





Depreciation
of fixed assets totaled approximately $2.7 million for the three months ended
October 2, 2010 compared to $1.7 million for the three months ended October 3,
2009.  The increase in depreciation is attributed to the Merger ($0.3
million) and depreciation from the 2009 conversion of a portion of our fleet
from operating leases to capital leases.





Amortization
of intangible assets acquired as a result of acquisitions resulted in
amortization expense of approximately $3.5 million for the three months ended
October 2, 2010 compared to $5.7 million for the three months ended October 3,
2009. The decrease is related to the impairment of the wireline
telecommunications reporting unit in 2009 that resulted in a write-down of the
customer contracts in the fourth quarter of fiscal 2009, partially offset by
increased amortization resulting from the merger with Berliner.





Interest
Expense





We
recognized $6.0 million and $4.9 million in interest expense during the three
months ended October 2, 2010 and October 3, 2009, respectively.  The
increase of $1.1 million was primarily related to $8.0 million of higher debt
($0.2 million), the credit support fee on the Holdings Revolving Facility
entered into during January 2010 ($0.4 million) and additional interest relating
to the Letter of Credit Facility entered into on March 31, 2010 ($0.3
million).





Income
Taxes




We
recorded income tax expense of $48 thousand for the three months ended October
2, 2010 and $0.3 million for the three months ended October 3, 2009. 
  The 2010 tax expense represents the estimated tax expense from our
Canadian operations.  The 2009 tax expense is due to differences between
book and tax amortization of intangible assets.





26





At
October 2, 2010, we had net operating loss carry forwards for federal and state
income tax purposes of approximately $43 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 for the
entire net deferred tax asset.





Net
Loss





We had a
net loss of $3.9 million for the three months ended October 2, 2010, compared to
a net loss of $7.0 million for three months ended October 3, 2009.  These
net losses include losses from discontinued operations of zero and $0.2 million
for the three months ended October 2, 2010 and October 3, 2009,
respectively.  The losses from discontinued operations are the result of
the closure of certain cable installation locations.





27




Results
of Operations – Nine months Ended October 2, 2010 Compared to Nine months Ended
October 3, 2009





The
following table presents, for the periods indicated, a summary of our condensed
consolidated statement of operations information.





Nine
      months EndedOctober
      2, 2010
                                          
                                          
                                          October
      3, 2009(in
      thousands, except per share data)
                                          
                                          (unaudited)
                                          
                                          
                                          (unaudited)Revenues
                                          
                                          $
                                          304,928
                                          
                                          
                                          $
                                          210,491Cost
      of revenues
                                          
                                          
                                          257,770
                                          
                                          
                                          
                                          181,388Gross
      profit
                                          
                                          
                                          47,158
                                          
                                          
                                          
                                          29,103Selling,
      general and administrative expenses
                                          
                                          
                                          27,532
                                          
                                          
                                          
                                          18,206Depreciation
      and amortization
                                          
                                          
                                          19,912
                                          
                                          
                                          
                                          20,784Operating
      loss
                                          
                                          
                                          (286
                                          )
                                          
                                          
                                          (9,887
                                          )Interest
      expense
                                          
                                          
                                          17,385
                                          
                                          
                                          
                                          13,202Other
      expense, net
                                          
                                          
                                          175
                                          
                                          
                                          
                                          104Loss
      from continuing operations before income taxes
                                          
                                          
                                          (17,846
                                          )
                                          
                                          
                                          (23,193
                                          )Income
      tax expense
                                          
                                          
                                          (151
                                          )
                                          
                                          
                                          (1,067
                                          )Loss
      from continuing operations
                                          
                                          
                                          (17,997
                                          )
                                          
                                          
                                          (24,260
                                          )Income
      (loss) from discontinued operations
                                          
                                          
                                          (461
                                          )
                                          
                                          
                                          555Net
      loss
                                          
                                          $
                                          (18,458
                                          )
                                          
                                          $
                                          (23,705
                                          )Net
      loss per share- basic and diluted:Continuing
      operations
                                          
                                          $
                                          (3.76
                                          )
                                          
                                          $
                                          (6.23
                                          )Discontinued
      operations
                                          
                                          $
                                          (0.10
                                          )
                                          
                                          $
                                          0.14Weighted
      average shares of common stock outstanding (basic and
    diluted)
                                          
                                          
                                          4,785
                                          
                                          
                                          
                                          3,896Adjusted
      EBITDA (1)
                                          
                                          $
                                          22,662
                                          
                                          
                                          $
                                          13,583


(1) See
description of “Adjusted EBITDA” and “Adjusted Pro Forma EBITDA”
below.


Revenues




The
following table sets forth information regarding our revenues by segment for the
nine months ended October 2, 2010 and October 3, 2009.




Nine
      months Ended (unaudited)(Amounts
      in thousands)
                                    
                                    October
      2, 2010
                                    
                                    
                                    October
      3, 2009Amount
                                    
                                    
                                    %
      of Revenues
                                    
                                    
                                    Amount
                                    
                                    
                                    %
      of Revenues
                                    
                                    
                                    IncreaseFulfillment
                                    
                                    $
                                    201,969
                                    
                                    
                                    
                                    66.2
                                    %
                                    
                                    $
                                    177,883
                                    
                                    
                                    
                                    84.5
                                    %
                                    
                                    $
                                    24,086Engineering
      and Construction
                                    
                                    
                                    102,959
                                    
                                    
                                    
                                    33.8
                                    %
                                    
                                    
                                    32,608
                                    
                                    
                                    
                                    15.5
                                    %
                                    
                                    
                                    70,351Total
                                    
                                    $
                                    304,928
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    210,491
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    94,437




We had
revenue of $304.9 million for the nine months ended October 2, 2010, compared to
$210.5 million for the nine months ended October 3, 2009.  This represents
an increase of $94.4 million, or 44.9%. Of the revenue gain, $66.1 million
reflects the operations of Berliner which have been included in our consolidated
results since the date of the Merger and are included in the engineering and
construction segment.




Revenue
for the fulfillment segment increased by $24.1 million, or 13.5%, from $177.9
million for the nine months ended October 3, 2009 to $202.0 million for the nine
months ended October 2, 2010. Revenue from the broadband cable
acquisitions completed in the fourth quarter of fiscal 2009 accounted for
$14.5 million in additional revenue and the timing impact of the 2009 DIRECTV
market swap added $2.8 million for the nine months ended October 2, 2010. 
The remaining portion of this increase is attributable to growth in our existing
fulfillment services business. These gains were partially offset by weather
issues in the first quarter of fiscal 2010 in the Northeast and Midwest portion
of the United States and lower customer promotions in the first quarter of 2010
as compared to 2009.





28




Revenue
for the engineering and construction segment increased $70.4 million, or 215.8%,
from $32.6 million for the nine months ended October 3, 2009 as compared to
$103.0 million for the nine months ended October 2, 2010.  The increase is
primarily related to the operations of Berliner which have been included in our
consolidated results since the date of the Merger combined with an increase in
revenues from our wireline business of $4.3 million, or 13.2%, as a result of
increased construction activity.




Cost
of Revenues




The
following table sets forth information regarding our cost of revenues by segment
for the nine months ended October 2, 2010 and October 3, 2009.




Nine
      months Ended (unaudited)(Amounts
      in thousands)
                              
                              October
      2, 2010
                              
                              
                              October
      3, 2009Amount
                              
                              
                              %
      of Revenues
                              
                              
                              Amount
                              
                              
                              %
      of Revenues
                              
                              
                              IncreaseFulfillment
                              
                              $
                              165,066
                              
                              
                              
                              81.7
                              %
                              
                              $
                              151,605
                              
                              
                              
                              85.2
                              %
                              
                              $
                              13,461Engineering
      and Construction
                              
                              
                              92,704
                              
                              
                              
                              90.0
                              %
                              
                              
                              29,783
                              
                              
                              
                              91.3
                              %
                              
                              
                              62,921Total
                              
                              $
                              257,770
                              
                              
                              
                              84.5
                              %
                              
                              $
                              181,388
                              
                              
                              
                              86.2
                              %
                              
                              $
                              76,382




Our cost
of revenue was $257.8 million and $181.4 million for the nine months ended
October 2, 2010 and October 3, 2009, respectively.  This represents an
increase of $76.4 million, or 42.1%, during a period when sales increased 44.9%.
Cost of revenues represents 84.5% and 86.2% of total revenue for the nine months
ended October 2, 2010 and October 3, 2009, respectively.  Of the cost of
revenue increase, $59.2 million is related to the operations of Berliner which
have been included in our consolidated results since the date of the Merger and
is included in the engineering and construction segment.




Cost of
revenue for the fulfillment segment increased $13.5 million from $151.6 million
for the nine months ended October 3, 2009 to $165.1 million for the nine months
ended October 2, 2010. This represents an increase of 8.9% during a period when
revenue increased by 13.5% representing operational improvements made in the
fulfillment segment, as well as the impact of volume leverage.




Cost of
revenue for the engineering and construction segment increased $62.9 million
from $29.8 million for the nine months ended October 3, 2009 to $92.7 million
for the nine months ended October 2, 2010.  The increase is related
primarily to the operations of Berliner which have been included in our
consolidated results since the date of the Merger.




Gross
Profit





The
following table sets forth information regarding our gross profit by segment for
the nine months ended October 2, 2010 and October 3, 2009.




Nine
      months Ended (unaudited)(Amounts
      in thousands)
                                
                                October
      2, 2010
                                
                                
                                October
      3, 2009Amount
                                
                                
                                %
      of Revenues
                                
                                
                                Amount
                                
                                
                                %
      of Revenues
                                
                                
                                IncreaseFulfillment
                                
                                $
                                36,903
                                
                                
                                
                                18.3
                                %
                                
                                $
                                26,278
                                
                                
                                
                                14.8
                                %
                                
                                $
                                10,625Engineering
      and Construction
                                
                                
                                10,255
                                
                                
                                
                                10.0
                                %
                                
                                
                                2,825
                                
                                
                                
                                8.7
                                %
                                
                                $
                                7,430Total
                                
                                $
                                47,158
                                
                                
                                
                                15.5
                                %
                                
                                $
                                29,103
                                
                                
                                
                                13.8
                                %
                                
                                $
                                18,055




Our gross
profit for the nine months ended October 2, 2010 was $47.2 million compared to
$29.1 million for the nine months ended October 3, 2009, representing an
increase of $18.1 million, or 62.0%.  Of the gross profit increase, $6.8
million is attributable to the operations of Berliner which have been included
in our consolidated results since the date of the Merger and is included in the
engineering and construction segment.  Our gross profit as a percentage of
revenue was approximately 15.5% for the nine months ended October 2, 2010, as
compared to 13.8% for the nine months ended October 3, 2009.





29





For the
fulfillment segment, gross margin increased from 14.8% for the nine months ended
October 3, 2009 to 18.3% for the nine months ended October 2, 2010.  The
increase is primarily related to the operational improvements in various
fulfillment markets and profitability improvements from the use of technology in
the field, dispatch cost reduction programs and other cost savings
initiatives.




For the
engineering and construction segment, gross margin increased from 8.7% to
10.0%.  The increase is primarily attributed to the addition of the
wireless business combined with operational improvements in both the wireline
and wireless portions of the engineering and construction segment.





Selling,
General and Administrative Expenses





SG&A
costs for the nine months ended October 2, 2010 were $27.5 million as compared
to $18.2 million for the nine months ended October 3, 2009. This represents an
overall increase of $9.3 million. The merger of Berliner, which has been
included in our consolidated results since the date of the Merger, contributed
an additional $5.1 million of SG&A costs.  The remaining increase in
SG&A costs was primarily from transaction costs related to the merger ($1.8
million), an increase in legal reserves ($0.7 million) and increases
expenses related to the start-up of our Canadian engineering and construction
segment operations ($0.7 million).




Adjusted EBITDA,
Adjusted Pro-Forma EBITDA and Net income (loss) after certain non-cash
adjustments




A
reconciliation of net loss to adjusted EBITDA and Net
(loss) income after certain non-cash adjustments is as follows for the
nine months ended October 2, 2010 and October 3, 2009 (amounts in
thousands):




Pro
      FormaNine
      Months Ended
              
              
              Nine
      Months EndedOctober
      2, 2010
              
              
              October
      3, 2009
              
              
              October
      2, 2010
              
              
              October
      3, 2009Net
      loss
              
              $
              (18,458
              )
              
              $
              (23,705
              )
              
              $
              (16,650
              )
              
              $
              (23,705
              )Berliner
      pro forma loss
              
              
              -
              
              
              
              -
              
              
              
              (1,308
              )
              
              
              (7,303
              )Non-cash
      stock based compensation
              
              
              1,228
              
              
              
              1,419
              
              
              
              1,312
              
              
              
              1,641Non-cash
      interest expense
              
              
              5,668
              
              
              
              3,251
              
              
              
              5,668
              
              
              
              3,776Non-cash
      amortization
              
              
              11,396
              
              
              
              16,426
              
              
              
              11,396
              
              
              
              16,426Net
      (loss) income after certain non-cash adjustments
              
              $
              (166
              )
              
              $
              (2,609
              )
              
              $
              418
              
              
              $
              (9,165
              )Loss
      (income) from discontinued operations
              
              
              461
              
              
              
              (555
              )
              
              
              461
              
              
              
              (555
              )Income
      tax expense
              
              
              151
              
              
              
              1,067
              
              
              
              151
              
              
              
              754Cash
      interest expense
              
              
              11,717
              
              
              
              9,951
              
              
              
              11,999
              
              
              
              11,224Other
      expense, non-cash
              
              
              175
              
              
              
              104
              
              
              
              175
              
              
              
              66Depreciation
              
              
              8,516
              
              
              
              4,358
              
              
              
              8,768
              
              
              
              6,450Merger
      transaction costs
              
              
              1,808
              
              
              
              174
              
              
              
              -
              
              
              
              174Pro
      forma EBIDTA from market swap
              
              
              -
              
              
              
              1,093
              
              
              
              -
              
              
              
              1,093Adjusted
      EBITDA/Adjusted pro forma EBITDA
              
              $
              22,662
              
              
              $
              13,583
              
              
              $
              21,972
              
              
              $
              10,041




(1)Berliner
pro forma net loss includes additional interest and amortization resulting from
the Merger as if the Merger had occurred at the beginning of the periods
presented.


(2)This
adjustment reflects the EBITDA impact for the fulfillment sites received from
DIRECTV as part of the market swap had the transaction been completed on January
1, 2009.




Adjusted
pro forma EBITDA increased 118.8% to $22.0 million for the nine months ended
October 2, 2010 from $10.0 million for the nine months ended October 3,
2009.  Of this increase, $10.6 million is attributable primarily to
higher gross profit within our fulfillment services segment due to higher
revenues and improved profitability from the use of technology in the field and other
operational improvements.  The adjusted pro forma EBITDA improvement also
includes an additional $5.8 million of year over year adjusted pro
forma EBITDA growth in the wireless business. These
increases in adjusted pro forma EBITDA were partially offset by higher
SG&A expenses to support both the combined businesses and the increased
revenue.





Depreciation
and Amortization





Depreciation
of fixed assets totaled approximately $8.2 million for the nine months ended
October 2, 2010 compared to $4.4 million for the nine months ended October 3,
2009.  The increase in depreciation is attributed to the Merger ($0.8
million) and depreciation from the 2009 conversion of a portion of our fleet
from operating leases to capital leases.





30




Amortization
of intangible assets acquired as a result of acquisitions resulted in
amortization expense of approximately $11.7 million for the nine months ended
October 2, 2010 compared to $16.4 million for the nine months ended October 3,
2009.  The decrease is related to the asset impairment of the wireline
telecommunications reporting unit in 2009 that resulted in a write-down of the
customer contracts in the fourth quarter of fiscal 2009, offset by increased
amortization resulting from the merger with Berliner.





Interest
Expense





We
recognized $17.4 million and $13.2 million in interest expense during the nine
months ended October 2, 2010 and October 3, 2009, respectively.  The
increase of $4.2 million was primarily due to the higher debt levels in 2010 as
a result of the Merger and working capital requirements, an increase in interest
rates from the 2009 amendments to the debt agreements, the credit support fee on
the Holdings Revolving Facility entered into during January 2010 ($1.2 million),
additional interest relating to the Letter of Credit Facility entered into on
March 31, 2010 ($0.5 million) and $1.2 million of noncash amortization of
deferred financing fees and the accretion of debt discounts.





Income
Taxes




We
recorded income tax expense of $0.2 million for the nine months ended October 2,
2010 and $1.1 million for the nine months ended October 3, 2009.  The 2010
tax expense represents the estimated tax expense from our Canadian
operations.  The 2009 tax expense is due to differences between book and
tax amortization of intangible assets.




At
October 2, 2010, we had net operating loss carry forwards for federal and state
income tax purposes of approximately $43 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 for the
entire net deferred tax asset.





Net
Loss





We had a
net loss of $18.5 million for the nine months ended October 2, 2010, compared to
a net loss of $23.7 million for nine months ended October 3, 2009.  These
net losses include a loss from discontinued operations of $0.5 million for the
nine months ended October 2, 2010 and income from discontinued operations of
$0.6 million for the nine months ended October 3, 2009.  The results from
discontinued operations are the result of the closure of certain cable
installation in 2010 and the impact of the DIRECTV market swap completed in the
first quarter of 2009.





31




LIQUIDITY
AND CAPITAL RESOURCES





At
October 2, 2010, we had consolidated current assets of approximately
$85.4 million, including cash and cash equivalents of approximately $1.7
million.  Historically, we have funded our operations primarily through
operating cash flow and borrowings under loan arrangements. Our primary
liquidity needs are for working capital, debt service, insurance collateral in
the form of cash and letters of credit and capital expenditures.  In the
past we have also used our capital resources to fund our growth through
strategic mergers and acquisitions. The principal use of cash during the nine
months ended October 2, 2010 was to fund the Merger and for working capital
purposes.





We
believe that our cash, cash equivalents and availability under our existing
Revolving Credit Facility will be sufficient to meet our anticipated cash
requirements for at least the next 12 months. If our available cash and cash
equivalents are insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or obtain an additional credit
facility. The sale of additional equity and debt securities may result in
additional dilution to our stockholders. If we raise additional funds through
the issuance of debt securities or preferred stock, these securities could have
rights senior to those of our common stock and could contain covenants that
would restrict our operations. We may require additional capital beyond our
currently forecast amounts. Any such required additional capital may not be
available on reasonable terms, if at all. If we are unable to obtain additional
financing, we may be required to reduce the scope of, delay or eliminate some or
all of our planned development and operations, which could harm our
business.




On
November 16, 2010, the Company completed an underwritten public offering of 19
million shares of common stock at a price of $4.75 per share.  After
deducting underwriting fees and estimated offering costs, the Company generated
net proceeds of approximately $82.6 million.  The Company expects to
use the net proceeds from the offering to repay approximately $61.9 million of
indebtedness, with the remaining net proceeds to be used for general corporate
purposes, including for working capital to support the execution of the
Company’s backlog.
  Below is
a summary of our debt agreements that is relevant to an understanding of our
liquidity and capital resources:





First
Lien Credit Agreement and Second Lien Credit Agreement




General




On
September 27, 2007, Acquisition entered into (1) the First Lien Credit
Agreement, by and among Acquisition, Midco, certain subsidiaries of Acquisition
as guarantors, the initial lenders, Royal Bank of Canada, as administrative
agent and collateral agent for the lenders and RBC Capital Markets, as lead
arranger and book-runner and (2) the Second Lien Credit Agreement, by and among
Acquisition, Midco, certain subsidiaries of Acquisition as guarantors, the
initial lenders, Royal Bank of Canada, as administrative agent and collateral
agent for the lenders and RBC Capital Markets, as lead arranger and
book-runner.





Availability
and Term




The
credit facilities under the First Lien Credit Agreement are (1) the Term B
Credit Facility, (2) the Term C Credit Facility and (3) the Revolving
Credit Facility, with a portion of such Revolving Credit Facility available as a
swing line facility and a portion available as a letter of credit
facility.  The Term B Credit Facility and the Revolving Credit Facility,
including the swing line loan facility and the letter of credit facility, mature
on September 27, 2012.  The Term C Credit Facility matures on the earlier
of (1) three months after the maturity date of the Term B Credit Facility
and (2) December 31, 2013.  As of October 2, 2010, the Term B Credit
Facility and the Term C Credit Facility are fully drawn at $106.1million,
excluding debt discounts of $2.8 million, and approximately $7.0
million of principal is outstanding under the Revolving Credit
Facility.





The
credit facility under the Second Lien Credit Agreement is a $25
million second lien term loan facility.  As of October 2, 2010, the
Second Lien Credit Agreement is fully drawn.  The Second Lien Credit
Agreement matures on the earlier of (1) three months after the maturity
date of the Term B Credit Facility and (2) December 31, 2013.




Interest
Rate and Fees




The Term
B Credit Facility currently bears interest at a rate per annum equal to 5.5% for
base rate advances and 6.5% of Eurodollar advanced (subject to 2.50% floor)
provided that the applicable margin shall be increased for each period in which
the Leverage Ratio is greater than 3.00:1.00 to 6.25% per annum for base rate
advances and 7.25% per annum for Eurodollar rate advances (subject to 2.5%
floor).  The Term C Credit Facility currently bears interest at a rate of
16.50% on $8 million of the debt and $13.08% on the remaining $11.5 million of
the debt.  The Second Lien Credit Facility currently bears interest at a
rate per annum equal to the greater of (1) 15.75% and (2) the
Eurodollar rate plus a margin of 7.25%.  The Revolving Credit Facility
interest rate margin is 5.0% for base rate advances and 6% of Eurodollar
advances (subject to 2.50% floor) provided that the applicable margin for the
Revolving Credit Facility shall be increased for periods in which the Leverage
Ratio is greater than 3.00:1.00 to 5.75% per annum for base rate advances and
6.75% per annum for Eurodollar rate advances (subject to 2.50%
floor).





32




Guaranties
and Security





The
obligations under the First Lien Credit Agreement are guaranteed by Midco and
certain subsidiaries of Midco (collectively, the “Guarantors”) and are secured
by a first priority lien on substantially all of the assets and property of the
Company and the Guarantors, including a pledge of all equity interests in Unitek
Acquisition and the Guarantors, other than Midco.





The
obligations under the Second Lien Credit Agreement are guaranteed by the
Guarantors and are secured by a second priority lien on substantially all of the
assets and property of the Company and the Guarantors, including a pledge of all
equity interests in Acquisition and the Guarantors, other than
Midco.





The First
Lien Credit Agreement and the Second Lien Credit Agreement contain
representations and warranties and affirmative and negative covenants that are
customary for debt facilities of this type.  In addition, the First Lien
Credit Agreement contains certain financial covenants, including, among other
things, a maximum total leverage ratio, a maximum first lien leverage ratio, a
minimum fixed charge coverage ratio, a minimum interest coverage ratio and
minimum liquidity requirements.  The Second Lien Credit Agreement also
contains total leverage ratio, maximum fixed charge coverage ratio and minimum
interest coverage ratio covenants, although in some cases the covenants
contained in the First Lien Credit Agreement are more restrictive.





The First
Lien Credit Agreement and the Second Lien Credit Agreement also include events
of default that are customary for debt facilities of this type, subject to
significant threshold amounts and cure periods.  These events of default
include, among other things, payment defaults, breaches of representations and
warranties, covenant defaults, cross-defaults to certain indebtedness and
bankruptcy.





On July
16, 2010, we amended our existing Term B Credit Facility to provide a Third
Incremental Term B Facility of up to $20 .0 million.  Upon closing of the
amendment, $15.0 million of the facility was made available to us.  The
additional $5.0 million of the facility shall be available to us as early as
November upon the achievement of certain EBITDA levels and covenant compliance
as defined in the amendment.  The proceeds were used to reduce the existing
balance on the Revolving Credit Facility to support future working capital
needs.  The Third Incremental Term B Facility currently bears interest at
the same rate as the prior Term B facility.  Pursuant to the terms of the
amendment, the Third Incremental Term B Lenders received warrants to purchase an
aggregate of 0.1 million shares of our common stock.  The warrants have an
exercise price of $0.28 per share, vested 25% upon issuance, and the remaining
warrants vest ratably through September 1, 2012.  The warrants contain a
cashless exercise provision and provide for anti-dilution adjustments in the
case of reclassifications, consolidations, mergers or sales that impact our
common stock.  We also agreed to pay to the Third Incremental Term B
Lenders a deferred fee in cash up to a maximum of $3.5 million, which will be
earned by the lenders through July 12, 2012 and is payable on March 26, 2013, or
earlier under certain circumstances contained in the amendment.  The
deferred fee payable in cash will be reduced by an amount calculated based on
value realized by or ascribed to the exercise of the warrants described
above.  Additionally, payment of the deferred fee in cash will result in
the termination of the related warrants.  As a result of the contractual
relationship between the exercise of the warrants and the payment of the
deferred fee, we consider them to be separate financial instruments that
should be measured at fair value and recorded as a discount to the debt issued
under the amendment, and classified as liabilities in the accompanying
condensed consolidated balance sheet.  The estimated fair value of this
instrument is $3.2 million, which was calculated using probability-weighted
discounted cash flows for the deferred fee and the fair value of the related
warrants based on the likelihood of satisfying the ultimate liability in either
cash or shares of common stock, or a combination of both.   During the
three months ended October 2, 2010, we recognized additional interest expense of
$0.3 million related to the accretion of both the debt, net of discount, and the
deferred fee liability to their estimated maturity values.





With the
net proceeds from the equity offering closed on November 16, 2010, we intend to
use approximately $16.3 million to repay indebtedness outstanding under our Term
B Credit Facility and approximately $15.3 million to repay indebtedness
outstanding under our Second Lien Credit Agreement.





Letter
of Credit Transaction





On March
31, 2010, we entered into the LOC Facility, via the Amendment, by and among
Acquisition, Midco, certain subsidiaries of Acquisition as guarantors, the
initial lenders under the LOC Facility, and Royal Bank of Canada, as
administrative agent and collateral agent for the lenders.  The Amendment
establishes the “Incremental Tranche added to the credit facilities established
by the First Lien Credit Agreement.  The full amount of Incremental Tranche
is solely available to Acquisition for the issuance of letters of credit in
support of Acquisition’s obligations under certain insurance policies and other
general corporate purposes.  The LOC Facility charges a 1.3333% per month
cash fee payable on issued but unfunded letters of credit and a 1.0% per annum
cash fee on the daily average unfunded amount of the LOC Facility.  Funded
letters of credit will carry an interest rate of LIBOR plus 6.75% per annum with
a 2.5% LIBOR floor.  As of October 2, 2010, there were $6.0 million in
letters of credit issued under the LOC Facility.





33




Loan
Authorization Agreement




Availability
and Term





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




The Loan
Authorization Agreement established the Holdings Revolving Facility and is
evidenced by a demand note.  The Holdings Revolving Facility is payable and
matures on demand of BMO.  As of October 2, 2010, approximately $25 million
of principal plus approximately $5.3 million in interest (calculated at a per
annum rate of 7.25%) is outstanding under the Holdings Revolving Facility. 
The lender under the Holdings Revolving Facility has the right to terminate the
Holdings Revolving Facility at any time upon demand.





Guaranties





The
obligations under the Loan Authorization Agreement are guaranteed severally, but
not jointly, by Sector Performance Fund, LP and SPF SBS LP, who are affiliates
of HM Capital Partners LLC.




With the
net proceeds from the equity offering closed on November 16, 2010, we intend to
use approximately $30.3 million to pay off the indebtedness outstanding under
the Holdings Revolving Facility.





Summary
of Cash Flows




The
following table summarizes our cash flows for the nine months ended October 2,
2010 and October 3, 2009:




For the Nine months
                      Ended(in thousands)
                    
                    October
                      2, 2010
                    
                    October
                      3, 2009Net
      cash provided by (used in) operating activities
                    
                    $
                    (3,799
                    )
                    
                    $
                    96Net
      cash used in investing activities
                    
                    $
                    (2,317
                    )
                    
                    $
                    (6,379
                    )Net
      cash provided by financing activities
                    
                    $
                    (5,591
                    )
                    
                    $
                    3,251




Net
cash provided by (used in) operating activities.




Net cash
(used in) and provided by operating activities for the nine months ended October
2, 2010 and October 3, 2009 was approximately ($3.8) million and $0.1 million,
respectively. During the nine months ended October 2, 2010, cash flow used in
operating activities primarily resulted from an increase in our working capital
due to the Merger and the longer collection period in the wireless business
combined with the overall increase in our revenues.   Accounts
receivable increased by approximately $17.0 million and accounts payable and
accrued expenses increased by approximately $5.2 million due to increased
revenue during the nine months ended October 2, 2010.  For the nine months
ended October 3, 2010, cash used in operating activities from discontinued
operations was approximately $0.4 million.





For the
nine months ended October 3, 2009, our accounts receivable increased by $6.3
million, offset by an increase in accounts payable and accrued expenses of $1.7
million.  Our inventories also decreased by $3.6 million due to lower
inventory levels in our satellite fulfillment business which was offset by an
increase in prepaid expenses and other assets of $3.5 million due to the timing
of insurance payments for the nine months ended October 3, 2009.  For the
nine months ended October 3, 2009, cash provided by discontinued operations was
approximately $1.1 million.




34




Net
cash used in investing activities.




Net cash
used in investing activities for the nine months ended October 2, 2010 and
October 3, 2009 was approximately $2.3 million and $6.4 million,
respectively.    Cash used for the purchase of fixed assets was
$2.7 million and $2.3 million for the nine months ended October 2, 2010 and
October 3, 2009, respectively. We received $0.2 million and $0.5 million in cash
proceeds from the sale of property and equipment during the nine months ended
October 2, 2010 and October 3, 2009, respectively.  During the nine months
ended October 3, 2009 we also used approximately $4.9 million of cash for the
acquisition of businesses.




Net
cash provided by financing activities.




Net cash
provided by financing activities for the nine months ended October 2, 2010 and
October 3, 2009 was approximately $5.6 million and $3.3 million,
respectively.   During the nine months ended October 2, 2010, net cash
provided by financing activities consisted primarily of $12.5 million from
issuance of preferred stock and $15.0 million from the closing of the Third
Incremental Term B Credit Facility.  These proceeds were used to reduce the
balance on the revolving credit facility, resulting in a net repayment of $4.5
million on the revolving credit facility for the nine months ended October 2,
2010.  As part of the Merger, existing Berliner debt of $7.2 million was
paid and $2.0 million was paid on the Term B Credit Facility.  Cash used
for the repayment of our capital leases and long-term debt for the nine months
ended October 2, 2010 was $5.9 million, excluding the payment made in
conjunction with the Merger. During the nine months ended October 2, 2010, we
also used $2.1 million of cash for deferred financing fees related to our term
debt and revolving credit facilities and $0.5 million for the payment of costs
associated with our equity offering completed on November 16, 2010.





During
the nine months ended October 3, 2009, net cash provided by financing activities
consisted primarily of borrowing $7.5 million under our revolving credit
facility, offset by $2.6 million in repayments of our long-term debt and capital
leases. During the nine months ended October 3, 2009, we also used $1.7 million
of cash for deferred financing fees related to our term debt and revolving
credit facilities.




Off-Balance
Sheet Arrangements





We
provide letters of credit to secure our obligations primarily related to our
insurance arrangements.  Total letters of credit issued as of November 15,
2010 was $8.7 million.





Effect
of Inflation





We do not
believe that the businesses are impacted by inflation to a significantly
different extent than the general economy.  However, there can be no
assurance that inflation will not have a material effect on the operations in
the future.




Item
4T.     Controls and Procedures




Our
management, with the participation of our Principal Executive Officer and
Principal Financial Officer, have evaluated the effectiveness of our disclosure
controls and procedures as defined in Rule 13a-15(e) and 15(d)-15(e) of the
Securities Exchange Act of 1934, as amended.  Based upon that evaluation,
such officers have concluded that our disclosure controls and procedures were
effective, as of the end of the period covered by this report, to provide
reasonable assurance that the information required to be disclosed by us in
reports filed under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that information required to be disclosed by
us in the reports we file or submit under the Securities Exchange Act of 1934,
as amended, is accumulated and communicated to our management, including our
principal executive and financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.





Changes
in Internal Control Over Financial Reporting





During
the three and nine months ended October 2, 2010, we completed the implementation
of a new Oracle enterprise resource planning software system to replace our
various legacy systems. We have modified the design and documentation of
internal control processes and procedures relating to the new system. We believe
that the new system has and will continue to strengthen our internal control
over financial reporting, and we intend to continue to add upgrades and
enhancements as needed to improve the system.  This implementation was done
to increase the efficiency of our systems and to accommodate future growth and
not as a result of any deficiencies identified in the evaluation of our controls
and procedures.  We believe these changes have not materially affected, and
are not reasonably likely to materially affect, our internal control over
financial reporting.





There
were not any other changes in internal control over financial reporting that
occurred during the most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control 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.





35




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.





In
addition, we are subject to the following claims.  We do not believe that
any of these claims has merit, intend to defend all these cases vigorously and
believe if decided adversely to us, these cases would not have a material
adverse effect on our business, financial condition and results of
operations.





Gerald
Farmer, et al. v. Direct Sat USA, LLC





On June
11, 2008, three named plaintiffs, who were formerly employed as technicians by
DirectSat USA, LLC, a UniTek subsidiary, 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.





On
February 9, 2010, plaintiffs’ counsel filed a companion case, Lashon
Jacks  v. DirectSat 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 DirectSat after June 10, 2008.





Monroe
et al. v. FTS USA, LLC and UniTek USA, LLC





On
February 15, 2008, plaintiffs, former employees of FTS USA, LLC, a UniTek
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.





Aaron
Espenscheid, et al. v. Direct Sat USA, LLC





On
October 12, 2009, a named plaintiff, who was formerly employed as a technician
by DirectSat, filed a claim in the United States District Court for the Western
District of Wisconsin, alleging violations of the FLSA and Wisconsin wage and
hour laws.





These
allegations related to the payment of overtime.  On February 3, 2010, the
named plaintiffs, joined by two other technicians at DirectSat, filed an Amended
Complaint re-alleging the previous overtime-related FLSA and state law claims,
and adding new overtime-related claims under Minnesota and Pennsylvania wage and
hour laws.





The
plaintiffs have sought and have been granted conditional
class certification for the FLSA claims, but class certification is still
pending on the state law claims.





Item
1A.  Risk Factors





There
have been no material changes to any of the risk factors disclosed in our most
recently filed Quarterly Report on Form 10-Q.





36




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





None





Item
3.  Defaults Upon Senior Securities





None.





Item
4.  (Removed and Reserved)





Item
5.  Other Information





On
September 29, 2010, Unitek Acquisition, Inc. (“Unitek Acquisition”), a Delaware
corporation and a subsidiary of UniTek Global Services, Inc. (the “Company”),
Unitek Midco, Inc., a Delaware corporation and a subsidiary of the Company
(“Unitek Midco”), certain subsidiaries of Unitek Acquisition as guarantors,
Royal Bank of Canada, as administrative agent, and the Lenders (as defined
below) entered into that certain Amendment No. 8 to the First Lien Credit
Agreement (the “Amendment”).  The Amendment amends that certain First
Lien Credit Agreement, dated as of September 27, 2007 (the “Credit Agreement”),
by and among Unitek Acquisition, Unitek Midco, certain subsidiaries of Unitek
Acquisition as guarantors and the lenders party thereto (the
“Lenders”).
 
 In light
of the Company’s offering of its common shares pursuant to the Company’s
Registration Statement on Form S-1 (Comission File No. 333-168854) (the “Form
S-1 Registration Statement”), the Amendment defines “IPO” as “the public
offering of the common stock of UniTek Global Services, Inc.,” and provides for
“Permitted Purposes” for the proceeds of an IPO, including but not limited to,
in the event;
 
 (1)           the
IPO is for less than $75,000,000, (i) the prepayment of the then outstanding
loans made pursuant to the Company’s Loan Authorization Agreement, (ii) the
payment of fees and expenses in connection with the IPO and the use of the
proceeds therefrom, (iii) any other purposes specifically set forth in the Form
S-1 Registration Statement, (iv) the prepayment of the Term B Advances (as such
term is defined in the Credit Agreement) in a minimum aggregate amount of
$4,000,000, and (v) the contribution of the remaining amount of proceeds from
the IPO on the balance sheet of the Company and its Subsidiaries reflected
either in unrestricted and available cash or Cash Equivalents or prepayment of
Revolving Credit Advances; and
 
 (2)           the
IPO is for $75,000,000 or more, (i) the prepayment of the then outstanding loans
made pursuant to the Company’s Loan Authorization Agreement, (ii) the prepayment
of the Term B Advances (as such term is defined in the Credit Agreement) in a
minimum aggregate amount of $10,000,000, (iii) subject to the prior or
substantially concurrent contribution of proceeds pursuant to clause (v) below,
the prepayment of advances under the Second Lien Term Loan Agreement (other than
the Term C Advances) in an aggregate amount of up to $10,000,000, (iv)
prepayment of certain other advances extended under the Credit Agreement, (v)
the contribution of a minimum of $15,000,000 on the balance sheet of the Company
reflected either in unrestricted and available cash or Cash Equivalents or
prepayment of Revolving Credit Advances; (vi) the payment of fees and expenses
in connection with the IPO and the use of the proceeds therefrom, and (vii) any
other purposes specifically set forth in the Form S-1 Registration
Statement.
 
 The
Company also agreed with the Lenders to pay certain fees upon consummation of
the IPO.





Item
6.  Exhibits.




(a)  
Exhibits




4.1
                        
                        Form
      of Warrant issued pursuant to the Third Incremental Term B Facility
      Amendment and Amendment No. 6 to the First Lien Credit Agreement, dated as
      of July 16, 2010 (incorporated herein by reference from Exhibit 99.2 to
      the Company’s Form 8-K filed on July 22, 2010).#10.1
                        
                        Amendment
      No. 2 to Employment Agreement, dated as of July 8, 2010, by and between
      UniTek Global Services, Inc. and Michael S. Guerriero (incorporated herein
      by reference from Exhibit 99.1 to the Company’s Form 8-K filed on July 12,
      2010).10.2
                        
                        Third
      Incremental Term B Facility Amendment and Amendment No. 6 to the First
      Lien Credit Agreement, dated as of July 16, 2010 (incorporated herein by
      reference from Exhibit 99.1 to the Company’s Form 8-K filed on July 22,
      2010).10.3
                        
                        Amendment
      No. 1 to Registration Rights Agreement, dated as of July 16, 2010
      (incorporated herein by reference from Exhibit 99.3 to the Company’s Form
      8-K filed on July 22, 2010).10.4
                        
                        Amendment
      No. 7 to the First Lien Credit Agreement, dated as of September 20, 2010
      (incorporated herein by reference from Exhibit 99.1 to the Company’s Form
      8-K filed on September 24, 2010).10.5
                        
                        Amendment
      No. 8 to the First Lien Credit Agreement, dated as of September 29, 2010
      (incorporated herein by reference from Exhibit 10.37 to the Company's
      Amendment No. 3 to Registration Statement on Form S-1 filed on October 28,
      2010).*31.1
                        
                        Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of
2002.




37




*31.2
            
            Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.**32.1
            
            Certification
      of our Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.




#
Management contract or compensatory plan or arrangement.




* Filed
herewith.




**
Furnished herewith.




38




SIGNATURES





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




UNITEK
GLOBAL SERVICES, INC.




Date:  November
      16, 2010
                  By:
                  /s/
      C. Scott HiseyC.
      Scott Hisey
                    Chief
      Executive Officer
                    (Principal
      Executive
Officer)




Date:  November
      16, 2010
                By:
                /s/
      Ronald J. LejmanRonald
      J. Lejman
                  Chief
      Financial Officer and Treasurer
                  (Principal
      Financial and Accounting Officer)




39