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 September 30, 2009





OR





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


SECURITIES
EXCHANGE ACT OF 1934





For the
transition period from _____________ to ______________




COMMISSION
FILE NUMBER 0-28579





BERLINER
COMMUNICATIONS, INC.


(Exact
Name of Registrant as Specified in Its Charter)





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




18-01
Pollitt Drive


Fair
Lawn, New Jersey 07410


(Address
of Principal Executive Offices)





(201)
791-3200


(Registrant’s
Telephone Number, Including Area Code)





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





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of “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 13, 2009, 26,515,732 shares of the registrant's common stock, $0.00002
par value per share, were outstanding.








BERLINER
COMMUNICATIONS, INC.





QUARTERLY
REPORT ON FORM 10-Q


INDEX





PAGE
      NO.PART
      I:
                FINANCIAL
      INFORMATIONItem
      1.
                Financial
      StatementsConsolidated
      Balance Sheets as of September 30, 2009 (Unaudited), and June 30,
      2009
                3Consolidated
      Statements of Operations for the three months ended September 30, 2009 and
      2008 (Unaudited)
                4Consolidated
      Statements of Cash Flows for the three months ended September 30, 2009 and
      2008 (Unaudited)
                5Consolidated
      Statement of Stockholders' Equity (Unaudited)
                7Notes
      to Consolidated Financial Statements
                8Item
      2.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                19Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                24Item
      4T.
                Controls
      and Procedures
                24PART
      II:
                OTHER
      INFORMATIONItem
      1.
                Legal
      Proceedings
                25Item
      1A.
                Risk
      Factors
                25Item
      2.
                Unregistered
      Sale of Equity Securities and Use of Proceeds
                25Item
      3.
                Defaults
      Upon Senior Securities
                25Item
      4.
                Submission
      of Matters to a Vote of Securities Holders
                26Item
      5.
                Other
      Information
                26Item
      6.
                Exhibits
                26SIGNATURES
                27


2





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Amounts
in thousands)





September 30,
                        
                        
                        June 30,2009
                        
                        
                        2009(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                        
                        $
                        2,208
                        
                        
                        $
                        1,390Accounts
      receivable, net of allowance for doubtful accounts of $98 and $200 at
      September 30, 2009 and June 30, 2009, respectively
                        
                        
                        22,971
                        
                        
                        
                        20,116Income
      tax receivable
                        
                        
                        2,521
                        
                        
                        
                        2,659Inventories
                        
                        
                        977
                        
                        
                        
                        1,005Deferred
      tax assets - current
                        
                        
                        742
                        
                        
                        
                        429Prepaid
      expenses and other current assets
                        
                        
                        742
                        
                        
                        
                        89130,161
                        
                        
                        
                        26,490Property
      and equipment, net
                        
                        
                        2,024
                        
                        
                        
                        2,239Amortizable
      intangible assets, net
                        
                        
                        416
                        
                        
                        
                        479Goodwill
                        
                        
                        2,284
                        
                        
                        
                        2,284Deferred
      tax assets - long-term
                        
                        
                        2,789
                        
                        
                        
                        2,789Other
      assets
                        
                        
                        285
                        
                        
                        
                        276Total
      Assets
                        
                        $
                        37,959
                        
                        
                        $
                        34,557LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                        
                        $
                        5,809
                        
                        
                        $
                        4,644Accrued
      liabilities
                        
                        
                        4,459
                        
                        
                        
                        3,685Line
      of credit
                        
                        
                        5,208
                        
                        
                        
                        2,967Current
      portion of long-term debt
                        
                        
                        564
                        
                        
                        
                        777Current
      portion of capital lease obligations
                        
                        
                        112
                        
                        
                        
                        11816,152
                        
                        
                        
                        12,191Long-term
      debt, net of current portion
                        
                        
                        9
                        
                        
                        
                        18Long-term
      capital lease obligations, net of current portion
                        
                        
                        165
                        
                        
                        
                        194Other
      long-term liabilities
                        
                        
                        99
                        
                        
                        
                        105Total
      liabilities
                        
                        
                        16,425
                        
                        
                        
                        12,508COMMITMENTSSTOCKHOLDERS'
      EQUITYCommon
      stock
                        
                        
                        1
                        
                        
                        
                        1Additional
      paid-in capital
                        
                        
                        25,733
                        
                        
                        
                        25,766Accumulated
      deficit
                        
                        
                        (4,200
                        )
                        
                        
                        (3,718
                        )Total
      stockholders' equity
                        
                        
                        21,534
                        
                        
                        
                        22,049Total
      liabilities and stockholders' equity
                        
                        $
                        37,959
                        
                        
                        $
                        34,557





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


3





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Amounts
in thousands, except per share data)


(Unaudited)





Three
      Months EndedSeptember
      30,2009
                
                
                2008Revenue
                
                $
                17,715
                
                
                $
                13,086Costs
      of revenue
                
                
                12,980
                
                
                
                7,475Gross
      profit
                
                
                4,735
                
                
                
                5,611Selling,
      general and administrative expenses
                
                
                5,128
                
                
                
                5,193Depreciation
      and amortization
                
                
                309
                
                
                
                303Loss
      on sale of fixed assets
                
                
                3
                
                
                
                -Income
      (loss) from operations
                
                
                (705
                )
                
                
                115Other
      (income) expenseInterest
      expense
                
                
                89
                
                
                
                60Amortization
      of deferred financing fees
                
                
                15
                
                
                
                15Interest
      income
                
                
                (4
                )
                
                
                (31
                )Other
      income
                
                
                (23
                )
                
                
                (340
                )Income
      (loss) before income taxes
                
                
                (782
                )
                
                
                411Income
      tax (benefit) expense
                
                
                (312
                )
                
                
                325Net
      income (loss) allocable to common shareholders
                
                $
                (470
                )
                
                $
                86Net
      income (loss) per share:Basic
                
                $
                (0.02
                )
                
                $
                0.00Diluted
                
                $
                (0.02
                )
                
                $
                0.00Weighted
      average number of shares outstanding:Basic
                
                
                26,516
                
                
                
                26,263Diluted
                
                
                26,516
                
                
                
                27,531





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


4





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)





Three
      Months EndedSeptember
      30,2009
                          
                          
                          2008Cash
      flows from operating activities:Net
      income (loss)
                          
                          $
                          (470
                          )
                          
                          $
                          86Adjustments
      to reconcile net income (loss) to netcash
      (used in) provided by operating activities:Depreciation
      and amortization
                          
                          
                          309
                          
                          
                          
                          322Amortization
      of deferred financing fees
                          
                          
                          15
                          
                          
                          
                          15Change
      in fair value of embedded derivative
                          
                          
                          (3
                          )
                          
                          
                          -Bad
      debt expense
                          
                          
                          (3
                          )
                          
                          
                          -Stock-based
      compensation
                          
                          
                          24
                          
                          
                          
                          37Loss
      on sale of fixed assets
                          
                          
                          3
                          
                          
                          
                          -Deferred
      tax assets, net
                          
                          
                          (311
                          )
                          
                          
                          302Changes
      in operating assets and liabilities:Accounts
      receivable
                          
                          
                          (2,522
                          )
                          
                          
                          9,653Income
      tax receivable
                          
                          
                          138
                          
                          
                          
                          -Inventories
                          
                          
                          28
                          
                          
                          
                          29Prepaid
      expenses and other current assets
                          
                          
                          135
                          
                          
                          
                          251Other
      assets
                          
                          
                          (14
                          )
                          
                          
                          (9
                          )Accounts
      payable
                          
                          
                          1,162
                          
                          
                          
                          (1,747
                          )Accrued
      liabilities
                          
                          
                          376
                          
                          
                          
                          (5,084
                          )Accrued
      income taxes
                          
                          
                          -
                          
                          
                          
                          (1,829
                          )Net
      cash (used in) provided by operating activities
                          
                          
                          (1,133
                          )
                          
                          
                          2,026Cash
      flows from investing activities:Purchases
      of property and equipment
                          
                          
                          (36
                          )
                          
                          
                          (111
                          )Proceeds
      from the sale of property and equipment
                          
                          
                          4
                          
                          
                          
                          2Net
      cash used in investing activities
                          
                          
                          (32
                          )
                          
                          
                          (109
                          )Cash
      flows from financing activities:Proceeds
      from line of credit
                          
                          
                          17,367
                          
                          
                          
                          25,054Repayment
      of line of credit
                          
                          
                          (15,126
                          )
                          
                          
                          (24,970
                          )Repayment
      of long-term debt
                          
                          
                          (222
                          )
                          
                          
                          (346
                          )Repayment
      of capital leases
                          
                          
                          (35
                          )
                          
                          
                          (35
                          )Proceeds
      from exercise of stock options and warrants
                          
                          
                          -
                          
                          
                          
                          146Reorganization
      expenses
                          
                          
                          (1
                          )
                          
                          
                          -Net
      cash (used in) provided by financing activities
                          
                          
                          1,983
                          
                          
                          
                          (151
                          )Net
      increase in cash and cash equivalents
                          
                          
                          818
                          
                          
                          
                          1,766Cash
      and cash equivalents at beginning of period
                          
                          
                          1,390
                          
                          
                          
                          3,173Cash
      and cash equivalents at end of period
                          
                          $
                          2,208
                          
                          
                          $
                          4,939





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


5




BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)





Three
      Months EndedSeptember
      30,2009
                    
                    
                    2008Supplemental
      cash flow information:Interest
      paid
                    
                    $
                    73
                    
                    
                    $
                    60Income
      taxes paid
                    
                    $
                    7
                    
                    
                    $
                    1,850





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


6





BERLINER
COMMUNICATIONS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(Amounts
in thousands except share and per share data)


(Unaudited)





Common
      Stock100,000,000 shares authorized
                    
                    
                    Additional
                    
                    
                    
                    
                    
                    Total$0.00002
      par value
                    
                    
                    Paid-in
                    
                    
                    Accumulated
                    
                    
                    Stockholders'Shares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Deficit
                    
                    
                    EquityBalance
      at June 30, 2009
                    
                    
                    26,515,732
                    
                    
                    $
                    1
                    
                    
                    $
                    25,766
                    
                    
                    $
                    (3,718
                    )
                    
                    
                    22,049Cumulative
      adjustment for fair value of warrants
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    (56
                    )
                    
                    
                    (12
                    )
                    
                    
                    (68
                    )Stock-based
      compensation
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    24
                    
                    
                    
                    -
                    
                    
                    
                    24Reorganization
      expenses
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    (1
                    )
                    
                    
                    -
                    
                    
                    
                    (1
                    )Net
      loss
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (470
                    )
                    
                    
                    (470
                    )Balance
      at September 30, 2009
                    
                    
                    26,515,732
                    
                    
                    $
                    1
                    
                    
                    $
                    25,733
                    
                    
                    $
                    (4,200
                    )
                    
                    $
                    21,534





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


7


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





1. Business





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





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





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





During
fiscal 2007, we purchased the assets of three businesses in our industry which
expanded our presence primarily in the West and Southwest portions of the United
States.





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





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





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





2. Basis
of Presentation





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




3.     Accounting
Policies




Basis of Presentation, Use of
Estimates





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


8


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





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





We follow
accounting standards set by the Financial Accounting Standards Board (“FASB”).
The FASB sets generally accepted accounting principles (“GAAP”) that we follow
to ensure we consistently report our financial condition, results of operations,
and cash flows. References to GAAP issued by the FASB in these footnotes are to
the FASB Accounting Standards of Codification.





Principles
of Consolidation





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





Cash
and Cash Equivalents





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





Accounts
Receivable, Allowance for Doubtful Accounts





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





Inventories





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





Prepaid
Expenses and Other Assets





Prepaid
expenses are recorded as assets and expensed in the period in which the related
services are received. At September 30, 2009 and June 30, 2009, current prepaid
expenses and other current assets totaled approximately $0.7 million and $0.9
million, respectively, and consisted mainly of insurance, income tax payments,
deferred financing fees and rents.  Other non-current assets of
approximately $0.3 million at September 30, 2009 and $0.3 million at June 30,
2009 are mainly deposits for our office and warehouse locations.





Property
and Equipment





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


9


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





Goodwill
and Other Intangible Assets





In
accordance with Topic 350, “Intangibles – Goodwill and Other”, goodwill and
indefinite lived intangible assets are no longer amortized but are assessed for
impairment on at least an annual basis. Topic 350 also requires that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for
impairment.





Topic 350
requires that goodwill be tested at least annually, utilizing a two-step
methodology. The initial step requires the Company to determine the fair value
of the business acquired (reporting unit) and compare it to the carrying value,
including goodwill, of such business. If the fair value exceeds its carrying
value, no impairment loss is recognized. However, if the carrying value of the
reporting unit exceeds its fair value, the goodwill of the unit may be impaired.
The amount, if any, of the impairment is then measured in the second step, based
on the excess, if any, of the reporting unit’s carrying value of goodwill over
its implied value.





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





Revenue
Recognition





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





Unbilled
receivables represent revenue recognized for work performed but is not yet
billed or billable, pursuant to contract terms. Deferred revenues principally
represent the value of services to customers that have been billed as of the
balance sheet date but for which the requisite services have not yet been
rendered.





Earnings Per
Share




We
calculate earnings per share in accordance with Topic 260 “Earnings Per Share”
(“EPS”). Topic 260 requires dual presentation of basic EPS and diluted EPS on
the face of the income statement for all entities with complex capital
structures.  Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options, warrants and convertible
debentures.





The
weighted average number of common shares utilized in the earnings per share
computation for the three months ended September 30, 2009 and 2008 was
26,515,732 and 26,263,351respectively.





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


10





BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





Three Months EndedSeptember 30,2009
                          
                          
                          2008Basic
      earnings per share:Numerator:Net
      income (loss) allocable to common shareholders
                          
                          $
                          (470
                          )
                          
                          $
                          86Denominator:Weighted
      average common shares outstanding
                          
                          
                          26,516
                          
                          
                          
                          26,263Net
      income (loss) per share - basic
                          
                          $
                          (0.02
                          )
                          
                          $
                          0.00Three Months EndedSeptember 30,2009
                          
                          
                          2008Diluted
      earnings per share:Numerator:Net
      income (loss) allocable to common shareholders
                          
                          $
                          (470
                          )
                          
                          $
                          86Denominator:Weighted
      average common shares outstanding
                          
                          
                          26,516
                          
                          
                          
                          26,263Effect
      of dilutive securities:Stock
      options
                          
                          
                          -
                          
                          
                          
                          626Warrants
                          
                          
                          -
                          
                          
                          
                          642Weighted
      average common shares outstanding assuming dilution
                          
                          
                          26,516
                          
                          
                          
                          27,531Net
      income (loss) per share - diluted
                          
                          $
                          (0.02
                          )
                          
                          $
                          0.00





Common
share equivalents consist of stock options and warrants, for which we used the
treasury stock method. For the three months ended September 30, 2008, 4,000
stock options were excluded from the computation of diluted net income per share
because the exercise price of these was greater than the average market price of
the Company’s common stock during the period and therefore the effect is
antidilutive.





Fair
Value of Financial Instruments





The
Company adopted Topic 820, "Fair Value Measurements and Disclosures" for cash
and cash equivalents effective January 1, 2008. This Topic defines fair value,
establishes a framework for measuring fair value, and requires expanded
disclosures about fair value measurements. Topic 820 emphasizes that fair value
is a market-based measurement, not an entity-specific measurement, and defines
fair value as the price that would be received to sell an asset or transfer a
liability in an orderly transaction between market participants at the
measurement date. Topic 820 discusses valuation techniques, such as the market
approach (comparable market prices), the income approach (present value of
future income or cash flow) and the cost approach (cost to replace the service
capacity of an asset or replacement cost), which are each based upon observable
and unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company’s market
assumptions. Topic 820 utilizes a fair value hierarchy that prioritizes inputs
to fair value measurement techniques into three broad levels:


11





BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





Level
      1:
              Observable
      inputs such as quoted prices for identical assets or liabilities in active
      markets.Level
      2:
              Observable
      inputs other than quoted prices that are directly or indirectly observable
      for the asset or liability, including quoted prices for similar assets or
      liabilities in active markets; quoted prices for similar or identical
      assets or liabilities in markets that are not active; and model-derived
      valuations whose inputs are observable or whose significant value drivers
      are observable.Level
      3:
              Unobservable
      inputs that reflect the reporting entity’s own
  assumptions.




The
Company’s investment in overnight money market institutional funds, which
amounted to $1.2 million at September 30, 2009, is included in cash and cash
equivalents on the accompanying balance sheets and is classified as a Level 1
asset.





Currently,
Topic 840 applies to the derivative that is embedded within our Warrants, which
is included in accrued liabilities in our consolidated balance sheet and is
considered a Level 2 asset. The embedded derivative was valued using the
Black-Scholes Merton pricing model. The key inputs in the model are as
follows:





September 30,
                    
                    
                    June 30,2009
                    
                    
                    2009Maturity
      date
                    
                    12/29/2011
                    
                    
                    12/29/2011Risk-free
      interest rate
                    
                    
                    0.98
                    %
                    
                    
                    1.72
                    %Price
      of Common Stock
                    
                    $
                    0.75
                    
                    
                    $
                    0.75Volatility
                    
                    
                    68
                    %
                    
                    
                    68
                    %





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





Concentration
of Credit Risk





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





Stock-based
Compensation




We
elected to adopt Topic 718 “Compensation – Stock Compensation” using a modified
prospective application, whereby the provisions of the Topic 718 applied going
forward only from the date of adoption to new (issued subsequent to July 1,
2005) stock option awards, and for the portion of any previously issued and
outstanding stock option awards for which the requisite service is rendered
after the date of adoption. All of our previously issued options had fully
vested prior to July 1, 2005.





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




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


12


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





Recently
Issued Accounting Pronouncements





In
September 2006, the FASB issued Topic 820 "Fair Value Measurements and
Disclosures" which is intended to increase consistency and comparability in fair
value measurements by defining fair value, establishing a framework for
measuring fair value and expanding disclosures about fair value measurements.
The provisions of Topic 820, which are effective for financial statements issued
for the fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years except as it relates to financial assets and
liabilities, which we adopted effective July 1, 2008. The adoption on July 1,
2009 of the remaining provisions of Topic 820 did not have a material effect to
the financial statements taken as a whole.





In May
2008, the FASB issued Topic 470.20.20 ”Debt with Conversion and Other Options”,
which applies to convertible debt that includes a cash conversion feature. Under
Topic 470.20, the liability and equity components of convertible debt
instruments within the scope of this pronouncement shall be separately accounted
for in a manner that will reflect the entity’s nonconvertible debt borrowing
rate when interest cost is recognized in subsequent periods. Topic 470.20 is
effective for fiscal years beginning after December 15, 2008. The Company
adopted Topic 470.20 effective July 1, 2009 with no material impact on the
Company’s consolidated financial position and results of
operations.





In June
2008, the FASB ratified Topic 815.40 “Derivatives and Hedging, Contracts in an
Entity’s Own Equity”. Topic 815.40 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions. It also clarifies the impact of
foreign currency denominated strike prices and market-based employee stock
option valuation instruments on the evaluation. Topic 815.40 is effective for
fiscal years beginning after December 15, 2008. The Company adopted Topic 815.40
effective July 1, 2009 with no material impact on the Company’s consolidated
financial position and results of operations. The Company recognized a liability
at July 1, 2009 of $67 thousand with a corresponding offset to Additional
paid-in capital and Cumulative adjustment to accumulated deficit, which
represented the fair value of certain warrants to purchase the Company’s Common
Stock on that date. The Company recognized other income during the three months
ended September 30, 2009 of $3 thousand representing the change in fair value of
these warrants during the period.





In May
2009, the FASB issued Topic 855 “Subsequent Events” to be effective for the
interim or annual periods ending after June 15, 2009. The objective of this
Topic is to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, this Topic sets forth
a) the period after the balance sheet date during which management of a
reporting entity  should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements; b)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and c) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The effect of the adoption of Topic 855
was not material on the Company’s consolidated financial position and results of
operations. The Company evaluated subsequent events through November 16, 2009,
which is the date the financial statements were issued.





4.           Accounts
Receivable and Concentration of Credit Risk





Accounts
receivable at September 30, 2009, and June 30, 2009, consist of the
following:




September 30,
                        
                        
                        June 30,2009
                        
                        
                        2009Accounts
      receivable
                        
                        $
                        18,098
                        
                        
                        $
                        16,204Unbilled
      receivables
                        
                        
                        4,971
                        
                        
                        
                        4,11223,069
                        
                        
                        
                        20,316Allowance
      for doubtful accounts
                        
                        
                        (98
                        )
                        
                        
                        (200
                        )Total
                        
                        $
                        22,971
                        
                        
                        $
                        20,116


13


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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




Unbilled
receivables principally represent the value of services rendered to customers
not billed as of the balance sheet date.  Unbilled receivables are
generally billed within three months subsequent to the provision of the
services. Unbilled receivables include deferred revenue which represent amounts
that have been billed to customers as of the balance sheet date but for which
the requisite services have not yet been rendered. The total amount of deferred
revenue included in unbilled receivables was $1.0 million and $0.6 million at
September 30, 2009 and June 30, 2009, respectively.





For the
three months ended September 30, 2009, we derived 35% of our total revenue from
our two largest customers, and these customers represented 32% of our accounts
receivable. Each of these customers represented in excess of 10% of our total
net revenue. For the three months ended September 30, 2008, we derived 65% of
our total revenue from our four largest customers, and these customers
represented 62% of our accounts receivable.  Of those customers, two
of them individually represented greater than 6%of net revenue, one of
them represented 19% of our net revenue, and one of them represented 34% of our
net revenue for the period.





5.           Inventories





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





6.
            Non-Current
      Assets





Non-current
assets include amortizable intangible assets consisting of customer
relationships and covenants not to compete. These assets, together with
goodwill, were the result of the allocation of the purchase price for the
Digitcom,  Radian andT3 Communications
acquisitions. Amortization expense related to amortizable intangible assets was
$0.1 million and $0.1 million for the three months ended September 30, 2009 and
2008, respectively.





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





7.
            Accrued
      Liabilities




Accrued
liabilities at September 30, 2009, and June 30, 2009, consist of the
following:




September 30,
                      
                      
                      June 30,2009
                      
                      
                      2009Employee
      compensation
                      
                      $
                      1,655
                      
                      
                      $
                      1,230Construction
      costs
                      
                      
                      1,864
                      
                      
                      
                      2,027Other
                      
                      
                      940
                      
                      
                      
                      428$
                      4,459
                      
                      
                      $
                      3,685




Accrued
construction costs are reported net of amounts deferred in the calculation of
percentage of completion for our construction projects. The amount of deferred
expense included in accrued construction costs was $2.5 million and $1.3 million
at September 30, 2009 and June 30, 2009, respectively.




8.
            Income
    Taxes




We
adopted Topic 740, ”Income Taxes” on July 1, 2007. We recognize interest, if
any, as interest expense, and penalties, if any, as a component of selling,
general and administrative expense in our consolidated financial statements. We
file a consolidated U.S. federal income tax return as well as income tax returns
for several state jurisdictions, of which New Jersey is the most significant. We
currently do not have any income tax returns which are under audit. Income tax
returns remain open for examination under U.S. and state statutes for years
ended June 30, 2006 and thereafter.


14


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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




We
recorded income tax benefit of $0.3 million and expense of $0.3 million for the
three months ended September 30, 2009 and 2008,
respectively.  Included in the income tax expense for the first
quarter of fiscal 2009 is approximately $0.2 million representing an adjustment
to certain items previously considered deductible to our fiscal year end 2008
income tax expense. This amount was not material to either our income tax
expense or net income for the fiscal year end 2008. This amount is reflected as
a current tax expense for the three months ended September 30,
2008.




9.           Line
of Credit




PNC
Bank, National Association Facility




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




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




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




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




Along
with the PNC Facility, BCI entered into a Revolving Credit Note (the “PNC Note”)
with the Lenders, pursuant to which, BCI agreed to repay the Lenders the
principal amount of $15.0 million or, if different from such amount, the unpaid
balance of advances due and owing to PNC under the PNC Facility, plus interest
on the principal amount from time to time outstanding until such principal
amount is paid in full, at the applicable interest rates in accordance with the
provisions of the PNC Facility.  The PNC Note is subject to mandatory
prepayment upon default under the terms of the agreement and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the PNC
Facility.  Upon the occurrence of an event of default due to
bankruptcy or BCI’s inability to pay, the PNC Note shall immediately become due
and payable, without notice.  Other uncured defaults under the PNC
Facility or any related document shall give the Lenders the right to declare the
PNC Note immediately due and payable, without notice, in accordance with the
terms of the PNC Facility.  Notwithstanding the foregoing, all
outstanding principal and interest are due and payable on April 17,
2011.  The balance outstanding at September 30, 2009 was $5.2 million
and the amount additionally available on the line of credit was $6.8
million.


Under the
PNC Facility, BCI must observe certain customary financial covenants, including
maintaining a Fixed Charge Coverage Ratio (as that term is defined in the PNC
Facility) for the quarter ended September 30, 2009 of not less than 1.00 to
1.00.  On November 11, 2009, we determined that we were no longer in
compliance with the Fixed Charge Coverage Ratio covenant.  A violation of
this financial covenant, unless waived by the Lenders, constitutes an event of
default under the PNC Facility, giving the Lenders the right to (i) accelerate
all of BCI’s indebtedness and any interest accrued thereon under the PNC
Facility, (ii) terminate the PNC Facility, (iii) refuse to make any additional
advances under the PNC Facility, and (iv) exercise any and all other rights or
remedies as provided for in the PNC Facility including, but not limited to,
increasing the interest rate for revolving Domestic Loans (as defined in the PNC
Facility) by two percent (2%) per annum.  While we have been told by the
Lenders that they have no intention to terminate the PNC Facility or demand
immediate repayment of the outstanding debt as a result of the aforementioned
event of default, the Lenders have the right to do so.


15


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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




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




10.           Stock-Based
Compensation





Prior to
September 22, 2009, we sponsored two stock option plans, the 1999 Omnibus
Securities Plan (the “1999 Plan”) and the 2001 Equity Incentive Plan (the “2001
Plan”).  On September 22, 2009, the 1999 Plan expired pursuant to its
terms.  On October 16, 2009, our Board of Directors approved the 2009
Omnibus Equity and Incentive Compensation Plan (the “2009 Plan”) to
succeed  the 1999 Plan (together the “Plans”).  The 2009 Plan has
been submitted to our stockholders for their approval at our Annual Stockholders
Meeting on December 14, 2009.  We have elected to account for these plans
under Topic 718.





The Plans
provide for the grant of incentive stock options and non-qualified stock
options. The terms of the options are set by our Board of Directors. The options
expire no later than ten years after the date the stock option is granted. The
number of shares authorized for grants under the 2009 Plan is 10% of the total
outstanding shares of common stock as determined by the Company to calculate
fully diluted earnings per share for the fiscal year preceding the date of
determination.  Under that formula, 2,651,573 shares of common stock
are currently available for issuance under the 2009 Plan.  The maximum
number of shares which can be issued under Incentive Stock Options granted under
the 2009 Plan shall be 2,000,000.  The 2001 Plan provides for the
grant of a maximum of 40,000 incentive stock options that expire no later than
ten years after the date the stock option is granted.





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





Stock-based
compensation expense of approximately $24 thousand and $37 thousand was recorded
during the three months ended September 30, 2009, and 2008,
respectively.  The fair value of each stock option grant is estimated
on the grant date using the Black-Scholes Merton option-pricing model with the
following assumptions: dividend yield of 0%; expected volatility of
approximately 68% and (derived from peer company implied estimated volatility);
expected term of 6.25 years (based on our best estimate since we do not have
adequate historical data); and risk-free interest rate between 2.43% and 2.66%
based on the yield at the time of grant of a U.S. Treasury security with an
equivalent remaining term.





As of
September 30, 2009, we have not granted any awards under the 2009 Plan. The
following table summarizes share-based award activity under our stock option
plans:


16





BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





2001
      Plan
                    
                    
                    1999
      Plan
                    
                    
                    Non-PlanWeighted
                    
                    
                    
                    
                    
                    Weighted
                    
                    
                    
                    
                    
                    WeightedAverage
                    
                    
                    
                    
                    
                    Average
                    
                    
                    
                    
                    
                    AverageNumber
      of
                    
                    
                    Exercise
                    
                    
                    Number
      of
                    
                    
                    Exercise
                    
                    
                    Number
      of
                    
                    
                    ExerciseShares
                    
                    
                    Price
                    
                    
                    Shares
                    
                    
                    Price
                    
                    
                    Shares
                    
                    
                    PriceBalance
      at June 30, 2009
                    
                    
                    16,891
                    
                    
                    $
                    1,387.50
                    
                    
                    
                    2,168,382
                    
                    
                    $
                    2.72
                    
                    
                    
                    18,704
                    
                    
                    $
                    6,786.00Options
      granted at fair value
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    424,896
                    
                    
                    
                    0.74Options
      cancelled
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (272,074
                    )
                    
                    
                    4.93Outstanding
      at September 30, 2009
                    
                    
                    16,891
                    
                    
                    $
                    1,387.50
                    
                    
                    
                    2,321,204
                    
                    
                    $
                    2.10
                    
                    
                    
                    18,704
                    
                    
                    $
                    6,786.00Exercisable
      at September 30, 2009
                    
                    
                    16,891
                    
                    
                    $
                    1,387.50
                    
                    
                    
                    1,120,216
                    
                    
                    $
                    3.07
                    
                    
                    
                    18,704
                    
                    
                    $
                    6,786.00





Nonvested
options activity:


2001
      Plan
                      
                      
                      1999
      PlanWeighted
                      
                      
                      WeightedAverage
                      
                      
                      AverageNumber of
                      
                      
                      Number of
                      
                      
                      Exercise
                      
                      
                      FairShares
                      
                      
                      Shares
                      
                      
                      Price
                      
                      
                      ValueBalance
      at June 30, 2009
                      
                      
                      -
                      
                      
                      
                      1,026,931
                      
                      
                      $
                      1.34
                      
                      
                      $
                      0.85Options
      granted at fair value
                      
                      
                      
                      
                      
                      
                      424,896
                      
                      
                      
                      0.74
                      
                      
                      
                      0.47Options
      vested
                      
                      
                      
                      
                      
                      
                      (104,599
                      )
                      
                      
                      0.76
                      
                      
                      
                      0.48Options
      cancelled
                      
                      
                      
                      
                      
                      
                      (146,239
                      )
                      
                      
                      1.24
                      
                      
                      
                      0.90Outstanding
      at September 30, 2009
                      
                      
                      -
                      
                      
                      
                      1,200,989
                      
                      
                      
                      1.19
                      
                      
                      
                      0.75





At
September 30, 2009, the range of exercise prices, weighted average exercise
price and weighted average remaining contractual life for options outstanding
are as follows:


Options
      Outstanding and ExercisableWeightedWeighted
                      
                      AverageNumber
                      
                      
                      
                      
                      
                      Average
                      
                      Remainingof
                      
                      
                      
                      
                      
                      Exercise
                      
                      ContractualOption
      Price Range
                      
                      
                      Shares
                      
                      
                      Exercisable
                      
                      
                      Price
                      
                      Life2001
      Plan
                      
                      
                      
                      
                      
                      $
                      1,387.50
                      
                      
                      
                      16,891
                      
                      
                      
                      16,891
                      
                      
                      $
                      1,387.50
                      
                      1.28  Years1999
      Plan
                      
                      $
                      0.30
                      
                      to
                      
                      $
                      0.81
                      
                      
                      
                      1,048,496
                      
                      
                      
                      722,324
                      
                      
                      $
                      0.53
                      
                      7.11  Years$
                      1.01
                      
                      to
                      
                      $
                      1.48
                      
                      
                      
                      1,269,458
                      
                      
                      
                      394,642
                      
                      
                      $
                      1.32
                      
                      8.45  Years$
                      7.05
                      
                      
                      
                      167
                      
                      
                      
                      167
                      
                      
                      $
                      7.05
                      
                      4.79  Years$
                      8.01
                      
                      
                      
                      250
                      
                      
                      
                      250
                      
                      
                      $
                      8.01
                      
                      4.41  Years$
                      16.50
                      
                      
                      
                      2,000
                      
                      
                      
                      2,000
                      
                      
                      $
                      16.50
                      
                      1.18  Years$
                      3,000.00
                      
                      
                      
                      833
                      
                      
                      
                      833
                      
                      
                      $
                      3,000.00
                      
                      1.18  YearsNon-Plan
                      
                      
                      
                      
                      
                      
                      $
                      3,600.00
                      
                      
                      
                      636
                      
                      
                      
                      636
                      
                      
                      $
                      3,600.00
                      
                      0.44  Years$
                      6,900.00
                      
                      
                      
                      18,067
                      
                      
                      
                      18,067
                      
                      
                      $
                      6,900.00
                      
                      0.51  Years





11.           Related
Party Transactions





Pursuant
to the provisions of the Note Purchase Agreement dated December 29, 2006 (the
“Note Purchase Agreement”) between us and Sigma Opportunity Fund, LLC (“Sigma”),
so long as Sigma beneficially owns at least 5% of our outstanding common stock,
Sigma has the right to nominate one director to our Board of Directors. On
December 29, 2006, Sigma nominated, and our Board of Directors appointed, Thom
Waye to serve as a member of our Board of Directors as a Class III director,
with his term expiring at the 2008 annual meeting. Mr. Waye was re-elected at
the 2008 annual meeting with a term expiring at the 2011 annual meeting. We are
obligated to use our best efforts to cause Mr. Waye, as well as all reasonably
suited future designees, to continue to serve on our Board of Directors. During
the three months ended September 30, 2009 and 2008, we paid Mr. Waye $5 thousand
and $0, respectively, for his service as a director pursuant to our standard
non-employee director compensation program.


17


BERLINER
COMMUNICATIONS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





12.           Legal
Proceedings





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




13.           Segment
Financial Data




We
currently report our financial results on the basis of two reportable segments:
(1) infrastructure construction and technical services and (2) site acquisition
and zoning.  The segments are determined in accordance with how
management views and evaluates our business based on the aggregation criteria as
outlined in Topic 280 “Segment Reporting”. Operating income, as presented below,
is defined as gross margin less selling, general and administrative expenses,
depreciation and amortization, and loss on sale of fixed assets.  We
do not identify or allocate assets, including capital expenditures, by operating
segment.  Accordingly, assets are not reported by segment because the
information is not available and is not reviewed in the evaluation of segment
performance or in making decisions in the allocation of
resources.   Selected segment financial information for the three
months ended September 30, 2009, and 2008, is presented below:




Three Months Ended September
      30,2009
                  
                  
                  2008Infrastructure
                  
                  
                  Site
                  
                  
                  
                  
                  
                  Infrastructure
                  
                  
                  SiteConstruction
                  
                  
                  Acquisition
                  
                  
                  Total
                  
                  
                  Construction
                  
                  
                  Acquisition
                  
                  
                  TotalRevenue
                  
                  $
                  13,728
                  
                  
                  $
                  3,987
                  
                  
                  $
                  17,715
                  
                  
                  $
                  11,716
                  
                  
                  
                  1,370
                  
                  
                  $
                  13,086Cost
      of revenue
                  
                  
                  10,525
                  
                  
                  
                  2,455
                  
                  
                  
                  12,980
                  
                  
                  
                  7,391
                  
                  
                  
                  84
                  
                  
                  
                  7,475Gross
      margin
                  
                  
                  3,203
                  
                  
                  
                  1,532
                  
                  
                  
                  4,735
                  
                  
                  
                  4,325
                  
                  
                  
                  1,286
                  
                  
                  
                  5,611Selling,
      general and administrative expenses
                  
                  
                  3,962
                  
                  
                  
                  1,166
                  
                  
                  
                  5,128
                  
                  
                  
                  4,721
                  
                  
                  
                  472
                  
                  
                  
                  5,193Depreciation
      and amortization
                  
                  
                  309
                  
                  
                  
                  -
                  
                  
                  
                  309
                  
                  
                  
                  272
                  
                  
                  
                  31
                  
                  
                  
                  303Loss
      on sale of fixed assets
                  
                  
                  3
                  
                  
                  
                  -
                  
                  
                  
                  3
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Operating
      income
                  
                  $
                  (1,071
                  )
                  
                  $
                  366
                  
                  
                  $
                  (705
                  )
                  
                  $
                  (668
                  )
                  
                  $
                  783
                  
                  
                  $
                  115




18





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





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


Reform
Act of 1995




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





Forward-Looking
Statements





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




The
important factors listed in Part II, Item 1A of this Quarterly Report and in our
Annual Report on Form 10-K for our fiscal year ended June 30, 2009 (the “Annual
Report”) under the heading entitled “Risk Factors,” as well as all other
cautionary language in this Quarterly Report, provide examples of risks,
uncertainties and events that may cause actual results to differ materially from
the expectations described in these “forward-looking” statements.  It
is important to note that the occurrence of the events described in these
considerations and elsewhere in this Quarterly Report and our Annual Report
could have an adverse effect on the business, results of operations or financial
condition of the entity affected.




Forward-looking
statements in this Quarterly 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;


§
            our
      ability to adequately staff our service
  offerings;


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


§
            opportunities
      for us from new and emerging wireless
  technologies;


§
            our
      ability to obtain additional
financing;


§
            our
      growth strategy;


§
            trends
      in the wireless telecommunications
industry;


§
            key
      drivers of change in our business;


§
            our
      competitive position; and


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





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





§
            risks
      related to the market for our
shares;


§
            risks
      related to disruptions in the global capital
  markets;


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


§
            risks
      associated with competition in the wireless telecommunications
      industry;


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


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


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


19





§
            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 Quarterly Report.  It is important not to
place undue reliance on these forward-looking statements, which reflect our
analysis, judgment, belief or expectation only as of the date of this Quarterly
Report. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date of this
Quarterly Report.





Summary of Operating
Results





The
following table presents consolidated selected financial information. The
statement of operations data for the three months ended September 30, 2009, and
2008, has been derived from our unaudited consolidated financial statements
that, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary to state fairly the data for such
period.  We operate in two reportable segments: (1) infrastructure
construction and technical services, and (2) site acquisition and zoning to
wireless communications carriers.





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





Three Months EndedSeptember 30,2009
                    
                    
                    2008Statement
      of Operations Data:Revenue
                    
                    $
                    17,715
                    
                    
                    $
                    13,086Gross
      margin
                    
                    
                    4,735
                    
                    
                    
                    5,611Operating
      income (loss)
                    
                    
                    (705
                    )
                    
                    
                    115Net
      income (loss)
                    
                    
                    (470
                    )
                    
                    
                    86Net
      income (loss) allocable to common shareholders per share:Basic
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.00Diluted
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.00Weighted
      average number of shares outstandingBasic
                    
                    
                    26,516
                    
                    
                    
                    26,263Diluted
                    
                    
                    26,516
                    
                    
                    
                    27,531September 30,
                    
                    
                    June 30,2009
                    
                    
                    2009Balance
      Sheet Data:Current
      assets
                    
                    $
                    30,161
                    
                    
                    $
                    26,490Total
      assets
                    
                    
                    37,959
                    
                    
                    
                    34,557Current
      liabilities
                    
                    
                    16,152
                    
                    
                    
                    12,191Long-term
      debt, net of debt discount and current portion
                    
                    
                    174
                    
                    
                    
                    212Shareholder's
      equity
                    
                    
                    21,534
                    
                    
                    
                    22,049




20





Three
months ended September 30, 2009, compared to three months ended September 30,
2008


(Amounts
in Thousands Unless Otherwise Stated)





Revenue


Three Months EndedSeptember 30,2009
                      
                      
                      2008
                      
                      
                      IncreaseInfrastructure
      construction and technical services
                      
                      $
                      13,728
                      
                      
                      $
                      11,716
                      
                      
                      $
                      2,012Site
      acquisition and zoning
                      
                      
                      3,987
                      
                      
                      
                      1,370
                      
                      
                      
                      2,617Total
                      
                      $
                      17,715
                      
                      
                      $
                      13,086
                      
                      
                      $
                      4,629





We had
revenue of $17.7million for the three
months ended September 30, 2009, versus $13.1 million for the three months ended
September 30, 2008.  This represents an increase of $4.6 million, or
35%. Revenue from infrastructure construction and technical services increased
$2.0 million from $11.7 million, or 17% for the three months ended September 30,
2009 as compared to the three months ended September 30, 2008. Revenue from site
acquisition and zoning increased $2.6 million, or 191%, for the three months
ended September 30, 2009 as compared to the three months ended September 30,
2008. These increases primarily relate to the expansion of our work supporting
the 4G WiMax build out across the country, as well as our work on a major
airport in-building technical services project.




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




Cost
of Revenue


Three Months EndedSeptember 30,2009
                        
                        
                        2008
                        
                        
                        IncreaseInfrastructure
      construction and technical services
                        
                        $
                        10,525
                        
                        
                        $
                        7,391
                        
                        
                        $
                        3,134Site
      acquisition and zoning
                        
                        
                        2,455
                        
                        
                        
                        84
                        
                        
                        
                        2,371Total
                        
                        $
                        12,980
                        
                        
                        $
                        7,475
                        
                        
                        $
                        5,505





Our cost
of revenue was $13.0million and $7.5 million
for the three months ended September 30, 2009 and 2008,
respectively.  This represents an increase of $5.5 million, or 74%,
during a period when sales increasead 35%. These amounts represent 73% and 57%
of total revenue for the three months ended September 30, 2009 and 2008,
respectively.




Cost of
revenue for infrastructure construction and technical services increased $3.1
million from $7.4 million for the three months ended September 30, 2008 to $10.5
million for the three months ended September 30, 2009. This represents an
increase of 42% during a period when revenue increased 17%.




Cost of
revenue for site acquisition and zoning increased $2.4 million from $0.1 million
for the three months ended September 30, 2008 to $2.5 million for the three
months ended September 30, 2009.




Gross
Profit


Three Months EndedSeptember 30,
                        
                        
                        Increase2009
                        
                        
                        2008
                        
                        
                        (Decrease)Infrastructure
      construction and technical services
                        
                        $
                        3,203
                        
                        
                        $
                        4,325
                        
                        
                        $
                        (1,122
                        )Site
      acquisition and zoning
                        
                        
                        1,532
                        
                        
                        
                        1,286
                        
                        
                        
                        246$
                        4,735
                        
                        
                        $
                        5,611
                        
                        
                        $
                        (876
                        )





Our gross
profit for the three months ended September 30, 2009, was $4.7 million as
compared to $5.6million for the three
months ended September 30, 2008.  Our gross profit margin as a
percentage of revenue was approximately 27% for the three months ended September
30, 2009, as compared to 43% for the three months ended September 30,
2008.  This decrease is further explained below.


21




Our gross
profit is lower than it has been historically because, in light of the current
telecommunications market and economic conditions generally, we have been
required to bid our services more aggressively than we have in the past. 
Competition has increased and many of our customers are exploring ways to reduce
costs, which could impact pricing for some services.  In addition, we have
been awarded a significant amount of work from OEMs and other project management
companies that do work for the carriers, which is at a lower profit margin than
the work we do for our carrier customers.  This has led to a decrease in
our gross profit margin.  For the first quarter of fiscal 2009, our margins
were higher than we typically see, primarily because of premature close-outs of
certain jobs related to the transition of 4G WiMax work. Absent these job
cancellations in the first quarter of fiscal 2009, our gross profit margin would
have been approximately 32%.




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the three months ended September 30,
2009 were $5.1 million as compared to $5.2 million for the three months ended
September 30, 2008. This represents an overall decrease of $0.1
million.





Depreciation
and Amortization





Depreciation
recorded on fixed assets totaled approximately $0.2 million for both of the
three months ended September 30, 2009 and 2008, respectively. Amortization of
intangible assets acquired as a result of the Digitcom and Radian acquisitions
resulted in amortization expense of approximately $0.1 million in both of the
three months ended September 30, 2009 and 2008, respectively.





Interest
Expense





We
recognized $0.1 million in interest expense during both of the three months
ended September 30, 2009 and 2008, respectively.





Amortization
of Deferred Financing Fees and Accretion of Debt Discount





We
recognized $15 thousand in amortization of deferred financing fees during both
of the three months ended September 30, 2009 and 2008,
respectively.





Other
Income





We
recognized $23 thousand in other income during the three months ended September
30, 2009. During the three months ended September 30, 2008, we recognized $0.3
million in other income, which is the result of the settlement of a lawsuit
which was filed on May 7, 2007 and settled on September 19, 2008 which resulted
in (i) a payment from the defendant to us of $0.4 million in exchange for our
agreement to release them from all claims, and (ii) a payment from the defendant
of $0.2 million related to disputed invoices that had been reserved for, which
were not related to the litigation. After payment of legal fees, the litigation
settlement resulted in other income of $0.3 million for the first quarter of
fiscal 2009.





Income
Taxes




We
recorded income tax benefit of $0.3 million and income tax expense of $0.3
million for the three months ended September 30, 2009 and 2008,
respectively.  Included in the income tax expense for the first
quarter of fiscal 2009 is approximately $0.2 million representing an adjustment
to certain items previously considered deductible  to our fiscal year
end 2008 income tax expense. This amount was not material to either our income
tax expense or net income for the fiscal year end 2008. This amount is reflected
as a current tax expense for the three months ended September 30,
2008.




At June
30, 2009, we had net operating loss carryforwards for federal and state income
tax purposes of approximately $1.2 million expiring in 2026 and
approximately $6.1 million expiring between 2012 and 2014, respectively, which
may be applied against future taxable income. We can only utilize approximately
$1.0 million per year of the federal carryforward due to limitations as a result
of the Acquisition and Old Berliner reorganization.


22




At
September 30, 2009, we had total income taxes receivable of $2.5 million,
consisting of $2.2 million federal and $0.3 million state income taxes
receivable which we expect to receive during the third quarter of fiscal
2010.





Liquidity
and Capital Resources





At
September 30, 2009, we had consolidated current assets of approximately
$30.2 million, including cash and cash equivalents of approximately $2.2
million and net working capital of approximately
$14.0 million.  Historically, we have funded our operations
primarily through operating cash flow, the proceeds of private placements of our
common stock and borrowings under loan arrangements. The principal use of cash
during the three months ended September 30, 2009 was to fund the increase in
accounts receivable.





On April
17, 2008, we entered into a revolving line of credit with PNC Bank, National
Association as lead lender, which provides for revolving loan advances from time
to time in an amount up to the lesser of: (i) 85% of the value of certain of our
receivables approved by the Lenders as collateral; or (ii)  $15.0
million.  Outstanding borrowings are secured by a blanket security
interest in favor of the  Lenders that covers all of our receivables,
equipment, general intangibles, inventory, investment property, certain real
property, certain leasehold interests, all subsidiary stock, records and other
property. The balance outstanding at September 30, 2009 was $5.2 million and the
amount additionally available on the line of credit was $6.8
million.





Under the
PNC Facility, BCI must observe certain customary financial covenants, including
maintaining a Fixed Charge Coverage Ratio (as that term is defined in the PNC
Facility) for the quarter ended September 30, 2009 of not less than 1.00 to
1.00.  On November 11, 2009, we determined that we were no longer in
compliance with the Fixed Charge Coverage Ratio covenant.  A violation of
this financial covenant, unless waived by the Lenders, constitutes an event of
default under the PNC Facility, giving the Lenders the right to (i) accelerate
all of BCI’s indebtedness and any interest accrued thereon under the PNC
Facility, (ii) terminate the PNC Facility, (iii) refuse to make any additional
advances under the PNC Facility, and (iv) exercise any and all other rights or
remedies as provided for in the PNC Facility including, but not limited to,
increasing the interest rate for revolving Domestic Loans (as defined in the PNC
Facility) by two percent (2%) per annum.  While we have been told by the
Lenders that they have no intention to terminate the PNC Facility or demand
immediate repayment of the outstanding debt as a result of the aforementioned
event of default, the Lenders have the right to do so.





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





Our
ability to satisfy our current obligations is dependent upon our cash on hand,
borrowings under our credit facility with PNC, and the operations of BCI. Our
current obligations consist of capital expenditures, debt service and funding
working capital. In the event we are not able to generate positive cash flow in
the future, or if we incur unanticipated expenses for operations and are unable
to acquire additional capital or financing, we will likely have to reassess our
strategic direction, make significant changes to our business operations and
substantially reduce our expenses until such time as we achieve positive cash
flow. Our ability to raise additional capital or financing, if necessary, may be
negatively impacted by recent downturns in the capital markets and the U.S.
economy in general.





As of
September 30, 2009, our backlog was approximately $32.5 million as compared
to $24.8 million as of June 30, 2009.  We believe substantially all of
our backlog at September 30, 2009 will be filled within the fiscal year ending
June 30, 2010.





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


23





For the three months endedSeptember
      30,2009
                  
                  
                  2008Net
      cash (used in) provided by operating activities
                  
                  $
                  (1,133
                  )
                  
                  $
                  2,026Net
      cash used in investing activities
                  
                  
                  (32
                  )
                  
                  
                  (109
                  )Net
      cash (used in) provided by financing activities
                  
                  
                  1,983
                  
                  
                  
                  (151
                  )




Cash
(used in) provided by operating activities.




Net cash
used in operating activities in the three months ended September 30, 2009 was
approximately $1.1 million and net cash provided by operating activities was
$2.0 million in the three months ended September 30,
2008.   During the three months ended September 30, 2009, cash
flow used in operating activities primarily resulted from our operating loss,
net of non-cash charges, of approximately $0.4 million, which represents a
decrease of $1.2 million from the three months ended September 30, 2008. This
decrease was primarily caused by net loss of $0.5 million as compared to net
income of $86 thousand, and increases in non-cash charges of $ 0.3 million in
net deferred tax assets. We also realized an increase in accounts receivable of
approximately $2.5 million due to increased revenue during the three months
ended September 30, 2009. These were partly offset by increases in accounts
payable of approximately $1.2 million and accrued liabilities of approximately
$0.4 million.In
the three months ended September 30, 2008, cash provided by operating activities
primarily resulted from operating income, net of non-cash charges, of
approximately $0.8 million, a decrease in accounts receivable of approximately
$9.7 million, and decreases in accounts payable of approximately $1.7 million
and accrued liabilities of approximately $5.1 million.




Cash
used in investing activities.




Net cash
used in investing activities was approximately $32 thousand and $0.1 million in
the three months ended September 30, 2009 and 2008, respectively. During both of
the three months ended September 30, 2009 and 2008, cash used in investing
activities was primarily used for the purchase of fixed assets.




Cash
(used in) provided by financing activities.




Net cash
provided by financing activities was approximately $2.0 million in the three
months ended September 30, 2009 as compared to cash used of $0.2 million in the
three months ended September 30, 2008.  During the three months ended
September 30, 2009, net cash provided by financing activities consisted
primarily of drawing down the PNC line of credit by $2.2 million which was
partly offset by the repayment of long-term debt of $0.2 million. During the
three months ended September 30, 2008, net cash used in financing activities
consisted primarily of repayment of long-term debt of $0.3 million.




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





Item
3.      Quantitative and Qualitative Disclosures
About Market Risk





Not
applicable.




Item
4T.    Controls and Procedures




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




24




PART
II:  OTHER INFORMATION




Item
1.    Legal Proceedings





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




Item
1A.  Risk Factors




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




For the
three months ended September 30, 2009, we derived 35% of our total revenue from
our two largest customers, and these customers represented 32% of our accounts
receivable. Each of these customers represented in excess of 10% of our total
net revenue. For the three months ended September 30, 2008, we derived 65% of
our total revenue from our four largest customers, and these customers
represented 62% of our accounts receivable.  Of those customers, two
of them individually represented greater than 6%of net revenue, one of
them represented 19% of our net revenue, and one of them represented 34% of our
net revenue for the period.





As of and
for the year ended June 30, 2009, we derived 43% of our total revenues from
three customers, and those customers represented 28% of our accounts
receivable.  During the year ended June 30, 2009, Metro PCS Inc. (and
its subsidiaries) represented 19%, T-Mobile (and its subsidiaries) represented
13% and Clearwire US LLC represented 11% of our total revenue.





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




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




On
November 11, 2009, we determined that we were no longer in compliance with the
Fixed Charge Coverage Ratio covenant in our credit facility with PNC Bank (the
"PNC Facility").  The Lenders under the PNC Facility now have the right to
(i) accelerate all of BCI’s indebtedness and any interest accrued thereon under
the PNC Facility, (ii) terminate the PNC Facility, (iii) refuse to make any
additional advances under the PNC Facility, and (iv) exercise any and all other
rights or remedies as provided for in the PNC Facility including, but not
limited to, increasing the interest rate for revolving Domestic Loans (as
defined in the PNC Facility) by two percent (2%) per annum.  While we do
not expect the Lenders to immediately terminate the PNC Facility or demand
immediate repayment of the outstanding debt and payment of accrued interest
thereon, as a result of the aforementioned event of default, the Lenders have
the right to do so.   PNC could then terminate our line of credit if
we remain in default, and execute additional remedies pursuant to the terms of
the PNC Facility, including demanding repayment of outstanding amounts due under
the line at that time.  In this circumstance, if we do not have sufficient
funds to make this payment, we could be forced into insolvency.  Even if we
were to pay off the line, we might not be able to access the line of credit for
additional funds going forward, and  this could severely impact our ability
to grow our business and execute ourbusiness
plan.




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





None.





Item
3.     Defaults Upon Senior Securities





None.


25





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





None.





Item
5.     Other Information





None





Item
6.     Exhibits





(a)
            Exhibits




31.1
                
                Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002. *31.2
                
                Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002. *32.1
                
                Certification
      of our Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002. *


* Filed
herewith.


26





SIGNATURES





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





BERLINER
COMMUNICATIONS, INC.





Date:
      November 16, 2009
                      By:
                      /s/ Richard B. BerlinerRichard
      B. BerlinerChief
      Executive Officer(Principal
      Executive Officer)Date:
      November 16, 2009
                      By:
                      /s/ Raymond A. Cardonne,
  Jr.Raymond
      A. Cardonne, Jr.Chief
      Financial Officer and Treasurer(Principal
      Financial
Officer)


27