**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, 2008**





**OR**





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


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      transition period from _____________ to ______________








**COMMISSION
      FILE NUMBER 0-28579**





**BERLINER
      COMMUNICATIONS, INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




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





**97
      Linden Avenue**


**Elmwood
      Park, New Jersey 07407**


(Address
      of Principal Executive Offices)





**(201)
      791-3200**


(Registrant’s
      Telephone Number, Including Area Code)





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





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




Larger
                  accelerated filero
              Accelerated
                  fileroNon-accelerated
                  filero
              Smaller
                  reporting companyx





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





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





On
      November 10, 2008, 26,516,612 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
                INFORMATION**Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheets as of September 30, 2008 (Unaudited),and
                June 30, 2008
            3Consolidated
                Statements of Operations for the three months endingSeptember
                30, 2008 and 2007 (Unaudited)
            4Consolidated
                Statements of Cash Flows for the three months endingSeptember
                30, 2008 and 2007 (Unaudited)
            5Consolidated
                Statement of Stockholders' Equity (Unaudited)
            7Notes
                to Consolidated Financial Statements
            8Item
                2.
            Management's
                Discussion and Analysis of Financial Condition andResults
                of Operations
            19Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            25Item
                4T.
            Controls
                and Procedures
            25**PART
                II:**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            25Item
                1A.
            Risk
                Factors
            25Item
                2.
            Unregistered
                Sale of Equity Securities and Use of Proceeds
            27Item
                3.
            Defaults
                Upon Senior Securities
            27Item
                4.
            Submission
                of Matters to a Vote of Securities Holders
            27Item
                5.
            Other
                Information
            27Item
                6.
            Exhibits
            27**SIGNATURES**
            
            28




2





**BERLINER
                COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS****(Amounts
                in thousands)**




**September
                30,**
            
            **June
                30,****2008**
            
            **2008****ASSETS**
            
            **(Unaudited)****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            4,939
            
            $
            3,173Accounts
                receivable, net of allowance for doubtful accountsof
                $595 and $830 at September 30, 2008 and June 30, 2008, respectively
            
            
            22,213
            
            
            31,189Inventories
            
            
            991
            
            
            1,012Deferred
                tax assets - current
            
            
            446
            
            
            536Prepaid
                expenses and other current assets
            
            
            497
            
            
            76229,086
            
            
            36,672Property
                and equipment, net
            
            
            2,659
            
            
            2,924Amortizable
                intangible assets, net
            
            
            732
            
            
            816Goodwill
            
            
            2,084
            
            
            2,084Deferred
                tax assets - long-term
            
            
            294
            
            
            505Other
                assets
            
            
            277
            
            
            268Total
                Assets
            
            $
            35,132
            
            $
            43,269**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            3,072
            
            $
            4,820Accrued
                liabilities
            
            
            7,505
            
            
            11,919Accrued
                income taxes
            
            
            20
            
            
            1,849Line
                of credit
            
            
            301
            
            
            217Current
                portion of long-term debt
            
            
            796
            
            
            1,133Current
                portion of capital lease obligations
            
            
            113
            
            
            11811,807
            
            
            20,056Long-term
                debt, net of current portion
            
            
            321
            
            
            467Long-term
                capital lease obligations, net of current portion
            
            
            275
            
            
            305Other
                long-term liabilities
            
            
            123
            
            
            104Total
                liabilities
            
            
            12,526
            
            
            20,932**COMMITMENTS****STOCKHOLDERS'
                EQUITY**Common
                stock
            
            
            1
            
            
            1Additional
                paid-in capital
            
            
            22,813
            
            
            22,630Accumulated
                deficit
            
            
            (208
            )
            
            (294
            )Total
                stockholders' equity
            
            
            22,606
            
            
            22,337Total
                liabilities and stockholders' equity
            
            $
            35,132
            
            $
            43,269




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


3




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




**Three
                Months Ended****September
                30,****2008**
            
            **2007**Revenues
            
            $
            13,086
            
            $
            23,142Costs
                of revenues
            
            
            7,475
            
            
            16,625Gross
                margin
            
            
            5,611
            
            
            6,517Selling,
                general and administrative expenses
            
            
            5,193
            
            
            5,456Depreciation
                and amortization
            
            
            303
            
            
            228Loss
                on sale of fixed assets
            
            
            -
            
            
            8Income
                from operations
            
            
            115
            
            
            825Other
                (income) expenseInterest
                expense
            
            
            60
            
            
            350Amortization
                of deferred financing fees andaccretion
                of debt discount
            
            
            15
            
            
            373Financing
                fees
            
            
            -
            
            
            36Interest
                income
            
            
            (31
            )
            
            (9
            )Other
                income
            
            
            (340
            )
            
            (6
            )Income
                before income taxes
            
            
            411
            
            
            81Income
                tax expense
            
            
            325
            
            
            42Net
                income
            
            $
            86
            
            $
            39Net
                income per share:Basic
            
            $
            0.00
            
            $
            0.00Diluted
            
            $
            0.00
            
            $
            0.00Weighted
                average number of shares outstanding:Basic
            
            
            26,263
            
            
            17,082Diluted
            
            
            27,531
            
            
            20,951




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


4





**BERLINER
                COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)****(Amounts
                in thousands)**


**Three
                  Months Ended****September
                  30,****2008**
              
              **2007**Cash
                  flows from operating activities:Net
                  income
              
              $
              86
              
              $
              39Adjustments
                  to reconcile net income to net
                cash
                  (used in) provided by operating activities:Depreciation
                  and amortization
              
              
              322
              
              
              326Amortization
                  of deferred financing fees
              
              
              15
              
              
              -Bad
                  debt expense
              
              
              -
              
              
              30Stock-based
                  compensation
              
              
              37
              
              
              51Loss
                  on sale of fixed assets
              
              
              -
              
              
              8Accretion
                  of interest from warrants
              
              
              -
              
              
              275Financing
                  fees
              
              
              -
              
              
              26Deferred
                  tax assets, net
              
              
              302
              
              
              (175
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              9,653
              
              
              (6,233
              )Inventories
              
              
              29
              
              
              (177
              )Prepaid
                  expenses and other current assets
              
              
              251
              
              
              (130
              )Other
                  assets
              
              
              (9
              )
              
              102Accounts
                  payable
              
              
              (1,747
              )
              
              1,546Accrued
                  liabilities
              
              
              (5,084
              )
              
              4,413Accrued
                  income taxes
              
              
              (1,829
              )
              
              (186
              )**Net
                  cash (used in) provided by operating activities**
              
              
              2,026
              
              
              (85
              )Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (111
              )
              
              (261
              )Proceeds
                  from the sale of property and equipment
              
              
              2
              
              
              12Acquisition
                  of Comtech
              
              
              -
              
              
              (39
              )**Net
                  cash used in investing activities**
              
              
              (109
              )
              
              (288
              )Cash
                  flows from financing activities:Proceeds
                  from line of credit
              
              
              25,054
              
              
              16,155Repayment
                  of line of credit
              
              
              (24,970
              )
              
              (18,003
              )Repayment
                  of long-term debt
              
              
              (346
              )
              
              (171
              )Repayment
                  of capital leases
              
              
              (35
              )
              
              (18
              )Proceeds
                  from exercise of stock options
              
              
              146
              
              
              -**Net
                  cash used in financing activities**
              
              
              (151
              )
              
              (2,037
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,766
              
              
              (2,410
              )Cash
                  and cash equivalents at beginning of period
              
              
              3,173
              
              
              2,483Cash
                  and cash equivalents at end of period
              
              $
              4,939
              
              $
              73




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


5








**BERLINER
                COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)****(Amounts
                in thousands)**




**Three
                Months Ended****September
                30,****2008**
            
            **2007****Supplemental
                cash flow information:**Interest
                paid
            
            $
            60
            
            $
            160Income
                taxes paid
            
            $
            1,850
            
            $
            311**Non-cash
                investing and financing activities:**Assets
                purchased under capital leases
            
            $
            -
            
            $
            22




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


6





**BERLINER
                COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY****(Unaudited)****(Amounts
                in thousands except share and per share
                data)**




**Common
                Stock**
              **100,000,000
                  shares authorized**
                **$0.00002
                    par value**
            
            
            **Additional**
                **Paid-in**
            
            
            **Accumulated**
            
            
            **Total**
                **Stockholders'****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Equity**Balance
                at June 30, 2008
            
            
            26,191,612
            
            $
            1
            
            $
            22,630
            
            $
            (294
            )
            $
            22,337Stock-based
                compensation expense
            
            
            
            
            
            
            
            
            37
            
            
            
            
            
            37Exercise
                of warrants
            
            
            200,000
            
            
            -
            
            
            146
            
            
            -
            
            
            146Net
                income
            
            
            
            
            
            
            
            
            
            
            
            86
            
            
            86Balance
                at September 30, 2008
            
            
            26,391,612
            
            $
            1
            
            $
            22,813
            
            $
            (208
            )
            $
            22,606






*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 our
      wholly-owned subsidiary. As part of this transaction, BCI acquired (the
“Acquisition”) the operations and substantially all of the assets and
      liabilities of Old Berliner. On September 16, 2005, Novo changed its name to
      Berliner Communications, Inc. (“Berliner”). Berliner is now the public reporting
      entity, and all of our operations are run out of Berliner’s wholly-owned
      subsidiary, BCI. Unless the context otherwise requires, references to “we”,
“us”, “our” and “the Company” refer to Berliner and its consolidated subsidiary
      BCI.





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





On
      February 19, 2007, we acquired substantially all of the assets of Comtech
      Systems, Inc.





On
      February 28, 2007, BCI entered into an Asset Purchase Agreement (the “Digitcom
      Asset Purchase Agreement”) with Digital Communication Services, Inc.
      (“Digitcom”) and its affiliates for the purchase of certain of its assets in
      Arlington, Texas. This acquisition expanded our presence in Texas and the
      Midwest markets.





On
      April
      16, 2007, we entered into an Asset Purchase Agreement with Radian Communication
      Services, Inc. (“Radian”) to purchase certain of the U.S. assets and operations
      of Radian and assume certain liabilities of Radian. This acquisition expanded
      our presence in the Los Angeles, California, Las Vegas, Nevada, and Seattle,
      Washington markets, and added offices in Salem, Oregon and Tempe, Arizona.





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,
      2008, and for the three months ended September 30, 2008, and 2007, respectively,
      have been prepared by us pursuant to the interim financial statements rules
      and
      regulations of the United States Securities and Exchange Commission (“SEC”). In
      our opinion, the accompanying unaudited consolidated financial statements
      include all adjustments necessary to present fairly the results of our
      operations and cash flows at the dates and for the periods indicated. The
      results of operations for the interim periods are not necessarily indicative
      of
      the results for the full fiscal year. The accompanying unaudited consolidated
      financial statements should be read in conjunction with the audited consolidated
      financial statements included in our Annual Report on Form 10-K for the fiscal
      year ended June 30, 2008.




8




**BERLINER
      COMMUNICATIONS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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




**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.





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





***Principles
      of Consolidation***





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





***Cash
      and Cash Equivalents***





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





***Accounts
      Receivable, Allowance for Doubtful Accounts***





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





***Inventories***





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





***Prepaid
      Expenses and Other Assets***





Prepaid
      expenses are recorded as assets and expensed in the period in which the related
      services are received. At September 30, 2008 and June 30, 2008, current prepaid
      expenses and other current assets totaled approximately $0.5 million and $0.8
      million, respectively, and consisted mainly of insurance, deferred financing
      fees and rents. Other non-current assets of approximately $0.3 million at
      September 30, 2008 and $0.3 million at June 30, 2008 are mainly deposits for
      our
      office and warehouse locations.




9




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


***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.


***Goodwill
      and Other Intangible Assets***





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





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





The
      Company determines the fair value of the business acquired (reporting units)
      for
      purposes of this test primarily using indications of value determined by the
      use
      of Guideline Public 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, 2008.
      Accordingly, step two was unnecessary and no impairment charge was recognized
      in
      the consolidated statements of income for the three months ended September
      30,
      2008. On an ongoing basis, the Company expects to perform its annual impairment
      test at January 31 absent any interim impairment indicators.





***Revenue
      Recognition***





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





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





***Earnings
      Per Share*** ****




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




10




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




The
      weighted average number of common shares utilized in the earnings per share
      computation for the three months ended September 30, 2008 and 2007 was
      26,263,351 and 17,081,786 **** respectively.





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




**Three
                Months Ended September 30,****2008**
            
            **2007****Basic
                earnings per share:**Numerator:Net
                income
            
            $
            86
            
            $
            39Denominator:Weighted
                average common shares outstanding
            
            
            26,263
            
            
            17,082Net
                income per share - basic
            
            $
            0.00
            
            $
            0.00**Diluted
                earnings per share:**Numerator:Net
                income
            
            $
            86
            
            $
            39Denominator:Weighted
                average common shares outstanding
            
            
            26,263
            
            
            17,082Effect
                of dilutive securities:Stock
                options
            
            
            626
            
            
            500Warrants
            
            
            642
            
            
            3,369Weighted
                average common shares outstandingassuming
                dilution
            
            
            27,531
            
            
            20,951Net
                income per share - diluted
            
            $
            0.00
            
            **$**
            0.00




Common
      share equivalents consist of stock options and warrants (for which we used
      the
      treasury stock method) and convertible notes payable (for which we used the
“if
      converted” method). For
      the
      three months ended 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. For the three months
      ended September 30, 2007, 448,651 stock options and 6,000,000 shares convertible
      upon conversion of our 7% notes were excluded from the computation of diluted
      net income per share because, in the case of the stock options, the exercise
      price of these was greater than the average market price of the Company’s common
      stock during the period, and, in the case of the convertible notes, the
      incremental per share increase was greater than the basic earnings per share,
      and therefore the effect is antidilutive.




***Fair
      Value of Financial Instruments***





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




11




**BERLINER
        COMMUNICATIONS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Amounts
        in thousands except for share and per share 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 o vernight
      money market institutional funds, which amounted to $4.8 million at September
      30, 2008, is included in cash and cash equivalents on the accompanying balance
      sheets and is classified as a Level 1 asset.





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





***Concentration
      of Credit Risk***





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





***Stock-based
      Compensation***




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





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




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





***Recently
      Issued Accounting Pronouncements***





In
      September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
      157
      which is intended to increase consistency and comparability in fair value
      measurements by defining fair value, establishing a framework for measuring
      fair
      value and expanding disclosures about fair value measurements. The provisions
      of
      SFAS No. 157 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 January 1, 2008. The Company has determined that the impact
      of SFAS 157 will not have a material effect to the financial statements taken
      as a
      whole.





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




12




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




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





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


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





**4.**
            **Accounts
                Receivable and Concentration of Credit
                Risk**





Accounts
      receivable at September 30, 2008, and June 30, 2008, consist of the
      following:




**September
                30,**
            
            
            **June
                30,****2008**
            
            
            **2008**Accounts
                receivable
            
            $
            14,912
            
            $
            23,870Unbilled
                receivables, net
            
            
            7,896
            
            
            8,14922,808
            
            
            32,019Allowance
                for doubtful accounts
            
            
            (595
            )
            
            (830
            )Total
            
            $
            22,213
            
            $
            31,189




Unbilled
      receivables principally represent the value of services rendered to customers
      not billed as of the balance sheet date. Unbilled receivables are generally
      billed within three months subsequent to the provision of the services. Unbilled
      receivables include deferred revenue which represent amounts that have been
      billed to customers as of the balance sheet date but for which the requisite
      services have not yet been rendered. The total amount of deferred revenue
      included in unbilled receivables was $0.3 million and $0.8 million at September
      30, 2008 and June 30, 2008, respectively.





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. For the three months ended
      September 30, 2007, we derived 86% of our total revenue from our two largest
      customers. Of those customers, one of them represented 7% of net revenue for
      the
      period and one of them represented 79% **** of
      net
      revenue for the period.




13




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




**5.**
            **Inventories**





Inventories
      totaled approximately $1.0 million and $1.0 million as of September 30, 2008,
      and June 30, 2008, 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 and Radian acquisitions. Amortization expense related to amortizable
      intangible assets was $0.1 million and $0.1 million for the three months ended
      September 30, 2008 and 2007, 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, 2008, and June 30, 2008, consist of the
      following:




**September
                30,**
            
            
            **June
                30,****2008**
            
            
            **2008**Employee
                compensation
            
            $
            1,820
            
            $
            2,998Construction
                costs, net
            
            
            4,790
            
            
            8,107Other
            
            
            895
            
            
            814$
            7,505
            
            $
            11,919




Accrued
      construction costs are reported net of amounts deferred in the calculation
      of
      percentage of completion for our construction projects. The amount of deferred
      expense included in accrued construction costs was $0.5 million and $0.8 million
      at September 30, 2008 and June 30, 2008, respectively.




14




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




**8.**
            **Income
                Taxes**




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




We
      recorded income tax expense of $0.3 million and $42 thousand for the three
      months ended September 30, 2008 and 2007, 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 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 (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 (y) one half of one
      percent (0.50%) of $15.0 million if the early termination occurs on or before
      April 16, 2009, and (z) three eighths of one percent (0.375%) of $15.0 million
      if the early termination occurs on or after April 17, 2009 or on or before
      April
      16, 2010.




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
      cause the PNC Note to be declared immediately due and payable, without notice,
      in accordance with the terms of the PNC Facility. Notwithstanding the foregoing,
      all outstanding principal and interest are due and payable on April 17, 2011.
      The balance outstanding at September 30, 2008 and June 30, 2008 was $0.3 million
      and $0.2 million, respectively.




15




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




**10.**
            **Stock-Based
                Compensation**





At
      September 30, 2008, we sponsored two stock option plans, the 1999 Omnibus
      Securities Plan (the “1999 Plan”) and the 2001 Equity Incentive Plan (the “2001
      Plan”), collectively (the “Plans”). We have elected to account for those Plans
      under SFAS 123R.





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





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


Stock-based
      compensation expense of approximately $37 thousand and $51 thousand was recorded
      during the three months ended September 30, 2008, and 2007, respectively. The
      fair value of each stock option grant is estimated on the grant date using
      the
      Black-Scholes Merton option-pricing model with the following assumptions:
      dividend yield of 0%; expected volatility of between 64% and 65% (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 2.93% and 3.06% based on the yield at the time
      of grant of a U.S. Treasury security with an equivalent remaining
      term.





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




**2001
                Plan**
            
            
            **1999
                Plan**
            
            
            **Non-Plan****Number**
              **of
                  Shares**
            
            
            **Weighted**Average

                **Exercise**
                  **Price**
            
            
            **Number**
              **of
                  Shares**
            
            
            **Weighted**Average

                **Exercise**
                  **Price**
            
            
            **Number**
              **of
                  Shares**
            
            
            **Weighted**Average

                **Exercise**
                  **Price**Balance
                at June 30, 2008
            
            
            16,891
            
            $
            1,387.50
            
            
            1,413,685
            
            $
            3.37
            
            
            18,704
            
            $
            6,786.00Options
                granted at fair value
            
            
            -
            
            
            -
            
            
            22,000
            
            
            1.13
            
            
            -
            
            
            -Options
                exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                cancelled
            
            
            -
            
            
            -
            
            
            (46,328
            )
            
            1.03
            
            
            -
            
            
            -Outstanding
                at September 30, 2008
            
            
            16,891
            
            $
            1,387.50
            
            
            1,389,357
            
            $
            3.41
            
            
            18,704
            
            $
            6,786.00Exercisable
                at September 30, 2008
            
            
            16,891
            
            $
            1,387.50
            
            
            782,119
            
            $
            5.18
            
            
            18,704
            
            $
            6,786.00




16




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


Nonvested
      options activity:




**2001
                Plan**
            
            
            **1999
                Plan**
            
            
            **Non-Plan****Number**
              **of
                Shares**
            
            
            **Number**
              **of
                Shares**
            
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            
            **Number**
              **of
                Shares**Balance
                at June 30, 2008
            
            
            -
            
            
            631,613
            
            $
            1.14
            
            $
            0.81
            
            
            -Options
                granted at fair value
            
            
            -
            
            
            22,000
            
            
            1.13
            
            
            0.70
            
            
            -Options
                vested
            
            
            -
            
            
            (4,125
            )
            
            1.02
            
            
            0.65
            
            
            -Options
                cancelled
            
            
            -
            
            
            (42,250
            )
            
            1.07
            
            
            0.68
            
            
            -Outstanding
                at September 30, 2008
            
            
            -
            
            
            607,238
            
            $
            1.14
            
            $
            0.82
            
            
            -





At
      September 30, 2008, the range of exercise prices, weighted average exercise
      price and weighted average remaining contractual life for options outstanding
      are as follows:




**Options
                Outstanding and Exercisable****Option
                Price Range**
            
            
            **Number**
              **of
                Shares**
            
            
            **Exercisable**
            
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            
            **Weighted**
              **Average** 

                **Remaining**
                  **Contractual**
                    **Life**2001
                Plan
            
            
            
            
            
            
            
            $
            1,387.50
            
            
            16,890
            
            
            16,890
            
            $
            1,387.50
            
            
            2.28
                Years1999
                Plan
            
            $
            0.30
            
            
            to
            
            $
            0.81
            
            
            668,625
            
            
            615,950
            
            $
            0.50
            
            
            7.65
                Years$
            1.01
            
            
            to
            
            $
            1.46
            
            
            716,732
            
            
            162,169
            
            $
            1.22
            
            
            8.57
                Years$
            7.05
            
            
            167
            
            
            167
            
            $
            7.05
            
            
            5.79
                Years$
            8.01
            
            
            250
            
            
            250
            
            $
            8.01
            
            
            5.41
                Years$
            16.50
            
            
            2,417
            
            
            2,417
            
            $
            16.50
            
            
            1.78
                Years$
            3,000.00
            
            
            1,167
            
            
            1,167
            
            $
            3,000.00
            
            
            1.02
                YearsNon-Plan
            
            
            
            
            
            
            
            $
            3,600.00
            
            
            636
            
            
            636
            
            $
            3,600.00
            
            
            1.44
                Years$
            6,900.00
            
            
            18,067
            
            
            18,067
            
            $
            6,900.00
            
            
            1.51
                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. 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, 2008 and 2007, we paid (or accrued to) Sigma $0
      and
      $53 thousand, respectively, in interest on a note payable to Sigma. During
      the
      three months ended September 30, 2008 and 2007, we paid Mr. Waye $0 and $1
      thousand, respectively, for his service as a director pursuant to our standard
      non-employee director compensation program.





On
      February 15, 2007, we entered into a Joinder Agreement to the Note Purchase
      Agreement with Sigma Berliner, LLC, (“Sigma Berliner”) an affiliate of Sigma and
      Thom Waye, and issued a note to Sigma Berliner in the principle amount of $1.5
      million (the “Sigma Berliner Note”) and a warrant to purchase 750,000 shares of
      our common stock. This transaction was the result of Sigma exercising a right
      that Sigma negotiated as part of a December 29, 2006 transaction, at a time
      at
      which it was not an affiliate of Berliner. During the three months ended
      September 30, 2008 and 2007, we paid (or accrued to) Sigma Berliner $0 and
      $26
      thousand, respectively, in interest on the Sigma Berliner Note.





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 FASB Statement
      No. 131, “Disclosures about Segments of an Enterprise and Related
      Information.” Operating income, as presented below, is defined as gross margin
      less selling, general and administrative expenses, depreciation and
      amortization, and 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, 2008,
      and
      2007, is presented below:




**Three
                Months Ended September 30,****2008**
            
            
            **2007****Infrastructure
                Construction**
            
            
            **Site
                Acquisition**
            
            
            **Total**
            
            
            **Infrastructure
                Construction**
            
            
            **Site
                Acquisition**
            
            
            **Total**Revenue
            
            $
            11,716
            
            $
            1,370
            
            $
            13,086
            
            $
            18,485
            
            $
            4,657
            
            $
            23,142Cost
                of revenue
            
            
            7,391
            
            
            84
            
            
            7,475
            
            
            12,836
            
            
            3,789
            
            
            16,625Gross
                margin
            
            
            4,325
            
            
            1,286
            
            
            5,611
            
            
            5,649
            
            
            868
            
            
            6,517Selling,
                general and administrative expenses
            
            
            4,721
            
            
            472
            
            
            5,193
            
            
            4,496
            
            
            960
            
            
            5,456Depreciation
                and amortization
            
            
            272
            
            
            31
            
            
            303
            
            
            182
            
            
            46
            
            
            228Loss
                on sale of fixed assets
            
            
            -
            
            
            -
            
            
            -
            
            
            6
            
            
            2
            
            
            8Operating
                income
            
            $
            (668
            )
            $
            783
            
            $
            115
            
            $
            965
            
            $
            (140
            )
            $
            825




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, 2008 (the “Annual
      Report”) under the heading entitled “Risk Factors,” as well as all other
      cautionary language in this Quarterly Report, provide examples of risks,
      uncertainties and events that may cause actual results to differ materially
      from
      the expectations described in these “forward-looking” statements. It is
      important to note that the occurrence of the events described in these
      considerations and elsewhere in this Quarterly Report and our Annual Report
      could have an adverse effect on 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


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




19


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, 2008,
      and
      2007, has been derived from our unaudited consolidated financial statements
      that, in the opinion of management, include all adjustments, consisting only
      of
      normal recurring adjustments, necessary to state fairly the data for such
      period. We operate in two
      reportable segments: (1) infrastructure construction and technical services,
      and
      (2) site acquisition and zoning to wireless communications carriers.





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




**Three
                months ended**
                **September
                  30,****2008**
            
            **2007****Statement
                of Operations Data:**Revenue
            
            $
            13,086
            
            $
            23,142Gross
                margin
            
            
            5,611
            
            
            6,517Operating
                income
            
            
            115
            
            
            825Net
                income
            
            
            86
            
            
            39Net
                income per shareBasic
            
            $
            0.00
            
            $
            0.00Diluted
            
            
            0.00
            
            
            0.00




**September
                30,**
            
            
            **June
                30,**Balance
                Sheet Data:
            
            
            **2008**
            
            
            **2008**Current
                assets
            
            $
            29,086
            
            $
            36,672Total
                assets
            
            
            35,132
            
            
            43,269Current
                liabilities
            
            
            11,807
            
            
            20,056Long-term
                debt, net of debt discountand
                current portion
            
            
            596
            
            
            772Shareholder's
                equity
            
            
            22,606
            
            
            22,337


20





**Three
      months ended September 30, 2008, compared to three months ended September 30,
      2007**


**(Amounts
      in Thousands Unless Otherwise Stated)**





*Revenue*




**Three
                Months Ended**
                **September
                  30,****2008**
            
            
            **2007**
            
            
            **(Decrease)**Infrastructure
                construction and technical services
            
            $
            11,716
            
            $
            18,485
            
            $
            (6,769
            )Site
                acquisition and zoning
            
            
            1,370
            
            
            4,657
            
            
            (3,287
            )Total
            
            $
            13,086
            
            $
            23,142
            
            $
            (10,056
            )




We
      had
      revenue of $13.1 **** million
      for the three months ended September 30, 2008, versus $23.1 million for the
      three months ended September 31, 2007. This represents a decrease of $10.0
      million, or 43%. Revenue from infrastructure construction and technical services
      decreased $6.8 million from $18.5 million, or 37% for the three months ended
      September 30, 2008 as compared to the three months ended September 30, 2007.
      Revenue from site acquisition and zoning decreased $3.3 million, or 71%, for
      the
      three months ended September 30, 2008 as compared to the three months ended
      September 30, 2007. This decrease in revenue is primarily related to our largest
      customer cancelling certain purchase orders and delaying the completion of
      other
      purchase orders, because of this customer’s involvement in a significant
      transaction unrelated to us.




Because
      of the nature of our business, we win and begin projects on an irregular basis,
      and therefore, we expect to see considerable variability in our quarterly
      results during fiscal 2009. In fiscal 2008, for example, we had an
      extraordinarily strong second quarter because of a significant push by our
      largest customer to complete a large number of jobs in this period. In the
      fourth quarter of fiscal 2008, this customer cancelled certain purchase orders,
      and instructed us to delay the completion of other existing purchase orders.
      This impacted our financial results in the quarter ended September 30, 2008
      and
      we expect it to continue to impact our financial results in the second fiscal
      quarter of fiscal 2009. We consider our annual results to be the most
      appropriate measure for evaluating our business because of the quarterly
      variability of our results.




We
      recognize revenues from contracts from infrastructure construction and technical
      services and site acquisition and zoning on the percentage-of-completion method
      of accounting.




*Cost
      of Revenue*




**Three
                  Months Ended**
                  **September
                    30,****2008**
              
              
              **2007**
              
              
              **(Decrease)**Infrastructure
                    construction and technical services
              
              $
              7,391
              
              $
              12,836
              
              $
              (5,445
              )Site
                    acquisition and zoning
              
              
              84
              
              
              3,789
              
              
              (3,705
              )Total
              
              $
              7,475
              
              $
              16,625
              
              $
              (9,150
              )


Our
      cost
      of revenue was $7.5 **** million
      and $16.6 million for the three months ended September 30, 2008 and 2007,
      respectively. This represents a decrease of $9.1 million, or 55%, during a
      period when sales decreased 43%. These amounts represent 57% and 72% of total
      revenue for the three months ended September 30, 2008 and 2007, respectively.




Cost
      of
      revenue for infrastructure construction and technical services decreased $5.4
      million from $12.8 million for the three months ended September 30, 2007 to
      $7.4
      million for the three months ended September 30, 2008. This represents a
      decrease of 42% during a period when revenue decreased 37%.




Cost
      of
      revenue for site acquisition and zoning decreased $3.7 million from $3.8 million
      for the three months ended September 30, 2007 to $0.1 million for the three
      months ended September 30, 2008. This represents a decrease of 98% during a
      period when revenue decreased 71%.




21


*Gross
      Margin*


**Three
                    Months Ended**
                    **September
                      30,****2008**
                
                
                **2007**
                
                
                **Increase**(Decrease)Infrastructure
                        construction and technical services
                
                $
                4,325
                
                $
                5,649
                
                $
                (1,324
                )Site
                        acquisition and zoning
                
                
                1,286
                
                
                868
                
                
                418Gross
                    margin
                
                $
                5,611
                
                $
                6,517
                
                $
                (906
                )


Our
      gross
      margin for the three months ended September 30, 2008, was $5.6 million as
      compared to $6.5 **** million
      for the three months ended September 30, 2007. Our gross margin as a percentage
      of revenue was approximately 43% for the three months ended September 30, 2008,
      as compared to 28% for the three months ended September 30, 2007. This increase
      is further explained below and is not expected to continue going
      forward.




Continuing
      from our results from the fourth quarter of fiscal 2008, overall gross margins
      increased because of a large number of premature job closeouts by our largest
      customer during the fourth quarter of fiscal 2008 and the first quarter of
      fiscal 2009. The revenue associated with these jobs is accounted for under
      the
      percentage-of-completion method of accounting using revenue and performance
      milestones as a method of estimating percentage of completion. This estimated
      percentage of completion is applied to the total estimated contract cost in
      order to accrue costs each quarter. When this large number of jobs was
      prematurely terminated, we reversed certain costs that we had previously accrued
      in this manner. This reversal lowered our cost of revenue and increased our
      reported gross margin. Absent these job cancellations in the first quarter,
      our
      gross margin would have been approximately 32%, which is slightly higher than
      our first quarter fiscal 2008 gross margin. We have historically had gross
      margins in this range.





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses for the three months ended September 30,
      2008 was $5.2 million as compared to $5.5 million for the three months ended
      September 30, 2007. This represents an overall decrease of $0.3 million, which
      consists of a decrease of $0.5 million, primarily driven by decreases in outside
      services of $0.1 million, insurance and professional fees of $0.1 million and
      rent and other occupancy costs of $0.1 million, which was partially offset
      by an
      increase in payroll related expenses of $0.2 million, which was primarily
      related to an expansion of our business development team and new hires in our
      Green Energy division.





*Depreciation
      and Amortization*





Depreciation
      recorded on fixed assets during the three months ended September 30, 2008
      totaled approximately $0.2 million as compared to $0.1 million for the three
      months ended September 30, 2007. The increase was primarily caused by an
      increase in purchases of property and equipment. 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, 2008 and 2007, respectively.





*Interest
      Expense*





We
      recognized $0.1 million in interest expense during the three months ended
      September 30, 2008 as compared to $0.4 million during the three months ended
      September 30, 2007. This decrease was primarily caused by the conversion in
      June
      2008 of our 7% Subordinated Convertible Note with Sigma and the other
      participating noteholders and the reduced usage of our line of credit with
      PNC.





*Amortization
      of Deferred Financing Fees and Accretion of Debt Discount*





We
      recognized $0 and $0.4 million in amortization of deferred financing fees and
      interest accretion caused by the issuance of warrants related to our financing
      transactions with Sigma and the other participating noteholders during the
      three
      months ended September 30, 2008 and 2007, respectively.




22


*Other
      Income*





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 expense of $0.3 million and $42 thousand for the three
      months ended September 30, 2008 and 2007, 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, 2008, we had net operating loss carryforwards for federal and state income
      tax purposes of approximately $1.2 million expiring in 2026, which may be
      applied against future taxable income. We can only utilize approximately $64
      thousand per year due to limitations as a result of the Acquisition (see Note
      1
      of our Consolidated Financial Statements).





**Liquidity
      and Capital Resources**





At
      September 30, 2008, we had consolidated current assets of approximately
      $29.1 million, including cash and cash equivalents of approximately $4.9
      million and net working capital of approximately $17.3 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, 2008 was to pay income taxes and to fund the payments in accounts
      payable and accrued expenses.




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 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 (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 (y) one half of one
      percent (0.50%) of $15.0 million if the early termination occurs on or before
      April 16, 2009, and (z) three eighths of one percent (0.375%) of $15.0 million
      if the early termination occurs on or after April 17, 2009 or on or before
      April
      16, 2010.





On
      February 28, 2007, in connection with the Asset Purchase Agreement with
      Digitcom, J&J Leasing Partnership and the shareholders of Digitcom for the
      purchase certain of the assets of Digitcom, we issued a promissory note to
      J&J Leasing Partnership (the  “J&J
      Note”) in the amount of $1.75 million. The principal amount and any accrued and
      unpaid interest thereon is due and payable quarterly for a three year period
      ending on March 1, 2010. The outstanding principal amount of the J&J Note
      bears interest at the rate of 8.25% per year. The J&J Note is secured by
      certain land and buildings sold to us by J&J Leasing Partnership. The
      balance outstanding at September 30, 2008 was $0.3 million.




23


Our
      ability to satisfy our current obligations is dependent upon our cash on hand,
      borrowings under our credit facility with PNC, and the operations of BCI. Our
      current obligations consist of capital expenditures, debt service and funding
      working capital. In the event we do not continue to generate positive cash
      flow,
      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. In addition, the cancellation and/or deferral of a number
      of
      projects from our largest customer may have a material impact on our ability
      to
      generate sufficient cash flow in future periods. We anticipate that certain
      cost
      savings strategies will be necessary unless and until our largest customer
      elects to proceed with these cancelled or deferred projects or we have obtained
      orders from other customers sufficient to replace these projects.





As
      of
      September 30, 2008, our backlog was approximately $13.5  million
      as compared to $15.2 million as of June 30, 2008. During the fourth quarter
      of
      fiscal 2008 and continuing into the first quarter of fiscal 2009, our largest
      customer notified us to delay completing certain purchase orders, and has
      cancelled other existing purchase orders. We believe substantially all of our
      backlog at September 30, 2008 will be filled within the fiscal year ending
      June
      30, 2009.





The
      net
      cash provided by (used in) ** operating,
      investing and financing activities for the three months ended September, 2008
      and 2007, is summarized below:




**For
                the Three Months Ended**
                **September
                  30,****2008**
            
            
            **2007**Net
                cash (used in) provided by operating activities
            
            $
            2,026
            
            $
            (85
            )Net
                cash used in investing activities
            
            
            (109
            )
            
            (288
            )Net
                cash used in financing activities
            
            
            (151
            )
            
            (2,037
            )




***Cash
      (used in) provided by operating activities.***




Net
      cash
      provided by operating activities in the three months ended September 30, 2008
      was approximately $2.0 million and net cash used in operating activities was
      $85
      thousand in the three months ended September 30, 2007. During the three months
      ended September 30, 2008, cash flow provided by operating activities primarily
      resulted from operating income, net of non-cash charges, of approximately $0.8
      million, which represents an increase of $0.2 million from the three months
      ended September 30, 2007. This increase was primarily caused by net income
      of
      $86 thousand as compared to $39 thousand, and decreases in non-cash charges
      of $
      0.3 million in accretion of interest expense resulting from the issuance of
      warrants. We also realized a decrease in accounts receivable of approximately
      $9.7  million
      due to increased collections and decreased revenue during the three months
      ended
      September 30, 2008. These were partly offset by decreases in accounts payable
      of
      approximately $1.7 million and accrued liabilities of approximately $5.1
      million. ** In
      the
      three months ended September 30, 2007, cash used in operating
      activities primarily resulted from an operating loss, net of non-cash charges,
      of approximately $0.6 million, a decrease in accounts receivable of
      approximately $6.2 million, an increase in accounts payable of approximately
      $1.5 million and an increase in accrued liabilities of approximately $4.4
      million.




***Cash
      used in investing activities.***




Net
      cash
      used in investing activities was approximately $0.1 million and $0.3 million
      in
      the three months ended September 30, 2008 and 2007, respectively. During the
      three months ended September 30, 2008, cash used in investing activities was
      primarily used for the purchase of fixed assets.




***Cash
      used in financing activities.***




Net
      cash
      used in financing activities was approximately $0.2 million in the three months
      ended September 30, 2008 and $2.0 million in the three months ended September
      30, 2007. During the three months ended September 30, 2008, net cash used in
      financing activities consisted primarily of repayment of long-term debt related
      to the Digitcom acquisition of $0.3 million. During the three months ended
      September 30, 2007, net cash used in financing activities consisted primarily
      of
      payments against our credit facility net of borrowings of approximately $1.8
      million and reductions of other debt obligations of approximately $0.2 million.




24


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.




**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, 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. For the three months ended
      September 30, 2007, we derived 86% of our total revenue from our two largest
      customers. Of those customers, one of them represented 7% of net revenue for
      the
      period and one of them represented 79% **** of
      net
      revenue for the period.




As
      of and
      for the year ended June 30, 2008, we derived 84% of our total revenues from
      our
      two largest customers, and those customers represented 62% of our accounts
      receivable. During the year ended June 30, 2008, Sprint Nextel Corporation
      represented 77% and Metro PCS represented 7% of our total revenues.





As
      of and
      for the year ended June 30, 2007, we derived 87% of our total revenues from
      our
      two largest customers, and those customers represented 77% of our accounts
      receivable. During the year ended June 30, 2007, Sprint Nextel Corporation
      represented 80% and T-Mobile USA, Inc. represented 7% of our total
      revenues.




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.




25


**If
      we experience delays and or defaults in customer payments, we could
      be**  **unable
      to cover all expenditures.**




Because
      of the nature of our contracts, at times we commit resources to projects prior
      to receiving payments from our customers in amounts sufficient to cover
      expenditures on client projects as they are incurred. Delays in customer
      payments may require us to make a working capital investment, or obtain advances
      from our line of credit, which may be adversely affected by the current turmoil
      in the credit markets. If a customer defaults in making its payments on a
      project or projects in which we have devoted significant resources, it could
      have a material negative effect on our results of operations or negatively
      impact our financial covenants with our lenders.




**We
      may need additional working capital, the lack of which would likely have
      a**  **significant
      negative impact on our ability to grow our business.**




We
      may
      require additional working capital in order to fund the growth of our
      operations. If adequate funds are not available on terms acceptable to us,
      we
      may not be able to effectively grow our operations and expand our business.
      Our
      ability to fund our operations and corporate infrastructure is directly related
      to the continued availability of these and other funding sources, which may
      be
      adversely affected by the current turmoil in the credit markets.




In
      order
      to grow our business, we may incur significant operating, borrowing and other
      costs. Should our operations require additional funding or our capital
      requirements exceed current estimates, we could be required to seek additional
      financing in the future, which may be adversely affected by the current turmoil
      in the credit markets. We can provide no assurances that we would be able to
      raise such financing when needed or on acceptable terms. As a result, we may
      be
      forced to reduce or delay additional expenditures or otherwise delay, curtail
      or
      discontinue some or all of our operations. Further, if we are able to access
      additional capital through borrowings, such debt would increase our debt
      obligations, which could have a material adverse effect on our financial
      condition, results of operations or cash flows.




**We
      bear the risk of cost overruns in some of our contracts.**




We
      conduct our business under various types of contractual arrangements. Under
      such
      contracts, prices are established, in part, on cost and scheduling estimates,
      which are based on a number of assumptions, including, without limitation,
      assumptions about future economic conditions, prices and availability of labor,
      equipment and materials, and other exigencies. These assessments are made more
      difficult by the current uncertainty in the capital markets and the wide
      fluctuation of prices for equipment, fuel and other costs associated with our
      services. If those estimates prove inaccurate, or circumstances change, cost
      overruns may occur, and we could experience reduced profits or, in some cases,
      a
      loss for that project.




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




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




·
            financing
                provided to customers and potential customers;




·
            the
                commencement, progress, completion or termination of contracts during
                any
                particular quarter;




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




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




·
            telecommunications
                market conditions and economic conditions
                generally.




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




26


**Our
      stock price is volatile and purchasers of our common stock could
      incur**  **substantial
      losses.**




Historically,
      our stock price has been volatile. The stock market in general, particularly
      recently, and the market for telecommunications companies in particular, has
      experienced extreme volatility that has often been unrelated to the operating
      performance of particular companies. As a result of this volatility, investors
      may not be able to sell their common stock at or above their respective purchase
      prices. The market price for our common stock may be influenced by many factors,
      including, but not limited to, variations in our financial results or those
      of
      companies that are perceived to be similar to us, investors’ perceptions of us,
      the number of our shares available in the market, future sales of our common
      stock, and general economic, industry and market conditions.




**Shares
      eligible for future sale may adversely affect the market price of our common
      stock, as the future sale of a substantial amount of outstanding stock in the
      public marketplace could reduce the price of our common
      stock.**




The
      market price of our common stock could decline as a result of sales of a large
      number of shares of our common stock in the market or the perception that these
      sales could occur. We are obligated to register over 13 million shares which
      will put a significant number of shares in the hands of non-affiliates who
      will
      have the ability to trade those shares in the market. These sales, or the
      possibility that these sales may occur, also might make it more difficult for
      us
      to sell equity securities in the future at a time and at a price that we deem
      appropriate.




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





None.





**Item
      3.**  **Defaults
      Upon Senior Securities**





None.





**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.


27





**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 13, 2008
              By:
              /s/
                  Richard B. BerlinerRichard
                  B. BerlinerChief
                  Executive Officer(Principal
                  Executive Officer)Date:
                  November 13, 2008
              By:
              /s/
                  Raymond A. Cardonne, Jr.Raymond
                  A. Cardonne, Jr.Chief
                  Financial Officer and Treasurer(Principal
                  Financial Officer)




28