UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-Q



(Mark One)



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

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30,
2012



OR



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

SECURITIES EXCHANGE ACT OF 1934



For the transition period from _____________
to ______________



COMMISSION FILE NUMBER 001-34867



UNITEK GLOBAL SERVICES, INC.

(Exact Name of Registrant as Specified in
Its Charter)



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



1777 Sentry Parkway West, Gwynedd Hall,
Suite 302

Blue Bell, Pennsylvania 19422

(Address of Principal Executive Offices)



(267) 464-1700

(Registrant’s Telephone Number, Including
Area Code)



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YesxNo ̈



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo ̈



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 the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



|Large accelerated filer ̈                                            | Accelerated filerx        
|------------------------------------------------------------------- | --------------------------
|Non-accelerated filer ̈(Do not check if a smaller reporting company) | Smaller reporting company ̈



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈Nox



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



On August 6, 2012, 18,668,200 shares of
the registrant’s common stock, $0.00002 par value per share, were outstanding.













UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



QUARTERLY REPORT ON FORM 10-Q

INDEX



|           |                                                                                                                                                 | PAGE
NO.
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | --------
|PART I:    | FINANCIAL INFORMATION                                                                                                                           |         
|           |                                                                                                                                                 |         
|Item 1.    | Financial Statements                                                                                                                            |         
|           |                                                                                                                                                 |         
|           | Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2012 and December 31, 2011                                                     | 3       
|           |                                                                                                                                                 |         
|           | Condensed Consolidated Statements of Comprehensive Income or Loss (Unaudited) for the three and six months ended June 30, 2012 and July 2, 2011 | 4       
|           |                                                                                                                                                 |         
|           | Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2012 and July 2, 2011                             | 5       
|           |                                                                                                                                                 |         
|           | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                                | 6       
|           |                                                                                                                                                 |         
|Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                           | 29      
|           |                                                                                                                                                 |         
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                                                                      | 41      
|           |                                                                                                                                                 |         
|Item 4.    | Controls and Procedures                                                                                                                         | 41      
|           |                                                                                                                                                 |         
|PART II:   | OTHER INFORMATION                                                                                                                               |         
|           |                                                                                                                                                 |         
|Item 1.    | Legal Proceedings                                                                                                                               | 42      
|           |                                                                                                                                                 |         
|Item 1A.   | Risk Factors                                                                                                                                    | 42      
|           |                                                                                                                                                 |         
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                     | 42      
|           |                                                                                                                                                 |         
|Item 3.    | Defaults Upon Senior Securities                                                                                                                 | 42      
|           |                                                                                                                                                 |         
|Item 4.    | Mine Safety Disclosures                                                                                                                         | 42      
|           |                                                                                                                                                 |         
|Item 5.    | Other Information                                                                                                                               | 42      
|           |                                                                                                                                                 |         
|Item 6.    | Exhibits                                                                                                                                        | 42      
|           |                                                                                                                                                 |         
|SIGNATURES | 43                                                                                                                                             











PART I: FINANCIAL INFORMATION



Item 1.  Financial Statements



UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and
per share amounts)

(Unaudited)



|                                                                                                                                                                        |  | June 30, |          |   | December 31, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -------- | - | ------------ | -
|                                                                                                                                                                        |  | 2012     |          |   | 2011         |  
|ASSETS                                                                                                                                                                  |  |          |          |   |              |  
|CURRENT ASSETS                                                                                                                                                          |  |          |          |   |              |  
|Cash and cash equivalents                                                                                                                                               |  | $        | —        |   |              | $
|Restricted cash                                                                                                                                                         |  |          | 25       |   |              |  
|Accounts receivable and unbilled revenue, net of allowances                                                                                                             |  |          | 104,748  |   |              |  
|Inventories                                                                                                                                                             |  |          | 10,059   |   |              |  
|Prepaid expenses and other current assets                                                                                                                               |  |          | 6,598    |   |              |  
|Total current assets                                                                                                                                                    |  |          | 121,430  |   |              |  
|Property and equipment, net                                                                                                                                             |  |          | 36,733   |   |              |  
|Amortizable customer relationships, net                                                                                                                                 |  |          | 25,889   |   |              |  
|Other amortizable intangible assets, net                                                                                                                                |  |          | 4,104    |   |              |  
|Goodwill                                                                                                                                                                |  |          | 166,053  |   |              |  
|Deferred tax assets, net                                                                                                                                                |  |          | 958      |   |              |  
|Other assets                                                                                                                                                            |  |          | 5,371    |   |              |  
|Total assets                                                                                                                                                            |  | $        | 360,538  |   |              | $
|                                                                                                                                                                        |  |          |          |   |              |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                    |  |          |          |   |              |  
|CURRENT LIABILITIES                                                                                                                                                     |  |          |          |   |              |  
|Accounts payable                                                                                                                                                        |  | $        | 36,539   |   |              | $
|Accrued liabilities                                                                                                                                                     |  |          | 38,165   |   |              |  
|Contingent consideration                                                                                                                                                |  |          | 84       |   |              |  
|Current portion of long-term debt                                                                                                                                       |  |          | 1,500    |   |              |  
|Current income taxes                                                                                                                                                    |  |          | 119      |   |              |  
|Current portion of capital lease obligations                                                                                                                            |  |          | 10,142   |   |              |  
|Other current liabilities                                                                                                                                               |  |          | 509      |   |              |  
|Total current liabilities                                                                                                                                               |  |          | 87,058   |   |              |  
|                                                                                                                                                                        |  |          |          |   |              |  
|Long-term debt, net of current portion                                                                                                                                  |  |          | 142,350  |   |              |  
|Long-term capital lease obligations, net of current portion                                                                                                             |  |          | 13,358   |   |              |  
|Deferred income taxes                                                                                                                                                   |  |          | 7,511    |   |              |  
|Other long-term liabilities                                                                                                                                             |  |          | 1,441    |   |              |  
|Total liabilities                                                                                                                                                       |  |          | 251,718  |   |              |  
|                                                                                                                                                                        |  |          |          |   |              |  
|STOCKHOLDERS’ EQUITY                                                                                                                                                    |  |          |          |   |              |  
|Preferred Stock, $0.00002 par value (20 million shares authorized, no shares issued or outstanding)                                                                     |  |          | —        |   |              |  
|Common Stock, $0.00002 par value (200 million shares authorized, 18,616,124 and 16,305,369 issued and outstanding at June 30, 2012 and December 31, 2011, respectively) |  |          | —        |   |              |  
|Additional paid-in capital                                                                                                                                              |  |          | 259,691  |   |              |  
|Accumulated other comprehensive income                                                                                                                                  |  |          | 59       |   |              |  
|Accumulated deficit                                                                                                                                                     |  |          | (150,930 | ) |              |  
|Total stockholders’ equity                                                                                                                                              |  |          | 108,820  |   |              |  
|Total liabilities and stockholders’ equity                                                                                                                              |  | $        | 360,538  |   |              | $



See accompanying notes



3







UNITEK GLOBAL SERVICES, INC. AND
SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME OR LOSS

(Amounts in thousands, except per share
amounts)

(Unaudited)



|                                                             |  | Three Months Ended |         |   | Six Months Ended |  
|------------------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | -
|                                                             |  | June 30,           |         |   | July 2,          |  
|                                                             |  | 2012               |         |   | 2011             |  
|                                                             |  |                    |         |   |                  |  
|Revenues                                                     |  | $                  | 115,533 |   |                  | $
|Cost of revenues                                             |  |                    | 94,306  |   |                  |  
|Gross profit                                                 |  |                    | 21,227  |   |                  |  
|Selling, general and administrative expenses                 |  |                    | 10,271  |   |                  |  
|Change in fair value of contingent consideration             |  |                    | (400    | ) |                  |  
|Restructuring charges                                        |  |                    | 797     |   |                  |  
|Depreciation and amortization                                |  |                    | 7,333   |   |                  |  
|Operating income (loss)                                      |  |                    | 3,226   |   |                  |  
|                                                             |  |                    |         |   |                  |  
|Interest expense                                             |  |                    | 3,662   |   |                  |  
|Loss on extinguishment of debt                               |  |                    | —       |   |                  |  
|Other income, net                                            |  |                    | (909    | ) |                  |  
|Income (loss) from continuing operations before income taxes |  |                    | 473     |   |                  |  
|Income tax expense                                           |  |                    | 909     |   |                  |  
|Loss from continuing operations                              |  |                    | (436    | ) |                  |  
|Loss from discontinued operations                            |  |                    | (131    | ) |                  |  
|Net loss                                                     |  | $                  | (567    | ) |                  | $
|                                                             |  |                    |         |   |                  |  
|Net loss per share – basic and diluted:                      |  |                    |         |   |                  |  
|Continuing operations                                        |  | $                  | (0.02   | ) |                  | $
|Discontinued operations                                      |  |                    | (0.01   | ) |                  |  
|Net loss                                                     |  | $                  | (0.03   | ) |                  | $
|                                                             |  |                    |         |   |                  |  
|Weighted average shares of common stock outstanding:         |  |                    |         |   |                  |  
|Basic and diluted                                            |  |                    | 18,629  |   |                  |  
|                                                             |  |                    |         |   |                  |  
|Comprehensive loss                                           |  | $                  | (567    | ) |                  | $



See accompanying notes



4







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



|                                                                                                                  |  | Six Months Ended |        
|----------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------
|                                                                                                                  |  | June 30,         |        
|                                                                                                                  |  | 2012             |        
|Cash flows from operating activities:                                                                             |  |                  |        
|Net loss                                                                                                          |  | $                | (10,397
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities – continuing operations: |  |                  |        
|Loss from discontinued operations                                                                                 |  |                  | 477    
|Provision for doubtful accounts                                                                                   |  |                  | 812    
|Depreciation and amortization                                                                                     |  |                  | 14,290 
|Amortization of deferred financing fees                                                                           |  |                  | 391    
|Change in fair value of derivatives                                                                               |  |                  | 36     
|Accretion of debt discount                                                                                        |  |                  | 236    
|Change in fair value of contingent consideration                                                                  |  |                  | (724   
|Loss on extinguishment of debt                                                                                    |  |                  | —      
|Stock-based compensation                                                                                          |  |                  | 3,047  
|Gain on sale of fixed assets                                                                                      |  |                  | (1,152 
|Deferred tax assets, net                                                                                          |  |                  | 1,610  
|Changes in assets and liabilities:                                                                                |  |                  |        
|Accounts receivable and unbilled revenue                                                                          |  |                  | (14,027
|Inventories                                                                                                       |  |                  | 926    
|Prepaid expenses and other assets                                                                                 |  |                  | (3,452 
|Accounts payable and accrued liabilities                                                                          |  |                  | 7,627  
|Payment of contingent consideration                                                                               |  |                  | (2,427 
|Net cash (used in) provided by operating activities – continuing operations                                       |  |                  | (2,727 
|Net cash used in operating activities – discontinued operations                                                   |  |                  | (420   
|Net cash (used in) provided by operating activities                                                               |  |                  | (3,147 
|                                                                                                                  |  |                  |        
|Cash flows from investing activities:                                                                             |  |                  |        
|Acquisition of property and equipment                                                                             |  |                  | (3,117 
|Proceeds from sale of property and equipment                                                                      |  |                  | 1,607  
|Cash paid for acquisition of businesses, net of cash acquired                                                     |  |                  | (2,858 
|Net cash used in investing activities                                                                             |  |                  | (4,368 
|                                                                                                                  |  |                  |        
|Cash flows from financing activities:                                                                             |  |                  |        
|Proceeds from revolving credit facilities, net                                                                    |  |                  | 12,447 
|Proceeds from issuance of long-term debt, net of debt discount                                                    |  |                  | 19,200 
|Repayment of long-term debt                                                                                       |  |                  | (250   
|Repayment of capital leases                                                                                       |  |                  | (6,255 
|Payment of contingent consideration                                                                               |  |                  | (17,114
|Financing fees                                                                                                    |  |                  | (514   
|Other financing activities                                                                                        |  |                  | (194   
|Net cash provided by financing activities                                                                         |  |                  | 7,320  
|                                                                                                                  |  |                  |        
|Effect of exchange rate on cash and cash equivalents                                                              |  |                  | 100    
|Net decrease in cash and cash equivalents                                                                         |  |                  | (95    
|Cash and cash equivalents at beginning of period                                                                  |  |                  | 95     
|Cash and cash equivalents at end of period                                                                        |  | $                | —      
|                                                                                                                  |  |                  |        
|Supplemental cash flow information:                                                                               |  |                  |        
|Interest paid                                                                                                     |  | $                | 3,105  
|Income taxes paid                                                                                                 |  | $                | 784    
|                                                                                                                  |  |                  |        
|Significant non-cash items:                                                                                       |  |                  |        
|Fair value of equity paid for acquisition                                                                         |  | $                | 7,093  
|Acquisition of property and equipment financed by capital leases                                                  |  | $                | 3,676  



See accompanying notes



5







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 1. | Business
| | -- | --------



UniTek Global Services, Inc. (“UniTek” or the “Company”)
is a premier provider of high-quality, specialized infrastructure services including engineering, construction management and installation
fulfillment services to the wireline and wireless telecommunications, public safety, broadband cable and satellite industries. UniTek
has created a scalable platform through which it can rapidly deploy a highly skilled workforce across the United States and Canada,
delivering a comprehensive end-to-end suite of permanently outsourced infrastructure services. The Company operates in two reportable
segments: (1) Fulfillment, which performs installation and other services for the satellite and broadband cable pay-television
industry; and (2) Engineering and Construction, which performs engineering and construction services on wired and wireless telecommunications
networks.



| | 2. | Basis of Presentation
| | -- | ---------------------



The accompanying unaudited condensed consolidated financial
statements as of June 30, 2012 and for the three and six months ended June 30, 2012 and July 2, 2011, have been prepared in accordance
with accounting standards generally accepted in the United States (“GAAP”) for interim financial statements and pursuant
to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the Company’s
opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal
and recurring nature, necessary to present fairly the results of its operations and cash flows at the dates and for the periods
indicated. The results of operations for the interim periods are not necessarily indicative of the results for the full fiscal
year. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany accounts have been eliminated in consolidation.



The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 7, 2012.



| | 3. | Summary of Significant Accounting Policies
| | -- | ------------------------------------------



The following is a summary of the significant accounting policies
followed in the preparation of the accompanying condensed consolidated financial statements.



Use of Estimates



The preparation of financial statements in conformity with GAAP
requires the Company to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, amounts
contained in certain of the notes to the condensed consolidated financial statements, and the revenues and expenses reported for
the periods covered by the financial statements. Although such assumptions are based on management’s best knowledge of current
events and actions the Company may undertake in the future, actual results could differ significantly from those estimates and
assumptions. The Company’s more significant estimates relate to revenue recognition, allowances for bad debts, accruals for
legal obligations, medical insurance and workers’ compensation insurance and the valuation of goodwill and intangible assets.



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



Cash and Cash Equivalents



The Company considers 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.



6







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Restricted Cash



Restricted cash represents collateral held for a letter of credit
issued in conjunction with a facility lease.



Accounts Receivable and Unbilled Revenue, Net of Allowances



Accounts receivable are customer obligations for services rendered
to such customers under normal trade terms. The Company’s customers are primarily communications carriers, corporate and
governmental entities, located primarily in the U.S. and Canada. The Company performs periodic credit evaluations of its customers’
financial condition. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Unbilled revenue
represents revenue on uncompleted infrastructure equipment construction and installation contracts that are not yet billed or billable
and revenue recognized on completed projects that are not yet billed 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. Any costs in excess of billings are deferred and recorded as a component of accrued liabilities.



The allowance for doubtful accounts is the Company’s best
estimate of the amount of probable credit losses in its existing accounts receivable and unbilled revenue. A specific reserve for
bad debts is recorded for known or suspected doubtful accounts receivable or unbilled revenue. For all other accounts, the Company
recognizes a general reserve for bad debts based on the length of time receivables are past due and historical write-off experience.
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, the customer’s payment history, the length of the customer’s relationship with
the Company, specific customer issues, availability of mechanics’ and other liens, existence of payment bonds and other sources
of payment, current industry trends and the current economic climate. Account balances are charged off against the allowance when
the Company believes it is probable that the receivable will not be recovered. Provisions for doubtful accounts are recorded in
selling, general and administrative expenses.



Inventories



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



Property and Equipment



Property and equipment consist of vehicles, equipment and computers,
land and buildings, leasehold improvements and assets under capital leases. Each class of asset is recorded at cost and depreciated
using the straight-line method over the estimated useful lives, which range from a period of three to five years, except as follows. Leasehold
improvements are depreciated over the term of the lease or the estimated useful life, whichever is shorter. Buildings are depreciated
over 27.5 years. Assets under capital leases are depreciated over the lesser of the lease term or the asset’s estimated useful
life. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. The Company
capitalizes certain costs incurred in connection with developing or obtaining internal use software, which are included within
equipment and computers. At the time of retirement or other disposition of property and equipment, the cost and accumulated
depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements
of comprehensive income or loss. All depreciation of property and equipment is included in the consolidated statements of
comprehensive income or loss in depreciation and amortization.



Leases



The Company leases vehicles primarily for performing fulfillment
services to the pay television industry. Leases are accounted for either as operating or capital depending on the terms of the
lease. Each lease is evaluated and a determination is made whether the lease is an operating or capital lease. Operating lease
payments are expensed as incurred. Capital leases are included on the condensed consolidated balance sheets as property
and equipment and capital lease obligations.



7







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Impairment of Long-Lived Assets



The Company periodically reviews long-lived assets, consisting
primarily of property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable. In analyzing potential impairment, management uses projections
of future undiscounted cash flows from the assets. These projections are based on management’s view of growth rates for the
related business, anticipated future economic conditions and estimates of residual values and are considered to be impaired when
the undiscounted net cash flows are less than its carrying value. The impairment recognized is the amount by which the carrying
value exceeds the fair value based on assumptions that marketplace participants would use in their estimates of fair value.



Goodwill and Other Intangible Assets



Goodwill represents the excess purchase price over the fair
value of the tangible net assets and intangible assets acquired in a business combination. The Company amortizes intangible assets,
consisting of customer relationships, trade names, technology, backlog and non-compete agreements from acquired businesses on a
straight-line basis over the 9- to 129-month lives of those agreements.



Goodwill is subject to an assessment for impairment using a
two-step, fair value-based test with the first step performed at least annually, or more frequently if events or circumstances
exist that indicate that goodwill may be impaired. The Company completes an annual analysis of the reporting units at the beginning
of the fourth quarter of each fiscal year. The first step requires the Company to determine the fair value of each reporting unit
and compare it to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value,
an impairment test is performed to determine the implied value of goodwill for that reporting unit. If the implied value is less
than the carrying amount of goodwill for that reporting unit, an impairment loss is recognized for that reporting unit.



Foreign Currency Translation



The balance sheets of foreign subsidiaries are translated into
U.S. dollars at current period-end rates, and the statements of comprehensive income or loss are translated at average monthly
rates during each monthly period. Net exchange gains or losses resulting from the translation of foreign financial statements and
the effect of exchange rate changes on intercompany transactions of a long-term investment nature are accumulated and credited
or charged directly to a separate component of stockholders’ equity. Any foreign currency gains or losses related to transactions
are charged to other income (expense), net.



Other Assets



Costs associated with obtaining long-term debt are deferred
and amortized to interest expense on a straight-line basis, which approximates the effective interest method, over the term of
the related debt. At June 30, 2012 and December 31, 2011, $3.6 million and $3.4 million (net), respectively, is included in
other assets related to deferred financing fees.



8







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Revenue Recognition



The Company recognizes revenue when persuasive evidence of an
agreement exists, delivery has occurred or services have been rendered, the price is fixed and determinable and collection is reasonably
assured. Revenue is recognized net of any estimated allowances.



Revenues from fulfillment services provided to the pay television
industry are recognized as the services are rendered. Fulfillment services are generally performed under master or other services
agreements and are billed on a contractually agreed price per unit, work order basis. Under master service and similar type
service agreements, the Company furnishes specified units of service for a separate fixed price per unit of service. The Company
recognizes revenue from fulfillment services net of equipment costs payable to the customer because the Company has determined
that it acts as an agent specific to the equipment costs.



Within the Engineering and Construction segment, the Company
enters into contracts that require the installation or construction of specified units within an infrastructure system. Under these
contracts, revenue is recognized at the contractually agreed price per unit as the units are completed, which best reflects the
pattern in which the obligation to the customer is fulfilled. In the wireless portion of the Engineering and Construction
segment, revenue for site acquisition and zoning services is based upon output measures using contract milestones as the basis. Revenue
from infrastructure equipment construction and installation contracts is recorded under the percentage-of-completion method based
on the percentage of the total direct costs incurred to date compared to estimated total costs at completion. Direct costs
typically include direct materials, labor and subcontractor costs and indirect costs related to contract performance, such as indirect
labor, supplies, tools and repairs. Direct materials are primarily purchased from third-party vendors and are therefore included
as a component of direct costs in estimating the percentage-of-completion. Losses relating to Engineering and Construction
work are recognized when such losses become known.



Certain contracts within the Engineering and Construction segment
include multiple deliverables, typically involving the design, construction and implementation of public safety radio networks
with a separate maintenance component for a specific period of time following implementation. The maintenance component of these
contracts is typically for a period of one to ten years. The Company accounts for the maintenance component of these contracts
as a separate unit of accounting with the revenue being recognized on a pro-rata basis over the term of the maintenance period.
The revenue for the remaining portion of the contract is recognized on the percentage of completion method. The value assigned
to each unit of accounting is objectively determined and obtained primarily from sources such as the separate selling price for
that item or a similar item or from competitor prices for similar items. The liability associated with these maintenance contracts
is reflected within other current liabilities and other long-term liabilities.



The Company is also subject to costs arising from vendor and
subcontractor change orders (work performed that was not in original scope), which may or may not be pre-approved by the customer.
The Company determines the likelihood that such costs will be recovered based upon past practices with the customer or specific
discussions, correspondence or negotiation with the customer. The Company accounts for costs relating to change orders as contract
costs to be expensed in the period incurred, unless persuasive evidence exists that the costs will be recovered. Unbilled revenues
represent revenue on uncompleted infrastructure equipment construction and installation contracts that are not yet billed or billable
and revenue recognized on completed projects that are not yet billed, 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. Any costs in excess of billings are deferred and recorded as a component of accrued liabilities.



9







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Net Income or Loss per Share



Basic net income or loss per share is computed by dividing
net income or loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net
income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding
during the periods adjusted for the dilutive effect, if any, of the exercise or conversion of instruments into common stock, such
as non-vested restricted stock units (“RSUs”), stock options or warrants.



During the three and six months ended June 30, 2012 and July
2, 2011, there were no differences in the computation of basic and diluted net loss per share.



During the three and six months ended June 30, 2012 and July
2, 2011, 0.7 million non-vested RSUs, stock options and warrants were excluded from the computation of diluted net loss per share
because their effect was anti-dilutive to the computation. These instruments could potentially be dilutive in a future period should
the Company report income from continuing operations and, with respect to outstanding stock options or warrants, should the market
price of the Company’s common stock exceed the exercise price of such instruments.



Insurance Reserves



The Company maintains a high-deductible casualty insurance program,
subject to per claim deductibles of $0.35 million for its workers’ compensation policy with a $0.15 million corridor policy
effective July 1, 2011, $0.25 million for its general liability policy and $0.35 million for its automobile liability policy. The
Company also has excess umbrella coverage up to $50.0 million per claim and in the aggregate subject to policy terms and conditions.
Because most claims do not exceed the deductibles under its insurance policies, the Company is effectively self-insured for substantially
all claims. The Company also has a self-insured plan for medical and dental claims. The Company determines any liabilities
for unpaid claims and associated expenses, including incurred but not reported losses, and reflects the undiscounted value of those
liabilities in the balance sheet within accrued liabilities. The determination of such claims and expenses and the appropriateness
of the related liability is reviewed and updated quarterly. As of June 30, 2012 and December 31, 2011, the liability for insurance
reserves was $15.2 million and $13.7 million, respectively. Known amounts for claims that are in the process of being settled,
but have been paid in periods subsequent to those being reported, are recorded in the subsequent reporting periods. The Company’s
insurance accruals are based upon known facts, historical trends and reasonable estimates of future expenses.



10







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Income Taxes



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



The Company recognizes uncertain tax positions in its financial
statements when minimum recognition criteria are met in accordance with current accounting guidance. The Company recognizes
interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of June 30, 2012
and December 31, 2011, the Company had accrued $0.1 million and $0.9 million, respectively, in federal and state taxes, interest
and penalties. The Company’s tax returns for the years ended December 31, 2008 through December 31, 2010 are still subject
to examination by tax jurisdictions. The Company provides an intra-period tax allocation of the income tax expense or benefit for
the year to continuing operations and discontinued operations.



Stock-based Compensation



The Company measures and recognizes compensation expense for
all stock-based awards made to employees and directors based on estimated grant-date fair values.



The condensed consolidated financial statements include stock-based
compensation expense of $1.0 million and $1.1 million, respectively, for the three months ended June 30, 2012 and July 2, 2011
and $3.0 million and $3.6 million, respectively for the six months ended June 30, 2012 and July 2, 2011 within selling, general,
and administrative expenses in the consolidated statements of comprehensive income or loss.



Stock-based compensation expense is based on the fair value
of awards ultimately expected to vest. The Company estimates forfeitures at the time of grant in order to estimate the amount of
awards that will ultimately vest. Limited historical forfeiture data is available. As such, management has based the estimated
forfeiture rate on expected employee turnover and reevaluates its estimates each period. The Company estimates the fair value of
RSUs on the date of grant based on quoted market prices for the Company’s common stock and the fair value of stock options
on the date of grant primarily using the Black-Scholes option-pricing model. Compensation expense for all stock-based awards is
recognized on a straight-line basis over the requisite service periods. The Company records the cash flows resulting from the tax
deductions in excess of the compensation cost recognized for those options (excess tax benefit) as financing cash flows.



11







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Fair Value Measurements



Fair value is a market-based measurement, not an entity-specific
measurement, and represents 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. 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) may be used to determine fair value, 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.



The Company uses a three-tier valuation hierarchy based upon
observable and non-observable inputs, as described below:



Level 1 – Quoted market prices in active markets
for identical assets or liabilities at the measurement date.



Level 2 – Observable market based inputs or other
observable inputs corroborated by market data at the measurement date, other than quoted prices included in Level 1, either directly
or indirectly.



Level 3 – Significant unobservable inputs that
cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally
determined using valuation models that utilize management’s estimates of market participant assumptions.



The Company determines the estimated fair value of assets and
liabilities using available market information and commonly accepted valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The use of different assumptions or estimation methodologies
could have a material effect on the estimated fair values.



Concentration of Credit Risk



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



Comprehensive Income or Loss



Comprehensive income or loss is a measure of net income or loss
and all other changes in equity that result from transactions other than those with stockholders. The following table presents
the components of comprehensive income or loss:



|                                  |  | Three Months Ended |      |   | Six Months Ended |  
|--------------------------------- |  | ------------------ | ---- | - | ---------------- | -
|                                  |  | June 30, 2012      |      |   | July 2, 2011     |  
|Net loss                          |  | $                  | (567 | ) |                  | $
|Foreign currency translation gain |  |                    | —    |   |                  |  
|Comprehensive loss                |  | $                  | (567 | ) |                  | $



12







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Recent Accounting Pronouncements



Fair Value

In May 2011, the FASB updated its accounting guidance for fair
value measurement to converge guidance of the FASB and the International Accounting Standards Board on fair value measurement and
disclosure. This update changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and
disclosing information about fair value measurements, clarifies the FASB’s intent about the application of existing fair
value measurement requirements, and changes particular principles or requirements for measuring fair value or for disclosing information
about fair value measurements. The updated guidance is effective prospectively for interim and annual periods beginning after December 15,
2011. The Company adopted this guidance beginning with its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.



Presentation of Comprehensive Income

In June 2011, the FASB updated its accounting guidance for the
presentation of comprehensive income. The objective of the updated guidance is to improve the comparability, consistency and transparency
of financial reporting and to increase the prominence of items reported in other comprehensive income. It provides the option to
present the total of comprehensive income, the components of net income and the components of other comprehensive income either
in a single continuous statement or in two separate but consecutive statements. Companies are no longer permitted to present the
components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the
FASB deferred the specific requirement to present items that are reclassified from accumulated other comprehensive income to net
income separately within their respective components of net income and other comprehensive income.



The updated guidance, other than the items subject to the December
2011 deferral, is effective retrospectively for interim and annual periods beginning after December 15, 2011. The Company adopted
this guidance beginning with its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.



Goodwill Impairment

In September 2011, the FASB updated its accounting guidance
for testing of goodwill for impairment. The updated guidance permits an entity to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having
a likelihood of more than 50%. The updated accounting guidance is effective for fiscal years and interim periods beginning after
December 15, 2011. The Company will adopt this guidance beginning with its annual assessment of goodwill impairment as of September
30, 2012. We are evaluating the impact that this standard will have on that assessment.





13







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 4. | Business Combinations
| | -- | ---------------------



Acquisition of Pinnacle



Effective April 3, 2011, UniTek completed the acquisition of
Pinnacle Wireless, Inc. (“Pinnacle”) pursuant to an Asset Purchase Agreement dated as of March 30, 2011, as amended
on March 28, 2012 (the “Asset Purchase Agreement”). Pinnacle specializes in large-scale communications projects
for transportation, public safety, entertainment, hospitality and enterprise-grade commercial real estate, which has expanded
the Company’s presence in the two-way radio and wireless communications systems integration markets.



In accordance with the Asset Purchase Agreement, UniTek agreed
to pay an aggregate purchase price of up to $50.7 million, subject to certain conditions and adjustments, consisting of a base
purchase price of $20.7 million and earn-out payments of up to $30.0 million. The base purchase price of $20.7 million consisted
of $12.7 million in cash and $8.0 million in shares of UniTek common stock. The number of shares of common stock was determined
using the volume-weighted average of the closing prices of the common stock as quoted on the Nasdaq Global Market for the 20 days
prior to March 31, 2011, which was $8.65 per share, resulting in the issuance of 924,856 shares of the Company’s common stock.
Of the consideration paid in shares of the Company’s common stock, 578,037 shares were delivered at closing and 346,819 shares
were placed into escrow, to be held until their release in accordance with the terms of the Asset Purchase Agreement.



The contingent consideration was in the form of earn-out payments
based upon the achievement of incremental earnings before interest, taxes, depreciation and amortization (“EBITDA”)
performance targets as defined in the Asset Purchase Agreement. Such payments were originally payable at up to three separate
dates, 60% in cash and 40% in equity, but the Asset Purchase Agreement was subsequently amended on March 28, 2012 to limit the
total number of shares issued (including those that had been issued in connection with the April 2011 closing of the acquisition)
to 3,029,856, with the remainder of the earn-out payments payable in cash. The Company satisfied its obligations under the earn-out
provision by making (i) an initial payment of $2.4 million in cash during the quarter ended December 31, 2011, and (ii) a second
payment of $27.2 million during the quarter ended June 30, 2012, consisting of $19.5 million of cash and $7.7 million of equity.
The number of shares of common stock issued in connection with the second earn-out payment was determined using the volume-weighted
average of the closing prices of the common stock as quoted on the Nasdaq Global Market for the 20 days prior to March 31, 2012,
which was $3.65 per share, resulting in the issuance of 2,105,000 shares of the Company’s common stock. The fair value of
these shares was determined using the Company’s closing stock price on March 30, 2012 of $3.37 per share.



The acquisition-date fair value of the consideration to acquire
Pinnacle was $47.0 million, consisting of $12.7 million in cash (net of cash acquired), $8.5 million in equity and contingent consideration
of $25.8 million representing the estimated fair value of the earn-out payments. The fair value of the equity was determined
based upon the Company’s closing stock price on the last business day prior to April 3, 2011, which was $9.14 per share. The
fair value of the contingent consideration was determined on the acquisition date and subsequently updated using a Monte Carlo
simulation model applied to the Company’s estimate of Pinnacle’s expected EBITDA performance at each of the measurement
dates. Changes in the fair value of the contingent consideration each period subsequent to the acquisition date were recognized
in earnings.



14







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



The following table presents the allocation of the purchase
price to the fair value of assets acquired and liabilities assumed as of the date of acquisition:



|Cash                                    |  | $ | 451    |  
|--------------------------------------- |  | - | ------ | -
|Accounts receivable                     |  |   | 4,313  |  
|Inventories                             |  |   | 652    |  
|Prepaid expenses and other assets       |  |   | 192    |  
|Property and equipment                  |  |   | 2,599  |  
|Amortizable intangible assets           |  |   | 28,686 |  
|Goodwill                                |  |   | 16,817 |  
|Other assets                            |  |   | 445    |  
|Accounts payable and accrued expenses   |  |   | (3,700 | )
|Billings in excess of costs             |  |   | (636   | )
|Deferred revenue                        |  |   | (2,462 | )
|Capital lease obligations               |  |   | (377   | )
|Total fair value of net assets acquired |  | $ | 46,980 |  



During the three and six months ended June 30, 2012, the acquisition
of Pinnacle contributed revenue of approximately $15.2 million and $29.0 million, respectively, and operating income of approximately
$2.9 million and $5.4 million, respectively. During the three months ended July 2, 2011, the acquisition of Pinnacle contributed
revenue of approximately $6.4 million and operating income of $0.4 million. Acquisition related costs for the three months
ended July 2, 2011 were $0.1 million, which were recorded as a component of selling, general and administrative expenses. The
Company has recognized goodwill of $16.8 million, which is tax-deductible, arising from the acquisition representing
the value of the existing workforce as well as expected synergies from the combination of operations. The goodwill associated
with the acquisition of Pinnacle is included in the Engineering and Construction segment’s assets.



The following table presents amortizable intangible assets acquired
as of the date of acquisition:



|                                   |  | Estimated  |        |  | Weighted-average    | 
|---------------------------------- |  | ---------- | ------ |  | ------------------- | 
|                                   |  | fair value |        |  | amortization period | 
|Customer relationships and backlog |  | $          | 23,530 |  |                     | 
|Non-compete agreements             |  |            | 388    |  |                     | 
|Technology and trade names         |  |            | 4,768  |  |                     | 
|Total                              |  | $          | 28,686 |  |                     | 



The following table presents pro forma revenue and loss from
continuing operations as if the Pinnacle acquisition had occurred on January 1, 2011:



|                                |  | Six Months Ended |        
|------------------------------- |  | ---------------- | -------
|                                |  | July 2, 2011     |        
|Revenue                         |  | $                | 199,845
|Loss from continuing operations |  | $                | (15,542



15







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



2012 Cable Acquisitions



On March 2, 2012, the Company acquired substantially all of
the assets and assumed certain liabilities of Cableview Communications Inc. (“Cableview”), a company that provides
cable television installation services, for a total purchase price of $2.9 million. The purchase price included $0.5 million of
cash paid at closing, $1.9 million of cash paid during the quarter ended June 30, 2012 and $0.5 million for the fair value of contingent
consideration in the form of earn-outs. The earn-outs are based on the achievement of certain revenue levels for the six- and 12-month
periods subsequent to the acquisition date up to maximum amounts of $0.4 million and $1.4 million, respectively. The fair value
of the contingent consideration was calculated based on the estimated probabilities of certain revenue levels being achieved. The
acquisition expanded the Company’s cable installation geographic footprint and enhanced customer diversification. The intangible
assets valued at approximately $0.5 million relate to a non-compete agreement which is being amortized over 12 months and customer
contracts that are being amortized over 24 months. The amortization of intangible assets and goodwill will be deductible for tax
purposes upon payment of all purchase consideration. The results of Cableview were included in the consolidated results of the
Company effective March 2, 2012 and have been contributing approximately $3.5 million to revenue quarterly at margins consistent
with the Company’s overall cable business.



On January 3, 2012, the Company acquired substantially all of
the assets and assumed certain liabilities of Streamline Communications, Inc., (“Streamline”), a company that provides
cable television installation services in the greater Dallas, Texas market, for a total purchase price of $0.5 million. The acquisition
expands the Company’s existing cable installation presence in the Dallas area. The intangible asset valued at $0.2 million
relates to customer contracts that are being amortized over 24 months. The amortization of intangible assets and goodwill is deductible
for tax purposes. The results of Streamline were included in the consolidated results of the Company effective January 3, 2012
and have been contributing approximately $0.4 million to revenue quarterly at margins consistent with the Company’s overall
cable business.



The following table presents the calculation of the preliminary
purchase prices for these acquisitions:



|                                       |  | Cableview |       |  | Streamline |  
|-------------------------------------- |  | --------- | ----- |  | ---------- | -
|Cash                                   |  | $         | 2,400 |  |            | $
|Fair value of contingent consideration |  |           | 484   |  |            |  
|Total purchase price                   |  | $         | 2,884 |  |            | $



The following table presents the allocation of the preliminary
purchase price to the fair value of assets acquired and liabilities assumed at the date of acquisition:



|                          |  | Cableview |       |   | Streamline |  
|------------------------- |  | --------- | ----- | - | ---------- | -
|Property and equipment    |  | $         | 501   |   |            | $
|Goodwill                  |  |           | 2,097 |   |            |  
|Customer contracts        |  |           | 360   |   |            |  
|Non-compete agreement     |  |           | 130   |   |            |  
|Capital lease obligations |  |           | (204  | ) |            |  
|Total net assets acquired |  | $         | 2,884 |   |            | $



The results of Cableview and Streamline were not material on
a pro forma basis to the Company’s consolidated revenues or loss from continuing operations.



16







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 5. | Accounts Receivable and Unbilled Revenue, Net of Allowances
| | -- | -----------------------------------------------------------



The following table presents the components of accounts receivable
and unbilled revenue, net of allowances:



|                                |  | June 30, |         |   | December 31, |  
|------------------------------- |  | -------- | ------- | - | ------------ | -
|                                |  | 2012     |         |   | 2011         |  
|Accounts receivable             |  | $        | 68,694  |   |              | $
|Unbilled revenue                |  |          | 39,711  |   |              |  
|                                |  |          | 108,405 |   |              |  
|Allowance for doubtful accounts |  |          | (3,657  | ) |              |  
|Total                           |  | $        | 104,748 |   |              | $



| | 6. | Concentration of Credit Risk
| | -- | ----------------------------



The following table presents revenue concentration information
as a percentage of total consolidated revenues:



|                                    |  | Three Months Ended |    |   | Six Months Ended |  |    |              
|----------------------------------- |  | ------------------ | -- | - | ---------------- |  | -- | -------------
|                                    |  | June 30, 2012      |    |   | July 2, 2011     |  |    | June 30, 2012
|Revenue from top 10 customers       |  |                    | 89 | % |                  |  | 88 | %            
|Revenue from significant customers: |  |                    |    |   |                  |  |    |              
|DIRECTV                             |  |                    | 37 | % |                  |  | 44 | %            
|Comcast                             |  |                    | 17 | % |                  |  | 17 | %            
|Eaton Electric                      |  |                    | 8  | % |                  |  | 1  | %            
|AT&T                                |  |                    | 7  | % |                  |  | —  |              
|Verizon Communications              |  |                    | 5  | % |                  |  | 10 | %            



At June 30, 2012 and December 31, 2011, credit risk was concentrated
with five customers that accounted for approximately $58.1 million or 55% and $47.6 million or 52%, respectively, of accounts receivable
and unbilled revenue.



17







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 7. | Goodwill and Intangible Assets
| | -- | ------------------------------



The following table presents the changes in the carrying amount
of the Company’s goodwill by segment:



|                                      |  | Fulfillment |         |   | Engineering & Construction |   |        | Total | 
|------------------------------------- |  | ----------- | ------- | - | -------------------------- | - | ------ | ----- | 
|Balance at December 31, 2011          |  | $           | 105,308 |   |                            | $ | 58,489 |       | 
|Goodwill associated with acquisitions |  |             | 2,257   |   |                            |   | —      |       | 
|Other adjustments                     |  |             | (1      | ) |                            |   | —      |       | 
|Balance at June 30, 2012              |  | $           | 107,564 |   |                            | $ | 58,489 |       | 



Management reviews goodwill and long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be realizable. Accumulated impairment losses
at June 30, 2012 and December 31, 2011 were $32.4 million, resulting from the impairment of the wireline reporting unit during
the year ended December 31, 2009.



The following table presents the components of amortizable intangible
assets, net:



|                                    |  | June 30, |         |  | December 31, |  
|----------------------------------- |  | -------- | ------- |  | ------------ | -
|                                    |  | 2012     |         |  | 2011         |  
|Amortizable intangible assets:      |  |          |         |  |              |  
|Customer relationships              |  | $        | 99,222  |  |              | $
|Technology and trade names          |  |          | 4,768   |  |              |  
|Non-compete agreements              |  |          | 2,101   |  |              |  
|Total amortizable intangible assets |  |          | 106,091 |  |              |  
|                                    |  |          |         |  |              |  
|Accumulated amortization:           |  |          |         |  |              |  
|Customer relationships              |  |          | 73,333  |  |              |  
|Technology and trade names          |  |          | 1,046   |  |              |  
|Non-compete agreements              |  |          | 1,719   |  |              |  
|Total accumulated amortization      |  |          | 76,098  |  |              |  
|Amortizable intangible assets, net  |  | $        | 29,993  |  |              | $



Amortization expense for the three months ended June 30, 2012
and July 2, 2011 was $2.6 million and $3.3 million, respectively. Amortization expense for the six months ended June 30, 2012 and
July 2, 2011 was $5.1 million and $6.1 million, respectively.



The following table presents estimated amortization expense
for the remainder of the current year, for each of the following four years and thereafter:



|Six months ending December 31, 2012 |  | $ | 4,698  | 
|----------------------------------- |  | - | ------ | 
|2013                                |  |   | 4,413  | 
|2014                                |  |   | 3,518  | 
|2015                                |  |   | 3,370  | 
|2016                                |  |   | 2,665  | 
|Thereafter                          |  |   | 11,329 | 
|Total                               |  | $ | 29,993 | 



18







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 8. | Long-Term Debt
| | -- | --------------



On April 15, 2011, the Company completed a refinancing of all
of its existing debt by entering into (i) a Credit Agreement (the “Term Loan Agreement”) by and among UniTek, the several
banks and other financial institutions or entities that are parties to the Term Loan Agreement (collectively, the “Term Lenders”);
and (ii) a Revolving Credit and Security Agreement (the “Revolving Loan Agreement”) by and among UniTek (and certain
subsidiaries of UniTek) and PNC Bank, National Association (the “Revolving Lender”).



The Term Loan Agreement provides for a $100.0 million term loan
(the “Term Loan”), and the Revolving Loan Agreement provides for a $75.0 million revolving credit facility (“Revolving
Loan”). Both the Term Loan and the Revolving Loan may be used for general business purposes. The Term Loan is to be repaid
in quarterly installments totaling 1.00% per annum of the term loan amount. Such payments began on June 30, 2011 and will end upon
maturity of the debt in 2018. The original borrowing under the Term Loan Agreement was subject to a three percent (3.00%) debt
discount totaling $3.0 million, which is being amortized over the life of the loan. The Term Loan bears interest at one, two, three
or six month LIBOR (with a floor of 1.50%) plus a margin of 7.50% (9.00% at June 30, 2012). The Revolving Loan matures in 2016.
UniTek may draw on the Revolving Loan and repay amounts borrowed in unlimited repetition up to the maximum allowed amount so long
as no event of default has occurred and is continuing. The interest rate on the Revolving Loan can be a combination of LIBOR (with
no floor) and/or a base rate plus a margin of between 2.25% and 2.75% (the weighted average interest rate of the Revolving Loan
was 3.78% at June 30, 2012). Subject to certain terms and conditions, the Term Loan Agreement and the Revolving Loan Agreement
include accordion features of $50.0 million and $25.0 million, respectively.



On May 3, 2012, the Company entered into an incremental term
draw of $20.0 million under the accordion feature of the Term Loan Agreement. The incremental term draw was subject to a four percent
(4.00%) debt discount which is being amortized over the remaining life of the loan. The interest rate, maturity date and terms
of the Term Loan Agreement did not change.



The Term Loan Agreement and the Revolving Loan Agreement contain
customary representations and warranties of UniTek as well as provisions for repayment, guarantees, other security and customary
events of default. Specifically, the Revolving Loan Agreement and the Term Loan Agreement provide the Revolving Lender and the
Term Lenders, respectively, with security interests in the collateral of UniTek (and certain subsidiaries of UniTek). As of
June 30, 2012, the Company had $21.3 million in letters of credit outstanding under the Revolving Loan Agreement.



The following table presents the components of long-term debt:



|                                                                    |  | June 30, |         |  | December 31, |  
|------------------------------------------------------------------- |  | -------- | ------- |  | ------------ | -
|                                                                    |  | 2012     |         |  | 2011         |  
|                                                                    |  |          |         |  |              |  
|Revolving Loan                                                      |  | $        | 28,110  |  |              | $
|Term Loan, net of debt discounts of $3,260 and $2,696, respectively |  |          | 115,740 |  |              |  
|Total long-term debt                                                |  |          | 143,850 |  |              |  
|Less current portion                                                |  |          | 1,500   |  |              |  
|Long-term debt, net of current portion                              |  | $        | 142,350 |  |              | $



The following table presents future maturities of total long-term
debt, exclusive of debt discounts:



|Six months ending December 31, 2012 |  | $ | 900     | 
|----------------------------------- |  | - | ------- | 
|2013                                |  |   | 1,200   | 
|2014                                |  |   | 1,200   | 
|2015                                |  |   | 1,200   | 
|2016                                |  |   | 29,310  | 
|Thereafter                          |  |   | 113,300 | 
|Total                               |  | $ | 147,110 | 



19







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



The Term Loan Agreement and the Revolving Loan Agreement require
the Company to be in compliance with specified financial covenants, including (i) a “Consolidated Leverage Ratio” (as
such term is respectively defined and applied in the Term Loan Agreement and the Revolving Loan Agreement) of less than a range
of 4.75-3.00 to 1.00 (such ratio declining over time); (ii) a “Fixed Charge Coverage Ratio” (as such term is defined
in the Term Loan Agreement and the Revolving Loan Agreement) not less than 1.2 to 1.0 for every fiscal quarter ended after the
end of fiscal year 2011; and (iii) certain other covenants related to the operation of UniTek’s business in the ordinary
course. In the event of noncompliance with these financial covenants and other defined events of default, the Term Lenders and
the Revolving Lender are entitled to certain remedies, including acceleration of the repayment of amounts outstanding on the Term
Loan and the Revolving Loan. The Company has to date not experienced any defaults with any such covenants.



| | 9. | Fair Value Measurements
| | -- | -----------------------



The carrying values of cash and cash equivalents, restricted
cash, accounts receivable and unbilled revenue, accounts payable, accrued liabilities and financial instruments included in other
assets and other liabilities are reflected in the consolidated balance sheets at historical cost, which is materially representative
of their fair value due to the relatively short-term maturities of these assets and liabilities. The carrying values of capital
lease obligations and long-term debt approximate fair value because they bear interest at rates currently available to the Company
for debt with similar terms and remaining maturities (Level 2 measurements).



The following table presents the Company’s financial assets
and liabilities measured at fair value on a recurring basis as of June 30, 2012:



|                                  |  | Fair Value Measurements at June 30, 2012 |    
|--------------------------------- |  | ---------------------------------------- | ---
|                                  |  | Fair Value at June 30, 2012              |    
|Assets                            |  |                                          |    
|Cash and cash equivalents         |  | $                                        | —  
|Deferred compensation plan assets |  |                                          | 716
|Total                             |  | $                                        | 716
|Liabilities                       |  |                                          |    
|Contingent consideration          |  | $                                        | 84 
|Interest rate swap                |  |                                          | 112
|Total                             |  | $                                        | 196



20







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



The following table summarizes the Company’s financial
assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:



|                                  |  | Fair Value Measurements at December 31, 2011 |       
|--------------------------------- |  | -------------------------------------------- | ------
|                                  |  | Fair Value at December 31, 2011              |       
|Assets                            |  |                                              |       
|Cash and cash equivalents         |  | $                                            | 95    
|Deferred compensation plan assets |  |                                              | 551   
|Total                             |  | $                                            | 646   
|Liabilities                       |  |                                              |       
|Contingent consideration          |  | $                                            | 26,958
|Interest rate swap                |  |                                              | 133   
|Total                             |  | $                                            | 27,091



Derivatives



The Company manages interest rate exposure by using derivative
instruments to reduce the variability of interest payments for variable-rate debt. The Company was also required to maintain interest
rate hedge agreements covering a notional amount of not less than 50% of the debt outstanding under the Term Loan Agreement. On
July 15, 2011, the Company entered into an interest-rate collar agreement with an aggregate notional principal amount of $50.0
million with a financial institution. This interest rate collar agreement matures on July 15, 2013. The collar is used to hedge
the required portion of the Company’s First Lien Credit Agreement. The fair value of the interest-rate collar liability was
$0.1 million at June 30, 2012 and December 31, 2011 and was recorded within accrued liabilities with changes in fair value recorded
in earnings as a component of interest expense. The change in fair value is also reflected within the condensed consolidated statement
of cash flows within the cash flows from operating activities. The valuation of the interest rate collar represents the estimate
of the net present value of expected cash flows from each transaction between the Company and the financial institution using relevant
mid-market data inputs and based on the assumption of no unusual market conditions or forced liquidations. Due to the Company’s
limited use of derivative instruments, there were no significant concentrations of credit risk with respect to derivative transactions
as of June 30, 2012.



21







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Contingent Consideration



The fair value of contingent consideration for the acquisitions
of Pinnacle and Cableview was calculated using significant unobservable inputs. The substantial majority the fair value relates
to the acquisition of Pinnacle and was determined using a Monte Carlo simulation model applied to the Company’s estimate
of Pinnacle’s expected EBITDA performance at each of the measurement dates. The significant assumptions used in this calculation
include forecasted revenue and earnings, an estimate of the volatility of Pinnacle’s earnings based upon a selected peer
group and a risk-free interest rate equal to that of U.S. Treasury bonds with terms approximating the earn-out periods.



The following table presents the changes in the fair value of
the contingent consideration during the six months ended June 30, 2012:



|                                                |  | Contingent Consideration |        
|----------------------------------------------- |  | ------------------------ | -------
|                                                |  |                          |        
|Balance as of December 31, 2011                 |  | $                        | 26,958 
|Acquisitions                                    |  |                          | 484    
|Payments                                        |  |                          | (19,541
|Reclassifications to additional paid-in-capital |  |                          | (7,093 
|Changes in fair value                           |  |                          | (724   
|Balance as of June 30, 2012                     |  | $                        | 84     



| | 10. | Legal Proceedings
| | --- | -----------------



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



| | 11. | Warrants
| | --- | --------



The following table presents outstanding warrants to purchase
shares of the Company’s common stock:



|Issued to                                |  | Shares |        | Grant Date |                    |  | Expiration Date |                    | Exercise
    Price                  |  
|---------------------------------------- |  | ------ | ------ | ---------- | ------------------ |  | --------------- | ------------------ | ----------------------------------- | -
|UniTek employees                         |  |        | 11,384 |            | September 26, 2007 |  |                 | September 26, 2017 |                                     | $
|Former owners of UniTek Holdings         |  |        | 77,902 |            | September 26, 2007 |  |                 | September 26, 2017 |                                     |  
|Former owners of acquired cable business |  |        | 2,456  |            | December 2, 2010   |  |                 | December 2, 2020   |                                     |  
|Total                                    |  |        | 91,742 |            |                    |  |                 |                    | Weighted average
    exercise price |  



During the three and six months ended June 30, 2012 and July
2, 2011, no warrants to purchase shares were exercised, and there were no new issuances of warrants.



22







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)

| | 12. | Stock Options and Restricted Stock Units
| | --- | ----------------------------------------



Plan Summary



As of June 30, 2012, the Company sponsored three stock option
plans, the 1999 Securities Plan (the “1999 Plan”), the 2007 Equity Incentive Plan (the “2007 Plan”) and
the 2009 Omnibus Securities Plan (the “2009 Plan”) (collectively, the “Plans”).



The Plans provide for the grant of RSUs, stock options and certain
other stock-based instruments. The terms of these instruments are set by the Company’s board of directors (the “Board”).
Stock options expire no later than ten years after the date the stock option is granted. As of June 30, 2012, a total of 1.6
million shares of the Company’s common stock had been authorized for issuance under the Plans, of which 0.3 million shares
remain eligible for the grant of awards under the Plans.



Tender Offer



On December 9, 2010, the Company commenced a tender offer to
exchange certain eligible options to purchase shares of its common stock that were currently outstanding under the following stock
option plans: (i) the 1999 Plan; (ii) the 2007 Plan; and (iii) the 2009 Plan. Eligible options fell within one of the following
three groups: (i) non-Homerun Portion (as defined below) stock options that were granted under the 2007 Plan and were vested as
of December 31, 2010 (“Group 1”); (ii) non-Homerun Portion stock options that were unvested as of December 31, 2010
and any Homerun Portion stock options (whether vested or unvested) that were granted under the 2007 Plan (“Group 2”);
and (iii) vested and unvested stock options granted under the 1999 Plan and the 2009 Plan (“Group 3”). The “Homerun
Portion” of a 2007 Plan stock option grant was the 40% portion of each stock option grant, whether vested or unvested, that
becomes exercisable (at its then current exercise price) only if and when the fair market value of the Company’s common stock
is at least $168.00 per share.



Each tendered eligible option was cancelled in exchange for
either a grant of RSUs or a replacement option, depending on whether the tendered eligible option was in Group 1, Group 2 or Group
3.  In exchange for each tendered eligible option in Group 1 and Group 3, the holder was granted a replacement option
with an exercise price per share equal to the fair market value of the Company’s common stock on the first business day following
the expiration of the tender offer, January 10, 2011. Except for the exercise price and the date of grant, all other material terms
and provisions (including post-termination exercise periods) of the eligible options remained unchanged.  In exchange
for the tender of all eligible options in Group 2, each holder received a grant of RSUs under the 2009 Plan. RSUs represent the
right to receive one share of the Company’s common stock for each vested RSU.



The tender offer expired on Friday, January 7, 2011, and pursuant
to the tender offer, eligible options to purchase an aggregate of 296,833 shares of the Company’s common stock were validly
tendered and not withdrawn, and the Company accepted for repurchase these eligible options. The holders of eligible options who
validly tendered eligible options received an aggregate of 688,976 RSUs and 96,204 replacement options, repriced at an exercise
price of $9.42 per share. For more information, refer to the Company’s Tender Offer Statement on Schedule TO, as filed
with the SEC on December 9, 2010, as amended on December 28, 2010 and January 10, 2011. The Company issued an additional 74,202
RSUs on January 10, 2011 to eligible employees and members of the Board who were not eligible to participate in the tender offer
or that did not hold any Group 2 options.



23







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



Long-Term Incentive Plan



At a meeting held on April 3, 2012, the Board of Directors approved
a Long Term Incentive Plan (“LTI Plan”) as part of a broader compensation plan for participating senior executives
of the Company. Under the LTI Plan, each participant shall receive an annual target grant of RSUs, valued as a percentage of the
participant’s base salary, that consist 50% of time-vested RSUs that vest in equal annual installments on the first four
anniversaries of the date of grant, and 50% of performance-vested RSUs that vest at the end of a three-year period following the
date of grant, based upon the achievement of annual performance conditions established by the Committee in advance of each year
during the grant period. The number of performance-vested RSUs ultimately earned will vary based on achievement with respect to
the established performance targets. In this regard, if achievement of the target goal is at less than 90%, no performance-based
RSUs will be earned. If achievement is between 90% and 100% of target, then the number of RSUs earned will be prorated from 50%
(at 90% achievement) to 100% (at 100% achievement) of the initial grant. If achievement is over 100% of target, then the number
of RSUs earned will be increased commensurate with the percentage of achievement over target, with a maximum award of 150% of the
initial grant. In connection with this plan, the Company issued 268,509 RSUs during the quarter ended June 30, 2012.



Other Disclosures



The following table presents the changes in stock options and
RSUs under each of the Plans:



|                                 |  | 2007 Plan        |   |  | 2009 Plan and 1999 Plan         |   |   | 2009 Plan RSUs   | 
|-------------------------------- |  | ---------------- | - |  | ------------------------------- | - | - | ---------------- | 
|                                 |  | Number of Shares |   |  | Weighted Average Exercise Price |   |   | Number of Shares | 
|Outstanding at December 31, 2011 |  |                  | — |  |                                 | $ | — |                  | 
|Granted – New                    |  |                  | — |  |                                 |   | — |                  | 
|Exercised / Vested               |  |                  | — |  |                                 |   | — |                  | 
|Cancelled / Forfeited            |  |                  | — |  |                                 |   | — |                  | 
|Outstanding at June 30, 2012     |  |                  | — |  |                                 |   | — |                  | 



During the three months ended June 30, 2012 and July 2, 2011,
the Company recorded stock-based compensation expense of $1.0 million and $1.1 million, respectively. During the six months ended
June 30, 2012 and July 2, 2011, the Company recorded stock-based compensation expense of $3.0 million and $3.6 million, respectively.
The stock-based compensation expense for the six months ended June 30, 2012 included $1.4 million for the acceleration of RSU vesting
related to the separation of the Chief Executive Officer and Executive Chairman. As of June 30, 2012, there was $4.7 million of
total unrecognized compensation cost related to the non-vested stock-based compensation arrangements granted under the Plans (Group
2 and new RSUs granted). That cost is expected to be recognized over a weighted-average period of 2.3 years.



24







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 13. | Related-Party Transactions
| | --- | --------------------------



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



Monitoring and Oversight Agreement

On January 27, 2010, the Company entered into an Amended and
Restated Monitoring and Oversight Agreement (the “M&O Agreement”) with HM Capital Partners LP (“HM LP”).



In connection with the closing of the equity offering completed
in November 2010 (the “Equity Offering”), the parties to the M&O Agreement agreed to terminate the M&O Agreement
and the Company has agreed to pay a termination fee of $4.3 million (payable in cash or stock, as described below) that would only
become payable only upon certain conditions being met as outlined below.



| | · | The Sector Performance Fund, which is an affiliate of HM LP, sells
its entire ownership stake in the Company, and
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | The average price per share of common stock realized by the Sector
Performance Fund is above its basis, which was calculated as of the closing of the Equity Offering and includes the conversion
of the Series B Preferred and all other shares owned by Sector Performance Fund prior to the Equity Offering. Subsequent to the
Equity Offering and as of June 30, 2012, the Sector Performance Fund’s basis in its stock was significantly above the quoted
market price of the Company’s common stock.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If the two conditions above are met and the termination payment
becomes payable, the Company will be entitled to satisfy this obligation in either cash or shares of its common stock, at its sole
discretion. If payment is made in shares of common stock, the stock price would be calculated using the 20-day trailing average
share price as of the date that the two conditions above are met and the termination payment becomes payable.



The termination fee resulting from the termination of the M&O
Agreement represents a loss contingency. As of June 30, 2012, the Company believes it does not yet meet the requirements to be
recorded as a liability since the Company’s quoted stock price is currently trading well below the Sector Performance Fund
basis and a sale of their stock would not meet the conditions precedent required to trigger payment of the termination fee. The
Company will continue to evaluate this loss contingency on an ongoing basis and as of each reporting period in order to determine
the probability of the triggering conditions being met.



25







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 14. | Income Taxes
| | --- | ------------



For the three months ended June 30, 2012, the Company’s
income tax expense was $0.9 million, which consisted primarily of a current tax benefit of $0.1 million related to its Canadian
operations and a deferred tax expense of $1.0 million related to tax deductible goodwill. During the three months ended July 2,
2011, the Company’s income tax expense was $0.9 million and consisted primarily of a current tax benefit of $0.1 million
related to the Company’s Canadian operations and a deferred tax expense of $1.0 million related to tax deductible goodwill
and state income taxes.



For the six months ended June 30, 2012, the Company’s
income tax expense was $1.6 million, which consisted primarily of a current tax benefit of $0.4 million related to its Canadian
operations and a deferred tax expense of $2.0 million related to tax deductible goodwill. For the six months ended July 2, 2011,
the Company’s income tax expense was $1.4 million, which consisted primarily of a current tax benefit of $0.2 million related
to its Canadian operations and a deferred tax expense of $1.6 million related to tax deductible goodwill and state income taxes.



Because the Company has not yet achieved profitable operations
outside of Canada, management believes the potential tax benefits from other deferred tax assets do not satisfy the criteria for
recognition and accordingly has recorded a valuation allowance for substantially its entire gross deferred tax asset. Additionally,
for tax purposes, certain goodwill is being amortized. In periods when the book basis of tax deductible goodwill exceeds its respective
tax basis, a net deferred tax liability is recorded in the consolidated financial statements, since the basis difference is not
expected to reverse within the periods that the Company’s deferred tax assets will be recognized.



| | 15. | Discontinued Operations
| | --- | -----------------------



Discontinued operations for the three and six months ended June
30, 2012 and July 2, 2011 consisted of certain wireless service locations that were shut down and discontinued due to lack of continuing
revenues.



The following table presents the results of the Company’s
discontinued operations:



|                                                      |  | Three Months Ended |      |   | Six Months Ended |  
|----------------------------------------------------- |  | ------------------ | ---- | - | ---------------- | -
|                                                      |  | June 30, 2012      |      |   | July 2, 2011     |  
|Revenues                                              |  | $                  | (22  | ) |                  | $
|Cost of revenues                                      |  |                    | 101  |   |                  |  
|Gross profit                                          |  |                    | (123 | ) |                  |  
|Selling, general and administrative expenses          |  |                    | (2   | ) |                  |  
|Depreciation and amortization                         |  |                    | 10   |   |                  |  
|Loss from discontinued operations before income taxes |  |                    | (131 | ) |                  |  
|Tax benefit from discontinued operations              |  |                    | —    |   |                  |  
|Loss from discontinued operations                     |  | $                  | (131 | ) |                  | $



26







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



| | 16. | Segment Reporting
| | --- | -----------------



Generally accepted accounting standards require the reporting
of information about operating segments in the annual financial statements of public business enterprises and require that those
enterprises report selected information about operating segments in interim financial reports issued to shareholders. Operating
segments are components of an enterprise about which separate financial information is available and regularly evaluated by the
chief operating decision makers of an enterprise. The Company reports its financial results on the basis of two reportable segments:
(1) Fulfillment and (2) Engineering and Construction.  The Fulfillment segment performs installation and other services for
the satellite and broadband cable pay-television industry. This reportable segment includes the aggregation of the satellite and
broadband cable operating segments of the Company. The Engineering and Construction segment performs engineering and construction
services on wired and wireless telecommunications networks. This reportable segment includes the aggregation of the wireline
and wireless operating segments of the Company. Transactions within and between segments are generally made on a basis to
reflect the market value of the services and have been eliminated in consolidation.



The Company evaluates the performance of its operating segments
based on several factors of which the primary financial measure is segment EBITDA. Management believes segment operating income
(loss) represents the closest GAAP measure to segment EBITDA.



The following table presents selected segment financial information
for the three months ended June 30, 2012:





|                                                             |  | Three Months Ended |       
|------------------------------------------------------------ |  | ------------------ | ------
|                                                             |  | June 30, 2012      |       
|                                                             |  | Fulfillment        |       
|                                                             |  |                    |       
|Revenues                                                     |  | $                  | 72,011
|Cost of revenues                                             |  |                    | 57,662
|Gross profit                                                 |  |                    | 14,349
|Selling, general and administrative expenses                 |  |                    | 5,661 
|Change in fair value of contingent consideration             |  |                    | (400  
|Restructuring charges                                        |  |                    | 497   
|Depreciation and amortization                                |  |                    | 5,002 
|Operating income (loss)                                      |  | $                  | 3,589 
|Interest expense                                             |  |                    |       
|Loss on extinguishment of debt                               |  |                    |       
|Other income, net                                            |  |                    |       
|Income (loss) from continuing operations before income taxes |  |                    |       



27







UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial
Statements

(Amounts in thousands, except share and
per share amounts, unless otherwise indicated)

(Unaudited)



The following table presents selected segment financial information
for the six months ended June 30, 2012:





|                                                    |  | Six Months Ended |        
|--------------------------------------------------- |  | ---------------- | -------
|                                                    |  | June 30, 2012    |        
|                                                    |  | Fulfillment      |        
|                                                    |  |                  |        
|Revenues                                            |  | $                | 141,951
|Cost of revenues                                    |  |                  | 114,828
|Gross profit                                        |  |                  | 27,123 
|Selling, general and administrative expenses        |  |                  | 13,170 
|Change in fair value of contingent consideration    |  |                  | (400   
|Restructuring charges                               |  |                  | 3,268  
|Depreciation and amortization                       |  |                  | 9,719  
|Operating income (loss)                             |  | $                | 1,366  
|Interest expense                                    |  |                  |        
|Loss on extinguishment of debt                      |  |                  |        
|Other income, net                                   |  |                  |        
|Loss from continuing operations before income taxes |  |                  |        



At June 30, 2012, the total assets of the Fulfillment segment
were $174.1 million and the total assets of the Engineering and Construction segment were $186.4 million. This compares to
$169.5 million and $179.4 million at December 31, 2011 for the Fulfillment segment and the Engineering and Construction segment,
respectively. The increase of $4.6 million in the assets of the Fulfillment segment was primarily due to the acquisitions
of Cableview and Streamline, and the increase of $7.0 million in the assets of the Engineering and Construction segment compared
to December 31, 2011 is primarily due to an increase in accounts receivable and unbilled revenue due to higher revenues in the
wireless business.



28







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



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS



The information included in this quarterly report of UniTek
Global Services, Inc. (“UniTek,” the “Company”, “we,” “our,” or “us”)
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the attainment of which involves various risks
and uncertainties. All statements other than statements of historical fact included in this quarterly report are forward-looking
statements. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may,”
“will,” “expects,” “believes,” “estimates,” “anticipates,” “planned,”
“scheduled,” “continue” or similar terms, variations of those terms or the negative of those terms.



These forward-looking statements are based on assumptions that
we have made in light of our experience in the industry in which we operate, as well as our perceptions of historical trends, current
conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and
consider this quarterly report, you should understand that these statements are not guarantees of performance or results. They
involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial condition
or results of operations and cause actual results to differ materially from those in the forward-looking statements. These factors
include, among other things:



| | · | our financial condition and strategic direction;                                                                                                                                                                                
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | our future capital requirements and our ability to satisfy our capital needs;                                                                                                                                                   
| | · | the potential generation of future revenues and/or earnings and our ability to manage and control costs;                                                                                                                        
| | · | changes in our ability to adequately staff our service offerings;                                                                                                                                                               
| | · | opportunities for us from new and emerging technologies in our industries;                                                                                                                                                      
| | · | changes in our ability to obtain additional financing and the potential for restrictive covenants within our credit agreements;                                                                                                 
| | · | our growth strategy and our ability to consummate acquisitions and integrate them into our existing operations;                                                                                                                 
| | · | trends in the satellite television, broadband cable and telecommunications industries;                                                                                                                                          
| | · | key drivers of change in our business, as identified in this quarterly report;                                                                                                                                                  
| | · | our competitive position and the competitive landscape;                                                                                                                                                                         
| | · | shortages in fuel supply or increases in fuel prices that could increase operating expense; and                                                                                                                                 
| | · | other statements that contain words like “may”, “will”, “expects”, “believes”, “estimates”, “anticipates”, “planned”, “scheduled”, “continue” and similar expressions that 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 risks:



| | · | related to a concentration in revenues from a small number of customers and competition;                   
| | - | -----------------------------------------------------------------------------------------------------------
| | · | associated with the consolidation of our customers;                                                        
| | · | associated with competition in the satellite television, broadband cable and telecommunications industries;
| | · | related to the current transition within our executive leadership team;                                    
| | · | that we will not be able to generate positive cash flow; and                                               
| | · | that we may not be able to obtain additional financing.                                                    



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 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.



Critical Accounting Policies and Estimates



There have been no changes to the critical accounting policies
and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.



29







Summary of Financial Condition and Results of Operations



Overview



The following sections present consolidated selected financial
information. The balance sheet data as of June 30, 2012 and December 31, 2011 and the results of operations data for the three
and six months ended June 30, 2012 and July 2, 2011 have been derived from our unaudited condensed consolidated financial statements
that, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary to state
fairly the data for such period. We operate in two reportable segments: (1) Fulfillment and (2) Engineering and Construction.



Effective April 3, 2011, we completed the acquisition of Pinnacle
pursuant to an Asset Purchase Agreement, dated as of March 30, 2011, as amended on March 28, 2012 (the “Asset Purchase Agreement”).
The operating results of Pinnacle are included in our consolidated results as a component of the Engineering and Construction segment
beginning April 3, 2011.



Non-GAAP Financial Measurements



Adjusted earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”) is a key indicator used by our management to evaluate operating performance of our company and
to make decisions regarding compensation and other operational matters. While this Adjusted EBITDA is not intended to replace any
presentation included in our consolidated financial statements under generally accepted accounting principles, or GAAP, and should
not be considered an alternative to operating performance, we believe this measure is useful to investors in assessing our performance
with other companies in our industry. This calculation may differ in method of calculation from similarly titled measures used
by other companies. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only
as supplemental information. Adjusted EBITDA is our EBITDA adding back transaction costs, certain restructuring costs and other
non-cash charges.



Net income or loss after certain non-cash adjustments is
a key indicator used by our management to evaluate operating performance of our company. While net income or loss after certain
non-cash adjustments is not intended to replace any presentation included in our consolidated financial statements under GAAP,
and should not be considered an alternative to operating performance, we believe this measure is useful to investors in assessing
our performance in comparison with other companies in our industry. Specifically, (i) non-cash compensation expense may vary
due to factors influencing the estimated fair value of performance based rewards, estimated forfeiture rates and amounts granted,
(ii) non-cash interest expense varies depending on the timing of amendments to our debt and changes to our debt structure and (iii)
amortization of intangible assets is impacted by the Company’s acquisition strategy and timing of acquisitions.



Financial Condition



The following table presents a summary of our condensed consolidated
balance sheet information.



|(Amounts in thousands)                                               |  | June 30, 2012 (unaudited) |         |  | December 31, 2011 |  
|-------------------------------------------------------------------- |  | ------------------------- | ------- |  | ----------------- | -
|Current assets                                                       |  | $                         | 121,430 |  |                   | $
|Total assets                                                         |  |                           | 360,538 |  |                   |  
|Current liabilities                                                  |  |                           | 87,058  |  |                   |  
|Long-term debt and capital lease obligations, net of current portion |  |                           | 155,708 |  |                   |  
|Stockholders’ equity                                                 |  |                           | 108,820 |  |                   |  



30







Results of Operations – Three Months Ended June 30,
2012 Compared to Three Months Ended July 2, 2011



The following table presents a summary of our results of operations.



|                                                                        |  | Three Months Ended |        
|----------------------------------------------------------------------- |  | ------------------ | -------
|                                                                        |  | June 30, 2012      |        
|(in thousands, except per share data)                                   |  | (unaudited)        |        
|Revenues                                                                |  | $                  | 115,533
|Cost of revenues                                                        |  |                    | 94,306 
|Gross profit                                                            |  |                    | 21,227 
|Selling, general and administrative expenses                            |  |                    | 10,271 
|Change in fair value of contingent consideration                        |  |                    | (400   
|Restructuring charges                                                   |  |                    | 797    
|Depreciation and amortization                                           |  |                    | 7,333  
|Operating income                                                        |  |                    | 3,226  
|Interest expense                                                        |  |                    | 3,662  
|Loss on extinguishment of debt                                          |  |                    | —      
|Other income, net                                                       |  |                    | (909   
|Income (loss) from continuing operations before income taxes            |  |                    | 473    
|Income tax expense                                                      |  |                    | 909    
|Loss from continuing operations                                         |  |                    | (436   
|Loss from discontinued operations                                       |  |                    | (131   
|Net loss                                                                |  | $                  | (567   
|Net loss per share – basic and diluted:                                 |  |                    |        
|Continuing operations                                                   |  | $                  | (0.02  
|Discontinued operations                                                 |  | $                  | (0.01  
|                                                                        |  |                    |        
|Weighted average shares of common stock outstanding – basic and diluted |  |                    | 18,629 
|                                                                        |  |                    |        
|Adjusted EBITDA                                                         |  | $                  | 11,995 



Revenues



The following table presents information regarding our revenues
by segment for the three months ended June 30, 2012 and July 2, 2011.



|                             |  | Three Months Ended (unaudited) |         |  |               | 
|---------------------------- |  | ------------------------------ | ------- |  | ------------- | 
|                             |  | June 30, 2012                  |         |  | July 2, 2011  | 
|(Amounts in thousands)       |  | Amount                         |         |  | % of Revenues | 
|Fulfillment                  |  | $                              | 72,011  |  |               | 
|Engineering and Construction |  |                                | 43,522  |  |               | 
|Total                        |  | $                              | 115,533 |  |               | 



We had revenue of $115.5 million for the three months ended
June 30, 2012, compared to $106.0 million for the three months ended July 2, 2011. This represents an increase of approximately
$9.6 million, or 9.0%.



Revenue for the Fulfillment segment increased by $3.2
million, or 4.6%, from $68.8 million for the three months ended July 2, 2011 to $72.0 million for the three months ended June
30, 2012. The increase in revenues from our Fulfillment segment was primarily attributable to growth in our cable business
from market share gains and the acquisitions completed earlier in 2012.



Revenue for the Engineering and Construction segment was $43.5
million for the three months ended June 30, 2012 and $37.1 million for the three months ended July 2, 2011. This 17.3% increase
in revenues in our Engineering and Construction segment was primarily attributable to growth in our wireless business.



31







Gross Profit



The following table sets forth information regarding our gross
profit by segment for the three months ended June 30, 2012 and July 2, 2011.



|                             |  | Three Months Ended (unaudited) |        |  |               | 
|---------------------------- |  | ------------------------------ | ------ |  | ------------- | 
|                             |  | June 30, 2012                  |        |  | July 2, 2011  | 
|(Amounts in thousands)       |  | Amount                         |        |  | % of Revenues | 
|Fulfillment                  |  | $                              | 14,349 |  |               | 
|Engineering and Construction |  |                                | 6,878  |  |               | 
|Total                        |  | $                              | 21,227 |  |               | 



Our gross profit for the three months ended June 30, 2012 was
$21.2 million compared to $21.6 million for the three months ended July 2, 2011, representing a decrease of $0.4 million or 1.7%. Our
gross profit as a percentage of revenue was approximately 18.4% for the three months ended June 30, 2012, as compared to 20.4%
for the three months ended July 2, 2011.



For the Fulfillment segment, gross margin decreased from 23.7%
for the three months ended July 2, 2011 to 19.9% for the three months ended June 30, 2012. The decrease in gross margin was
attributable to mix of revenue changes between our broadband cable operations and our satellite operations.



For the Engineering and Construction segment, gross margin increased
from 14.2% for the three months ended July 2, 2011 to 15.8% for the three months ended June 30, 2012. The increase is primarily
the result of volume leverage in our wireline business and the increased margins in the wireless business.



Selling, General and Administrative Expenses



Selling, general and administrative expense (“SG&A”)
for the three months ended June 30, 2012 was $10.3 million as compared to $13.1 million for the three months ended July 2, 2011,
representing an overall decrease of $2.8 million. The primary driver of the decrease in SG&A was a decrease in salary
and personnel costs of $1.4 million driven by lower corporate personnel cost, including the vacancy of our Chief Executive
Officer position which was filled in July 2012.



32







Adjusted EBITDA and Net Loss after Certain Non-cash Adjustments



The following table presents the reconciliation of net loss
to net income after certain non-cash adjustments and Adjusted EBITDA:



|                                              |  | Three Months Ended (unaudited) |       
|--------------------------------------------- |  | ------------------------------ | ------
|(Amounts in thousands)                        |  | June 30, 2012                  |       
|                                              |  |                                |       
|Net loss                                      |  | $                              | (567  
|Non-cash stock-based compensation             |  |                                | 982   
|Loss on extinguishment of debt                |  |                                | —     
|Non-cash interest expense                     |  |                                | 337   
|Non-cash amortization                         |  |                                | 2,607 
|Net income after certain non-cash adjustments |  | $                              | 3,359 
|                                              |  |                                |       
|Loss from discontinued operations             |  |                                | 131   
|Income tax expense                            |  |                                | 909   
|Restructuring charges                         |  |                                | 797   
|Change in fair value                          |  |                                | (400  
|Cash interest expense                         |  |                                | 3,325 
|Other income                                  |  |                                | (909  
|Depreciation                                  |  |                                | 4,726 
|Transaction costs                             |  |                                | 57    
|Adjusted EBITDA                               |  | $                              | 11,995



Adjusted EBITDA increased by 19.7% to $12.0 million for the
three months ended June 30, 2012 from $10.0 million for the three months ended July 2, 2011. The year-over-year increase in Adjusted EBITDA was primarily related to higher revenue and lower SG&A,
partially offset by mix of work and infrastructure investments for wireless growth.



33







Depreciation and Amortization



Depreciation of fixed assets totaled approximately $4.7 million
for the three months ended June 30, 2012 compared to $3.8 million for the three months ended July 2, 2011. The increase in
depreciation was primarily attributable to the addition of vehicles in the fourth quarter of 2011 related to our cable business
growth.



Amortization of intangible assets totaled approximately $2.6
million for the three months ended June 30, 2012 compared to $3.3 million for the three months ended July 2, 2011. A portion of
our customer related intangible assets arising from acquisitions completed in prior years reached the end of their estimated useful
lives resulting in a decrease in amortization expense.



Interest Expense



We recognized $3.7 million and $3.5 million of interest expense
during the three months ended June 30, 2012 and July 2, 2011, respectively. Interest expense increased due to the incremental
draw on our Term Loan in May 2012 and additional borrowings on our Revolving Loan, partially offset by favorable variable interest
rates on our debt.



Income Taxes



For the three months ended June 30, 2012, we recognized income
tax expense of $0.9 million, which consisted primarily of a current tax benefit of $0.1 million related to our Canadian operations
and a deferred tax expense of $1.0 million related to tax deductible goodwill. During the three months ended July 2, 2011, we recognized
income tax expense of $0.9 million and consisted primarily of a current tax benefit of $0.1 million related to our Canadian operations
and a deferred tax expense of $1.0 million related to tax deductible goodwill and state income taxes.



Because we have not yet achieved profitable operations outside
of Canada, management believes the potential tax benefits from other deferred tax assets do not satisfy the criteria for recognition
and accordingly has recorded a valuation allowance for substantially its entire gross deferred tax asset. Additionally, for
tax purposes, certain goodwill is being amortized. In periods when the book basis of tax deductible goodwill exceeds its respective
tax basis, a net deferred tax liability is recorded in the consolidated financial statements, since the basis difference is not
expected to reverse within the periods that the Company’s deferred tax assets will be recognized.



Net Loss



We had net loss of $0.6 million for the three months ended June
30, 2012, compared to net loss of $6.4 million for the three months ended July 2, 2011. The net loss for the three months
ended June 30, 2012 includes a loss from discontinued operations of $0.1 million. The decrease in net loss is primarily due
to the loss on extinguishment of debt of $3.5 million in the 2011 period and the reductions in our SG&A described previously.



34







Results of Operations – Six Months Ended June 30, 2012
Compared to Six Months Ended July 2, 2011



The following table presents a summary of our results of operations.



|                                                                        |  | Six Months Ended |        
|----------------------------------------------------------------------- |  | ---------------- | -------
|                                                                        |  | June 30, 2012    |        
|(in thousands, except per share data)                                   |  | (unaudited)      |        
|Revenues                                                                |  | $                | 223,760
|Cost of revenues                                                        |  |                  | 184,569
|Gross profit                                                            |  |                  | 39,191 
|Selling, general and administrative expenses                            |  |                  | 23,330 
|Change in fair value of contingent consideration                        |  |                  | (724   
|Restructuring charges                                                   |  |                  | 5,085  
|Depreciation and amortization                                           |  |                  | 14,290 
|Operating loss                                                          |  |                  | (2,790 
|Interest expense                                                        |  |                  | 6,684  
|Loss on extinguishment of debt                                          |  |                  | —      
|Other (income) expense, net                                             |  |                  | (1,138 
|Loss from continuing operations before income taxes                     |  |                  | (8,336 
|Income tax expense                                                      |  |                  | 1,584  
|Loss from continuing operations                                         |  |                  | (9,920 
|Loss from discontinued operations                                       |  |                  | (477   
|Net loss                                                                |  | $                | (10,397
|Net loss per share – basic and diluted:                                 |  |                  |        
|Continuing operations                                                   |  | $                | (0.56  
|Discontinued operations                                                 |  | $                | (0.03  
|                                                                        |  |                  |        
|Weighted average shares of common stock outstanding – basic and diluted |  |                  | 17,587 
|                                                                        |  |                  |        
|Adjusted EBITDA                                                         |  | $                | 19,032 



Revenues



The following table presents information regarding our revenues
by segment for the six months ended June 30, 2012 and July 2, 2011.



|                             |  | Six Months Ended (unaudited) |         |  |               | 
|---------------------------- |  | ---------------------------- | ------- |  | ------------- | 
|                             |  | June 30, 2012                |         |  | July 2, 2011  | 
|(Amounts in thousands)       |  | Amount                       |         |  | % of Revenues | 
|Fulfillment                  |  | $                            | 141,951 |  |               | 
|Engineering and Construction |  |                              | 81,809  |  |               | 
|Total                        |  | $                            | 223,760 |  |               | 



We had revenue of $223.8 million for the six months ended June
30, 2012, compared to $197.0 million for the six months ended July 2, 2011. This represents an increase of $26.7 million or
13.6%.



Revenue for the Fulfillment segment increased by $9.2
million or 6.9%, from $132.8 million for the six months ended July 2, 2011 to $142.0 million for the six months ended June
30, 2012. The increase in revenues from our Fulfillment segment was primarily attributable to growth in our cable business
from market share gains and the acquisitions completed earlier in 2012.



Revenue for the Engineering and Construction segment was $81.8
million for the six months ended June 30, 2012 and $64.3 million for the six months ended July 2, 2011. The growth in revenue is
primarily attributable to growth in our wireless business.



35







Gross Profit



The following table sets forth information regarding our gross
profit by segment for the six months ended June 30, 2012 and July 2, 2011.



|                             |  | Six Months Ended (unaudited) |        |  |               | 
|---------------------------- |  | ---------------------------- | ------ |  | ------------- | 
|                             |  | June 30, 2012                |        |  | July 2, 2011  | 
|(Amounts in thousands)       |  | Amount                       |        |  | % of Revenues | 
|Fulfillment                  |  | $                            | 27,123 |  |               | 
|Engineering and Construction |  |                              | 12,068 |  |               | 
|Total                        |  | $                            | 39,191 |  |               | 



Our gross profit for the six months ended June 30, 2012 was
$39.2 million compared to $36.1 million for the six months ended July 2, 2011, representing an increase of $3.1 million or 8.5%. Our
gross profit as a percentage of revenue was approximately 17.5% for the six months ended June 30, 2012, as compared to 18.3% for
the six months ended July 2, 2011.



For the Fulfillment segment, gross margin decreased from 21.9%
for the six months July 2, 2011 to 19.1% for the six months ended June 30, 2012. The decrease in gross margin was attributable
to mix of revenue changes between our broadband cable operations and our satellite operations.



For the Engineering and Construction segment, gross margin increased
from 11.0% for the six months ended July 2, 2011 to 14.8% for the six months ended June 30, 2012. The increase is primarily the
result of volume leverage in our wireline business and the increased margins in the wireless business which includes
the impact of Pinnacle.



Selling, General and Administrative Expenses



SG&A for the six months ended June 30, 2012 was $23.3 million
as compared to $23.9 million for the six months ended July 2, 2011, representing an overall decrease of $0.6 million. Excluding
the impact of the Pinnacle acquisition, SG&A decreased by $1.8 million. Salary and personnel costs decreased $1.1 million driven
by lower corporate personnel cost, including the vacancy of our Chief Executive Officer position which was filled in July
2012. Stock-based compensation expense decreased $0.5 million due to the impact of the tender offer in January 2011, partially
offset by the accelerated vesting of RSUs in 2012.



36







Adjusted EBITDA and Net (Loss) Income after Certain Non-cash
Adjustments



The following table presents the reconciliation of net loss
to net (loss) income after certain non-cash adjustments and Adjusted EBITDA:



|                                                     |  | Six Months Ended (unaudited) |        
|---------------------------------------------------- |  | ---------------------------- | -------
|(Amounts in thousands)                               |  | June 30, 2012                |        
|                                                     |  |                              |        
|Net loss                                             |  | $                            | (10,397
|Non-cash stock-based compensation                    |  |                              | 3,047  
|Loss on extinguishment of debt                       |  |                              | —      
|Non-cash interest expense                            |  |                              | 663    
|Non-cash amortization                                |  |                              | 5,116  
|Net (loss) income after certain non-cash adjustments |  | $                            | (1,571 
|                                                     |  |                              |        
|Loss from discontinued operations                    |  |                              | 477    
|Income tax expense                                   |  |                              | 1,584  
|Restructuring charges                                |  |                              | 5,085  
|Change in fair value                                 |  |                              | (724   
|Cash interest expense                                |  |                              | 6,021  
|Other income                                         |  |                              | (1,138 
|Depreciation                                         |  |                              | 9,174  
|Transaction costs                                    |  |                              | 124    
|Adjusted EBITDA                                      |  | $                            | 19,032 



Adjusted EBITDA increased by 17.5% to $19.0 million for the
six months ended June 30, 2012 from $16.2 million for the six months ended July 2, 2011. The year-over-year increase in Adjusted EBITDA was primarily related to higher revenue and lower SG&A,
partially offset by mix of work and infrastructure investments for wireless growth.



37







Depreciation and Amortization



Depreciation of fixed assets totaled approximately $9.2 million
for the six months ended June 30, 2012 compared to $7.3 million for the six months ended July 2, 2011. Of this increase, $0.2
million was attributable to Pinnacle. The remaining increase in depreciation was primarily attributable to the addition of vehicles
in the fourth quarter of 2011 related to our cable business growth.



Amortization of intangible assets totaled approximately $5.1
million for the six months ended June 30, 2012 compared to $6.1 million for the six months ended July 2, 2011. A portion of our
customer related intangible assets arising from acquisitions completed in prior years reached the end of their estimated useful
lives resulting in a decrease in amortization expense, which was partially offset by amortization of intangible assets resulting
from the Pinnacle acquisition.



Interest Expense



We recognized $6.7 million and $8.0 million of interest expense
during the six months ended June 30, 2012 and July 2, 2011, respectively. The decrease of approximately $1.3 million was primarily
attributable to lower overall effective interest expense resulting from the debt refinancing on April 15, 2011.



Income Taxes



For the six months ended June 30, 2012, we recognized income
tax expense of $1.6 million, which consisted primarily of a current tax benefit of $0.4 million related to our Canadian operations
and a deferred tax expense of $2.0 million related to tax deductible goodwill. For the six months ended July 2, 2011, we recognized
income tax expense of $1.4 million, which consisted primarily of a current tax benefit of $0.2 million related to our Canadian
operations and a deferred tax expense of $1.6 million related to tax deductible goodwill and state income taxes.



Because we have not yet achieved profitable operations outside
of Canada, management believes the potential tax benefits from other deferred tax assets do not satisfy the criteria for recognition
and accordingly has recorded a valuation allowance for substantially its entire gross deferred tax asset. Additionally, for
tax purposes, certain goodwill is being amortized. In periods when the book basis of tax deductible goodwill exceeds its respective
tax basis, a net deferred tax liability is recorded in the consolidated financial statements, since the basis difference is not
expected to reverse within the periods that the Company’s deferred tax assets will be recognized.



Net Loss



We had net loss of $10.4 million for the six months ended June
30, 2012, compared to net loss of $14.2 million for the six months ended July 2, 2011. The net loss for the six months
ended June 30, 2012 includes a loss from discontinued operations of $0.5 million compared to $0.3 million for the six months ended
July 2, 2011. The decrease in net loss is primarily due to the loss on extinguishment of debt of $3.5 million in the 2011
period and the reductions in our SG&A described previously.



38







Liquidity and Capital Resources



At June 30, 2012, we had consolidated current assets of approximately
$121.4 million. We had a total cash balance and current availability under the Revolving Loan Agreement of $9.2 million based
on the June 30, 2012 borrowing base levels. We have an additional availability under the Revolving Loan Agreement of $16.4 million
for incremental eligible accounts receivable above the June 30, 2012 amount. Our cash management process applies daily cash received
from customers directly to the outstanding balance under the revolving credit facility.



Historically, we have funded our operations primarily through
operating cash flows and borrowings under loan arrangements. Our primary liquidity needs are for working capital, debt service,
insurance collateral in the form of cash and letters of credit, capital expenditures, and funding our growth through strategic
mergers and acquisitions. During the three months ended June 30, 2012, we funded the cash portion of an earn-out payment for the
Pinnacle acquisition and scheduled payments for the Cableview acquisition. These payments were funded by an incremental draw under
the Term Loan Agreement, as discussed in additional detail below, with the remainder funded by operations. Aside from this, the
principal uses of cash during the three and six months ended June 30, 2012 were for working capital purposes.



We need working capital primarily to support the expected growth
in our business, particularly in our Engineering and Construction segment as a result of wireless growth, fiber deployment and
cable fulfillment related construction. We are also subject to seasonal variations in our business, which occur primarily
due to the impact of weather on our Engineering and Construction work, as well as seasonal fluctuations within our Fulfillment
segment. Our business is typically slower during the first quarter and second half of the fourth quarter of each calendar
year. As a result, we generally experience seasonal working capital needs from approximately July through November of each
calendar year in order to support growth in accounts receivable and unbilled revenue. Our billing terms are generally 30 days,
and in addition, we also maintain inventory to meet the material requirements of certain of our contracts, primarily within the
Fulfillment segment. Our vendors typically offer us terms ranging from 30 to 90 days, while our agreements with subcontractors
are generally 14 to 21 days, with some terms as long as 35 to 45 days.



On May 3, 2012, we entered into an incremental term draw of
$20.0 million under the accordion feature of the Term Loan Agreement. The Incremental Term Loan was subject to a four percent (4.00%)
debt discount, which will be amortized over the remaining life of the loan. The interest rate, maturity date and terms of the Term
Loan Agreement did not change. The funds were used for the scheduled payments of $1.9 million for the Cableview acquisition and
for the $4.3 million of incremental cash required by the March 28, 2012 amendment to the Asset Purchase Agreement. The remaining
funds after payment of fees were used to reduce the outstanding balance under the Revolving Loan Agreement, creating approximately
$12.6 million of incremental liquidity for working capital and other cash obligations.



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



39







Capital Leases and Other Contractual Obligations



We rent office space, equipment and trucks under non-cancelable
operating and capital leases, certain of which contain purchase option terms. Operating lease payments are expensed as incurred. Leases
meeting certain criteria are capitalized, with the related asset being recorded in property and equipment and an offsetting amount
recorded as a liability. These capital leases are non-cash transactions and, accordingly, have been excluded from the consolidated
statements of cash flows. As of June 30, 2012 and December 31, 2011, the total cost of the assets under capital leases was
approximately $38.2 million and $38.8 million, respectively, the related accumulated depreciation was approximately $16.6 million
and $13.7 million, respectively, and the total capital lease liability related to these assets was $23.5 million and $25.9 million,
respectively.



Summary of Cash Flows



The following table summarizes our cash flows for the six months
ended June 30, 2012 and July 2, 2011:



|                                                    |  | Six Months Ended (unaudited) |       
|--------------------------------------------------- |  | ---------------------------- | ------
|(Amounts in thousands)                              |  | June 30, 2012                |       
|Net cash (used in) provided by operating activities |  | $                            | (3,147
|Net cash used in investing activities               |  |                              | (4,368
|Net cash provided by financing activities           |  |                              | 7,320 



Cash Flows from Operating Activities



Net cash used in operating activities for the six months ended
June 30, 2012 was approximately $3.2 million, and net cash provided by operations for the six months ended July 2, 2011 was approximately
$3.3 million. During the six months ended June 30, 2012, cash flows resulting from operating activities were impacted primarily
by increased accounts receivable and unbilled revenue associated with the higher revenues in our wireless business as well as payment
of contingent consideration of $2.4 million.



Cash Flows from Investing Activities



Net cash used in investing activities for the six months ended
June 30, 2012 and July 2, 2011 was approximately $4.4 million and $15.0 million, respectively. The change in net cash used
in investing activities was driven by business acquisitions. Cash paid for acquisitions during the six months ended June 30, 2012
and July 2, 2011 was approximately $2.9 million and $12.6 million, respectively, which reflects two cable acquisitions during the
first quarter of 2012 and the acquisition of Pinnacle during the second quarter of 2011. The remainder of the change in net
cash used in investing activities was the result of net acquisitions of and proceeds from the disposal of property and equipment.



Cash Flows from Financing Activities



Net cash provided by financing activities for the
six months ended June 30, 2012 and July 2, 2011 was approximately $7.3 million and $1.5 million, respectively. During the
six months ended June 30, 2012, we had net proceeds of $31.4 million from the net increase in our Term Loan and net
borrowings under our Revolving Loan Agreement, offset by payment of contingent consideration of $17.1 million, capital lease
repayments of $6.3 million and $0.5 million of financing fees. During the six months ended July 2, 2011, we had net proceeds
of $119.6 million from the refinancing of our long-term debt, offset by $109.2 million to repay the pre-existing debt, $3.8
million of financing fees and capital lease repayments of $4.6 million.



40







Off-Balance Sheet Arrangements



We provide letters of credit to secure our obligations related
to our insurance arrangements and bonding requirements. Total letters of credit issued as of June 30, 2012 and December 31,
2011 were $21.3 million and $18.2 million, respectively, which were issued under the Revolving Loan Agreement. We expect that the
total letters of credit issued will peak during 2012 as we build a longer loss and claim history under our existing insurance plans.



In the ordinary course of business, we are required by certain
customers and state license agencies to provide performance, payment and permit bonds for some of our contractual commitments related
to projects in process. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and
that we will pay subcontractors and other vendors. As of June 30, 2012 and December 31, 2011, the Company had $59.7 million and
$58.9 million, respectively, in bonds outstanding.



Effect of Inflation



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



Item 3. Quantitative and Qualitative Disclosures About Market
Risk



There have been no material changes to our market risk since
our Annual Report on Form 10-K for the year ended December 31, 2011.



Item 4.  Controls and Procedures



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



Changes in Internal Control Over Financial Reporting



There were no changes in our internal control over financial
reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.



41







PART II: OTHER INFORMATION



Item 1.  Legal Proceedings



We are subject to various litigation claims that occur in the
ordinary course of business, which the Company believes, even if decided adversely to us, would not have a material adverse effect
on our business, financial condition, results of operations and liquidity.



Item 1A. Risk Factors



There have been no material changes to any of the risk factors
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.



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



None



Item 3. Defaults Upon Senior Securities



None



Item 4. Mine Safety Disclosures



Not applicable



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.



** Furnished herewith.



Note:



Pursuant to Rule 405(a)(ii)(2) of Regulation
S-T, the Company will, within 30 days after the date this Form 10-Q is filed, file an amendment to this Form 10-Q to include detailed
tagging of footnotes and schedules.



42







SIGNATURES



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



UNITEK GLOBAL SERVICES, INC.



|Date: August 8, 2012 | By: | /s/ Rocco Romanella                  
|-------------------- | --- | -------------------------------------
|                     |     | Rocco Romanella                      
|                     |     | Chief Executive Officer              
|                     |     | (Principal Executive Officer)        
|                     |     |                                      
|Date: August 8, 2012 | By: | /s/ Ronald J. Lejman                 
|                     |     | Ronald J. Lejman                     
|                     |     | Chief Financial Officer and Treasurer
|                     |     | (Principal Financial Officer)        
|                     |     |                                      
|Date: August 8, 2012 | By: | /s/ Kevin McClelland                 
|                     |     | Kevin McClelland                     
|                     |     | Corporate Controller                 
|                     |     | (Principal Accounting Officer)       



43