UniTek Global Services, Inc. - FORM 10-Q

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EX-31.1 - UniTek Global Services, Inc.	v202424_ex31-1.htm
EX-32.1 - UniTek Global Services, Inc.	v202424_ex32-1.htm
EX-31.2 - UniTek Global Services, Inc.	v202424_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2010

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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________

COMMISSION FILE NUMBER 0-28579

UNITEK GLOBAL SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

1777 Sentry Parkway West

Blue Bell, Pennsylvania 19422

(Address of Principal Executive Offices)

(267) 464-1700

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

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

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

UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

INDEX

		PAGE NO.
PART I:	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (Unaudited) as of October 2, 2010 and December 31, 2009	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended October 2, 2010 and October 3, 2009	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended October 2, 2010 and October 3, 2009	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 4T.	Controls and Procedures	35

PART II:	OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	(Removed and Reserved)	37

Item 5.	Other Information	37

Item 6.	Exhibits	37

SIGNATURES		39

UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

	October 2,			December 31,
	2010			2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,688		$	2,263
Restricted cash		-			133
Accounts receivable and unbilled revenue, net of allowances		66,933			24,680
Inventories		11,205			8,326
Prepaid expenses and other current assets		5,584			3,804
Total current assets		85,410			39,206
Property and equipment, net		17,463			20,665
Amortizable intangible assets, net		19,936			26,941
Goodwill		143,475			137,827
Deferred tax assets, net		109			109
Other assets		7,958			7,093
Total assets	$	274,351		$	231,841

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	31,936		$	19,302
Accrued liabilities		31,030			23,329
Current portion of long-term debt		33,048			33,006
Current income taxes		103			187
Current portion of capital lease obligations		5,203			5,097
Total current liabilities		101,320			80,921

Long-term debt, net of current portion		132,498			127,163
Long-term capital lease obligations, net of current portion		814			4,244
Other long-term liabilities		3,186			-
Total liabilities		237,818			212,328

Series B Convertible Preferred Stock (liquidation value of $26,528 at October 2, 2010)		13,265			-

STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock		-			-
Common Stock		3			1,091
Additional paid-in capital		136,080			112,747
Accumulated other comprehensive income (loss)		89			60
Accumulated deficit		(112,904	)		(94,385	)
Total stockholders' equity		23,268			19,513
Total liabilities, convertible preferred stock, and stockholders' equity	$	274,351		$	231,841

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

UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	October 2, 2010			October 3, 2009			October 2, 2010			October 3, 2009

Revenues	$	110,121		$	72,579		$	304,928		$	210,491
Costs of revenues		91,933			61,327			257,770			181,388
Gross profit		18,188			11,252			47,158			29,103
Selling, general and administrative expenses		9,813			5,410			27,532			18,206
Depreciation and amortization		6,199			7,351			19,912			20,784
Operating income (loss)		2,176			(1,509	)		(286	)		(9,887	)

Interest expense		5,972			4,897			17,385			13,202
Other expense, net		29			59			175			104
Loss from continuing operations before income taxes		(3,825	)		(6,465	)		(17,846	)		(23,193	)
Income tax expense		(48	)		(297	)		(151	)		(1,067	)
Loss from continuing operations		(3,873	)		(6,762	)		(17,997	)		(24,260	)

(Loss) income from discontinued operations		(2	)		(220	)		(461	)		555
Net loss	$	(3,875	)	$	(6,982	)	$	(18,458	)	$	(23,705	)

Net income (loss) per share - basic:
Continuing operations	$	(0.79	)	$	(1.73	)	$	(3.76	)	$	(6.23	)
Discontinued operations		0.00			(0.06	)		(0.10	)		0.14
Net loss	$	(0.79	)	$	(1.79	)	$	(3.86	)	$	(6.09	)

Net income (loss) per share - diluted:
Continuing operations	$	(0.79	)	$	(1.73	)	$	(3.76	)	$	(6.23	)
Discontinued operations		0.00			(0.06	)		(0.10	)		0.14
Net loss	$	(0.79	)	$	(1.79	)	$	(3.86	)	$	(6.09	)

Weighted average shares of common stock outstanding:
Basic		4,885			3,896			4,785			3,896
Diluted		4,885			3,896			4,785			3,896

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

UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine Months Ended
	October 2,			October 3,
	2010			2009

Cash flows from operating activities:
Net loss	$	(18,458	)	$	(23,705	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (income) from discontinued operations		461			(555	)
Provision for doubtful accounts		664			1,252
Depreciation and amortization		19,912			20,784
Amortization of deferred financing fees		2,486			1,635
Accrued interest expense (income) on collar		248			(17)
Accretion of debt discount		306			-
Stock-based compensation		1,228			1,419
Interest added to debt principal		2,806			1,498
Refundable deposits		(389	)		(107	)
Loss on sale of fixed assets		116			133
Deferred tax assets, net		25			1,146
Changes in assets and liabilities:
Accounts receivable and unbilled revenue		(16,953	)		(6,261	)
Inventories		(1,981	)		3,610
Prepaid expenses and other assets		912			(3,545	)
Accounts payable and accrued liabilities		5,176			1,717
Net cash used in operating activities – continuing operations		(3,441	)		(996	)
Net cash (used in) provided by operating activities – discontinued operations		(358	)		1,092
Net cash (used in) provided by operating activities		(3,799	)		96

Cash flows from investing activities:
Acquisition of property and equipment		(2,656	)		(2,289	)
Proceeds from sale of property and equipment		241			486
Cash restricted for acquisition of business		133			317
Cash paid for acquisition of business		(35	)		(4,893	)
Net cash used in investing activities		(2,317	)		(6,379	)

Cash flows from financing activities:
Proceeds from issuance of common shares		420			50
Proceeds from issuance of preferred shares		12,500			-
Proceeds from (repayment of) revolving credit facilities, net		(4,500	)		7,500
Repayment of capital leases		(4,059	)		(1,456	)
Repayment of long term debt		(3,868	)		(1,170	)
Proceeds from issuance of long term debt		15,000			-
Repayment of acquired debt, net of cash acquired		(7,246	)		-
Financing fees		(2,136	)		(1,673	)
Payment of costs associated with equity offering		(520	)		-
Net cash provided by financing activities		5,591			3,251

Effect of exchange rate on cash and cash equivalents		(50	)		165
Net decrease in cash and cash equivalents		(575	)		(2,867	)
Cash and cash equivalents at beginning of period		2,263			5,348
Cash and cash equivalents at end of period	$	1,688		$	2,481

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

UNITEK GLOBAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine months Ended
	October 2,		October 3,
	2010		2009

Supplemental cash flow information:
Interest paid	$	13,421	$	10,121
Income taxes paid	$	366	$	253

Significant noncash items:
Fair value of equity paid for acquisition	$	19,927	$	-
Acquisition of property and equipment financed by capital lease	$	154	$	3,029
Credit support fee paid in shares of Series B Convertible Preferred Stock	$	765	$	-

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business

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

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

2. Basis of Presentation

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

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

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

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

3. Accounting Policies

Use of Estimates

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Principles of Consolidation

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

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Inventories

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

Prepaid Expenses and Other Current Assets

Prepaid and other current assets consist primarily of prepaid insurance, taxes and expenses. These costs are expensed ratably over the related periods of benefit.

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which principally range from three to seven years for computers, construction equipment, furniture, vehicles, and equipment. The useful life of leasehold improvements is based on the shorter of the term of the lease or five years. Assets under capital leases are amortized over the lesser of the lease term or the asset’s estimated useful life. When assets are retired or disposed of, the cost and accumulated depreciation thereon are removed and any resultant gains or losses are recognized. All depreciation of property and equipment is included in the condensed consolidated statements of operations in Depreciation and Amortization.

Goodwill and Other Intangible Assets

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Other Long-Term Assets

Costs associated with obtaining long-term debt are deferred and amortized to interest expense on a straight-line basis, which approximates the effective interest method, over the term of the related debt (see Note 7). At October 2, 2010 and December 31, 2009, $6.7 million and $6.6 million (net), respectively, is included in other long-term assets related to deferred financing fees.

Derivative Financial Instruments

The Company utilizes derivative financial instruments to reduce interest rate risks. The Company does not hold derivative financial instruments for trading purposes. All derivatives are accounted for at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction.

Revenue Recognition

Revenues from fulfillment services provided to the pay television industry are recognized as the services are rendered. The Company recognizes revenue from fulfillment services net of equipment because the Company has determined that it acts as an agent.

The Company also enters into contracts that require the installation or construction of specified units within an infrastructure system. Under these contracts, revenue is recognized at the contractually agreed price per unit as the units are completed. Unbilled revenues represent amounts earned and recognized in the period for which customer billings are issued in a subsequent period per the contract terms. In the wireless portion of the engineering and construction segment, revenue is primarily recorded on the percentage of completion basis either based on direct costs incurred or on milestones completed. Losses are recognized when such losses become known.

Net Loss per Share

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

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

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair Value of Financial Instruments

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

Income Taxes

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

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

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

At October 2, 2010, the Company had net operating loss carry forwards for U.S. federal and state income tax purposes of approximately $43 million which begin to expire in 2014 and will fully expire by 2029. Because the Company has not yet achieved profitable operations, management believes the potential tax benefits from the U.S. deferred tax assets do not satisfy the realization criteria set forth in ASC 740, and accordingly, has recorded a valuation allowance for the entire net U.S. deferred tax asset.

Leases

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

Stock-Based Compensation

The Company measures and recognizes compensation expense for all share-based awards made to employees and directors including employee stock options based on estimated fair values.

The consolidated financial statements as of October 2, 2010 and for the three and nine months ended October 2, 2010 and October 3, 2009 include stock option expense as compensation expense. Pretax stock-based compensation expense recognized for the three months ended October 2, 2010 and October 3, 2009 was $0.4 million and $0.5 million, respectively. Pretax stock-based compensation expense recognized for the nine months ended October 2, 2010 and October 3, 2009 was $1.2 million and $1.4 million, respectively. For the three and nine months ended October 2, 2010 and October 3, 2009, all stock-based compensation expense was included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Comprehensive Loss

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

Comprehensive loss consisted of the following (in thousands):

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

Recent Accounting Pronouncements

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

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

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

4. Berliner-UniTek Holdings Merger

On January 27, 2010, Berliner and Holdings entered into the Merger Agreement. Pursuant to the terms and conditions of the Merger Agreement, at the Effective Time, each outstanding share of common stock of Holdings (the “Holdings Common Stock”) (prior to adjusting for the one-for-28 reverse stock-split effected on November 9, 2010) was converted into the right to receive 0.012 shares of series A preferred stock of Berliner (the “Berliner Series A Preferred Stock”) and 0.40 shares of common stock of Berliner (the “Berliner Common Stock”), and each share of series A preferred stock of Holdings (the “Holdings Preferred Stock”) was converted into the right to receive 0.02 shares of series B preferred stock of Berliner (the “Berliner Series B Preferred Stock”). The terms of the Berliner Series A Preferred Stock and the Berliner Series B Preferred Stock are summarized in Item 5.03 of the Form 8-K filed with the SEC on January 27, 2010. The Merger expanded Holdings presence in the wireless telecommunications market in the site acquisition and construction of wireless cell towers and related services.

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Based on the number of shares of Holdings capital stock and Berliner capital stock outstanding as of January 27, 2010, the stockholders of Holdings immediately prior to the Effective Time held more than 80% of the voting capital stock of Berliner outstanding immediately following the Merger.

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

Cash	$	336
Accounts receivable		25,964
Inventories		898
Prepaid expenses and other current assets		2,686
Property and equipment		2,649
Amortizable intangible assets		4,658
Goodwill		5,675
Other assets		289
Accounts payable and accrued expenses		( 14,501	)
Other liabilities		(534	)
Capital lease obligations		( 611	)
Total fair value of net assets acquired	$	27,509

The results of the Merger are included in the consolidated results of the Company effective January 27, 2010 in the engineering and construction segment. During the three- and nine-month periods ended October 2, 2010, the Merger contributed revenue of approximately $23.5 million and $66.1 million and operating income of $0.4 million and $0.0 million, respectively. The Company has recognized goodwill of $5.7 million, which is not tax-deductible, arising from the acquisition representing the value of the existing workforce as well expected synergies from the combination of operations. The goodwill associated with the Merger is included in the engineering and construction segment’s assets.

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

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

5. Accounts Receivable and Concentration of Credit Risk

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

	October 2,			December 31,
	2010			2009
Accounts receivable	$	45,283		$	19,584
Unbilled revenue		23,225			6,425
		68,508			26,009
Allowance for doubtful accounts		(1,575	)		(1,329	)
Total	$	66,933		$	24,680

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

6. Goodwill and Intangible Assets

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

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

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

	October 2,		December 31,
	2010		2009
Amortizable intangible assets:
Customer relationships	$	74,727	$	70,468
Non-compete agreements		1,433		1,025
Total amortizable intangible assets		76,160		71,493

Accumulated amortization:
Customer relationships		55,268		43,904
Non-compete agreements		956		648
Total accumulated amortization		56,224		44,552
Amortizable intangible assets, net	$	19,936	$	26,941

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

Three months ending December 31, 2010	$	3,462
2011		7,998
2012		6,252
2013		1,049
Thereafter		1,175
Total	$	19,936

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. Long-Term Debt

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

	October 2,		December 31,
	2010		2009
First Lien Credit Agreement:
Revolving Credit Facility	$	7,000	$	11,500
Term B Credit Facility, net of debt discount of $2,847		83,788		75,503
Term C Credit Facility		19,500		19,500
		110,288		106,503
Second Lien Credit Agreement:
Term Facility		25,000		25,000
Loan Authorization Agreement
Holdings Revolving Facility		30,258		28,666
Total debt		165,546		160,169
Less current portion		33,048		33,006
Long-term debt, net of current portion	$	132,498	$	127,163

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

Three months ending December 31, 2010	$	30,956
2011		2,790
2012		134,647
Total	$	168,393

First Lien Credit Agreement

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

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

The Term B Credit Facility as amended provides for borrowings up to $93 million, including the Third Incremental Term B Facility described below. As of October 2, 2010, $86.6 million (including the debt discount of $2,847) was outstanding under the Term B Credit Facility. The term loan provides for interest, depending on the Company’s election, with interest at a rate of one-half of 1% per annum above the Federal Funds Rate plus 5.5% or Eurodollar plus 6.5%. At December 31, 2009, in connection with the closing of an amendment in January 2010, the interest rate increases by 75 basis points if the Company’s Leverage Ratio exceeds a certain level. The loan under the Term B Credit Facility is to be amortized from December 31, 2007 until maturity. The Term B Credit Facility is secured by substantially all of the assets of the Company.

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

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

Letter of Credit Transaction

On March 31, 2010, the Company entered into a Senior Secured Letter of Credit Facility arrangement (the “LOC Facility”), via an amendment to the First Lien Credit Agreement (the “Amendment”), by and among UniTek Acquisition, Inc., a Delaware company and indirect wholly owned subsidiary of the Company (“Acquisition”), UniTek Midco, Inc., a Delaware company and indirect wholly owned subsidiary of the Company (“Midco”), certain subsidiaries of Acquisition as guarantors, the initial lenders under the LOC Facility, and Royal Bank of Canada, as administrative agent and collateral agent for the lenders. The Amendment establishes an incremental $12 million revolving tranche (the “Incremental Tranche”) added to the credit facilities established by the First Lien Credit Agreement. The full amount of Incremental Tranche is solely available to Acquisition for the issuance of letters of credit in support of Acquisition’s obligations under certain insurance policies and other general corporate purposes. The LOC Facility charges a 1.3333% per month cash fee payable on issued but unfunded letters of credit and a 1.0% per annum cash fee on the daily average unfunded amount of the LOC Facility. Funded letters of credit will carry an interest rate of LIBOR plus 6.75% per annum with a 2.5% LIBOR floor. There was $6.0 million in letters of credit issued against the LOC Facility as of October 2, 2010.

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Second Lien Credit Agreement

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

Loan Authorization Agreement

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

8. Derivative Financial Instruments

The Company manages interest rate exposure by using derivative instruments to reduce the variability of interest payments for variable-rate debt. The Company is also required to maintain interest rate hedge agreements covering a notional amount of not less than 50% of the debt outstanding under the First Lien Credit Agreement for the first three years of the agreement.

On November 29, 2007, the Company entered into an interest rate collar agreement with an aggregate notional principal amount of $65 million and a maturity date of November 30, 2010. The collar is used to hedge the required portion of the Company’s First Lien Credit Agreement and consists of a cap and a floor with a strike of 5.50% and 2.98%, respectively. The strike is indexed to three-month LIBOR. The change in the fair value of the derivative is reported as a component of interest expense. The amount of interest expense recorded for the interest rate collar for the three months ended October 2, 2010 and October 3, 2009 was $(0.1) million and $0.3 million, respectively, which includes changes in the fair value of the collar liability. The amount of interest expense recorded for the interest rate collar for the nine months ended October 2, 2010 and October 3, 2009 was $(1) thousand and $0.8 million, respectively, which includes changes in the fair value of the collar liability. The fair value of the interest rate collar liability was $0.3 million and $1.5 million at October 2, 2010 and December 31, 2009, respectively, and is recorded as a component of accrued expenses in the condensed consolidated balance sheets.

9. Stockholders’ Equity

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In conjunction with the Merger, Berliner designated approximately 0.7 million shares of Berliner Series B Preferred Stock. At the Effective Time, each share of Holdings Preferred Stock was converted to the right to receive 0.02 shares of Berliner Series B Preferred Stock. The Holdings Preferred Stock was issued in January 2010, prior to the Merger, in an amount of $12.5 million for 12.5 million shares. The Berliner Series B Preferred Stock ranks senior to all existing classes of capital stock of Berliner. The Berliner Series B Preferred Stock has an optional conversion feature to UniTek Common Stock, such that the actual conversion ratio would currently be 50 shares of UniTek Common Stock for each share of Berliner Series B Preferred Stock, subject to standard anti-dilution adjustments for stock splits, dividends and similar events. In addition, in the event of liquidation, dissolution or winding up of UniTek, the Berliner Series B Preferred Stock has a liquidation preference. As there are certain events that are considered “deemed liquidation” events, such as a merger or consolidation or similar transaction resulting in a change of control (as more fully defined in the Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock filed with the Company’s Form 8-K on January 27, 2010) which can be influenced by the holders of the Berliner Series B Preferred Stock, the Berliner Series B Preferred Stock has been reflected as mezzanine equity on the accompanying consolidated balance sheet. At October 2, 2010, there were approximately 0.27 million shares of Berliner Series B Preferred Stock outstanding with a liquidation value of approximately $26.5 million.

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

10. Warrants

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

11. Stock Options

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

12. Related Party Transactions

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

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

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

13. Legal Proceedings

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

14. Fair Value Measurements

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

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

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

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

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

	Fair Value Measurements at October 2, 2010
	Fair Value at October 2, 2010		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents	$	1,688	$	1,688	$	-	$	-
Total	$	1,688	$	1,688	$	-	$	-

Liabilities
Interest-rate collar	$	322	$	-	$	322	$	-
Total	$	322	$	-	$	322	$	-

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Liabilities
Interest-rate collar	$	1,548	$	-	$	1,548	$	-
Total	$	1,548	$	-	$	1,548	$	-

Derivatives

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

15. Discontinued Operations

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

	Three Months Ended						Nine Months Ended
	October 2,			October 3,			October 2,			October 3,
	2010			2009			2010			2009

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

16. Segment Reporting

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

	Three Months Ended
	October 2, 2010								October 3, 2009
	Fulfillment		Engineering & Construction			Total			Fulfillment		Engineering & Construction			Total

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

	Nine months Ended
	October 2, 2010								October 3, 2009
	Fulfillment		Engineering & Construction			Total			Fulfillment		Engineering & Construction			Total

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

UniTek Global Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At the quarter ended October 2, 2010, the total assets of the fulfillment segment were $175.6 million and the engineering and construction segment were $98.8 million. This compares to $174.4 million and $57.4 million at December 31, 2009 for the fulfillment segment and the engineering and construction segment, respectively. The increase of $1.2 million in the assets of the fulfillment segment was primarily from higher working capital. The increase of $41.4 million in the engineering and construction assets compared to December 31, 2009 is primarily the $45.1 million of assets from the operations of Berliner which have been included in the Company’s consolidated results since the date of the Merger, offset by changes in working capital.

17. Subsequent Events

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

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

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

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

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

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

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

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

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

Note Regarding Forward-Looking Statements

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

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

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

our financial condition and strategic direction;

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

the potential generation of future revenue and or earnings;

our ability to adequately staff our service offerings;

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

our ability to obtain additional financing;

our growth strategy;

trends in the telecommunications, satellite and cable industries;

key drivers of change in our business;

our competitive position and the competitive landscape; and

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

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

risks related to the market for our shares;

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

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

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

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

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

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

Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, without limitation, those discussed elsewhere in this report and the Transition Report. It is important not to place undue reliance on these forward-looking statements, which reflect our analysis, judgment, belief or expectation only as of the date of this report. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this report.

Summary of Operating Results

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

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

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

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

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

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

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

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

Revenues

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

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

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

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

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

Cost of Revenues

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

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

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

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

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

Gross Profit

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

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

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

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

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) for the three months ended October 2, 2010 were $9.8 million as compared to $5.4 million for the three months ended October 3, 2009. This represents an overall increase of $4.4 million. A portion of the increase ($1.7 million) is from the merger of Berliner which has been included in our consolidated results since the date of the Merger. The remaining increase in SG&A costs of $2.7 million is attributable primarily to additional salary and personnel costs ($0.5 million), integration and transaction expenses related to the Merger ($0.5 million), an increase in our reserve for legal claims ($0.7 million) and increased expenses related to the startup of our Canadian engineering and construction segment operations ($0.3 million).

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

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

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

A reconciliation of adjusted pro forma EBITDA and net income (loss) after certain non-cash adjustments to net loss for the three month periods is as follows (amounts in thousands):

							Pro Forma
	Three Months Ended						Three Months Ended
	October 2, 2010			October 3, 2009			October 2, 2010			October 3, 2009

Net loss	$	(3,875	)	$	(6,982	)	$	(3,404	)	$	(6,982	)
Berliner pro forma net loss (a)		-			-			-			(1,370	)
Non-cash stock based compensation		408			473			408			497
Non-cash interest expense		2,144			1,117			2,144			1,642
Non-cash amortization		3,369			5,475			3,369			5,475
Net income (loss) after certain non-cash adjustments	$	2,046		$	83		$	2,517		$	(738)

Loss from discontinued operations		2			220			2			220
Income tax expense		48			297			48			(15	)
Cash interest expense		3,828			3,780			3,828			3,880
Other expense, non cash		29			59			29			39
Depreciation		2,830			1,876			2,830			2,560
Merger transaction costs		471			164			-			164
Adjusted EBITDA/Adjusted pro forma EBITDA	$	9,254		$	6,479		$	9,254		$	6,110

(a)

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

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

Depreciation and Amortization

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

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

Interest Expense

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

Income Taxes

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

At October 2, 2010, we had net operating loss carry forwards for federal and state income tax purposes of approximately $43 million which begin to expire in 2014 and will fully expire by 2029. Because the Company has not yet achieved profitable operations, management believes the potential tax benefits from the deferred tax assets do not satisfy the realization criteria set forth in FASB ASC 740, and accordingly, has recorded a valuation allowance for the entire net deferred tax asset.

Net Loss

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

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

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

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

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

Revenues

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

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

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

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

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

Cost of Revenues

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

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

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

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

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

Gross Profit

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

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

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

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

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

Selling, General and Administrative Expenses

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

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

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

							Pro Forma
	Nine Months Ended						Nine Months Ended
	October 2, 2010			October 3, 2009			October 2, 2010			October 3, 2009

Net loss	$	(18,458	)	$	(23,705	)	$	(16,650	)	$	(23,705	)
Berliner pro forma loss		-			-			(1,308	)		(7,303	)
Non-cash stock based compensation		1,228			1,419			1,312			1,641
Non-cash interest expense		5,668			3,251			5,668			3,776
Non-cash amortization		11,396			16,426			11,396			16,426
Net (loss) income after certain non-cash adjustments	$	(166	)	$	(2,609	)	$	418		$	(9,165	)

Loss (income) from discontinued operations		461			(555	)		461			(555	)
Income tax expense		151			1,067			151			754
Cash interest expense		11,717			9,951			11,999			11,224
Other expense, non-cash		175			104			175			66
Depreciation		8,516			4,358			8,768			6,450
Merger transaction costs		1,808			174			-			174
Pro forma EBIDTA from market swap		-			1,093			-			1,093
Adjusted EBITDA/Adjusted pro forma EBITDA	$	22,662		$	13,583		$	21,972		$	10,041

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

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

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

Depreciation and Amortization

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

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

Interest Expense

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

Income Taxes

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

Net Loss

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

Below is a summary of our debt agreements that is relevant to an understanding of our liquidity and capital resources:

First Lien Credit Agreement and Second Lien Credit Agreement

General

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

Availability and Term

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

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

Interest Rate and Fees

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

Guaranties and Security

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

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

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

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

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

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

Letter of Credit Transaction

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

Loan Authorization Agreement

Availability and Term

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

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

Guaranties

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

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

Summary of Cash Flows

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

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

Net cash provided by (used in) operating activities.

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

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

Net cash used in investing activities.

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

Net cash provided by financing activities.

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

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

Off-Balance Sheet Arrangements

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

Effect of Inflation

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

Item 4T. Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

There were not any other changes in internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There are, however, inherent risks in implementing any new system that could impact our financial reporting. In the event that issues arise, we have procedures in place which would facilitate our continued recording and reporting of results from the new system. We will continue to monitor, test and appraise the impact and effect of the new system on our internal controls and procedures as additional phases and features of the system are implemented.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

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

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

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

On June 11, 2008, three named plaintiffs, who were formerly employed as technicians by DirectSat USA, LLC, a UniTek subsidiary, filed a claim in the United States District Court for the Northern District of Illinois, alleging violations of the Illinois Wage and Hour Laws and the Fair Labor Standards Act (“FLSA”).

These allegations related to the payment of overtime. The plaintiffs have sought and have been granted class certification for the state law claims.

On February 9, 2010, plaintiffs’ counsel filed a companion case, Lashon Jacks v. DirectSat et al., in the Cook County, Illinois Circuit Court, seeking to expand the class in the Farmer case to include all technicians in Illinois that worked with DirectSat after June 10, 2008.

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

On February 15, 2008, plaintiffs, former employees of FTS USA, LLC, a UniTek subsidiary, filed a class action in the United States District Court for the Western District of Tennessee, alleging violations of the FLSA related to overtime payments. Conditional class certification was granted.

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

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

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

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

Item 1A. Risk Factors

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

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

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

On September 29, 2010, Unitek Acquisition, Inc. (“Unitek Acquisition”), a Delaware corporation and a subsidiary of UniTek Global Services, Inc. (the “Company”), Unitek Midco, Inc., a Delaware corporation and a subsidiary of the Company (“Unitek Midco”), certain subsidiaries of Unitek Acquisition as guarantors, Royal Bank of Canada, as administrative agent, and the Lenders (as defined below) entered into that certain Amendment No. 8 to the First Lien Credit Agreement (the “Amendment”). The Amendment amends that certain First Lien Credit Agreement, dated as of September 27, 2007 (the “Credit Agreement”), by and among Unitek Acquisition, Unitek Midco, certain subsidiaries of Unitek Acquisition as guarantors and the lenders party thereto (the “Lenders”).

In light of the Company’s offering of its common shares pursuant to the Company’s Registration Statement on Form S-1 (Comission File No. 333-168854) (the “Form S-1 Registration Statement”), the Amendment defines “IPO” as “the public offering of the common stock of UniTek Global Services, Inc.,” and provides for “Permitted Purposes” for the proceeds of an IPO, including but not limited to, in the event;

(1) the IPO is for less than $75,000,000, (i) the prepayment of the then outstanding loans made pursuant to the Company’s Loan Authorization Agreement, (ii) the payment of fees and expenses in connection with the IPO and the use of the proceeds therefrom, (iii) any other purposes specifically set forth in the Form S-1 Registration Statement, (iv) the prepayment of the Term B Advances (as such term is defined in the Credit Agreement) in a minimum aggregate amount of $4,000,000, and (v) the contribution of the remaining amount of proceeds from the IPO on the balance sheet of the Company and its Subsidiaries reflected either in unrestricted and available cash or Cash Equivalents or prepayment of Revolving Credit Advances; and

(2) the IPO is for $75,000,000 or more, (i) the prepayment of the then outstanding loans made pursuant to the Company’s Loan Authorization Agreement, (ii) the prepayment of the Term B Advances (as such term is defined in the Credit Agreement) in a minimum aggregate amount of $10,000,000, (iii) subject to the prior or substantially concurrent contribution of proceeds pursuant to clause (v) below, the prepayment of advances under the Second Lien Term Loan Agreement (other than the Term C Advances) in an aggregate amount of up to $10,000,000, (iv) prepayment of certain other advances extended under the Credit Agreement, (v) the contribution of a minimum of $15,000,000 on the balance sheet of the Company reflected either in unrestricted and available cash or Cash Equivalents or prepayment of Revolving Credit Advances; (vi) the payment of fees and expenses in connection with the IPO and the use of the proceeds therefrom, and (vii) any other purposes specifically set forth in the Form S-1 Registration Statement.

The Company also agreed with the Lenders to pay certain fees upon consummation of the IPO.

Item 6. Exhibits.

(a) Exhibits

4.1		Form of Warrant issued pursuant to the Third Incremental Term B Facility Amendment and Amendment No. 6 to the First Lien Credit Agreement, dated as of July 16, 2010 (incorporated herein by reference from Exhibit 99.2 to the Company’s Form 8-K filed on July 22, 2010).

#10.1		Amendment No. 2 to Employment Agreement, dated as of July 8, 2010, by and between UniTek Global Services, Inc. and Michael S. Guerriero (incorporated herein by reference from Exhibit 99.1 to the Company’s Form 8-K filed on July 12, 2010).

10.2		Third Incremental Term B Facility Amendment and Amendment No. 6 to the First Lien Credit Agreement, dated as of July 16, 2010 (incorporated herein by reference from Exhibit 99.1 to the Company’s Form 8-K filed on July 22, 2010).

10.3		Amendment No. 1 to Registration Rights Agreement, dated as of July 16, 2010 (incorporated herein by reference from Exhibit 99.3 to the Company’s Form 8-K filed on July 22, 2010).

10.4		Amendment No. 7 to the First Lien Credit Agreement, dated as of September 20, 2010 (incorporated herein by reference from Exhibit 99.1 to the Company’s Form 8-K filed on September 24, 2010).

10.5		Amendment No. 8 to the First Lien Credit Agreement, dated as of September 29, 2010 (incorporated herein by reference from Exhibit 10.37 to the Company's Amendment No. 3 to Registration Statement on Form S-1 filed on October 28, 2010).

*31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

# Management contract or compensatory plan or arrangement.

* Filed herewith.

** Furnished herewith.

SIGNATURES

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

UNITEK GLOBAL SERVICES, INC.

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

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

Attached files

UniTek Global Services, Inc. Reports

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