- Amended Annual Report (10-K/A)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A Number 1

ANNUAL REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For Year Ended December 31, 2008

Brookside Technology Holdings Corp.

(Exact name of registrant as specified in its charter)


Florida	0-52702	20-3634227
(State or Other Jurisdiction)	(Commission File Number)	(IRS Employer Identification No.)

15500 Roosevelt Blvd, Suite 101
Clearwater, FL 33760
(Address of principal executive offices) (zip code)

(727) 535-2151

(Registrant’s telephone number, including area code)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

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

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 þ No o

Check if there was no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company þ

Revenues for the year ended December 31, 2008: $21,709,607

Aggregate market value of the voting common stock held by non-affiliates of the registrant as of March 31, 2009 was: $3,117,819

Number of shares of the registrant’s common stock outstanding as of March 31, 2009 is: 140,228,340

TABLE OF CONTENTS


	PART I
	ITEM I. DESCRIPTION OF BUSINESS
	ITEM 2. DESCRIPTION OF PROPERTY
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
	ITEM 7. FINANCIAL STATEMENTS
	ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 8A. CONTROLS AND PROCEDURES
	Item 8A(T). Controls and Procedures.
	ITEM 8B. OTHER INFORMATION
PART III
	ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
	ITEM 9A. DISCLOSURES AND PROCEDURES
	ITEM 10. EXECUTIVE COMPENSATION
	ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
	ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 13. EXHIBITS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
EX-2.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Explanatory Note:

Brookside Technology Holdings Corp. is filing this Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2008, which was originally filed with the Securities and Exchange Commission on March 31, 2009 (“Original Form 10-K”), to amend Item 1 “Description of Business”, Item 5 “Selected Financial Data”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), “Risk Factors”, Item 8 “Financial Statements and Supplementary Data”, Item 8A “Controls and Procedures”, Item 9A “Disclosures and Procedures”, and Item 15 “Exhibits and Financial Statement Schedules.” Additionally, the Registrant added Note 2 regarding the restatement of the Registrant’s financial statements and revised Note 1, Note 3, Note 4 and Note 7.

As discussed in Note 1 to the Financial Statements, on November 16, 2009, Brookside Technology Holdings Corp and its Board of Directors, after consultation with Brookside Technology Holdings Corp’s independent registered public accounting firm, concluded that Brookside Technology Holdings Corp would amend its annual report on Form 10-K for the year ended December 31, 2008 and restate its financial statements and financial information for the year ended December 31, 2008. Brookside Technology Holdings Corp concluded that it should have been accounting for certain warrants as a liability under EITF 00-19, due to the cash redemption rights included in the warrant agreements. The treatment and effect to the financial statements is further discussed in Note 2. In prior 10-K filings for years ended 2007 and 2008 and related quarterly filings, the Company had incorrectly accounted for these warrants resulting in not recording the quarterly change in estimated fair value of the warrants as derivative financial instruments. Please refer to Note 2 of these financial statements for a detailed discussion of the impact on the Company’s quarterly financial information. The restatement adjustments correct for the establishment of “Derivative financial instruments at fair value” liability on the Consolidated Balance Sheets of $12,016,463 and $7,605,601 as of December 31, 2008 and 2007, respectively, the related “Finance expense on derivatives” of $4,156,069 and $12,348,466 for the years ended December 31, 2008 and 2007, respectively, an addition to Amortization expense of $1,244,830 and $414,943 for the years ended December 31, 2008 and 2007, respectively and “Gain on change in fair value of derivative financial instruments” of $5,245,207 and 10,402,865 for the years ended December 31, 2008 and 2007, respectively on the Consolidated Statements of Income.

For the convenience of the reader, this Form 10-K/A sets forth the Original Form 10-K, as amended hereby, in its entirety. However, this Form 10-K/A amends and restates only Items 1, 5, 7, 8, 8A, 9A and 15 of the Original Form 10-K, in each case solely as a result of and to reflect the adjustments discussed above and more fully in Note 2 of the accompanying financial statements, and no other information in the Original Form 10-K is amended hereby.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by Brookside Technology Holdings Corp’s principal executive officer and principal financial officer are being filed with this new Form 10-K/A as Exhibits 31.1 and 32.1.

PART I

ITEM I. DESCRIPTION OF BUSINESS

DESCRIPTION OF BROOKSIDE TECHNOLOGY HOLDINGS CORP.’S BUSINESS

Operations

We are the holding company for Brookside Technology Partners, Inc, a Texas corporation (“Brookside Technology Partners”), US Voice & Data, LLC, an Indiana Limited Liability Company (“USVD”), Standard Tel Acquisitions, Inc., a California Corporation (“Acquisition Sub”), Trans-West Network Solutions, Inc., (“Trans-West”), a California Corporation and Standard Tel Networks, LLC, a California Limited Liability Company (“STN”) and all operations are conducted through these (five) wholly owned subsidiaries.

Collectively, the subsidiary companies are providers of converged business communications products and services from Mitel, Inter-tel (owned by Mitel), Nortel and NEC. The Company, is the 2nd largest MITEL dealer in the United States, and is recognized by Mitel as a Platinum ELITE Partner. The Company combines technical expertise in a range of communications products, including IP-enabled platforms, wired and wireless IP and digital endpoints and leading edge communications applications to create converged voice, video and data networks that help businesses increase efficiency and optimize revenue opportunities, critical for success in today’s competitive business environment. Specializing in selling, designing, analyzing and implementing converged Voice over IP (VoIP), data and wireless business communications systems and solutions for commercial and state/government organizations of all types and sizes in the United States, the Company has offices that provide a national footprint. Headquartered in Huntington Beach, California, STN has offices in the San Francisco Bay Area, Sacramento, and San Diego. Headquartered in Austin, Texas, Brookside Technology Partners serves the Texas market. Headquartered in Louisville, Kentucky, USVD serves the Kentucky and Southern Indiana markets, operating out of offices in Louisville, Lexington and Indianapolis. Combined, new implementations represent approximately 70% of the Company’s revenues with the remaining 30% generated by Service, Support, Maintenance and other recurring revenues from our existing customer base.

Background/Name Change/Redomestication

Cruisestock, Inc, (“Cruisestock”) was incorporated in September 2005 under the laws of the State of Texas. Immediately prior to February 21, 2007, it was a shell corporation with no significant operations or assets. On February 21, 2007, Cruisestock acquired all of the stock of Brookside Technology Partners, a Texas corporation, in a transaction where the shareholders of Brookside Technology Partners exchanged all of their shares for shares of common stock of Cruisestock (the “Share Exchange”). As a result, Brookside Technology Partners became a wholly owned subsidiary of Cruisestock. However, from an accounting perspective, Brookside Technology Partners was the acquirer in the Share Exchange.

Subsequent to the Share Exchange, on July 6, 2007 (the “Effective Time”), Cruisestock changed its name to Brookside Technology Holdings Corp. and redomesticated in Florida. The name change and redomestication were accomplished by merging Cruisestock into a newly-formed, Florida wholly-owned subsidiary, with the subsidiary being the surviving entity (the “Redomestication”).

The Company’s common stock is quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol: BKSD.

Stock Split

Concurrently with the Redomestication and as of the Effective Time:

	•		Each outstanding share of Cruisestock’s common stock, $0.001 per share, was automatically converted into seven shares of Brookside Technology Holdings Corp.’s common stock, $0.001 par value per share;

	•		Each outstanding share of Cruisestock’s Series A convertible preferred stock (“Series A Stock”), $0.001 per share, was automatically converted into one share of Brookside Technology Holdings Corp.’s Series A Stock, $0.001 par value per share;

	•		The price at which the Series A Stock converts into common stock was automatically adjusted, on a proportionate basis, to account for the forward split of the common shares by reducing the current conversion price of $0.40 per share to $0.0571428; and

•

The number of shares of common stock underlying all of Cruisestock’s outstanding options and warrants to purchase common stock, and the exercise price of such options and warrants, was automatically adjusted to account for the 7-for-1 common share stock split.

Acquisition of USVD

On September 26, 2007, the Company acquired all of the membership interest of US Voice & Data, LLC, an Indiana Limited Liability Company (“USVD”). USVD, headquartered in Louisville, Kentucky, with offices in Lexington, Kentucky and Indianapolis, Indiana, is a leading regional provider of telecommunication services, including planning, design, installation and maintenance for converged voice and data systems.

Increase in Authorized Shares

On August 4, 2008, the Company filed Articles of Amendment to its Articles of Incorporation (the “Amendment”) with the Florida Department of State increasing the number of shares of common stock that the Company has the authority to issue from Two Hundred and Fifty Million (250,000,000) shares to One Billion (1,000,000,000) shares. On November 19, 2009, shareholders representing a majority of the Company’s shares entitled to vote at a meeting executed and delivered to the Company written consents in lieu of a meeting approving an increase in the Company’s authorized shares of Common Stock from 1,000,000,000 to 10,000,000,000.

Vicis Equity Infusion

On July 3, 2008, the Company entered into a Securities Purchase Agreement (the “Vicis Agreement”) with Vicis Capital Master Fund, a sub-trust of Vicis Capital Series Master Trust (“Vicis”), pursuant to which Vicis acquired (a) 2,500,000 shares of Series A Stock; and (b) a warrant (the “Warrant”) to purchase 250,000,000 shares of common stock of the Company at $0.03 per share (the “Exercise Price”), for an aggregate purchase price of $2,500,000 (“Vicis Equity Infusion”). Furthermore, pursuant to the Vicis Agreement, all of the 3,000,000 shares outstanding of the Company’s Series B Stock) previously owned by Vicis were converted into 3,000,000 shares of Series A Stock. Accordingly, the Company no longer has any outstanding shares of Series B Stock. The Exercise Price is subject to a price adjustment from time to time upon the occurrence of certain events set forth in the Warrant.

The Company accounted for these two transactions as one event for accounting purposes. The $5,500,000 ($2,500,000 in cash and $3,000,000 of principal of Series B Stock) was considered for investment in 5,500,000 shares of Series A Stock and 250,000,000 warrants to purchase common stock. Initially the $5,500,000 was allocated based on the relative fair value of the Series A Stock and the warrants issued. The value assigned to the Series A Stock was reduced to zero as a result of a beneficial conversion feature. Upon the restatement, the full value of the warrant was set up as a liability totaling $18,008,466. The amount assigned to equity was $0. There was no beneficial conversion feature as restated.

Vicis also purchased and assumed from Hilco Financial, LLC (“Hilco”), and Hilco assigned to Vicis, all credit agreements, loans and promissory notes under which Hilco had loaned money to the Company. The Company consented to such assignments. In connection with such assignments, Hilco transferred to Vicis its warrants to purchase 61,273,835 shares of common stock of the Company. In addition, Vicis purchased and assumed from Dynamic Decisions (“DD”), and DD assigned to Vicis, all credit agreements, loans and promissory notes under which DD had loaned money to the Company. The Company consented to such assignments.

All Warrants and Series A Stock each contain provisions that limit their holders ability to exercise and convert, as applicable, the Warrant and Series A Stock to the extent that, after such conversion/exercise, the sum of the number of shares of common stock beneficially owned by the holder would result in beneficial ownership by any holder and its affiliates of more than 4.99% of the outstanding shares of common stock.

As a result of Vicis equity infusion described above, the exercise price of all of the Company’s outstanding warrants, including the warrants transferred to Vicis from Hilco, has been reset to $0.03 pursuant to the price protection provisions of those warrants. Additionally, the conversion price of all outstanding shares of Series A Stock, including those previously owned by Vicis, has been reset to $0.03 pursuant to the price protection provisions of the Series A Stock.

Acquisition of Standard Tel Networks, LLC

On September 23, 2008, Brookside Technology Holdings Corp. (the “Company), through its wholly owned subsidiary, Standard Tel Acquisitions, Inc. (“Acquisition Sub”), acquired Standard Tel Networks, LLC (“STN”), an independent distributor of high quality, turnkey converged voice and data business communications products and services with California offices in the San Francisco Bay Area, Sacramento, San Diego and headquartered in Huntington Beach. The acquisition was conducted pursuant to a previously-disclosed Stock and Membership Interest Purchase Agreement dated July 17, 2008, and was structured as the acquisition of (a) all of the stock of Trans-West Network Solutions, Inc. (“Trans-West”) from the shareholders of Trans-West (the “Trans-West Shareholders”) and (b) all of the membership interest of STN owned by ProLogic Communication, Inc. (“ProLogic” and collectively with the Trans-West Shareholders, the “Seller Parties”). As previously reported, Trans-West, a holding company with no operations, owns eighty percent (80%) of the membership interest of STN and ProLogic owned the other twenty percent (20%), and, accordingly, the Company now owns (directly, in part, and indirectly through Trans West, in other part) one hundred percent (100%) of STN.

Restatement of Prior Periods

On November 16, 2009, the Company concluded that it should have been accounting for certain warrants as a liability under EITF 00-19, due to the cash redemption rights included in the warrant agreements. The treatment and effect to the financial statements is further discussed in Note 2. In prior 10-K filings for years ended 2007 and 2008 and related quarterly filings, and quarterly information filed for three months ended March 31, June 30, and September 30, 2009, the Company had incorrectly accounted for these warrants resulting in not recording the quarterly change in estimated fair value of the warrants as derivative financial instruments. Please refer Note 2 of these financial statements for a detailed discussion of the impact on the Company’s quarterly financial information.

Industry Overview

The Company, through its subsidiaries, operates in a highly specialized market of providing turnkey converged voice and data solutions for companies of all sizes and types. We believe this market is currently evolving. This coupled with the de-franchising and customer abandonment in the small to medium size market place as a result of numerous mergers by traditional operating companies such as Southwestern Bell, AT&T, Verizon and Bellsouth has created a significant opportunity for expert convergence companies. We believe Voice over IP (“VoIP”) is one of the most promising advancements in the telecommunications industry in the past 10 years. This technology uses Internet Protocol or IP to support two-way transmission of voice traffic over IT networks rather than traditional separate phone networks. Setting voice on an IP network allows service providers and businesses to combine both voice and data services over a single network. Key benefits to Voice over IP are:

	•		Network cost reduction

	•		Cost-effective remote user applications

	•		New, simplified features and functionality for users

	•		Shared infrastructure resources

	•		Improved inter-company WAN communications

Products and Services

The Company, through its wholly owned subsidiary companies, is a provider of converged business communications products and services from Mitel, Inter-tel (owned by Mitel), Nortel and NEC. The Company, as the 2nd largest MITEL dealer and as a Platinum ELITE Partner, combines technical expertise in a range of communications products, including IP-enabled platforms, wired and wireless IP and digital endpoints and leading edge communications applications to create converged voice, video and data networks that help businesses increase efficiency and optimize revenue opportunities, critical for success in today’s competitive business environment. Specializing in selling, designing, analyzing and implementing converged Voice over IP (VoIP), data and wireless business communications systems and solutions for commercial and state/government organizations of all types and sizes in the United States, the Company has offices that provide a national footprint. Headquartered in Huntington Beach, California, STN has offices in the San Francisco Bay Area, Sacramento, and San Diego. Headquartered in Austin, Texas, Brookside Technology Partners serves the Texas market. Headquartered in Louisville, Kentucky, USVD serves the Kentucky and Southern Indiana markets, operating out of offices in Louisville, Lexington and Indianapolis. Combined new implementations represent approximately 70% of the

Company’s revenues with the remaining 30% generated by Service, Support, Maintenance and other recurring revenues from our existing customer base.

Through our growth strategy, which is discussed below, we hope to offer a complete line of emerging communications technology and service support coverage to the national marketplace.

Growth Strategy

We believe there is a growing customer demand for a nationally authorized and certified distributor specializing in converged VoIP technologies. We hope to acquire synergistic small to medium size VoIP convergence distributors in an effort to develop a national telecommunications company focused on VoIP. Potential acquisition candidates would include wholesalers and re-marketers of business telephones systems and telecommunications equipment components and other companies that would complement the various technologies that are part of a converged voice, data, and wireless network. Such companies would include those that provide point of sale, wireless ISP, data networking professional services, web development and hosting technologies and services. Management believes there will be a number of significant advantages derived from combining and merging such small and medium sized companies, including:

	•		Expanded product offering

	•		Increased product volume discounts

	•		Centralized accounting and administration

	•		National market presence

	•		Accreditations and Certifications for complete product offering(s)

	•		Network Operations Center (NOC)

	•		National professional services capabilities

	•		Improved management focus and direction

	•		Institutional training and skill development

There can be no assurance that we will be able to successfully acquire and integrate such companies into its business. See “Risk Factors.”

See “Management’s Discussion and Analysis of Financial Condition and Plan of Operation.”

Marketing and Distribution

Through our 8 district offices, we employ advanced technical experts and provide unparalleled service in converged voice, data and video markets. We have also established a standard sales process amount all of our district offices as well as company wide tracking of the sales process by specific sales person in order to properly manage and track sales activity. We have technology demonstration facilities in all offices and on large multi-location sales opportunities leverage our manufacturing partners.

We target businesses with 25-500 employees as well as certain vertical markets that have embraced our value proposition. These targeted efforts have been accelerated though the use of certain lead-generating databases we have developed and have purchased. Our prospecting approach and sales process revolves around our proprietary promise of value through our Telefficiency™ program. This process includes telemarketing, email, and face-to-face activities to identify prospective customers. We practice a 5 STEP Sales/Assessment process to identify where and how our products and services align with our prospects goals and objectives. The effects of Telefficiency™ for our customers include increased top and bottom line and improvements in employees’ productivity and efficiency. Our proprietary Telefficiency™ Program bundles into one payment the technology, warranty, care/support, as well as protection against obsolescence.

Competition

The converged voice and data solutions market is highly competitive. As we continue to grow, we will have greater market presence and resources to compete with any national providers of like products and services. Management believes that its three primary competitors are equipment manufacturers, professional service firms and hosted-solution providers within the premise based and hosted solution environments.

Equipment Manufacturers. Some traditional phone manufacturers and VoIP equipment manufacturers (Cisco, Mitel, Siemens, Avaya, etc.) possess professional service organizations that sell and deploy VoIP solutions. The companies have vast resources and large sales forces and represent the primary competitive threat to us.

Professional Service Firms. The professional service category is one of the fastest growing IT service market segments due to the rapid pace of VoIP deployments. The firms in this category range from individual contractors that service local communities to large IT organizations wanting to enter the VoIP market.

Hosted Solutions Firms. A hosted VoIP system is a phone system that is available over the Internet or a secure network through which the supplier houses telecom equipment and features are delivered remotely. Hosted telecom services are gaining in popularity because they require less capital and expense commitment, can be implemented quickly, require less in-house technical expertise, and are also very scalable. A premise based solution refers to environments where equipment, which provides the functionality for the phone system, resides at the site/office building of the company. This equipment (typically systems called PBX’s) and related software systems are housed in a central location near the IT network equipment. These solutions allow companies’ greater control of the equipment, customization capability for their environments and the ability to develop back-up/redundant systems for critical path applications (e.g. call centers). Premise based solutions typically require higher-level IT staff or outside contractors to manage, large capital investments and long implementation/upgrade times. Companies such as Voxpath, PointOne and Vonage are competitors now, but the larger threats in this category come from the cable companies (Time Warner, AT&T, etc.) and the traditional phone companies (SBC, Verizon). Both entities have marketing muscle and sophisticated networks but, we believe, currently lack specific VoIP knowledge. This is rapidly changing as companies are making large investments on equipment, personnel and service organizations in order to ride the VoIP wave.

Government Regulation

Various aspects of our business are subject to regulation and ongoing review by a variety of federal, state, and local agencies, including the Federal Trade Commission, the United States Post Office, the Consumer Product Safety Commission, the Federal Communications Commission, Food and Drug Administration, various States’ Attorneys General and other state and local consumer protection and health agencies. The statutes, rules and regulations applicable to our operations, and to various products marketed by it, are numerous, complex and subject to change.

Employees

We have 144 employees as of March 31, 2009, consisting of six executive officers, 50 salespeople, two engineers, 69 technicians and 17 administrative staff.

Our principal corporate office is located at 15500 Roosevelt Blvd, Suite 101, Clearwater, FL 33760, and our telephone number is (727) 535-2151. We are a Florida corporation.

ITEM 2. DESCRIPTION OF PROPERTY

We lease approximately 2,047 square feet of office space located at 15500 Roosevelt Blvd, Suite 101, Clearwater, Florida, 33760. We are leasing this space for five years until November 30, 2012. We are also leasing approximately 5,000 square feet of office space located at 7703 North Lamar Boulevard, Suite 500, Austin, Texas, 78734. We are leasing this space for a 30-month term ending March 31, 2010. We also lease approximately 5060 square feet of office space located at 11500 Blankenbaker Access Dr., Suite 101, Louisville, KY 40299. We lease approximately 5,998 square feet of office space located at 8345 Clearvista Place, Indianapolis, Indiana 46256. We lease approximately 2,400 square feet of office space located at 2301 Maggard Court, Lexington, Kentucky. We believe these premises are currently sufficient to meet our needs. However, as we expand into other markets, we intend to lease out the appropriate space to keep pace with our expansion. Additionally, we lease approximately 5,110 square feet of office space located at 15153-61 Springdale Street, Huntington Beach, CA 92649. We lease approximately 1,510 square feet of office space located 11875 Dublin Boulevard, Dublin, CA 94568. We lease approximately 1,807 square feet of office space located 6133 Freeport Boulevard, Sacramento, CA 95822. We also lease approximately 4033 square feet of office space located 7098 Miratech Drive, Suites 140 and 150, San Diego, CA 92121.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Shares of the Company’s common stock are quoted on the Over the Counter Bulletin Board (“OTCBB”) under the symbol BKSD. Our shares began being quoted in July, 2006. The following table sets forth, since July, 2006, the range of high and low intraday closing bid information per share of our common stock as quoted on the OTCBB.


Quarter Ended	High ($)		Low ($)

December 31, 2008		0.04		0.02
September 30, 2008		0.06		0.02
June 30, 2008		0.07		0.03
March 31, 2008		0.14		0.05
December 31, 2007		0.35		0.05
September 30, 2007		0.74		0.21
June 30, 2007		0.27		0.18
March 31, 2007		0.24		0.15

Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The Company has approximately 33 common shareholders of record.

Dividend Policy

The Company has not paid or declared any dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. The Company intends to keep future earnings, if any, to finance the expansion of the Company’s business, and the Company does not anticipate that any cash dividends will be paid in the near future. The Company’s financing facility prohibits the payment of any dividends on its common stock. The Company’s future payment of dividends will depend on the Company’s earnings, capital requirements, expansion plans, financial condition and other relevant factors.

The Series A Stock pays an annual dividend of 8%, which is payable quarterly, at the option of the Company, either in cash or in shares of registered common stock at a 10% discount to the Company’s stock price. Effective July 3, 2008, all of the Series B Stock previously owned by Vicis was converted into Series A Stock. Accordingly the Company no longer has any outstanding shares of Series B Stock. The Series B Stock paid an annual dividend of 16%, payable quarterly, classified as interest expense. The accrued interest of $371,945 was also converted to Series A Stock on July 3, 2008.

SELECTED FINANCIAL DATA

The selected financial information below has been derived from Brookside’s financial statements. You should read this information in conjunction with Brookside’s financial statements and related notes included elsewhere in this Form 10-K.


	For the Years Ended December 31,
	2008			2007
REVENUES
Installation and other services	$	5,327,723		$	1,369,097
Equipment sales		16,381,884			4,182,486

Total revenues		21,709,607			5,551,583
Cost of sales		11,160,248			3,174,127

GROSS PROFIT		10,549,359			2,377,456
OPERATING EXPENSES
General and administrative		8,851,632			4,305,139
Depreciation expense		132,294			69,921

Total operating expenses		8,983,926			4,375,060

OTHER INCOME (EXPENSE)
Interest expense		(2,041,393	)		(621,633	)
Amortization expense of loan and intangibles		(5,602,861	)		(5,414,703	)
Finance expense on derivatives		(4,156,069	)		(12,348,466	)
Gain on change in fair value of derivative
Financial instruments		5,245,207			10,402,865
Gain on extinguishment of debt		151,619			—
Other income (expenses), net		15,582			14,493

Total other income (expense)		(6,387,915	)		(7,967,444	)

Loss before income taxes		(4,822,482	)		(9,965,048	)
Provision for income taxes		(164,000	)		—

Net loss	$	(4,986,482	)	$	(9,965,048	)
Preferred stock dividends		(476,023	)		(139,856	)

Net loss attributable to common shareholders	$	(5,462,505	)	$	(10,104,904	)
Earnings per share: Basic and diluted	$	(0.052	)	$	(0.126	)

Weighted average shares outstanding		104,802,022			80,264,658

BALANCE SHEET AND OTHER DATA


	As of December 31,
	2008		2007
Total current assets	$	9,171,809	$	3,526,728

Total assets		27,294,139		17,589,342

Total current liabilities		8,745,868		12,175,996

Long term debt, less current portion		17,069,598		8,210,954

Total liabilities		25,815,466		20,386,950

Total stockholders’ equity (deficit)	$	1,478,673	$	(2,797,608	)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Forward Looking Statements

Some of the statements contained in this Form 10-K contain forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. You should read statements that contain these words carefully because they:

	•		discuss our future expectations;

	•		contain projections of our future results of operations or of our financial condition; and

	•		state other “forward-looking” information.

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in this prospectus.

Plan of Operation

Introduction

Our company, Brookside Technology Holdings Corp. (formerly “Cruisestock, Inc.”), was incorporated in September, 2005 under the laws of the State of Texas. On February 21, 2007, through a series of transactions (the “Share Exchange”), we acquired Brookside Technology Partners, Inc. (“Brookside Technology Partners”), which was incorporated in December 2001 under the laws of the State of Texas. Prior to the Share Exchange, we were a development stage company and had not realized any revenues from our operations. As a result of the Share Exchange, (i) Brookside Technology Partners became our wholly-owned subsidiary, (ii) the former stockholders of Brookside Technology Partners obtained, collectively, the majority ownership of the outstanding common stock of our company and (iii) we succeeded to the business of Brookside Technology Partners as our sole business. From an accounting perspective, Brookside Technology Partners was the acquirer in the Share Exchange. Because of the forgoing, management does not believe that it is informative or useful to compare Cruisestock’s results of operations with those of Brookside Technology Partners. Instead, below we discuss Brookside Technology Partners’ results of operations and financial performance. See Note 1 to our Financial Statement contained herein.

Headquartered in Austin, Texas, Brookside is a provider and global managed service company specializing in selling, designing, analyzing and implementing converged Voice over IP (VoIP), data and wireless business communications systems and solutions for commercial and state/government organizations of all types and sizes in the United States. Brookside is recognized a leading VoIP resellers and professional services vendors with over 300 BCM installations that have various forms of networked or VoIP functionality.

Additionally, on September 14, 2007, we acquired all of the membership interest of USVD from The Michael P. Fischer Irrevocable Delaware Trust under Agreement dated April 5, 2007, and The M. Scott Diamond Irrevocable Delaware Trust under Agreement dated April 23, 2007 (the “Sellers”), pursuant to a Membership Interest Purchase Agreement closed on such date (the “Purchase Agreement”).

Headquartered in Louisville, Kentucky, USVD is a leading regional provider of telecommunication services including planning, design, installation and maintenance for the converged voice and data systems. USVD serves the Kentucky and Southern Indiana markets, operating out of offices in Louisville, Lexington and Indianapolis. USVD combines technical expertise in a range of communications products, including IP-enabled platforms, wired and wireless IP and digital endpoints and leading edge communications applications to create converged voice, video and data networks that help

businesses increase efficiency and optimize revenue opportunities, critical for success in today’s competitive business environment. The sale of new systems, built on either Inter-Tel or NEC platforms, is the backbone of USVD’s business, typically accounting for approximately 65% of USVD’s revenue. The purchase price of approximately $15,400,000 was paid through a combination of common stock, cash at closing and a seller note. Additionally, the Purchase Agreement provides the Sellers with the opportunity to earn additional stock or cash consideration in the form of a three-year performance based earnout.

Additionally, the Company caused USVD, its new subsidiary, to enter into employment agreements with Michael P. Fischer and M. Scott Diamond, with initial terms of three years, pursuant to which they will serve as USVD’s CEO and COO, respectively. The employment agreements contain standard terms and provisions, including non competition and confidentiality provisions and provisions relating to early termination and constructive termination, and provide for an annual base salary and certain standard benefits. These employee agreements are attached as an exhibit to this prospectus.

Additionally, on September 23, 2008, the Company, through its wholly owned subsidiary, Standard Tel Acquisitions, Inc. (“Acquisition Sub”), acquired Standard Tel Networks, LLC (“STN”), an independent distributor of high quality, turnkey converged voice and data business communications products and services with California offices in the San Francisco Bay area, Sacramento, San Diego and headquartered in Huntington Beach. The Company caused STN, its new subsidiary, to enter into an employment agreement with Michael Promotico, with an initial term of three years, pursuant to which he will serve as STN’s Chief Executive Officer. The employment agreement contain standard terms and provisions, including non competition and confidentiality provisions and provisions relating to early termination and constructive termination, and provide for an annual base salary and certain standard benefits. This employee agreement is attached as an exhibit to this prospectus.

From February 21, 2007 to April 30, 2007, we sold shares of Series A Stock and warrants in a private placement (the “Private Placement”) to a group of accredited investors for an aggregate price of $2,141,990. A portion of this aggregate purchase price came in the form of the conversion of notes payable in the aggregate amount of $235,000. The net cash proceeds to us from the Private Placement, not including the conversion of the forgoing notes payable and after deducting all related expenses, was $969,943. Through the date hereof, we have expended most of the net proceeds from the Private Placement in connection with the acquisition of USVD and for working capital purposes.

The Company, through Midtown Partners & Co., LLC and LCG Capital, raised approximately $11,000,000 less fees and expenses of $1,192,000 for net cash proceeds of $9,808,000 to finance the acquisition of USVD. The financing consisted of approximately $7.0 million of senior and $1.0 million subordinated debt and $3.0 million of Series B Stock (classified as debt). In connection therewith, the Company and its two subsidiaries, USVD and Brookside Technology Partners, entered into a Credit Agreement with Hilco Financial LLC, pursuant to which Hilco agreed to provide a $7,000,000 revolving line of credit, bearing interest at 15% and maturing on September 26, 2008 (the “Senior Loan”). Additionally, the Company also entered into a Subordinated Note and a related Subordinated Note Purchase Agreement with DD Growth Premium Fund, pursuant to which DD Growth Premium Fund loaned the Company $1 million, bearing interest at 10% per annum and maturing on December 30, 2008 (the “Subordinated Loan”). Additionally, the Company entered into a Securities Purchase Agreement with Vicis Capital Master Fund, a sub-trust of Vicis Capital Series Master Trust, pursuant to which Vicis acquired 3,000,000 shares of Series B Stock of the Company for $3,000,000, which shares are convertible into 24,000,000 shares of common stock of the Company at an exercise price of $0.125 per share (subject to certain adjustments).

In connection with the forgoing, the Company granted (a) Vicis a warrant to purchase 24,000,000 shares of common stock of the Company at an exercise price of $0.125 per share; (b) Hilco Financial LLC a warrant to purchase 61,273,835 shares of common stock of the Company at an exercise price of $0.137 per share; (c) DD Growth Premium Fund a warrant to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.114 per share; and (d) Midtown Partners & Co. a warrant to purchase 5,800,000 shares of common stock of the Company at an exercise price of $0.114 per share.

The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Act”) for (a) the issuance of the shares to the Sellers in connection with the acquisition of USVD, (b) the private placement of the Series B Stock to Vicis and (c) the issuance of the warrants listed above pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about the company and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities. Pursuant to various registration rights agreements entered into with the

various parties receiving securities as set forth above, the Company has agreed to register the resale of the shares of common stock issued or issuable upon conversion and/or exercise of the forgoing securities.

On July 3, 2008, the Company entered into a Securities Purchase Agreement (the “Vicis Agreement”) with Vicis Capital Master Fund, a sub-trust of Vicis Capital Series Master Trust (“Vicis”), pursuant to which Vicis acquired (a) 2,500,000 shares of Series A Stock; and (b) a warrant to purchase 250,000,000 shares of common stock of the Company at $0.03 per share (the “Exercise Price”), for an aggregate purchase price of $2,500,000 (“Vicis Equity Infusion”). Furthermore, pursuant to the Vicis Agreement, all of the 3,000,000 shares outstanding of the Company’s Series B Stock previously owned by Vicis were converted into 3,000,000 shares of Series A Stock. Accordingly, the Company no longer has any outstanding shares of Series B Stock. The Exercise Price is subject to a price adjustment from time to time upon the occurrence of certain events set forth in the Warrant.

Vicis also purchased and assumed from Hilco Financial, LLC (“Hilco”), and Hilco assigned to Vicis, all credit agreements, loans and promissory notes under which Hilco had loaned money to the Company. The Company consented to such assignments. In connection with such assignments, Hilco transferred to Vicis their warrants to purchase 61,273,835 shares of common stock of the Company. In addition, Vicis purchased and assumed from Dynamic Decisions (“DD”), and DD assigned to Vicis, all credit agreements, loans and promissory notes under which DD had loaned money to the Company. The Company consented to such assignments.

In connection with the closing of the STN Acquisition and the Chatham Financing, Vicis and the Company entered into, and closed upon, a Securities Purchase and Loan Conversion Agreement, dated September 23, 2008, pursuant to which the Company, in full satisfaction of the Vicis Debt: (i) paid $2,250,000 in cash to Vicis; (ii) delivered to Vicis a subordinated note in the principal amount of $1,500,000, bearing interest at 10% and maturing on April 15, 2010; and (iii) converted the balance of the Vicis Debt (assumed from Hilco and DD), including all accrued interest of $676,384, in the combined aggregate amount of $5,026,384, into 5,026,384 shares of the Company’s Series A Stock. Vicis entered into a subordination agreement with Chatham, wherein Vicis agreed to subordinate the Vicis Subordinated Note to the Loans. As a result, all Prior Credit Documents have been terminated effective September 23, 2008.

Results of Operations

The following discussion of the financial condition and results of operations of Brookside should be read in conjunction with the financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

HISTORICAL RESULTS — YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007.

Revenues, Cost of Sales and Gross Margins

Total revenues from operations for the year ended December 31, 2008 were $21,709,607 compared to $5,551,583 reported for the same period in 2007, an increase of $16,158,024 or 291.1%. This increase is primarily due to the full year of USVD revenues recognized in 2008 of $16,488,899 versus only $3,945,785 recognized in 2007 since the acquisition of USVD occurred on September 14, 2007. Additionally, $2,897,489 of the increase was due to the revenues of STN which we acquired on September 23, 2008. The remaining increase of $714,421 was due to an increase in revenues at Brookside Technology Partners, Inc for the year ended December 31, 2008 versus the comparable period in 2007.

Cost of sales was $11,160,248 for the year ended December 31, 2008 compared to $3,174,127 reported for the same period in 2007, an increase of $7,986,121 or 251.6%. Total cost of sales increased due to increased revenues discussed above while cost of sales decreased as a percentage of total sales. As a percentage of sales, cost of sales was 51.4% and 57.2% for the year ended December 31, 2008 and 2007, respectively. This improvement in cost of sales as a percentage of sales is primarily attributable to the initiatives we implemented in our sales process to focus on higher margin business in 2008 versus 2007. Additionally, STN cost of sales was 40.1% as a percentage of sales from acquisition date of September 23, 2008 through December 31, 2008.

Gross margin was 48.6% for the year ended December 31, 2008 compared to 42.8% reported for the same period in 2007. The increase in the gross margin percentage is due primarily to the initiatives we implemented in our sales process to focus on higher margin business in 2008 versus 2007. Additionally, STN gross margin was 59.9% from acquisition date of September 23, 2008 through December 31, 2008.

General and Administrative Expenses

General and administrative expenses were $8,851,632 and $4,305,139 for the year ended December 31, 2008 and 2007, respectively, representing an increase of $4,546,493. The increase in 2008 was due primarily to the full year of operations for USVD in 2008 versus only a partial year in 2007. This accounted for $4,134,655 of the increase. STN incurred general and administrative expenses of $1,204,028 for the period beginning September 23, 2008 (acquisition date) through December 31, 2008. The remaining increase is due primarily to the full year expense associated with being a public company, such as executive compensation, legal, accounting, public relations and investor relations, and additional administrative headcount. The increase was partially offset by a decrease in stock compensation expense of $749,763 for the year ended December 31, 2007 versus the comparable period in 2007.

Rental expense for operating leases for the year ended December 31, 2008 and 2007 was $504,693 and $141,004 respectively, representing an increase of $363,689. The increase is primarily due to the full year of operations of USVD which accounted for $228,225 of the increase. $72,476 of the increase is due to the full year expense of new office leases entered into at our corporate headquarters in Clearwater, FL and Brookside Technology Partners, Inc. in Austin, TX. The remaining increase of $62,988 was due to the acquisition of STN.

On July 26, 2007, the Company entered into a 31 month lease for its Austin operations under a lease classified as an operating lease. Effective September 26, 2007, the Company assumed current operating leases for the three offices leased by USVD. On October 15, 2007 the Company entered into a 60 month lease for its headquarters in Clearwater, Florida effective December 1, 2007. Effective September 23, 2008, the Company assumed current operating leases for the four offices leased by STN. Minimum lease obligations are as follows:


2009	$	557,543
2010		353,510
2011		169,138
2012		158,176
2013		—

Stock Based Compensation

Stock based compensation for the year ended December 31, 2008 was $165,237 compared to $915,000 reported for the same period in 2007. The 2007 expense relates to the stock option agreements entered into with George Pacinelli, our

President, and Bryan McGuire, our Chief Financial Officer. Pursuant to Mr. Pacinelli’s stock option agreement, we granted to Mr. Pacinelli an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.185714 per share (the “Pacinelli Options”). Pursuant to Mr. McGuire’s stock option agreement, we granted to Mr. McGuire an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.185714 per share (the “McGuire Options”) (the Pacinelli Options and the McGuire Options collectively hereinafter referred to as the “Options”).

The 2008 expense relates to the stock option agreements entered into with Dan Parker, Bonnie Parker, Michael Promotico, and the cancellation and re-issuance in 2008 of the stock options originally issued to Bryan McGuire and George Pacinelli in 2007. Pursuant to Mr. Parker’s stock option agreement, we granted to Mr. Parker an option to purchase up to 1,000,000 shares of our common stock at an exercise price of $0.05 per share (the “Dan Parker Options”). Pursuant to Ms. Parker’s stock option agreement, we granted to Ms. Parker an option to purchase up to 200,000 shares of our common stock at an exercise price of $0.05 per share (the “Bonnie Parker Options”). Pursuant to Mr. Promotico’s stock option agreement, we granted to Mr. Promotico an option to purchase up to 4,000,000 shares of our common stock at an exercise price of $0.04 per share (the “Promotico Options”). Additionally, we cancelled the options originally issued to Bryan McGuire and George Pacinelli in 2007 (discussed in the previous paragraph) and re-issued to Mr. Pacinelli an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.025 per share (the “Pacinelli Options”) and re-issued to Mr. McGuire’s an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.025 per share (the “McGuire Options”) (the Dan Parker Options, the Bonnie Parker Options, the Promotico Options, the Pacinelli Options and the McGuire Options collectively hereinafter referred to as the “Options”). The Options are intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and were granted pursuant to our 2007 Stock Option Plan, pursuant to which we have reserved 35,000,000 shares of common stock for issuance to employees, directors and consultants. The Options vest as follows:


Number of Shares	Year Vested
1,633,333		2008
15,333,333		2009
1,633,333		2010
300,000		2011

The Company recognizes employee stock based compensation in accordance with the adoption of SFAS 123R. The Company utilizes the Black-Scholes valuation model to value all stock options. Compensation for restricted stock awards is measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. Compensation cost for all awards will be recognized in earnings, net of estimated forfeitures, on a straight-line basis over the requisite service period. For the years ended December 31, 2008 and 2007, the Company recognized $165,237 and $915,000 in Employee Stock Compensation Expense, respectively. The Company has unrecognized stock compensation expense of $503,878 which will be recognized to expense over the remaining vesting period.

Amortization Expense

The Company recognized $5,602,861 and $5,414,703 of amortization expense for the years ending December 31, 2008 and 2007, respectively. This represented an increase of $188,158. The amortization expense was related to the accounting treatment of the warrants issued and allocation of beneficial conversion in connection with the debt financing for the acquisition of USVD and the acquisition of STN. The amortization expense also includes amortization related to deferred financing costs and intangible assets. The decrease is due primarily to less amortization incurred with the new Chatham debt due to the three year amortization of the warrants versus the 12 month amortization of the USVD acquisition debt.

Interest Expense

Interest expense was $2,041,393 and $621,633 for the year ended December 31, 2008 and 2007, respectively. This increase of $1,419,760 is due primarily to the additional debt incurred with the acquisition of USVD in 2007, as well as the debt incurred with the acquisition of STN. Since the USVD acquisition occurred on September 14, 2007, we experienced only a partial years interest related to that acquisition in 2007, versus a full year in 2008. Additionally, $686,189 of non-cash amortization of deferred finance charges associated with the acquisition debt was charged to interest expense in 2008. This is partially offset by $154,400 related to liquidated damages related to various registration rights agreements charged in 2007, versus $0 in 2008.

Finance Expense on Derivatives

Finance expense on derivatives was $4,156,069 and $12,348,466 for the years ended December 31, 2008 and 2007, respectively. The $12,348,466 in 2007 was due to the valuation of the Hilco warrants issued in connection with the USVD acquisition financing. The $4,156,069 in 2008 was due to the valuation of the Vicis warrants issued in connection with the STN acquisition financing. This expense is the amount by which the fair value of the derivative liability exceeds the proceeds received. These valuations were based on the Black-Scholes model for valuation and are further discussed in Note 2 to the financial statements.

Gain (loss) on Change in Fair Value of Derivative Financial Instruments

Gain on change in fair market value of derivative financial instruments was $5,245,207 and $10,402,865 for the years ended December 31, 2008 and 2007, respectively. This is a decrease in gain of $5,157,658. This is due to the decrease in fair market value of the warrants pursuant to valuation using the Black-Scholes Model. The fair value of the derivative liability decreased as a result of a decline in the market price of the Company’s common stock.

Income Taxes

Provision for income taxes was $164,000 and $0 for the years ended December 31, 2008 and 2007, respectively. This expense relates to state income tax due for the year ended December 31, 2008.

Effective at the beginning of the first quarter of 2007, the Company adopted the provision of FIN 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. As a result of the implementation of FIN 48, the Company has not changed any of its tax accrual estimates. The Company files U.S. federal and U.S. state tax returns. For state tax returns the Company is generally no longer subject to tax examinations for years prior to 2005.

Net Loss

Net loss was $4,986,482 and $9,965,048 for the years ended December 31, 2008 and 2007, respectively. This represents a decrease in net loss of $4,978,566. This decrease is primarily due to the increased gross profit of $8,171,903. The net loss was primarily attributed to amortization expense of $5,602,861, interest expense of $2,041,393, provision for income taxes of $164,000 and stock compensation expense of $165,237 totaling $7,973,491. Additionally, the decrease in loss from operations is a result of the increase in gross margin of $8,171,903, the decrease in stock compensation expense of $749,763, the increase in amortization expense of $188,158 partially offset by the increase in general and administrative expenses of $4,546,493, the increase in interest expense of $1,419,760 and the increase in provision for income taxes of $164,000.

Liquidity and Capital Resources

Prior to the Share Exchange on February 21, 2007, Brookside Technology Partners was funded primarily through shareholder loans and from cash provided by its operations. In connection with the Share Exchange, as previously reported, the Company raised funds through a private placement of Series A Stock (the “Private Placement”). In the Private Placement, the Company received net cash proceeds of $1,280,337, after the deduction of all expenses and not including the conversion of certain notes payable.

Subsequent to the Private Placement, the Company acquired USVD. In order to fund the acquisition, the Company, through Midtown Partners & Co, LLC and LCG Capital, raised approximately $11,000,000 less fees and expenses of $1,192,000 for net cash proceeds of $9,808,000. The financing consisted of approximately $8,000,000 of senior and subordinated debt and $3.0 million of Series B Stock. In connection therewith, the Company and its two subsidiaries, USVD and Brookside Technology Partners, entered into a Credit Agreement with Hilco Financial LLC, pursuant to which Hilco agreed to provide a $7,000,000 revolving line of credit, bearing interest at 15% and maturing on September 26, 2008 (the “Senior Loan”). This note was assumed by Vicis and refinanced on June 18, 2008.

Additionally, the Company entered into a Securities Purchase Agreement with Vicis Capital Master Fund, a sub-trust of Vicis Capital Series Master Trust, pursuant to which Vicis acquired 3,000,000 shares of Series B Stock of the Company for $3,000,000, which shares are convertible into 24,000,000 shares of common stock of the Company (subject to certain adjustments). The Series B Stock was converted to Series A Stock on July 3, 2008. Accordingly, the Company no longer has any outstanding shares of Series B Stock.

Additionally, the Company also entered into a Subordinated Note and a related Subordinated Note Purchase Agreement with DD Growth Premium Fund, pursuant to which DD Growth Premium Fund loaned the Company $1 million, bearing interest at 10% per annum and maturing on December 30, 2008 (the “Subordinated Loan”). Hilco Financial, LLC, Vicis Capital and DD Growth Premium Fund are together hereinafter referred to as “Lenders”. The DD debt was assumed by Vicis and refinanced on June 18, 2008.

The Company completed the STN acquisition on September 23, 2008. As part of the acquisition, the Company was able to rearrange its debt and equity and obtain more favorable terms with a $7,000,000 term loan with Chatham Credit Management III, LLC (“Chatham Term Loan”), the refinance of the Series B Stock, Hilco and DD debt owned by Vicis, as well as the additional $2,500,000 cash received by Vicis for issuance of Series A Stock, and the $1,500,000 subordinated loan issued to us by Vicis. The Chatham Term Loan is for a term of 36 months. The interest rate is LIBOR plus nine percent (9%). The Company is required to pay interest only for the first six months, then interest plus principal in the amount of $83,333 per month for the remaining 30 months, with the remaining principal due on full on September 26, 2011. The Company also has a $2,000,000 line of credit with Chatham Credit Management III, LLC (this in connection with the Chatham Term Loan hereinafter referred to as the “Chatham Senior Debt”) with no outstanding balance and cash and cash equivalents of approximately $1.2 million at December 31, 2008. The Chatham line of credit has calculates monthly interest at LIBOR plus four percent (4%). The Chatham Credit Agreement contains standard representations, warranties and covenants that require the Company, on a consolidated basis, to maintain at the end of each month: (1) a fixed charge coverage ratio for the 12 months then ended of at least 1.75:1; and (2) a leverage ratio as of the last day of such fiscal month and for the 12 months then ended of not more than 3:1, in each case calculated as set forth in the Credit Agreement. Although the Company was in compliance with all of its covenants at December 31, 2008, the Company is currently not in compliance with the leverage ratio. The leverage ratio for the 12 months ended January 31, 2009 was 3.20:1.In accordance with terms of our Chatham Senior Loan credit facility, we can only borrow up to three times our trailing twelve months EBITDA, calculated monthly. So long as the Company remains in non-compliance with the leverage ratio, the Company’s ability to borrow under its line of credit with Chatham will be limited, unless such non-compliance is suspended or waived by Chatham.

There can be no assurances that we will generate sufficient availability under this arrangement to provide adequate financing to fund our business strategy. Failure to do so will have a severe adverse affect on the Company. The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to establish profitable operations, raise additional financing through public or private equity financings, or secure other sources of financing to fund operations. The Company has cash and cash equivalents of $835,525, restricted cash and cash collateral of $1,735,332 and working capital of $425,941 at December 31, 2008. The Company had net cash used in operating activities of $332,352 during the year ended December 31, 2008. The Company sustained a loss for the year ended December 31, 2008 of approximately $5.0 million, sustained losses in 2007 and 2006 and has a retained deficit of approximately $17 million. These losses were primarily due to the amortization expense related to the accounting treatment of warrants issued in connection with the debt raised to fund the USVD acquisition, and stock compensation expense related to the accounting treatment of employee stock options. Currently, the Company believes it has the ability to meet its short-term and long-term capital needs for operations and cash on hand, cash to be generated from operations and the borrowing availability on its credit lines. In reaching this conclusion, the Company has taken into account all future obligations, including the obligation to pay the sellers of USVD 50% of USVD’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) through September 2010 if its EBITDA exceeds certain targets. Additionally, in reaching such conclusion the Company has taken into consideration management’s strategy of managing costs in line with estimated total revenues for the balance of fiscal 2009 and beyond. As part of such strategy, the Company intends to

implement further cost reductions if projected revenues are not fully realized, which should reduce the Company’s cash requirements. However, there can be no assurance that anticipated revenues will be realized, which should reduce the Company’s cash requirements. However, there can be no assurance that anticipated revenues will be realized, that cost reductions can be implemented, or that the Company will successfully implement its plans. Various factors, including the recent economic downturn and the risks discussed under the heading “Risk Factors” could materially impact the Company’s business operations, including its capital needs, liquidity and capital resources. The Company may need to raise additional capital or seek additional financing to support its operations and to implement its business plan, and there can be no assurances that it will be able to do so. See Risk Factors.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. For a description of those estimates, see Note 3, Significant Accounting Policies, contained in the explanatory notes to our financial statements contained in this Report. On an ongoing basis, we evaluate our estimates, including those related to reserves, deferred tax assets and valuation allowance, and impairment of long-lived assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above described items, are reasonable.

Revenue Recognition

The Company derives its revenues primarily from sales of converged VOIP telecommunications equipment and professional services implementation/installation, data and wireless equipment and installation, recurring maintenance/managed service and network service agreements and other services. The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104. Under SAB 101 and SAB 104, revenue is recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectibility is reasonably assured. Sales are recorded net of discounts, rebates, and returns.

The Company primarily applies the percentage-of-completion method and generally recognizes revenue based on the relationship of total costs incurred to total projected costs. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Provision for anticipated losses on uncompleted contracts is made in the period in which such losses become evident.

The Company’s recognizes revenue from the equipment sales and installation services using the percentage of completion method. The services for maintaining the systems we install are sold as a stand-alone contract and treated according to the terms of the contractual arrangements then in effect. Revenue from this service is generally recognized over the term of the subscription period or the terms of the contractual arrangements then in effect.

A majority of equipment sales and installation services revenues are billed in advance on a monthly basis based upon the fixed price, and are included both accounts receivable and deferred income on the accompanying balance sheets. Direct costs incurred on such contracts are deferred until the related revenue is recognized and are included in deferred contract costs on the accompanying balance sheets.

The Company also provides professional services (maintenance/managed services) on a fixed price basis. These services are billed as bundles and or upon completion of the services.

RISK FACTORS

You should carefully consider the risks described below before deciding to invest in or maintain your investment in our Company. The risks described below are not intended to be an all-inclusive list of the potential risks relating to an investment in our securities. If any of the following or other risks actually occur, our business, financial condition or operating results and the trading price or value of our securities could be materially adversely affected.

RISKS RELATED TO OUR BUSINESS:

Our Chatham Senior Loan may not provide adequate cash flow to finance our operations.

The Chatham Credit Agreement contains standard representations, warranties and covenants that require the Company, on a consolidated basis, to maintain at the end of each month: (1) a fixed charge coverage ratio for the 12 months then ended of at least 1.75:1; and (2) a leverage ratio as of the last day of such fiscal month and for the 12 months then ended of not more than 3:1, in each case calculated as set forth in the Credit Agreement. Although the Company was in compliance with all of its covenants at December 31, 2008, the Company is currently not in compliance with the leverage ratio. The leverage ratio for the 12 months ended January 31, 2009 was 3.20:1. In accordance with terms of our Chatham Senior Loan credit facility, we can only borrow up to three times our trailing twelve months EBITDA, calculated monthly. There can be no assurances that we will generate sufficient availability under this arrangement to provide adequate financing to fund our business strategy. Failure to do so will have a severe adverse affect on the Company.

We have very limited liquidity from operations.

In addition to the financing and operational concerns discussed in this filing, we incurred net losses of $4,986,482 and $9,965,048 during the years ended December 31, 2008 and 2007, respectively. Further, the Company had net cash used in operating activities of $332,352 and $1,048,494 during the years ended December 31, 2008 and 2007, respectively. Failure to improve the Company’s cash from operations could have a severe adverse affect on the Company.

We may not be able to undertake our growth strategy.

In addition to operating Brookside Technology Partner’s, USVD’s and STN’s historical businesses, our growth strategy calls for undertaking strategic acquisitions over the next 12 months. See “Description of Business — Growth Strategy.” If our liquidity issues cause us to enter into a default situation with Chatham, which will limit our access to capital, we will not be able to implement our acquisition strategy.

We may not be able to manage our anticipated growth.

Our growth plan calls for the acquisition of other businesses. As a result of the USVD and STN acquisitions, our management team has greater experience in negotiating, closing and integrating acquisitions into our core business. However, there can be no assurances that we will be able to successfully acquire or integrate other business. Additionally, our growth strategy is anticipated to place significant demands on our managerial and operational resources. Our failure to manage our growth efficiently may, among other things, divert management’s attention from the operation of our core business and negatively impact our business.

As a result of our being a reporting public company, our expenses increase proportionately.

Our ongoing expenses have increased significantly, including expenses in compensation to our officers, ongoing public company expenses, including increased legal and accounting expenses as a result of our status as a reporting company and the requirement that we register the shares underlying the preferred stock and warrants issued pursuant to the Purchase Agreement, expenses incurred in complying with the internal controls requirements of the Sarbanes Oxley Act, and obligations incurred in connection with the acquisition of USVD and STN. Our failure to generate sufficient revenue and gross profit could result in reduced profits or increased losses as a result of the additional expenses.

Fluctuations in our operating results and announcements and developments concerning our business affect our stock price.

Our quarterly operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting us, could cause the market price of our common stock to fluctuate substantially.

Our officers and directors are involved in other businesses which may cause them to devote less time to our business.

Our officers’ and directors’ involvement with other businesses may cause them to allocate their time and services between us and other entities. Consequently, they may give priority to other matters over our needs, which may materially cause us to lose their services temporarily, which could affect our operations and profitability. We also rely heavily on Mike Fischer and Scott Diamond, CEO and COO, respectively, of USVD, as well as Michael Promotico, CEO of STN. The loss of any of these individuals would adversely impact us. Per their employment agreements, if we fail to make any payments to Mike Fischer or Scott Diamond under any of their agreements, they can compete with us, and that would also materially adversely impact us.

We are dependent upon third party suppliers to provide our products, and the loss of these suppliers or a disruption or interruption in the supply chain may adversely affect our business.

We do not manufacture any of our products. We purchase our products from third parties. The loss of one or more of our suppliers could cause a significant disruption or interruption in the supply chain and could have a material adverse effect on our business. Nortel, one of our major third party suppliers, filed for bankruptcy protection on January 14, 2009. The Company does not believe that the Nortel bankruptcy will material impact its future revenues or results from operation. As a percentage of total sales, Nortel represents the least amount of products sold. Only Brookside Technology Partners, Inc., the Company’s subsidiary in Texas, sells Nortel. Further, Nortel products remain available to the Company notwithstanding the bankruptcy. Additionally, while Brookside Technology Partners, Inc. has and will continue to support Nortel customers with Nortel products, it can transition new and future customers to Mitel and NEC products.

Our success depends, in part, on the quality of our products.

Our success depends, in part, on the quality of our products. If our products are found to be defective or unsafe, or if they otherwise fail to meet our customers’ standards, our relationships with our customers could suffer, our brand appeal could be diminished, and we could lose market share and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition.

Our business is dependent on our relationship with certain strategic partners .

We are a Mitel Platinum Elite Partner, a Nortel Premium Advantage Partner and a NEC dealer. As such, we provide Mitel, Nortel and NEC certified System Design and Support professionals for pre-sales system design, implementation, and project management. We specialize in selling, designing, analyzing and implementing converged Voice over IP (VoIP), data and wireless business communications systems and solutions for commercial and state/government organizations of all types and sizes in the United States. These platforms are the backbone of our business, typically accounting for approximately 65% of the Company’s revenue. A loss of any of these relationships could have a material adverse effect on our business.

RISKS RELATING TO OUR CURRENT FINANCING ARRANGEMENT:

There are a large number of shares underlying our Series A Stock and various classes of warrants held by Chatham and Vicis that may be available for future sale and the sale of these shares may depress the market price of our common stock.

We have very light trading volume and a lot of shares available for sale. We have issued shares of Preferred Stock that initially are convertible into 407,223,867 shares of common stock, along with warrants that initially are convertible into a total of 504,440,793 shares of common stock. We also issued an additional warrant to purchase 250,000,000 shares of common stock to Vicis as well as a warrant to purchase 140,930,835 of our common stock to Chatham. We have agreed to register the resale of all the shares of common stock underlying the Preferred Stock and the warrants. The sale of any of the foregoing shares of common stock may adversely affect the market price of our common stock. We haven’t experienced a significant amount of trading volume. As a result, if you purchase any shares of common stock, such shares may be relatively illiquid and you may lose your entire investment. Further, if we fail to timely file or maintain the effectiveness of the registration statement in violation of our contractual obligations to register the shares, we may incur additional

liquidated damages. In December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration Payment Arrangements (“FSP EITF 00-19-2”). FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. The Company adopted FSP EITF 00-19-2 in the first quarter of 2007 as a result of its issuance of Series A Stock and warrants subject to a registration payment agreement in February 2007. FSP EITF 00-19-2 requires that the contingent obligation to pay liquidated damages under the securities purchase agreement should be separately recognized and measured in accordance with FASB Statement No. 5 (FASB No. 5), Accounting for Contingencies ”. The Company implemented FSP EITF 00-19-2, Accounting for Registration Payment Arrangements in the first quarter of 2008. Through December 31, 2008, the Company has incurred a liability totaling $154,400. 2,523,919 in penalty warrants were issued in connection with the late registration of the shares underlying the Series A Stock and warrants issued in the Private Placement. The liability incurred in connection with the Private Placement therefore totaled $25,693 and were included in additional paid-in capital as it was considered possible at the time the Series A Stock were issued. The liability incurred as a result of the late filing of the Series B Stock (classified as debt) and the USVD Sellers was 720,000 additional warrants issued and 105,000 common shares to be issued with a calculated liability of $154,400 at December 31, 2008. The Company utilizes the Black-Scholes model to determine the fair value of its warrants.

RISKS RELATING TO OUR COMMON STOCK:

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the rules and regulations of the OTCBB. The requirements of these rules and regulations will increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources.

The Sarbanes-Oxley Act will require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. This can be difficult to do. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. We have a substantial effort ahead of us as we implement the appropriate processes, document the system of internal control over relevant processes, assess their design, remediate any deficiencies identified, and test their operation. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition and results of operations. These efforts will also involve substantial accounting related costs.

We are not required to maintain a board of directors with a majority of independent directors. To the extent we become required to do so, we expect these rules and regulations may make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified directors, especially those directors who may be considered independent and officers will be significantly curtailed.

We are not required to meet or maintain any listing standards for our common stock to be quoted on the OTC Bulletin Board, which could affect our stockholders’ ability to access trading information about our stock.

OTCBB Market is separate and distinct from the NASDAQ Stock Market and any national stock exchange, such as the New York Stock Exchange or the American Stock Exchange. Although the OTC Bulletin Board is a regulated quotation service operated by the National Association of Securities Dealers (“NASD”) that displays real-time quotes, last sales prices, and volume information in over-the-counter (OTC) equity securities like our common stock, we are not required to meet or maintain any qualitative or quantitative standards for our common stock to be quoted on the OTCBB. Our common stock does not presently meet the minimum listing standards for listing on the NASDAQ Stock Market or any national securities exchange, which could affect our stockholders’ ability to access trading information about our common stock.

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Our directors and executive officers beneficially own approximately 24% of our common stock; their interests could conflict with yours; significant sales of stock held by them could have a negative effect on our stock price; stockholders may be unable to exercise control.

As of March 31, 2009, our executive officers, directors and affiliated persons beneficially owned approximately 65% of our common stock. As a result, our executive officers, directors and affiliated persons will have significant influence to:

	•		elect or defeat the election of our directors;

	•		amend or prevent amendment of our articles of incorporation or bylaws;

	•		effect or prevent a merger, sale of assets or other corporate transaction; and

	•		control the outcome of any other matter submitted to the stockholders for vote.

As a result of their ownership and positions, our directors and executive officers collectively are able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

Because we may be subject to the “penny stock” rules, you may have difficulty in selling our common stock.

If our stock price is less than $5.00 per share, our stock may be subject to the SEC’s penny stock rules, which impose additional sales practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional accredited investors. The application of these rules may affect the ability of broker-dealers to sell our common stock and may affect your ability to sell any common stock you may own. According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

	•		Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

	•		Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

	•		“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

	•		Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

	•		The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we

are a penny stock company, we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. We may be required in the future to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased control over financial reporting requirements, including annual management assessments of the effectiveness of such internal controls and a report by our independent certified public accounting firm addressing these assessments. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

ITEM 7. FINANCIAL STATEMENTS

The Financial Statements required by this item are included in Part III, Item 13 and are presented beginning on Page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

Item 8A(T). Controls and Procedures.

Disclosure Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, December 31, 2008. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, our disclosure controls and procedures were ineffective as of December 31, 2008 and 2007.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that occurred in the last fiscal quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE

Changes in Directors and Executive Officers

Executive Officers and Directors

On February 21, 2007, Ruth Shepley, our sole director, resigned as an officer of Cruisestock and appointed Michael Nole as Chief Executive Officer and Bryan McGuire as Chief Financial Officer of Brookside Technology Holdings Corp. Michael Dance was the President of Brookside Technology Partners, Inc prior to the Share Exchange and now serves as that subsidiary’s senior account executive. Further, on February 21, 2007, Ms. Shepley, acting in her capacity as the sole director on the board of directors, increased the size of Brookside Technology Holdings Corp’s board to two and appointed Michael Nole to fill the vacancy. Ms. Shepley has since resigned from the Board of Directors. Mr. McGuire has since been appointed to fill this vacancy on the board. Additionally, on October 22, 2008, Chris Phillips was appointed to the Company’s board of directors, increasing the size of the board of directors to three.


			Annual
Name	Age	Position	Compensation
Michael Nole	43	Chairman and Chief Executive Officer and Director	$	280,000	(1)
George Pacinelli	51	President of Brookside Technology Holdings Corp	$	192,000	(1)
Bryan McGuire	43	Chief Financial Officer and Director	$	180,000	(1)
Mike Fischer	58	Chief Executive Officer — US Voice & Data, LLC	$	105,000	(1)
Scott Diamond	40	Chief Operating Officer — US Voice & Data, LLC	$	145,000	(1)
Chris Phillips	37	Director	$	0
Michael Promotico	41	Chief Executive Officer — Standard Tel Networks, LLC	$	230,000	(1)


(1)		We currently do not have any employment agreements with any of our executive officers, other than with Mike Fischer, Scott Diamond and Michael Promotico. The Company entered into employment agreements with Mike Fischer, Scott Diamond and Michael Promotico. The effective date of the employment agreements for Mike Fischer and Scott Diamond was September 14, 2007, and has a three year term. Per their employment agreements, Mr. Fischer receives a base salary of $105,000 and Mr. Diamond receives a base salary of $145,000. For termination without cause, or constructive termination, the Company may be obligated to pay up to $750,000 each. The effective date of the employment agreement for Michael Promotico was September 23, 2008, and has a three year term. Per the employment agreement, Mr. Promotico receives a base salary of $230,000.

Background of Executive Officers and Directors

Michael Nole. Mr. Nole serves as Chairman of the Board and Chief Executive Officer of Brookside Technology Holdings Corp. He has over 20 years experience within the communications industry. Since 2002, he had been a private consultant to the VoIP and telecom industry and since 2005 worked as a private consultant with Brookside. During this time and since 1998, he co-founded Experience Total Communications, Inc. (ETC), a communications-consulting firm specializing and consulting directly with clients in all areas of communications including Voice, Data, and Wireless communications products and services and formed a subsidiary company, Enterprise Consulting Group, Inc., expanding the consulting services to include management consulting and business development. Prior to that, over a 12 year period, he held various executive management positions with Executone Information Systems, Inc., which later became Executone Business Solutions, Claricom, and Staples Communications, which was, in turn, acquired by NextiraOne, LLC. His responsibilities included the management of sales/marketing, installation and service, and inventory of multiple districts and regions throughout the United States.

Chris Phillips . On October 22, 2008, Chris Phillips was appointed to the Company’s board of directors, increasing the size of the board of directors to three. Mr. Phillips has been a managing director for Vicis Capital, LLC since February 2008. From 2004 through January 2008, Mr. Phillips served as President and CEO of Apogee Financial Investments, Inc., a merchant bank that owns 100% of Midtown Partners & Co., LLC, a FINRA licensed broker-dealer. From 2000 through January 2008, he also served as managing member of TotalCFO, LLC, which provides consulting and CFO services to a number of public and private companies and high net worth individuals. From November 2007 through January 2008 Mr. Phillips served as the CEO and Chief Accounting Officer of OmniReliant Holdings, Inc. (OTCBB: ORHI). Presently, he is

a member of the Board of Directors OmniReliant Holdings, Inc., Precision Aerospace Components, Inc. (OTCBB: PAOS), The Amacore Group, Inc. (OTCBB: ACGI), MDwerks, Inc. (OTCBB: MDWK), and a few private companies. Mr. Phillips received a B.S. in Accounting and Finance and a Masters of Accountancy, with a concentration in tax, both from the University of Florida. Mr. Phillips is a Florida CPA.

As previously reported, Vicis Capital Master Fund (“Vicis”), an affiliate of Vicis Capital, LLC, is the Company’s largest preferred stockholder and one of the Company’s creditors. As recently reported in the Company’s Form 8-K dated September 29, 2008, in connection with the Company’s acquisition of Standard Tel Networks, LLC, Vicis and the Company entered into, and closed upon, a Securities Purchase and Loan Conversion Agreement, dated September 23, 2008, pursuant to which the Company, in full satisfaction of the prior sums owed to Vicis: (i) paid $2,250,000 in cash to Vicis; (ii) delivered to Vicis a subordinated note in the principal amount of $1,500,000, bearing interest at 10% and maturing on April 15, 2010; and (iii) converted the balance of the debt owed to Vicis, including all accrued interest of $676,384, in the combined aggregate amount of $5,026,384, into 5,026,384 shares of the Company’s Series A Stock. Vicis also owns warrants to purchase 336,353,835 shares of the Company’s common stock as well as 5,500,000 Series A Stock acquired by converting 3,000,000 shares of Series B Stock and the cash purchase of 2,500,000 shares of Series A Stock, and an additional warrant to purchase 250,000,000 shares of the Company’s common stock.

George Pacinelli . Mr. Pacinelli has over 25 years of experience as an executive in the voice and data communications technology sector. Prior to joining the Company, Mr. Pacinelli initially provided consulting for, and later held a Director position with TAMCO, a Telecom-specific finance company. During that time, he assisted in taking the company from 2 national telecom dealer Partners to over 100 metropolitan, regional and national partners. In 2001, Pacinelli founded eTC, Inc., a telecommunications consulting firm based in Florida that specialized in providing consulting services to Telecom related companies seeking to increase the overall value of their business through the implementation of proven sales strategies and/or processes, as well as through the development of alliances with various providers of value added products and services. Additionally, eTC assisted its commercial business clients with the design, specification, negotiation, contracting, and implementation of various Telecommunications technologies. Prior to his formation of eTC and since 1980, Mr. Pacinelli served in senior executive positions with companies such as Executone of Miami, which later became Contel Executone, Executone Information Systems, Inc., Executone Business Solutions, Claricom, and Staples Communications, which was, in turn, acquired by NextiraOne, LLC.

Bryan McGuire. Mr. McGuire serves as the Chief Financial Officer and a director of Brookside Technology Holdings Corp. He has over 18-years experience in executive finance specializing in growing companies. From 2000 to 2006, Mr. McGuire was the Chief Financial Officer for Ker’s WingHouse where revenue grew from $12,000,000 to $50,000,000 during his tenure. From 1997 to 2000, he was Vice President of Finance & MIS for Hops Restaurant Bar & Brewery where they experienced growth from 22 units to 78. Prior to that, he was Controller with Cucina! Cucina! based in Seattle where he experienced growth from 12 to 30 locations. Prior to that he was with Medical Resources Inc. where he was responsible for all finance and SEC reporting. From 1991 to 1995 he was with Checker’s Drive-in Restaurants. Experience at Checkers included an IPO, a secondary public offering, private placement and growth from 103 restaurants to over 550. Mr. McGuire began his career in 1987 in public accounting with Concannon Miller & Company and Cherry Bekaert & Holland, CPA’s.

Mike Fischer. Mr. Fischer serves as Chief Executive Officer of US Voice & Data, LLC. He is one of USVD’s two founding members, along with Scott Diamond, who are jointly responsible for the overall direction of USVD. For more than five years, Mr. Fischer has been directly responsible for managing many of USVD’s administrative functions, including finance and accounting, purchasing, inventory control and human resources. Mr. Fischer has over 25 years experience in the telecommunications industry. Prior to USVD, Mr. Fischer owned Cedco, Inc, a Kentucky based provider of business communications equipment and services, which he sold in 1998 to Expanets, a unit of Northwestern Corp. Mr. Fischer started at Cedco as a salesman in 1981 and after several promotions ended up buying the company. Mr. Fischer received a BA and an MA from Western Kentucky University and an MBA from the University of Louisville.

Scott Diamond. Mr. Diamond serves as Chief Operating Officer of US Voice & Data, LLC. He is one of USVD’s founding members, along with Mike Fischer, who are jointly responsible for the overall direction of USVD. For more than five years, Mr. Diamond has been directly responsibility for USVD’s sales, technical services and customer service functions. Mr. Diamond has nearly twenty years experience in sales and marketing of telecommunications equipment and services and is the chief architect of USVD’s successful sales organization. Prior to USVD, Mr. Diamond was the Sales Manager for Cedco, Inc. and continued in that capacity after its acquisition by Expanets. Mr. Diamond left Expanets in 2002 to join Mr. Fischer in the acquisition of USVD. Mr. Diamond received a BA from Georgetown College.

Michael Promotico. Mr. Promotico serves as Chief Executive Officer of Standard Tel Networks, LLC. Mr Promotico began his 22 year career in the telecommunications business while working towards a Bachelor’s Degree in Economics at San Diego State University. After just two years in the business, Mr. Promotico was named a Principal and Executive Vice President of INet Corp., a San Diego based Telecommunications Company. Over the next 15 years, he helped to grow that company into one of the largest Mitel resellers in North America. Also during that time, Mr. Promotico founded Horizon Communications, to fill the need for a reliable source for pre-owned communications equipment. He also co-founded Technology Assurance Group, a national organization of telecommunication companies that researches and provides to its members valuable insight into the best business practices currently in use in the telecommunication industry. In 2000, he assisted in the successful sale of INet to publicly traded Pac West Telecom (PACW), and subsequently served as a Vice President and Member of the Board. Two years later, he co-founded Trans-West Network Solutions, California. In October 2004, this company was named the 3rd Fastest Growing Privately Held Company by the San Diego Business Journal, with more than $10 million dollars in revenue. In October, 2005, he was instrumental in the merger with Standard Tel to form Trans-West Network Solutions, (dba Standard Tel), and again in June, 2006 in the merger with Prologic Communications Inc. of Northern California to form Standard Tel Networks, LLC.

Family Relationships

There are no family relationships among the individuals comprising our board of directors, management and other key personnel.

Board Committees

The Board may appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by the national securities exchanges, although such requirements currently do not apply to us. Chris Philips serves as the chairman of the Company’s audit committee, which is comprised of all members of the board of directors. Until further determination by the Board, the full Board will undertake the duties of the compensation committee and nominating committee.

Employment Agreements

On September 14, 2007, the Company caused USVD, its new subsidiary, to enter into employment agreements with Michael P. Fischer and M. Scott Diamond, with initial terms of three years, pursuant to which they will serve as USVD’s CEO and COO, respectively. The employment agreements contain standard terms and provisions, including non competition and confidentiality provisions and provisions relating to early termination and constructive termination, and provide for an annual base salary and certain standard benefits. On September 23, 2008, the Company caused STN , its new subsidiary, to enter into an employment agreement with Michael Promotico, with an initial term of three years, pursuant to which he will serve as STN’s Chief Executive Officer . The employment agreement contain standard terms and provisions, including non-competition and confidentiality provisions and provisions relating to early termination and constructive termination, and provide for an annual base salary and certain standard benefits.

Compensation of Directors

There are presently no arrangements providing for payments to directors for director or consulting services. We expect to establish these arrangements shortly upon increased business activities.

Code of Ethics

We have formally adopted a written code of ethics that applies to our board of directors, principal executive officer, principal financial officer and employees. See Item 13.

ITEM 9A. DISCLOSURES AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting as of December 31, 2008

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

	•		pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

	•		provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

	•		provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with existing policies or procedures may deteriorate.

Based on these discoveries, we evaluated the design and operation of our disclosure controls and procedures as of December 31, 2008 and 2007 to determine whether they were effective in ensuring that we disclose the required information in a timely manner and in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and forms of the Securities and Exchange Commission. Management, including our principal financial officer, supervised and participated in the evaluation. Our principal executive officer and principal financial officer concluded based on their review that:

•

We had previously not treated the valuation of the put provision in some of our warrants properly. We concluded that it was necessary to record a liability for derivative financial instruments because of the put provisions inherent in the redemption provision included in the warrant agreements and recorded at issuance as a liability for “Derivative financial instruments at estimated fair value” on the Company’s balance sheet in accordance with the current authoritative guidance including EITF 00-19. In accordance with provisions of SFAS 133, the Company is required to adjust the carrying value of the above warrants to its fair value at each balance sheet date and recognize any change since the prior balance sheet date as a component of other expense or income.

Our review was concluded in November 2009 after the filing of our 10-K for the 2008 fiscal year and after the filings of our 10-Q for the quarters ended March 31, 2009 and June 30, 2009, but before the filing of our 10-Q for the quarter ended September 30, 2009. As a result of our evaluation, we concluded that our year-end financial statements for 2008 and 2007 would require restatement adjustments to correct for the establishment of a “Derivative financial instruments at fair value” liability on the Consolidated Balance Sheets of $12,016,463 and $7,605,601 as of December 31, 2008 and 2007, respectively, the related “Finance expense on derivatives” of $4,156,069 and $12,348,466 for the years ended December 31, 2008 and 2007, respectively, an addition to Amortization expense of $1,244,830 and $414,943 for the years ended December 31, 2008 and 2007, respectively and “Gain on change in fair value of derivative financial instruments” of $5,245,207 and 10,402,865 for the years ended December 31, 2008 and 2007, respectively on the Consolidated Statements of Operations. Following discussions regarding the matter with our independent auditors and our audit committee, the amounts of the adjustment were deemed material based on quantitative factors. However, in order to provide the utmost transparency with respect to our financial statements we decided to restate voluntarily our financial results for the years ended December 31, 2008 and 2007.

In order to correct for this misstatement for future issuance of warrants, we have established an additional more thorough review process of the warrants and the accounting treatment of such with our third party consultant and our internal

accounting staff and management. This review will carefully examine and review the language in the warrant agreement, with a clear understanding of the accounting ramifications of such language.

Based upon the corrective action taken, our restatement of our 2008 and 2007 financial results through the filing of a report on Form 10-K/A, and the fact that corrections were made to subsequent financial results prior to their public disclosure, our principal executive officer, and principal financial officer were able to conclude that our financial statements for our years ended December 31, 2008 and 2007, as included in our report on Form 10-K, as amended, fairly present in all material respects, the financial condition, results of operations and cash flows of Brookside Technology Holdings Corp.

In accordance with the internal control reporting requirements of the SEC, management completed an assessment of the adequacy of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth in Internal Control — Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the SEC’s guide entitled “Sarbanes-Oxley Section 404: A Guide for Small Business. As a result of this assessment and based on the criteria in the COSO framework and SEC guidance, management has concluded that, as of December 31, 2008, our internal control over financial reporting was ineffective.

Our independent registered public accounting firm has not issued an audit report on the effectiveness of our internal control over financial reporting.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As of year ended December 31, 2008 we identified the following significant deficiencies in our internal controls over financial reporting:

Audit Committee composition: Our audit committee comprises of one member who also represents our largest investor and debt holder. We are in the process of strengthening our audit committee composition and expect to add at a minimum of one additional audit committee member in 2009.

Information Technology: During 2008 we did not complete sufficient documentation and testing of our processes and controls relating to our information technology systems. We are in the process of completing the documentation and expect to complete the documentation and testing during 2009.

Company is in the process of establishing a whistleblower contact as its on-going effort to improve controls relating to compliance. We expect to have this in place in 2009.

As a result of acquisitions made during 2008, we currently do not have standard processes and internal controls which are consistent across the company for some of our critical applications. We are in the process of establishing consistent processes and internal controls for all our operations and expect to have consistent internal controls by end of 2009 for all our locations and critical applications.

There were no other significant changes to internal controls during 2008. We are currently in the process of performing a comprehensive review of our existing internal controls and expect to make some changes to these internal controls in 2009 so that they are consistent across all our geographic locations.

ITEM 10. EXECUTIVE COMPENSATION

On February 21, 2007, Ruth Shepley, our sole director, resigned as an officer of Cruisestock and appointed Michael Nole as Chief Executive Officer and Bryan McGuire as Chief Financial Officer of Cruisestock. Michael Dance was the President of Brookside Technology Partners, Inc. prior to the Share Exchange and now serves as Senior Account Executive of Brookside Technology Partners Inc. Further, on February 21, 2007, Ms. Shepley, acting in her capacity as the sole director on the board of directors, increased the size of Cruisestock’s board to two and appointed Michael Nole to fill the vacancy. Ms. Shepley has since resigned from the Board of Directors. Mr. McGuire was appointed to fill this vacancy on the board as a director effective February 21, 2007. Additionally, on October 22, 2008, Chris Phillips was appointed to the Company’s board of directors as a director, increasing the Company’s board to three.

Compensation of Directors

There are presently no arrangements providing for payments to directors for director or consulting services. We expect to establish these arrangements shortly upon increased business activities.

Compensation Discussion and Analysis

Until March 1, 2007, we had not paid any compensation to our executive officers in light of Brookside Technology Holdings Corp’s cash position and status as a start up company. Since the closing of the Share Exchange, we have been rounding out our management team and we have begun to compensate our executive officers. Our board of directors reviews, modifies, and approves, as necessary, our executive compensation policies in light of our current status as a new operating company and working capital (deficit) positions. This review is and will be conducted with the goal of compensating our executives so as to maximize their, as well as our, performance. We do not currently have any employment agreement with any of our executive officers.

In connection with the appointments as the following executive officers, we entered into stock option agreements with George Pacinelli and Bryan McGuire. In 2008, we cancelled and re-issued the stock options originally issued to Bryan McGuire and George Pacinelli in 2007. Additionally, we cancelled the options originally issued to Bryan McGuire and George Pacinelli in 2007 and re-issued to Mr. Pacinelli an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.025 per share (the “Pacinelli Options”) and re-issued to Mr. McGuire’s an option to purchase up to 7,000,000 shares of our common stock at an exercise price of $0.025 per share (the “McGuire Options”) (the Pacinelli Options and the McGuire Options collectively hereinafter referred to as the “Executive Options”). The Executive Options are intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and were granted pursuant to our 2007 Stock Option Plan, pursuant to which we have reserved 35,000,000 shares of common stock for issuance to employees, directors and consultants. The Executive Options vest as follows:


Number of Shares	Year Vested
1,633,333		2008
15,333,333		2009
1,633,333		2010
300,000		2011

Compensation Committee Interlocks and Insider Participation

During 2008, we did not have a compensation committee or another committee of the board of directors performing equivalent functions. Instead the entire board of directors performed the function of compensation committee.

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the total compensation that Brookside Technology Holdings Corp has paid or that has accrued on behalf of Brookside Technology Holdings Corp’s chief executive officer and other executive officers with annual compensation exceeding $100,000 during the years ended December 31, 2008 and 2007.


									Long-Term Compensation
			Annual Compensation						Awards				Payouts
							Other				Securities				All Other
							Annual				Underlying		LTIP		Compen-
							Compen-		Restricted Stock		Options/		Pay-		sation
Name and Principal Position	Year		Salary ($)		Bonus (4)		Sation ($)		Award(s)		SARs		outs		($)
Michael Nole — CEO		2008		180		29		-0-		-0-		-0-		-0-		-0-
		2007		145		-0-		-0-		-0-		-0-		-0-		-0-
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
George Pacinelli — President		2008		140		-0-		-0-		-0-		-0-		-0-		-0-
		2007		87		-0-		-0-		-0-		-0-		-0-		-0-
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Mike Fischer CEO — US Voice		2008		105		-0-		-0-		-0-		-0-		-0-		-0-
& Data, LLC		2007		28		-0-		-0-		-0-		-0-		-0-		-0-
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Scott Diamond		2008		145		-0-		-0-		-0-		-0-		-0-		-0-
COO — US Voice &Data, LLC		2007		39		-0-		-0-		-0-		-0-		-0-		-0-
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Michael Promotico		2008		65		-0-		-0-		-0-		-0-		-0-		-0-
President — Standard Tel Networks, LLC		2007		N/A		N/A		N/A		N/A		N/A		N/A		N/A
		2006		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Bryan McGuire — CFO		2008		100		-0-		-0-		-0-		-0-		-0-		-0-
		2007		81		-0-		-0-		-0-		-0-		-0-		-0-
		2006		N/A		-0-		-0-		-0-		-0-		-0-		-0-

Amounts represented above are in thousands of dollars (000’s).

The Company has not implemented an incentive bonus compensation plan as of March 31, 2009.

Compensation Committee Interlocks and Insider Participation

During 2007, we did not have a compensation committee or another committee of the board of directors performing equivalent functions. Instead the entire board of directors performed the function of compensation committee.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The following table sets forth certain information, as of March 31, 2009 with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the named executive officers, directors and director nominees; and (iii) our directors, director nominees and named executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.


	Common Stock		Percentage of Common stock
Name of Beneficial Owner ⁽¹⁾	Beneficially Owned		Beneficially Owned ⁽²⁾
Officers and Directors
Michael Nole		17,500,000		12.5	%
Mike Fischer (3)		3,500,000		2.5	%
Scott Diamond (4)		3,500,000		2.5	%
Michael Promotico (5)		9,502,008		6.8	%
5% Shareholders
Mike Dance		28,000,000		20.0	%
Pro Logic (7)		8,168,675		5.8	%
Herb Rosen (8)		8,168,675		5.8	%
Sam & Peggy Standridge (9)		16,337,350		11.7	%
Apogee Financial Investments, Inc (9)		18,355,085		20.1	%

All officers and directors as a group (6 persons)		34,002,008		24.2	%


*		Less than 1%

(1)		Except as otherwise indicated, the address of each beneficial owner is c/o Brookside Technology Partners, Inc. 15500 Roosevelt Blvd, Suite 101, Clearwater, FL 33760.

(2)		Applicable percentage ownership of common stock is based on 140,228,340 shares of common stock outstanding as of March 31, 2009, together with securities exercisable or convertible into shares of common stock within 60 days of March 31, 2009 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock underlying convertible securities that are currently exercisable or exercisable within 60 days of March 31, 2009 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(3)		Represents 3,500,000 shares issued as consideration in connection with the acquisition of USVD

(4)		Represents 3,500,000 shares issued as consideration in connection with the acquisition of USVD

(5)		Represents 1,333,333 shares underlying stock options, all of which are presently exercisable. Plus 8,168,675 shares issued as consideration in connection with the acquisition of STN

(6)		Represents 8,168,675 shares issued as consideration in connection with the acquisition of STN (7) Represents 8,168,675 shares issued as consideration in connection with the acquisition of STN (8) Represents 16,337,350 shares issued as consideration in connection with the acquisition of STN

(7)		Represents 8,168,675 shares issued as consideration in connection with the acquisition of STN

(8)		Represents 16,337,350 shares issued as consideration in connection with the acquisition of STN

(9)		Represents 5,314,155 shares of common stock underlying the shares of series A Preferred Stock owned by Apogee Financial Consultants, Inc. and the following warrants:

(i)

series A warrants issued to Midtown Partners, & Co, LLC to purchase 2,664,767 shares of common stock at an exercise price of $0.03;

	(ii)		series B warrants issued to Midtown Partners, & Co, LLC to purchase 2,664,767 shares of common stock at an exercise price of $0.03;

	(iii)		series C warrants issued to Midtown Partners, & Co, LLC to purchase 5,329,534 shares of common stock at an exercise price of $0.03.

	(iv)		a series A warrant issued to Apogee Financial Consultants, Inc. to purchase 320,831 shares of common stock at an exercise price of $0.03; and

	(v)		a series B warrant issued to Apogee Financial Consultants, Inc. to purchase 320,831 shares of common stock at an exercise price of $0.03.

All of the warrants are presently exercisable. Apogee Financial Investments, Inc. is the sole member of Midtown Partners & Co., LLC. Apogee’s address 4218 West Linebaugh Avenue, Tampa, FL. 33624.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Michael Nole has loaned $30,000 to Brookside. This loan has an unamortized balance of $16,945 at December 31, 2008 and is subordinate to the Chatham Senior Debt.

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, directors and significant stockholders. We intend to establish such policies and procedures so that such transactions will, on a going-forward basis, be subject to review, approval or ratification of our board of directors, or an appropriate committee thereof.

The Company currently has three directors, Michael Nole, Chris Phillips and Bryan McGuire. They are not independent. Mr. Phillips chairs the audit committee.

ITEM 13. EXHIBITS

The following exhibits are included as part of this Form 10-K. References to “the Company” in this Exhibit list mean Brookside Technology Holdings Corp., a Florida corporation.


Exhibit
Number		Description

2.1		Articles of Incorporation (1)

2.2		Amendment to Articles of Incorporation dated September 14, 2007 (2)

2.3		Amendment to Articles of Incorporation dated July 3, 2008

2.4		Amendment to Articles of Incorporation dated August 4, 2008 (3)

2.5		By-laws (5)

10.1		Dynamic Decisions Note (2)

10.2		Dynamic Decisions Purchase Agreement (2)

10.3		Vicis Capital Master Fund Securities Purchase Agreement (2)

10.4		Vicis Capital Master Fund Registration Rights Agreement (2)

10.5		Hilco Credit Agreement (2)

10.6		US Voice & Data, LLC Membership Purchase Agreement (2)


Exhibit
Number		Description
10.7		Michael P. Fischer Employment Agreement (2)

10.8		M. Scott Diamond Employment Agreement (2)

10.9		STN Stock Membership Purchase Agreement (4)

10.10		Michael Promotico Employment Agreement (4)

10.11		Chatham Credit Facility (4)

10.12		Chatham Term Note Dated September 23, 2008 (4)

10.13		Chatham Revolving Note Dated September 23, 2008 (4)

10.14		Chatham Warrant Purchase and Registration Rights Agreement (4)

10.15		Vicis Securities Purchase and Loan Conversion Agreement (4)

10.16		Vicis Subordinated Note Dated September 23, 2008 (4)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(1)		Incorporated by reference from Brookside Technology Holdings Corp’s Form S-1/A filed with the Securities and Exchange Commission on February 2, 2008.

(2)		Incorporated by reference from Brookside Technology Holdings Corp’s Form 10-QSB filed with the Securities and Exchange Commission on November 19, 2007.

(3)		Incorporated by reference from Brookside Technology Holdings Corp’s Form 8-K filed with the Securities and Exchange Commission on August 8, 2008.

(4)		Incorporated by reference from Brookside Technology Holdings Corp’s Form 8-K filed with the Securities and Exchange Commission on September 29, 2008.

(5)		Incorporated by reference from Brookside Technology Holdings Corp’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2009.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

For the Company’s year ended December 31, 2008, we were billed approximately $170,543 for professional services rendered for the audit of the Brookside Technology Holdings Corp financial statements by PMB Helin Donovan, LLP and review included in our periodic and other reports filed with the Securities and Exchange Commission for our year ended December 31, 2008. We were also billed approximately $102,867 for the audit of the financial statements of Standard Tel Networks, LLC for the fiscal years ended September 30, 2008 and 2007.. For the Company’s year ended December 31, 2007, we were billed approximately $57,475 for professional services rendered for the audit of the Brookside Technology Holdings Corp. financial statements. We also were billed approximately $30,080 for the review of financial statements included in our periodic and other reports filed with the Securities and Exchange Commission for our year ended December

31, 2007. We also incurred professional fees of $42,627 for services rendered in connection with the audit of USVD in 2007.

Tax Fees

For the Company’s fiscal year ended December 31, 2008 and 2007, we were billed approximately $34,241 and $5,000 for professional services rendered for tax compliance, tax advice, and tax planning.

All Other Fees

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended December 31, 2008 and 2007.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Brookside Technology Holdings Corp. Brookside Technology Holdings Corp.
Dated: January 12, 2010	By:	/s/ Michael W. Nole
		Name:	Michael W. Nole
		Title:	Chief Executive Officer, Chairman of the Board (Principal Executive Officer)


Dated: January 12, 2010	By:	/ s/ Bryan G. McGuire
		Name:	Bryan G. McGuire
		Title:	Chief Financial Officer (Principal Financial Officer)

Brookside Technology Holdings Corp.
Consolidated Financial Statements
Table of Contents


		Page
Report of Independent Registered Public Accounting Firm		F-1
Financial Statements:
Consolidated Balance Sheets as of December 31, 2008 and 2007		F-3
Statements of Consolidated Operations for the Years Ended December 31, 2008 and 2007		F-4
Statements of Consolidated Stockholder’s Equity for the Years Ended December 31, 2008 and 2007		F-5
Statements of Consolidated Cash Flows for the Years Ended December 31, 2008 and 2007		F-6
Notes to the Consolidated Financial Statements		F-7

F-1

The Board of Directors and Shareholders of
Brookside Technology Holdings Corp.

We have audited the accompanying consolidated balance sheets of Brookside Technology Holdings Corp. (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Brookside Technology Holdings Corp. as of December 31, 2008 and 2007 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company restated certain amounts previously reported as of and for the years ended December 31, 2008 and 2007.

As discussed in Note 21 to the consolidated financial statements, the Company is currently not in compliance with their leverage ratio with the Company’s Chatham Senior Loan credit facility. The Company can only borrow up to three times its trailing twelve months EBITDA, calculated monthly, based on the loan agreement. The Company’s management is under discussions with Chatham, and believes that it will again be in compliance with this covenant by April 30, 2009. Pursuant to the Chatham Loan Agreement, Chatham may place the Company in default if the Company is not in compliance with its covenants. Although the Company is not in compliance with their leverage ratio, Chatham has not formally issued a letter of default.

As discussed in Note 11 to the consolidated financial statements, on February 21, 2007, the Company entered into an Exchange transaction. As discussed in Note 16 to the consolidated financial statements, on September 14, 2007, the Company acquired all of the membership interests in U.S. Voice and Data, LLC. As discussed in Note 17 to the consolidated financial statements, on September 23, 2008, the Company acquired all of the membership interests in Standard Tel Networks, LLC.

PMB Helin Donovan, LLP

March 27, 2009 (January 11, 2010 as to Note 2 and the effects of the restatement)
Austin, Texas

F-2

BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED BALANCE SHEETS
As of December 31, 2008 and 2007


	December 31,
	2008			2007
	(Restated)			(Restated)
ASSETS
Current assets
Cash and cash equivalents	$	835,525		$	187,846
Restricted cash		368,666			—
Cash collateral account		1,366,666			—
Accounts receivable, net		4,225,692			2,113,675
Inventory		1,652,300			849,176
Deferred contract costs		107,382			89,922
Deferred finance charges, net of amortization		536,085			245,155
Prepaid expenses		79,493			40,954

Total current assets		9,171,809			3,526,728
Property and equipment
Office equipment		615,721			330,022
Furniture, fixtures and leasehold improvements		155,151			137,745

		770,872			467,767
Less: accumulated depreciation		(326,383	)		(194,089	)

Property and equipment, net		444,489			273,678

Goodwill		16,918,396			13,236,369
Intangible assets, net		731,710			510,868
Deposits and other assets		27,735			41,699

TOTAL ASSETS	$	27,294,139		$	17,589,342


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current liabilities
Accounts payable and accrued expenses	$	2,211,611		$	981,766
Billings in excess of revenues		2,620,857			1,776,271
Payroll liabilities		851,833			371,470
Current portion of long term debt		2,669,177			8,207,900
Income taxes payable		164,000			—
Other current liabilities		228,390			838,589

Total current liabilities		8,745,868			12,175,996
Long term debt, less current portion		5,053,135			605,353
Derivative financial instruments at fair value		12,016,463			7,605,601

Total liabilities		25,815,466			20,386,950


Stockholders’ equity (deficit)
Series A convertible preferred stock, 15,000,000 authorized, 12,216,716 and 2,175,322 issued and outstanding at December 31, 2008 and 2007, respectively, at 8% dividend yield. Liquidation preference of $12,832,595 and $2,315,178 at December 31, 2008 and 2007, respectively.		6,812,914			1,699,000
Common stock, $.01 par value, 1,000,000,000 shares authorized, 140,228,340 shares issued and outstanding at December 31, 2008 and 87,900,000 shares issued and outstanding at December 31, 2007, respectively		140,229			87,900
Additional paid in capital		11,885,674			7,313,131
Accumulated deficit		(17,360,144	)		(11,897,639	)

Total stockholders’ equity (deficit)		1,478,673			(2,797,608	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	27,294,139		$	17,589,342

See accompanying notes and independent auditors’ report.

F-3

BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007


	For the Years Ended December 31,
	2008			2007
	(Restated)			(Restated)
REVENUES
Installation and other services	$	5,327,723		$	1,369,097
Equipment sales		16,381,884			4,182,486

Total revenues		21,709,607			5,551,583

COST OF SALES		11,160,248			3,174,127


GROSS PROFIT		10,549,359			2,377,456


OPERATING EXPENSES
General and administrative		8,851,632			4,305,139
Depreciation expense		132,294			69,921

Total operating expenses		8,983,926			4,375,060


OTHER INCOME (EXPENSE)
Interest expense		(2,041,393	)		(621,633	)
Amortization expense of loan discount and intangibles		(5,602,861	)		(5,414,703	)
Finance expense on derivatives		(4,156,069	)		(12,348,466	)
Gain on change in fair value of derivative financial instruments		5,245,207			10,402,865
Gain on extinguishment of debt		151,619			—
Other income, net		15,582			14,493

Total other expense		(6,387,915	)		(7,967,444	)


LOSS BEFORE INCOME TAXES		(4,822,482	)		(9,965,048	)
Provision for income taxes		(164,000	)		—


NET LOSS	$	(4,986,482	)	$	(9,965,048	)

Preferred Stock Dividends		(476,023	)		(139,856	)

Net loss attributable to common shareholders	$	(5,462,505	)	$	(10,104,904	)


Loss per share- basic and fully diluted	$	(0.052	)	$	(0.126	)

Weighted average shares outstanding		104,802,022			80,264,658

See accompanying notes and independent auditors’ report.

F-4

BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2008 and 2007
(Restated)


	Common Stock						Series A Preferred Stock
													Additional			Retained
	Shares			Amount			Shares			Amount			Paid-in Capital			Earnings			Total

Balance at December 31, 2006		63,000,000		$	63,000			—		$	—		$	337,927		$	(1,246,927	)	$	(846,000	)
Issuance of Series A preferred Stock for cash		—			—			1,656,990			1,656,990			—			—			1,656,990
Issuance of Series A preferred stock for services		—			—			250,000			250,000			—			—			250,000
Issuance of Series A preferred stock for for conversion of note payable		—			—			268,332			235,000			—			—			235,000
Fees paid for issuance of Series A preferred stock		—			—			—			(336,269	)		—			—			(336,269	)
Legal fees paid for issuance of Series A preferred stock		—			—			—			(40,383	)		—			—			(40,383	)
Issuance of warrants to Series A preferred stock investors		—			—			—			(178,344	)		178,344			—			—
Intrinsic value of conversion option on Series A preferred stock investors		—			—			—			(2,157	)		—			2,157			—
Accretion of Series A preferred stock dividends		—			—			—			139,856			—			(139,856	)		—
Amount classified as registration rights obligation		—			—			—			(25,693	)		25,693			—			—
Purchase and cancellation of 20,000,000 shares of Cruisestock common		—			—			—			—			—			(127,930	)		(127,930	)
Acquisition of Cruisestock Common		28,000,000			28,000			—			—			(24,000	)		(4,000	)		—
Brookside shares cancelled per Cruisestock acquisition agreement		(10,500,000	)		(10,500	)		—			—			10,500			—			—
Fees related to Cruisestock acquisition		—			—			—			—			—			(416,035	)		(416,035	)
Stock compensation expense		—			—			—			—			915,000			—			915,000
Acquisition of US Voice & Data LLC		7,000,000			7,000			—			—			2,338,000			—			2,345,000
Value of warrants issued in connection with the acquisition of US Voice & Data LLC		—			—			—			—			3,472,067			—			3,472,067
Conversion of note payable to MAJ Ventures, LTD to common stock		400,000			400			—			—			59,600			—			60,000
Net loss																	(9,965,048	)		(9,965,048	)

Balance at December 31, 2007 (Restated)		87,900,000		$	87,900			2,175,322		$	1,699,000		$	7,313,131		$	(11,897,639	)	$	(2,797,608	)


Accretion of Series A preferred stock dividends		—			—			—			476,023			—			(476,023	)		—
Conversion of Series A preferred stock to common stock		11,484,939			11,485			(484,990	)		(388,493	)		377,008			—			—
Stock compensation expense		—			—			—			—			165,237			—			165,237
Acquisition of Standard Tel Networks, LLC		40,843,401			40,844			—			—			1,128,910			—			1,169,754
Value of warrants issued in connection with the Chatham senior note		—			—			—			—			2,901,388			—			2,901,388
Refinancing of Hilco debt, Dynamic Decisions debt, to Series A preferred stock		—			—			5,026,384			5,026,384			—			—			5,026,384
Refinancing of Series B preferred stock to Series A preferred stock — intrinsic value of beneficial conversion feature and relative fair value of warrants		—			—			5,500,000			—			—			—			—
Net loss		—			—			—			—			—			(4,986,482	)		(4,986,482	)
Balance at December 31, 2008 (Restated)		140,228,340		$	140,229			12,216,716		$	6,812,914		$	11,885,674		$	(17,360,144	)	$	1,478,673

See accompanying notes and independent auditors’ report.

F-5

BROOKSIDE TECHNOLOGY HOLDINGS CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007


	2008			2007
	(Restated)			(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,986,482	)	$	(9,965,048	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		132,294			69,921
Amortization of loan discounts and intangibles		5,602,861			5,414,703
Non-cash interest expense		686,189			—
Gain on change in fair value of derivative financial instruments		(1,089,138	)		1,945,601
Gain on debt extinguishment		(151,619	)		—
Bad debt expense		—			30,465
Stock based compensation		165,237			915,000
(Increase) decrease in:
Accounts receivable		(935,625	)		264,788
Inventory		99,653			1,055,293
Deferred contract costs		(17,460	)		(79,039	)
Prepaid expenses		4,053			(10,638	)
Deposits and other assets		13,964			(2,428	)
Increase (decrease) in:
Accounts payable and accrued expenses		485,032			140,347
Accrued payroll liabilities		437,840			277,131
Billings in excess of revenues		(997,993	)		(1,224,156	)
Income taxes payable		164,000			—
Other current liabilities		54,842			119,566

		4,654,130			8,916,554

NET CASH USED IN OPERATING ACTIVITIES		(332,352	)		(1,048,494	)


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment		(180,428	)		(76,941	)
Cash used for restricted cash		(368,666	)		—
Cash used for cash collateral		(1,366,667	)		—
Acquisition of US Voice & Data, LLC (“USVD”), net of $855,791 in cash received		(227,091	)		(9,094,289	)
Acquisition of Standard Tel Networks, LLC (“STN”), net of $522,319 in cash received		(2,719,558	)		—

NET CASH USED IN INVESTING ACTIVITIES		(4,862,410	)		(9,171,230	)


CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term debt		14,097,455			10,424,576
Cash paid for fees in connection with USVD acquisition financing		—			(463,000	)
Proceeds from Series B preferred stock financing classified as long-term debt, net of issuance costs of $250,000		—			2,750,000
Deferred finance charges		(588,984	)		(349,538	)
Proceeds from issuance of Series A preferred stock, net of issuance costs of $376,653		—			1,280,337
Proceeds from issuance of Series A preferred stock, in connection with the STN acquisition		2,500,000			—
Cash paid for fees in connection with the Exchange Transaction		—			(293,963	)
Repayment of long term debt		(10,166,030	)		(2,976,508	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		5,842,441			10,371,904


NET INCREASE IN CASH		647,679			152,180
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		187,846			35,666

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	835,525		$	187,846


SUPPLEMENTAL DISCLOSURE
Income taxes paid	$	63,559		$	—

Interest paid	$	899,840		$	265,213

Non-cash financing and investing activities
Exchange Transaction fee to Venture Fund II for consulting fees, paid in preferred stock	$	—		$	250,000

Accretion of preferred stock dividend	$	476,023			139,856

Payment of notes payable paid in preferred stock	$	—		$	235,000

Note Payable issued in USVD acquisition, net of origination discount	$	—		$	2,747,934

Value of common stock issued in USVD acquisition	$	—		$	2,345,000

Accrued interest added to note payable balance	$	—		$	46,556

Conversion of note for 400,000 shares of common stock	$	—		$	60,000

Beneficial conversion feature assigned to convertible debt	$	—		$	695,006

Warrant value assigned with Hilco debt	$	—		$	18,008,466

Warrant value assigned and beneficial conversion feature assigned from USVD acquisition debt	$	—		$	3,472,067

Warrant value assigned with Series A preferred stock	$	—		$	178,344

Value of common stock issued in STN acquisition	$	1,169,755		$	—

Warrant value assigned from Chatham financing	$	2,901,388		$	—

Beneficial conversion feature assigned to Series A preferred stock	$	—		$	2,157

Registration rights obligation assigned to Series A preferred stock	$	—		$	25,693

Warrant value and beneficial conversion feature assigned from Vicis Series A preferred issuance	$	9,656,069		$	—

Conversion of debt to Series A preferred stock	$	5,026,384		$	—

Conversion of Series A preferred stock to common stock	$	388,493		$	—

Registration rights obligation assigned to Series A preferred stock	$	—		$	25,693

See accompanying notes and independent auditors’ report.

F-6

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 1 — Nature of Business

Operations

Brookside Technology Holdings Corp., (the “Company”), is the holding company for Brookside Technology Partners, Inc, a Texas corporation (“Brookside Technology Partners”), US Voice & Data, LLC, an Indiana Limited Liability Company (“USVD”), Standard Tel Acquisitions, Inc, a California Corporation (“Acquisition Sub”), Trans-West Network Solutions, Inc., (“Trans-West”), a California Corporation and Standard Tel Networks, LLC, a California Limited Liability Company (“STN”) and all operations are conducted through these (five) wholly owned subsidiaries.

Collectively, the subsidiary companies are providers of converged business communications products and services from Mitel, Inter-tel (owned by Mitel), Nortel and NEC. The Company, as the 2 ^nd largest MITEL dealer recognized as a Platinum ELITE Partner, combines technical expertise in a range of communications products, including IP-enabled platforms, wired and wireless IP and digital endpoints and leading edge communications applications to create converged voice, video and data networks that help businesses increase efficiency and optimize revenue opportunities, critical for success in today’s competitive business environment. Specializing in selling, designing, analyzing and implementing converged Voice over IP (VoIP), data and wireless business communications systems and solutions for commercial and state/government organizations of all types and sizes in the United States the Company has offices that provides a national footprint. Headquartered in Huntington Beach, California, STN has offices in the San Francisco Bay Area, Sacramento, and San Diego. Headquartered in Austin, Texas, Brookside Technology Partners serves the Texas market. Headquartered in Louisville, Kentucky, USVD serves the Kentucky and Southern Indiana markets, operating out of offices in Louisville, Lexington and Indianapolis. Combined, new implementations represent approximately 70% of the Company’s revenues with the remaining 30% generated by Service, Support, Maintenance and other recurring revenues from our existing customer base.

Background/Name Change/Redomestication

Because Brookside Technology Partners was the accounting acquirer in the Share Exchange, management does not believe that it is informative or useful to compare Cruisestock’s historical results of operations with those of Brookside Technology Partners.

The Company’s common stock is quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol: BKSD.

F-7

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 1 — Nature of Business (continued)

Stock Split

Concurrently with the Redomestication and as of the Effective Time:

	•		Each outstanding share of Cruisestock’s common stock, $0.001 per share, was automatically converted into seven shares of Brookside Technology Holdings Corp.’s common stock, $0.001 par value per share;

	•		Each outstanding share of Cruisestock’s Series A preferred stock (“Series A Stock”), $0.001 per share, was automatically converted into one share of Brookside Technology Holdings Corp.’s Series A Stock, $0.001 par value per share;

	•		The price at which the Series A Stock converts into common stock was automatically adjusted, on a proportionate basis, to account for the forward split of the common shares by reducing the current conversion price of $0.40 per share to $0.0571428; and

	•		The number of shares of common stock underlying all of Cruisestock’s outstanding options and warrants to purchase common stock, and the exercise price of such options and warrants, was automatically adjusted to account for the 7-for-1 common share stock split.

Acquisition of USVD

Increase in Authorized Shares

Acquisition of Standard Tel Networks, LLC

On September 23, 2008, Brookside Technology Holdings Corp. (the “Company), through its wholly owned subsidiary, Standard Tel Acquisitions, Inc. (“Acquisition Sub”), acquired Standard Tel Networks, LLC (“STN”), an independent distributor of high quality, turnkey converged voice and data business communications products and services with California offices in the San Francisco Bay Area, Sacramento, San Diego and headquartered in Huntington Beach. The acquisition was conducted pursuant to a previously-disclosed Stock and Membership Interest Purchase Agreement dated July 17, 2008 (the “Purchase Agreement”), and was structured as the acquisition of (a) all of the stock of Trans-West Network Solutions, Inc. (“Trans-West”) from the shareholders of Trans-West (the “Trans-West Shareholders”) and (b) all of the membership interest of STN owned by ProLogic Communication, Inc. (“ProLogic” and collectively with the Trans-West Shareholders, the “Seller Parties”). As previously reported, Trans-West, a holding company with no operations, owns eighty percent (80%) of the membership interest of STN and ProLogic owned the other twenty percent (20%), and, accordingly, the Company now owns (directly, in part, and indirectly through Trans West, in other part) one hundred percent (100%) of STN. Collectively, the forgoing transactions are referred to in this Current Report as the “STN Acquisition.” Prior to the STN Acquisition, the Company did not have any relationships with the Seller Parties.

Restatement of Prior Periods

F-8

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 1 — Nature of Business (continued)

and related quarterly filings, the Company had incorrectly accounted for these warrants resulting in not recording the quarterly change in estimated fair value of the warrants as derivative financial instruments. Please refer to Note 2 of these financial statements for a detailed discussion of the impact on the Company’s quarterly financial information.

Note 2 — Restatement of Prior Periods

The Company has restated its financial statements from the amounts previously reported by filing this amended Annual Report on Form 10-K. The restatement adjustments correct for the establishment of a “Derivative financial instruments at fair value” liability on the Consolidated Balance Sheets of $12,016,463 and $7,605,601 as of December 31, 2008 and 2007, respectively, the related “Finance expense on derivatives” of $4,156,069 and $12,348,466 for the years ended December 31, 2008 and 2007, respectively, an addition to Amortization expense of $1,244,830 and $414,943 for the years ended December 31, 2008 and 2007, respectively and “Gain on change in fair value of derivative financial instruments” of $5,245,207 and 10,402,865 for the years ended December 31, 2008 and 2007, respectively on the Consolidated Statements of Operations. Following is a summary of the restatement adjustments:


2008 Summary Balance Sheet	As Reported			Adjustments			As Restated

Current assets	$	9,171,809			—		$	9,171,809
Property and equipment, net		444,489			—			444,489
Goodwill		16,918,396			—			16,918,396
Intangible assets, net		731,710			—			731,710
Deposits and other assets		27,735			—			27,735

Total assets	$	27,294,139			—		$	27,294,139


Current liabilities:
Accounts payable and accrued expenses	$	2,211,611			—		$	2,211,611
Billings in excess of revenues		2,620,857			—			2,620,857
Payroll liabilities		851,833			—			851,833
Current portion of long term debt		2,669,177			—			2,669,177
Income taxes payable		164,000			—			164,000
Other current liabilities		228,390			—			228,390

Total current liabilities		8,745,868			—			8,745,868
Long-term debt, less current portion		5,053,135			—			5,053,135
Derivative financial instruments at
Fair value		—			12,016,463			12,016,463

Total Liabilities		13,799,003	(1)		12,016,463			25,815,466
Stockholders’ equity:
Series A convertible preferred stock		8,796,521	(2)		(1,983,607	)		6,812,914
Common stock		140,229			—			140,229
Additional paid-in capital		21,385,901	(3)		(9,500,227	)		11,885,674
Accumulated deficit		(16,827,515	)(4)		(532,629	)		(17,360,144	)

Total stockholders’ equity		13,495,136			(11,860,771	)		1,478,673

Total liabilities and stockholders’ equity	$	27,294,139			—		$	27,294,139


(1)		— Fair value of derivative financial instruments at December 31, 2008 based on Black-Scholes model valuation.

(2)		— Amount of beneficial conversion feature eliminated as debt was reduced to zero as fair value of derivatives was recorded as a liability.

(3)		— Represents the initial entries to record the fair value of derivatives at issuance date.

F-9

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)


(4)		— Represents the total of amortization of additional discount on debt, finance expense on derivatives, reversal of beneficial conversion feature and gain on change in fair value of derivatives since issuance of warrants.


2008 Summary Consolidated Statement of
Operations:	As Reported			Adjustments			As Restated

Installation and other services	$	5,327,723			—		$	5,327,723
Equipment sales		16,381,884			—			16,381,884

Total revenues		21,709,607			—			21,709,607
Cost of sales		11,160,248			—			11,160,248

Gross Profit		10,549,359			—			10,549,359
Operating Expenses:					—
General and administrative		8,851,632						8,851,632
Depreciation		132,294						132,294

Total operating expenses		8,983,926			—			8,983,926

Other Income (Expense):					—
Interest expense		(2,041,393	)		—			(2,041,393	)
Amortization expense of loan discount and intangibles		(4,358,031	)(A)		(1,244,830	)		(5,602,861	)
Finance expense on derivatives		—	(B)		(4,156,069	)		(4,156,069	)
Gain on change in fair value of derivative Financial instruments		—	(C)		5,245,207			5,245,207
Gain on extinguishment of debt		151,619			—			151,619
Other income, net		15,582			—			15,582

Total other expenses		(6,232,223	)		(155,692	)		(6,387,915	)

Loss Before Income Taxes		(4,666,790	)		(155,692	)		(4,822,482	)
Provision for Income Taxes		(164,000	)		—			(164,000	)

Net Loss	$	(4,830,790	)	$	(155.692	)	$	(4,986,482	)

Preferred Stock Dividends		(2,459,630	)(D)		1,983,607			(476,023	)

Net loss attributable to common Shareholders	$	(7,290,420	)	$	1,827,915		$	(5,462,505	)

Loss per share-basic and fully diluted	$	(0.070	)	$	0.018		$	(0.052	)

Weighted average shares outstanding		104,802,022						104,802,022


(A)		— Additional discount on debt being amortized.

(B)		— Financing expense recognized for warrants at fair value in excess of face amount of debt.

(C)		— Change in fair value of derivatives.

(D)		— Amount of beneficial conversion feature eliminated as debt was reduced to zero as fair value of derivative was recorded as a liability.


Summary Statement of Cash Flows for the
Year Ended December 31, 2008:	As Reported			Adjustments		As Restated

Net Cash Used in Operating Activities	$	(332,352	)		—	$	(332,352	)
Net Cash Used in Investing Activities		(4,862,410	)		—		(4,862,410	)
Net Cash Provided by Financing Activities		5,842,441			—		5,842,441

Increase in cash		647,679			—		647,679
Cash at Beginning of Period		187,846			—		187,846

Cash at End of Period	$	835,525			—	$	835,525

F-10

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)


2007 Summary Balance Sheet	As Reported			Adjustments			As Restated

Current assets	$	3,526,728			—		$	3,526,728
Property and equipment, net		273,678			—			273,678
Goodwill		13,236,369			—			13,236,369
Intangible assets, net		510,868			—			510,868
Deposits and other assets		41,699			—			41,699

Total assets	$	17,589,342			—		$	17,589,342


Current liabilities:
Accounts payable and accrued expenses	$	981,766			—		$	981,766
Billings in excess of revenues		1,776,271			—			1,776,271
Payroll liabilities		371,470			—			371,470
Current portion of long term debt		8,207,900			—			8,207,900
Other current liabilities		838,589			—			838,589

Total current liabilities		12,175,996			—			12,175,996
Long-term debt, less current portion		1,850,183	(1)		(1,244,830	)		605,353
Derivative financial instruments at Fair value		—	(2)		7,605,601			7,605,601

Total Liabilities		14,026,179			6,360,771			20,386,950
Stockholders’ equity (deficit):
Series A convertible preferred stock		1,699,000			—			1,699,000
Common stock		87,900			—			87,900
Additional paid-in capital		11,313,358	(3)		(4,000,227	)		7,313,131
Accumulated deficit		(9,537,095	)(4)		(2,360,544	)		(11,897,639	)

Total stockholders’ equity (deficit)		3,563,163			(6,360,771	)		(2,797,608	)

Total liabilities and stockholders’ Equity (deficit)	$	17,589,342			—		$	17,589,342


(1)		— Additional discount on debt being amortized since issuance date.

(2)		— Fair value of derivative financial instruments at December 31, 2007 based on Black-Scholes model valuation.

(3)		— Represents the initial entries to record the fair value of derivatives at issuance date.

(4)		— Represents the total of amortization of additional discount on debt, finance expense on derivatives, reversal of beneficial conversion feature and gain on change in fair value of derivatives since issuance of warrants.

F-11

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)


2007 Summary Consolidated Statement of Operations:	As Reported			Adjustments			As Restated

Installation and other services	$	1,369,097			—		$	1,369,097
Equipment sales		4,182,486			—			4,182,486

Total revenues		5,551,583			—			5,551,583
Cost of sales		3,174,127			—			3,174,127

Gross Profit		2,377,456			—			2,377,456
Operating Expenses:					—
General and administrative		4,305,139						4,305,139
Depreciation		69,921						69,921

Total operating expenses		4,375,060			—			4,375,060

Other Income (Expense):					—
Interest expense		(621,633	)		—			(621,633	)
Amortization expense of loan discount and intangibles		(4,999,760	)(A)		(414,943	)		(5,414,703	)
Finance expense on derivatives		—	(B)		(12,348,466	)		(12,348,466	)
Gain on change in fair value of derivative Financial instruments		—	(C)		10,402,865			10,402,865
Other income, net		14,493			—			14,493

Total other expenses		(5,606,900	)		(2,360,544	)		(7,967,444	)

Loss Before Income Taxes		(7,604,504	)		(2,360,544	)		(9,965,048	)
Provision for Income Taxes		—			—			—

Net Loss	$	(7,604,504	)	$	(2,360,544	)	$	(9,965,048	)

Preferred Stock Dividends		(139,856	)		—			(139,856	)

Net loss attributable to common Shareholders	$	(7,744,360	)	$	(2,360,544	)	$	(10,104,904	)

Loss per share-basic and fully diluted	$	(0.096	)	$	(0.003	)	$	(0.126	)

Weighted average shares outstanding		80,264,658						80,264,658


(A)		— Additional discount on debt being amortized.

(B)		— Financing expense recognized for warrants at fair value in excess of face amount of debt.

(C)		— Change in fair value of derivatives.


Summary Statement of Cash Flows for the Year Ended December 31, 2007:	As Reported			Adjustments		As Restated

Net Cash Used in Operating Activities	$	(1,048,494	)		—	$	(1,048,494	)
Net Cash Used in Investing Activities		(9,171,230	)		—		(9,171,230	)
Net Cash Provided by Financing Activities		10,371,904			—		10,371,904

Increase in cash		152,180			—		152,180
Cash at Beginning of Period		35,666			—		35,666

Cash at End of Period	$	187,846			—	$	187,846

F-12

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

The Company issued the following warrants in conjunction with various financing related activities:


			2008 Vicis
	Hilco		Financing
Financing	$	6,000,000	$	5,500,000

Total number of warrants		61,273,872		250,000,000
Exercise Price	$	0.137	$	0.03
Term of warrants (years)		5		5
Debt issuance costs	$	1,659,773	$	—
Face value of debt/equity	$	4,340,227	$	5,500,000
Fair value of derivative at Inception	$	18,008,466	$	9,656,069
Financing expense recorded	$	12,348,466	$	4,156,069

The above amounts have been classified as derivative financial instruments because of the put provisions inherent in the redemption provision included in the warrant agreements and recorded at issuance as a liability for “Derivative financial instruments at estimated fair value” on the Company’s balance sheet in accordance with the current authoritative guidance including EITF 00-19. In accordance with provisions of SFAS 133, the Company is required to adjust the carrying value of the above warrants to its fair value at each balance sheet date and recognize any change since the prior balance sheet date as a component of other expense or income. In valuing the above warrants, the Company used the Black-Scholes model. Changes in warrant liabilities for 2007 and 2008 were as follows:


	2007
	3/31/07		6/30/07		9/30/07		12/31/07
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Derivative financial instrument at opening balance sheet date	$	—	$	—	$	—	$	19,789,148
Fair value of new derivative during the period		—		—		18,008,466		—
Change in estimated fair market value of derivative financial instrument		—		—		1,780,682		(12,183,547	)

Derivative financial instrument at closing balance sheet date	$	—	$	—	$	19,789,148	$	7,605,601


	2008
	3/31/08			6/30/08			9/30/08		12/31/08
	(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
Derivative financial instrument at opening balance sheet date	$	7,605,601		$	3,448,910		$	1,385,780	$	11,967,175
Fair value of new derivative during the period		—			—			9,656,069		—
Change in estimated fair market value of derivative financial instrument		(4,156,691	)		(2,063,130	)		925,326		49,288

Derivative financial instrument at closing balance sheet date	$	3,448,910		$	1,385,780		$	11,967,175	$	12,016,463

F-13

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

Effects of recording the above discussed derivatives at fair value on the applicable previously issued unaudited quarterly financial statements for 2007 and 2008 are as follows:

Period ended September 30, 2007:


	As Reported		Adjustments			As Restated
Balance Sheet as of September 30, 2007	(Unaudited)		(Unaudited)			(Unaudited)

Total current assets	$	3,855,714		—		$	3,855,714
Total other assets		14,477,425		—			14,477,425

Total Assets	$	18,333,139		—		$	18,333,139

Total current liabilities	$	6,242,721		—		$	6,242,721
Long-term debt		2,549,027		(1,659,773	)		889,254
Derivative financial instruments at Fair value		—		19,789,148			19,789,148

Total Liabilities		8,791,748		18,129,375			26,921,123

Total stockholders’ equity (deficit)		9,541,391		(18,129,375	)		(8,587,984	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	18,333,139		—		$	18,333,139


Summary Consolidated Statement of Operations	As Reported			Adjustments			As Restated
for the Three Months Ended September 30, 2007:	(Unaudited)			(Unaudited)			(Unaudited)

Total revenues	$	927,036			—		$	927,036
Total cost of goods sold		555,217			—			555,217

Gross profit		371,819			—			371,819
Total operating expenses		856,871			—			856,871
Total other expenses		(954,724	)		(14,129,148	)		(15,083,872	)
Net income (loss)		(1,439,776	)		(14,129,148	)		(15,568,924	)

Preferred stock dividends		(43,506	)		—			(43,506	)

Net income (loss) attributable to common Shareholders	$	(1,483,282	)		(14,129,148	)		(15,612,430	)
Net income (loss) per share-basic	$	(0.018	)		(0.172	)	$	(0.19	)

Weighted average shares outstanding-basic		81,327,632			—			81,327,632


Summary Statement of Cash Flows for the Period	As Reported			Adjustments		As Restated
Ended September 30, 2007:	(Unaudited)			(Unaudited)		(Unaudited)

Net Cash Used in Operating Activities	$	(1,036,693	)		—	$	(1,036,693	)
Net Cash Used in Investing Activities		(9,109,531	)		—		(9,109,531	)
Net Cash Provided by Financing Activities		10,244,243			—		10,244,243

Increase in cash		98,019			—		98,019
Cash at Beginning of Period		35,666			—		35,666

Cash at End of Period	$	133,685			—	$	133,685

F-14

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

Period ended March 31, 2008:


	As Reported		Adjustments			As Restated
Balance Sheet as of March 31, 2008	(Unaudited)		(Unaudited)			(Unaudited)

Total current assets	$	3,732,204		—		$	3,732,204
Total other assets		13,944,625		—			13,944,625

Total Assets	$	17,676,829		—		$	17,676,829

Total current liabilities	$	14,075,792		—		$	14,075,792
Long-term debt		1,835,962		(829,887	)		1,006,075
Derivative financial instruments at Fair value		—		3,448,910			3,448,910

Total Liabilities		15,911,754		2,619,023			18,530,777

Total stockholders’ equity (deficit)		1,765,075		(2,619,023	)		(853,948	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	17,676,829		—		$	17,676,829


Summary Consolidated Statement of Operations	As Reported			Adjustments		As Restated
for the Three Months Ended March 31, 2008:	(Unaudited)			(Unaudited)		(Unaudited)

Total revenues	$	4,208,066			—	$	4,208,066
Total cost of goods sold		2,229,881			—		2,229,881

Gross profit		1,978,185			—		1,978,185
Total operating expenses		1,781,958			—		1,781,958
Total other expenses		(1,994,314	)		3,741,748		1,747,343
Net income (loss)		(1,798,087	)		3,741,748		1,943,661

Preferred stock dividends		(43,506	)		—		(43,506	)

Net income (loss) attributable to common Shareholders	$	(1,841,593	)		3,741,748		1,900,155
Net income (loss) per share-basic	$	(0.020	)		0.042	$	0.022

Weighted average shares outstanding-basic		87,900,000			—		87,900,000

Net income (loss) per share-fully diluted	$	(0.020	)		0.021	$	0.001

Weighted average shares outstanding-fully diluted		87,900,000			1,221,671,600		1,309,571,600


Summary Statement of Cash Flows for the Period	As Reported			Adjustments		As Restated
Ended March 31, 2008:	(Unaudited)			(Unaudited)		(Unaudited)

Net Cash Used in Operating Activities	$	(268,106	)		—	$	(268,106	)
Net Cash Used in Investing Activities		(83,911	)		—		(83,911	)
Net Cash Provided by Financing Activities		253,164			—		253,164

Decrease in cash		(98,853	)		—		(98,853	)
Cash at Beginning of Period		187,846			—		187,846

Cash at End of Period	$	88,993			—	$	88,993

F-15

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

Period ended June 30, 2008:


	As Reported			Adjustments			As Restated
Balance Sheet as of June 30, 2008	(Unaudited)			(Unaudited)			(Unaudited)

Total current assets	$	4,420,853			—		$	4,420,853
Total other assets		13,818,289			—			13,818,289

Total Assets	$	18,239,142			—		$	18,239,142

Total current liabilities	$	17,199,245			—		$	17,199,245
Long-term debt		1,044,607			(414,944	)		629,663
Derivative financial instruments at Fair value		—			1,385,780			1,385,780

Total Liabilities		18,243,852			970,836			19,214,688

Total stockholders’ equity (deficit)		(4,710	)		(970,836	)		(975,546	)

Total Liabilities and Stockholders’ Equity (Deficit)	$	18,239,142			—		$	18,239,142


Summary Consolidated Statement of Operations	As Reported			Adjustments		As Restated
for the Three Months Ended June 30, 2008:	(Unaudited)			(Unaudited)		(Unaudited)

Total revenues	$	4,533,447			—	$	4,533,447
Total cost of goods sold		2,250,924			—		2,250,924

Gross profit		2,282,523			—		2,282,523
Total operating expenses		2,145,837			—		2,145,837
Total other expenses		(2,011,922	)		1,648,187		(363,735	)

Net income (loss)		(1,875,236	)		1,648,187		(227,049	)

Preferred stock dividends		(40,430	)		—		(40,430	)

Net income (loss) attributable to common Shareholders	$	(1,915,666	)		1,648,187		(267,479	)
Net income (loss) per share-basic	$	(0.021	)		0.018	$	(0.003	)

Weighted average shares outstanding-basic		90,714,185			—		90,714,185


Summary Statement of Cash Flows for the Period	As Reported			Adjustments		As Restated
Ended June 30, 2008:	(Unaudited)			(Unaudited)		(Unaudited)

Net Cash Used in Operating Activities	$	(454,317	)		—	$	(454,317	)
Net Cash Used in Investing Activities		(148,912	)		—		(148,912	)
Net Cash Provided by Financing Activities		649,202			—		649,202

Increase in cash		45,973			—		45,973
Cash at Beginning of Period		187,846			—		187,846

Cash at End of Period	$	233,819			—	$	233,819

F-16

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

Period ended September 30, 2008:


	As Reported		Adjustments			As Restated
Balance Sheet as of September 30, 2008	(Unaudited)		(Unaudited)			(Unaudited)

Total current assets	$	9,918,398		—		$	9,918,398
Total other assets		18,261,615		—			18,261,615

Total Assets	$	28,180,013		—		$	28,180,013

Total current liabilities	$	10,798,312		—		$	10,798,312
Long-term debt		3,501,866		—			3,501,866
Derivative financial instruments at Fair value		—		11,967,175			11,967,175

Total Liabilities		14,300,178		11,967,175			26,267,353

Total stockholders’ equity (deficit)		13,879,835		(11,967,175	)		1,912,660

Total Liabilities and Stockholders’ Equity (Deficit)	$	28,180,013		—		$	28,180,013


Summary Consolidated Statement of Operations	As Reported			Adjustments			As Restated
for the Three Months Ended September 30, 2008:	(Unaudited)			(Unaudited)			(Unaudited)

Total revenues	$	5,657,123			—		$	5,657,123
Total cost of goods sold		3,175,528			—			3,175,528

Gross profit		2,481,595			—			2,481,595
Total operating expenses		1,963,248			—			1,963,248
Total other expenses		(1,303,330	)		(5,496,339	)		(6,799,669	)

Net loss		(784,983	)		(5,496,339	)		(6,281,322	)

Preferred stock dividends		(2,019,353	)		1,983,607			(35,746	)

Net loss attributable to common Shareholders	$	(2,804,336	)		(3,512,732	)		(6,317,068	)
Net income loss per share-basic and fully diluted	$	(0.028	)		(0.053	)	$	(0.063	)

Weighted average shares outstanding		99,576,825			—			99,576,825


Summary Statement of Cash Flows for the Period	As Reported			Adjustments		As Restated
Ended September 30, 2008:	(Unaudited)			(Unaudited)		(Unaudited)

Net Cash Provided by Operating Activities	$	49,798			—	$	49,798
Net Cash Used in Investing Activities		(4,251,679	)		—		(4,251,679	)
Net Cash Provided by Financing Activities		6,012,946			—		6,012,946

Increase (decrease) in cash		1,811,065			—		1,811,065
Cash at Beginning of Period		187,846			—		187,846

Cash at End of Period	$	1,998,911			—	$	1,998,911

The determination of fair value includes significant estimates by management including volatility of the Company’s common stock, interest rates, and the probability of redemption or a future dilutive financing transaction among other items. The recorded value of the derivative financial instrument can fluctuate significantly based on fluctuations in the fair value of the Company’s common stock, as well as in the volatility of the stock price during the term used for observation and the term remaining for exercise of these warrants. The fluctuation in estimated fair value may be significant from period to period which in turn may have a significant impact on reported financial condition and results of operations.

F-17

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 2 — Restatement of Prior Periods (Continued)

In prior 10-K filings for the years ended 2007 and 2008 and related quarterly filings, the Company had incorrectly accounted for these warrants resulting in not recording the quarterly change in estimated fair value of derivative financial instruments. Accordingly the impact on the Company’s quarterly financial information is as follows:


	For the Three Months Ended 2008 (Unaudited)									Year Ended
	3/31/08			6/30/08			9/30/08			12/31/08
Net loss, as previously reported	$	(1,798,087	)	$	(1,875,236	)	$	(784,983	)	$	(4,830,790	)
Net income (loss), as restated	$	1,943,661		$	(227,049	)	$	(6,281,322	)	$	(4,986,482	)
Total liabilities, as previously reported	$	15,911,754		$	18,243,852		$	14,300,178		$	13,799,003
Total liabilities, as restated	$	18,530,777		$	19,214,688		$	26,267,353		$	25,815,466
Total equity (deficit), as previously reported	$	1,765,075		$	(4,710	)	$	13,879,835		$	13,495,136
Total equity (deficit), as restated	$	(853,948	)	$	(975,546	)	$	1,912,660		$	1,478,673

	Three Months Ended (Unaudited)									Year Ended
							9/30/07			12/31/07
Net loss, as previously reported	$						$	(1,439,776	)	$	(7,604,504	)
Net income (loss), as restated	$						$	(15,568,924	)	$	(9,965,048	)
Total liabilities, as previously reported	$						$	8,791,748		$	14,026,179
Total liabilities, as restated	$						$	26,921,123		$	20,386,950
Total equity (deficit), as previously reported	$						$	9,541,391		$	3,563,163
Total equity (deficit), as restated	$						$	(8,587,984	)	$	(2,797,608	)

Note 3 — Liquidity and Capital Resources

The Company completed the STN acquisition on September 23, 2008. As part of the acquisition, the Company was able to rearrange its debt and equity and obtain more favorable terms. The Company has a $2,000,000 line of credit with no outstanding balance and cash and cash equivalents of approximately $836,000 at December 31, 2008. The Company sustained a loss for the year ended December 31, 2008 of approximately $5.0 million, sustained losses in 2007 and 2006 and has a retained deficit of approximately $17.4 million. These losses were primarily due to the amortization expense related to the accounting treatment of warrants issued in connection with the debt raised to fund the USVD and STN acquisitions. For the year ended December 31, 2008, the Company had net cash used in operations of $332,352. Historically, the Company has relied on borrowings and equity financings to maintain its operations. The Company believes it has enough cash to operate for the coming year with its cash on hand, cash to be generated from operations and the borrowing availability on its credit lines. However, the recent economic downturn could have a material affect on its business operations.

F-18

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 4 — Significant Accounting Policies

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (GAAP) and to the practices within the telecommunications industry. The following summarizes the more significant of these policies.

Principles of Consolidation

The consolidated financial statements include the accounts of Brookside Technology Holdings Corp. and its wholly-owned subsidiaries, certain of which are Brookside Technology Partners, Inc., US Voice & Data, LLC, an Indiana Limited Liability Company, Standard Tel Acquisitions, Inc a California Corporation, Trans-West Network Solutions, Inc, a California Corporation and Standard Tel Networks, LLC, a California Limited Liability Company. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash Equivalents

For purposes of the statements of cash flows, the Company considers short-term investments, purchased with a remaining maturity at purchase of three months or less, to be cash equivalents. Restricted cash and deposits in the cash collateral account are not considered to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment:


Classification		Useful Lives
Telecom equipment		3-5 years
Software		3-5 years
Computer equipment		3-5 years
Furniture, fixtures and leasehold improvements		2-7 years

The Company periodically evaluates the estimated useful lives used to depreciate its assets and the estimated amount of assets that will be abandoned or have minimal use in the future. While the Company believes its estimates of useful lives are reasonable, significant differences in actual experience or significant changes in assumptions may affect future depreciation expense.

Expenditures for maintenance and repairs are charged to expense as incurred. Major expenditures for additions, replacements and betterments are capitalized. When assets are sold, retired or fully depreciated, the cost, reduced by the related amount of accumulated depreciation, is removed from the accounts and any resulting gain or loss is recognized as income or expense.

F-19

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 4 — Significant Accounting Policies (continued)

Financial Instruments and Credit Risk

Financial instruments that potentially subject the Company to credit risk include cash and cash equivalents, accounts receivable and unbilled receivables from customers. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Accounts receivable and unbilled receivables are generally unsecured. With respect to accounts receivable and unbilled receivables, the Company performs ongoing credit evaluations of customers and generally does not require collateral.

Receivables are concentrated with a small number of customers. The Company maintains reserves for potential credit losses on customer accounts when deemed necessary. There were no allowances for credit losses at December 31, 2008 and 2007.

The amounts reported for cash and cash equivalents, receivables, accounts payable, and accrued liabilities are considered to approximate their market values based on comparable market information available at the respective balance sheet dates and their short-term nature. The Company believes that the notes payable fair values approximate their notional value at December 31, 2008.

Inventories

Inventories are comprised primarily of telephone systems ordered for installations, and spare parts or common parts used in telephone system installations and are stated at the lower of cost (first-in, first out) or market through the use of an inventory valuation allowance. In order to assess the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements compared to current or committed inventory levels. Allowance requirements generally increase as the projected demand requirement decreases due to market conditions, technological and product life cycle changes.

Redeemable Securities

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS 150). SFAS 150 requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. The Company classified Series B Stock as a liability in the balance sheet and related accretion being charged to interest expense in the statement of operations. On July 3, 2008, pursuant to the Vicis Agreement, Vicis agreed to convert this Series B Stock to Series A Stock. The Series A Stock is not presently redeemable and has been classified in equity in the consolidated financial statements.

F-20

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 4 — Significant Accounting Policies (continued)

Convertible Securities With Beneficial Conversion Features

Under EITF No.00-27, “ Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments, ” the Company considered the effect of a beneficial conversion feature of the Series A Stock issued in the December 2007 private placement and subsequently issued to Vicis during 2008. Since the redemption requirement of the Series A Stock is contingent on the occurrence of future events, the Company is not accreting the carrying value of the Series A Stock to redemption value and will not do so until the occurrence of any one of those future events becomes probable.

Derivative Financial Instruments at Fair Value . Amounts have been classified as derivative financial instruments because of the put provisions inherent in the redemption provision included in the Hilco and Vicis warrant agreements and recorded at issuance as a liability for “Derivative financial instruments at estimated fair value” on the Company’s balance sheet in accordance with the current authoritative guidance including EITF 00-19. In accordance with provisions of SFAS 133, the Company is required to adjust the carrying value of the above warrants to its fair value at each balance sheet date and recognize any change since the prior balance sheet date as a component of other expense or income. In valuing the above warrants, the Company used the Black-Scholes model.

The Company’s Series A Stock is redeemable under certain conditions, including:

o		The Company effecting a merger or consolidation with another entity

o		The Company sells all or substantially all of the Company’s assets

o		The Company’s shareholders approve a tender or exchange offer, or

o		The Company’s holders of the common stock exchange their shares for securities or cash

Accordingly, upon the occurrence of any one of these events, the Series A Stock will become redeemable and the Company will accrete the carrying value of the Series A Stock to redemption value at that time.

Goodwill and Intangibles

Goodwill represents the acquisition costs in excess of the fair value of net tangible and intangible assets of the businesses purchased. This premium paid for the acquisitions is based on management’s belief that the acquired technologies, businesses and engineering talent were of strategic importance in the Company’s growth strategy. Intangible assets consist primarily of the value of intellectual property, customer relationships, non-compete agreements, trademarks and goodwill. Goodwill is evaluated annually for impairment, or earlier if indications of impairment exist. The determination as to whether or not goodwill or other intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the reporting units. Changes in operating strategy and market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets.

The Company does an annual testing of goodwill in accordance with provisions of SFAS 144, “Accounting for the Impairment or Disposal of Long Lived Assets”. In accordance with these provisions, the Company performs testing of goodwill for impairment by comparing the fair value of the reporting unit with its carrying value including goodwill. If the fair value of the reporting unit exceeded the carrying value including goodwill, no further testing for goodwill was deemed necessary. Goodwill is comprised of two reporting units:

1. Goodwill relating to acquisition of USVD

Note 4 — Significant Accounting Policies (continued)

F-21

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

2. Goodwill relating to acquisition of STN

As the STN acquisition was consummated during September 2008, the Company did not perform the impairment testing for goodwill. The Company tested goodwill relating to USVD by comparing the fair value of USVD (which is a separate reporting entity) with the carrying value, including goodwill. Based on testing, the Company assessed the fair value of USVD at December 31, 2008 to be approximately $13.7 million compared to the net book value of the Company of $13.6 million. The fair value of the reporting entity was based on EBITDA for the year ended December 31, 2008, which was approximately $3.0 million. With a multiple of 4.5 times, which is consistent with the amount paid for the STN acquisition and is less than the multiple paid for USVD, the fair value was deemed to be approximately $13.7 million. Accordingly, the Company concluded that no impairment of goodwill exists as of December 31, 2008.

Every quarter, the Company reassesses the impact of the economic downtown and changes in market conditions in the assessment of the changes to fair value computation for the above acquisitions. This was reflected in the Company’s assessment of fair value computation of USVD where the Company used a lower multiple of EBITDA in computation of fair value due to economic downtown and changes in market conditions. The Company will continue to reassess the assumptions underlying the Company’s valuation approach.

Impairment of Long-lived Assets and Long-lived Assets to be Disposed of

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair market value less costs to sell. There were no impairments to long-lived assets as of December 31, 2008 and 2007.

Extinguishment of Debt

Extinguishments of debt, unless the extinguishment is a troubled debt restructuring or a conversion by the holder pursuant to conversion privileges contained in the original debt issue, requires the difference between the net carrying amount of the extinguished debt and the reacquisition price of the extinguished debt to be recognized currently in income of the period of extinguishment. The reacquisition price of the extinguished debt is to be determined by the value of the common or preferred stock issued or the value of the debt—whichever is more clearly evident.

The extinguishment of convertible debt does not change the character of the security as between debt and equity at that time. Therefore, a difference between the cash acquisition price of the debt and its net carrying amount shall be recognized currently in income in the period of extinguishment as a loss or gain.

Revenue Recognition

The Company derives its revenues primarily from sales of converged VoIP telecommunications equipment and professional services implementation/installation, data and wireless equipment and installation, recurring maintenance/managed service and network service agreements and other services. The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104 “Revenue Recognition, Corrected Copy” (“SAB 104”). Under SAB 101 and SAB 104, revenue is recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectibility is reasonably assured. Sales are recorded net of discounts, rebates, and returns.

Note 4 — Significant Accounting Policies (continued)

F-22

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

based on total estimated sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Provision for anticipated losses on uncompleted contracts is made in the period in which such losses become evident.

Revenue from contracts that contain multiple elements that are not accounted for under the percentage-of-completion method are accounted for in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Revenue from these contracts is allocated to each respective element based on each element’s relative fair value, if determinable, and is recognized when the respective revenue recognition criteria for each element are fulfilled. The Company’s recognizes revenue from the equipment sales and installation services using the percentage of completion method. The services for maintaining the systems we install are sold as a stand-alone contract and treated according to the terms of the contractual arrangements then in effect. Revenue from this service is generally recognized over the term of the subscription period or the terms of the contractual arrangements then in effect. A majority of equipment sales and installation services revenues are billed in advance on a monthly basis based upon the fixed price, and are included both accounts receivable and deferred income on the accompanying balance sheets. Direct

costs incurred on such contracts are deferred until the related revenue is recognized and are included in deferred contract costs on the accompanying balance sheets. The Company also provides professional services (maintenance/managed services) on a fixed price basis. These services are billed as bundles and or upon completion of the services.

Warranty Reserves

Reserves are provided for estimated warranty costs when revenue is recognized. The costs of warranty obligations are estimated based on warranty policy or applicable contractual warranty, historical experience of known product failure rates and use of materials and service delivery charges incurred in correcting product failures. Specific warranty accruals may be made if unforeseen technical problems arise. If actual experience, relative to these factors, adversely differs from these estimates, additional warranty expense may be required. At December 31, 2008 and 2007, the Company has accrued $231,906 and $0, respectively. The Company’s warranty accrual takes into account the telecommunications equipment covered by original equipment manufacturer warranties. Prior to December 31, 2008, warranty costs not covered by the original equipment manufacturer warranty were not considered material to the financial statements

Advertising

The Company recognizes advertising expenses as incurred.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2008 presentation.

Income taxes

Income taxes are accounted for under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Note 4 — Significant Accounting Policies (continued)

F-23

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

The Company records a valuation allowance to reduce its deferred assets when it is more likely than not that some portion or all of the deferred tax assets will expire before realization of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends on the Company’s ability to generate sufficient future taxable income. Accordingly, establishment of the valuation allowance requires the Company’s management to use estimates and make assumptions regarding significant future events.

The Company evaluates its tax positions under FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes . Accordingly, the Company’s management first determines whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. Any tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. Each identified tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. No such tax positions were identified during the years ended December 31, 2008 and 2007.

Earnings Per Common Share

Basic and diluted net income per common share is presented in conformity with Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128) for all periods presented. Basic earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net loss available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive common shares outstanding.

At December 31, 2008, there were potentially dilutive securities outstanding consisting of Series A Stock, warrants, and stock options issued to employees. The potential shares would be anti-dilutive during 2008, and as such, have not been considered in the calculation of earnings per share. At December 31, 2008, the number of potentially dilutive shares that are anti-dilutive at December 31, 2008 consisted of 19,200,000 stock option shares, 12,216,716 Series A Stock (exercisable into 407,223,867 common shares), and 544,440,793 common shares purchase warrants. At December 31, 2007, there were potentially dilutive securities outstanding consisting of Series A Stock, convertible debt, warrants, and stock options issued to employees of 14,000,000.

Derivatives

A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts (“embedded derivatives”) and for hedging activities. As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions. However, complex transactions that the Company entered into in order to finance its operations and acquisitions, and the subsequent restructuring of such debt transactions, involved financial instruments containing certain features that have resulted in the instruments being deemed derivatives or containing embedded derivatives. The Company may engage in other similar complex equity or debt transactions in the future, but not with the intention to enter into derivative instruments. Derivatives and embedded derivatives, if applicable, are measured at fair value and marked to market through earnings, as required by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS 133”). However, such new and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation often incorporate significant estimates and assumptions, which may impact the level of precision in the financial statements.

Stock Based Compensation

The Company recognizes the compensation cost relating to share-based payment transactions in accordance with provisions of SFAS No. 123 (revised 2004), Share-Based Payment. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). The Company recorded $165,237 and $915,000 for stock Note 4 compensation cost for the years ended December 31, 2008 and 2007, respectively.

Note 4 — Significant Accounting Policies (continued)

F-24

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations-Revised 2007. SFAS 141R provides guidance on improving the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141R applies to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 141R to have a material effect on the Company’s financial statements.

In April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible Assets , (the “FSP”), which amends the factors that must be considered in developing renewal or extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible asset under SFAS No. 142. The FSP amends paragraph 11(d) of SFAS No. 142 to require an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset.

The FSP also requires the following incremental disclosures for renewable intangible assets:

	•		The weighted-average period prior to the next renewal or extension (whether explicit and implicit) for each major intangible asset class

	•		The entity’s accounting policy for the treatment of costs incurred to renew or extend the term of a recognized intangible asset

	•		For intangible asset renewed or extended during the period:

	•		For entities that capitalize renewal or extension costs, the costs incurred to review or extend the asset, for each major intangible asset class

	•		The weighted-average period prior to the next renewal or extension (whether explicit and implicit) for each major intangible asset class

The FSP is effective for financial statements for fiscal years beginning after December 15, 2008. The guidance for determining the useful life of a recognized intangible asset must be applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. Accordingly, the FSP would not serve as a basis to change the useful life of an intangible asset that was acquired prior to the effective date (January 1, 2009 for a calendar year company). However, the incremental disclosure requirements described above would apply to all intangible assets, including those recognized in periods prior to the effective date of the FSP. The Company does not expect the adoption of this FSP to have a material effect on the Company’s financial statements.

As described in “Adoption of New Accounting Standards,” the Company adopted SFAS No. 157 effective January 1, 2008. SFAS 157 established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. SFAS 157 does not require assets and liabilities that were previously recorded at cost to be recorded at fair value or for assets and liabilities that are already required to be disclosed at fair value. SFAS 157 introduced, or reiterated, a number of key concepts which form the foundation of the fair value measurement approach to be used for financial reporting purposes. The fair value of the Company’s financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price).

Note 4 — Significant Accounting Policies (continued)

F-25

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

			Level 1—quoted prices in active markets for identical assets and liabilities.

			Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities.

			Level 3—unobservable inputs.

The adoption of FAS 157 did not have an effect on the Company’s financial condition or results of operations, but SFAS 157 introduced new disclosures about how the Company values certain assets and liabilities. Much of the disclosure is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. As of December 31, 2008, the Company did not have financial assets or liabilities that would require measurement on a recurring basis based on the guidance in SFAS 157. At December 31, 2008 all financial assets consisted of cash and cash equivalents at financial institutions in the United States.

In February 2008, the FASB issued Staff Position (FSP) No. FAS 157-2, which delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, excluding those assets that are recognized or disclosed at fair value on a recurring basis for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. the Company elected a partial deferral of SFAS No. 157 under the provisions of FSP No. FAS 157-2, associated with the measurement of fair value used when evaluating goodwill, other intangible assets and other long-lived assets for impairment.

Note 5 —Billings in Excess of Revenues

Billings in excess of revenues at December 31, 2008 and 2007 consisted of the following:


	December 31,		December 31,
	2008		2007
Customer deposits and deferred income on installation contracts	$	1,683,266	$	718,574
Deferred revenue on maintenance contracts		937,591		1,057,697

	$	2,620,857	$	1,776,271

Note 6 —Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:


	December 31,		December 31,
	2008		2007
Accounts payable, trade	$	1,857,905	$	981,766
Accrued warranty liability		231,906		—
Other accrued expenses		121,800		—

Total	$	2,211,611	$	981,766

Note 7 —Long Term Debt

Long-term debt as of December 31, 2008 and 2007 consisted of the following:

F-26

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements


	December 31,
	2008			December 31, 2007
Note payable to an individual, unsecured, accruing interest at 2% per annum, with monthly payments of $5,215 due May 1, 2010.	$	98,049		$	153,066
Note payable to executive officers and shareholders, unsecured, accruing interest at 0% per annum, due in installments over 3 years with a maturity date of September 26, 2009, less unamortized discount of $75,812 and $283,368, respectively.		1,524,188			2,816,632
Notes payable to an individual, unsecured, accruing interest at 7% per annum, with monthly payments of $1,130 due May 1, 2011.		31,006			40,361
Note payable to executive officer and shareholders, unsecured, accruing interest at 7% per annum, with monthly payments of $968, due September 1, 2010.		16,945			28,558
Notes payable to shareholder, unsecured, accruing interest at 7% per annum, with monthly payments of $6,432 due June 1, 2010.		115,360			176,547
Note payable to Vicis, secured by all assets of the Company, accruing interest at 10% per annum, principal and accrued interest due in full September 26, 2008. Principal amount due of $7,088,301. Formerly payable to Hilco Financial, LLC. Note was assigned to Vicis on June 18, 2008 and subsequently extinguished on September 23, 2008. This note had an unamortized discount of $4,050,468 at December 31, 2007.		—			1,991,100
Note payable to Dynamic Decisions Strategic Opportunities (“DD”), unsecured, accruing interest at 10% per annum, total principal and accrued interest due September 26, 2008. Note was subsequently assigned to Vicis on July 3, 2008 and subsequently extinguished on December 31, 2008. This note had an unamortized discount of $403,677 at December 31, 2007.		—			596,323
Series B Preferred Stock issued to Vicis Capital, unsecured, accruing interest at 16% per annum, matured on December 27, 2007, converted to Series A preferred stock on July 3, 2008.		—			3,000,000
Subordinated Note Payable to Vicis Capital Master Fund, accruing interest at 10%, maturing April 15, 2010, subordinated to the Chatham senior note. Net of discount of $118,917. (STN acquisition.)		1,381,083			—
Senior note payable, Chatham Investment Fund III, LLC and Chatham Investment Fund III QP, LLC, accruing interest at the LIBOR rate plus 9.00%, payments of $83,333 beginning on the first of the month after 6 months from the closing date, with the balance due on the third anniversary of the closing date of September 23, 2008, net of unamortized discount of $2,658,050. (STN acquisition)		4,380,916			—
Secured notes payable to Enterprise Fleet Services, accruing interest at 5% per annum, with monthly payments of $1,476, maturing June 1, 2010. Notes are secured by vehicles.		60,617			—
Secured notes payable to GMAC, accruing interest at 9.25% with monthly payments of $2,272, maturing July 14, 2012. Notes are secured by vehicles.		82,673			—
Secured notes payable to Huntington Bank, accruing interest at a prime rate plus 3.73% with monthly payments of $383, with a maturity date of March 28, 2009. Note is secured by a vehicle.		1,007			10,666
Secured notes payable to NEC Financial Services, accruing interest at 11.25% with monthly payments of $1,128, with a maturity date of February 25, 2011. Note is secured by testing equipment.		30,468			—

Total long term debt		7,722,312			8,813,253
Less current portion		(2,669,177	)		(8,207,900	)

Long term portion	$	5,053,135		$	605,353

Note 7 —Long Term Debt (Continued)

F-27

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Principal maturities of long-term debt as of December 31, 2008 are as follows:


Years Ending December 31,	Gross
2009	$	2,669,177
2010		2,639,001
2011		5,247,367
2012		19,546
2013		—

		10,575,091
Less: Unamortized discounts		(2,852,779	)

Net of Discounts	$	7,722,312

Warrants Issued in Connection with Financing

In connection with the foregoing financing of the acquisition of USVD and STN, the Company issued debt at a discount.

A summary of the notes payable and discounts is as follows:
As a result of these contract provisions, the Hilco Senior Note balance at Inception (September 26, 2007) was adjusted as follows:


Notional balance of Hilco Senior Note	$	6,000,000
Adjustments:
Discount for warrant issued (based on relative fair value assigned)		(5,660,000	)
Discount for loan fees paid to Hilco on Note		(340,000	)

Hilco Senior Note balance, net of unamortized discount at September 26, 2007	$	—

On June 18, 2008, the Hilco Senior Note and warrants were assumed by Vicis, then converted to Series A Stock on July 3, 2008.

As a result of these contract provisions, the DD Subordinated Note balance at Inception (August 31, 2007) was adjusted as follows:


Notional balance of DD Subordinated Note at August 31, 2007	$	1,000,000
Adjustments:
Discount for warrant (based on relative fair value assigned)		(696,049	)

DD Subordinated Note balance, net of unamortized discount at August 31, 2007	$	303,951

On July 3, 2008, the DD Subordinated Note and warrants were assumed by Vicis.

As a result of these contract provisions, the Series B Stock balance at Inception (September 14, 2007) was adjusted as follows:


Notional balance of Series B Stock	$	3,000,000
Adjustments:
Discount for warrants issued (based on relative fair value assigned)		(2,054,995	)
Discount for beneficial conversion feature (based on relative fair value assigned)		(695,005	)
Discount for loan fees paid to Vicis		(250,000	)

Series B Stock balance, net of unamortized discount at September 14, 2007	$	—

The Series B Stock and warrants were converted on July 3, 2008 to Series A Stock.

F-28

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 7 —Long Term Debt (continued)

As a result of these contract provisions, the USVD Seller’s Note balance at Inception (September 14, 2007) was adjusted as follows:


Notional balance of USVD Seller’s Note	$	3,100,000
Adjustments:
Discount for imputed interest		(352,066	)

USVD Seller’s Note balance, net of unamortized discount at September 14, 2007	$	2,747,934

USVD Seller’s Note at December 31, 2008-

The USVD Seller’s Note balance on the consolidated balance sheet as of December 31, 2008 is comprised of the following:


Notional balance of USVD Seller’s Note at December 31, 2008	$	1,600,000
Adjustments:
Unamortized discount		(75,812	)

USVD Seller’s Note balance, net of unamortized discount at December 31, 2008	$	1,524,188

The following assumptions were used in the preparation of the Warrant valuations using the Black-Scholes method, at inception (September 26, 2006), December 31, 2007 and February 21, 2007:


	Hilco Note			DD Sub Debt			Series B
Assumptions	Warrant			Warrant			Warrant

Dividend yield		0.00	%		0.00	%		0.00	%
Risk-free interest rate		4.21	%		4.21	%		4.21	%
Volatility		61.55	%		61.55	%		61.55	%
Expected Term	5 years			5 years			5 years

As previously reported, as of July 3, 2008, Vicis purchased and assumed from Hilco Financial, LLC (“Hilco”), the Company’s prior senior lender, and from DD, the Company’s prior mezzanine lender, all their credit agreements, loans and promissory notes under which Hilco and DD had loaned to the Company representing an aggregate of $8,100,000 (“Vicis Debt”). In connection with the closing of the STN Acquisition and the Chatham Financing, Vicis and the Company entered into, and closed upon, a Securities Purchase and Loan Conversion Agreement, dated September 23, 2008, pursuant to which the Company, in full satisfaction of the Vicis Debt: (i) paid $2,250,000 in cash to Vicis; (ii) delivered to Vicis a subordinated note in the principal amount of $1,500,000, bearing interest at 10% and maturing on April 15, 2010; and (iii) converted the balance of the Vicis Debt (assumed from Hilco and DD), including all accrued interest of $676,384, in the combined aggregate amount of $5,026,384, into 5,026,384 shares of the Company’s Series A Stock. Vicis entered into a subordination agreement with Chatham, wherein Vicis agreed to subordinate the Vicis Subordinated Note to the Loans. As a result, all Prior Credit Documents have been terminated effective September 23, 2008.

The Company concluded that the cash and the Series A Stock exchanged for equal amounts of debt would result in no gain or loss on the extinguishment. The Company determined that the remaining $1,500,000 of debt at 15% per annum market rate had a fair value of $151,619 less than the new debt of $1,500,000 at 10% per annum actual rate due to the difference in interest rates. Therefore, the Company recognized a gain on the extinguishment of $151,619. The Company determined that the new debt should be carried at its appropriate fair value and the difference to the old debt’s carrying value at exchange is a gain or loss on extinguishment.


Notional balance of Vicis Note	$	1,500,000
Adjustments:
Discount for gain on extinguishment		(151,619	)

Vicis Note balance, net of unamortized discount at September 23, 2008	$	1,348,381

F-29

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 7 —Long Term Debt (continued)

The Vicis Note balance on the consolidated balance sheet as of December 31, 2008 is comprised of the following:


Notional balance of Vicis Note at December 31, 2008	$	1,500,000
Adjustments:
Unamortized discount for gain on extinguishment		(118,917	)

Vicis Note balance, net of unamortized discount at December 31, 2008	$	1,381,083

Long-term Debt — Acquisition of STN

Concurrently with the closing of the STN Acquisition, the Company and its five subsidiaries (U.S. Voice and Data, LLC, Brookside Technology Partners, Inc., Acquisition Sub, Trans-West and STN (hereinafter, the Company and its five subsidiaries collectively are referred to as the “Borrowers”) entered into a Credit Agreement (the “Chatham Credit Agreement”) with Chatham Investment Fund III, LLC, Chatham Investment Fund III QP, LLC and Chatham Credit Management III, LLC (“Chatham”), pursuant to which Chatham agreed to provide a $7,000,000 term loan and a $2,000,000 revolving line of credit (collectively the “Loans”). The Loans are evidenced by a Term Note and a Revolving Note. As a condition precedent to the extension of the Loans: (a) the Borrowers entered into a Pledge Agreement, dated September 23, 2008, pursuant to which the Borrowers pledged the stock of each subsidiary owned by it as collateral to secure payment of the Loans; (b) the Borrowers granted to Chatham a Warrant to purchase an aggregated of 140,930,835 shares of Borrower’s Common Stock (“Chatham Warrants”); and (c) the Borrowers entered into a Warrant Purchase and Registration Rights Agreement, dated September 23, 2008, pursuant to which, among other things, the Borrowers agreed to register the resale of the shares underlying the Chatham Warrants upon demand by Chatham. The Loans have a term of three years and bear interest, at the following rates: (i) with respect to the Revolving Note, LIBOR plus 4.00% per annum, and (ii) with respect to the Term Loan, LIBOR Rate plus 9.00% per annum. Additionally, the Chatham Credit Agreement contains standard representations, warranties and covenants that require the Borrowers, on a consolidated basis, to maintain at the end of each month: (1) a fixed charge coverage ratio for the 12 months then ended of at least 1.75:1; and (2) a leverage ratio as of the last day of such fiscal month and for the 12 months then ended of not more than 3:1, in each case calculated as set forth in the Credit Agreement. Although the Borrowers were in compliance with all of its covenants at December 31, 2008, the Borrowers are currently not in compliance with the leverage ratio. The leverage ratio for the 12 months ended January 31, 2009 was 3.20:1. The forgoing transactions (the “Chatham Financing”) were consummated on September 23, 2008. Prior to the closing of the Chatham Financing, the Borrowers did not have any relationship with Chatham.

As a result of the note provisions, the Notional balance of Chatham Senior Note balance at Inception (September 23, 2008) was adjusted as follows:


Notional balance of Chatham Senior Note	$	7,000,000
Adjustments:
Discount for warrant issued (based on relative fair value assigned)		(2,901,388	)

Chatham Senior Note balance, net of unamortized discount at September 23, 2008	$	4,098,612

The following assumptions were used in the preparation of the Warrant valuations using the Black-Scholes method, at inception (September 23, 2008):


	Chatham Note
Assumptions	Warrant

Dividend yield		0.00	%
Risk-free interest rate		4.21	%
Volatility		181.04	%
Expected Term	5 years

F-30

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 7 —Long Term Debt (continued)

The Chatham Senior Note balance on the consolidated balance sheet as of December 31, 2008 is comprised of the following:


Notional balance of Chatham Senior Note at December 31, 2008	$	7,038,966
Adjustments:
Unamortized discount for gain on extinguishment		(2,658,050	)

Chatham Senior Note balance, net of unamortized discount at December 31, 2008	$	4,380,916

Change in unamortized discount and loan costs of the Note —

For the year ended December 31, 2008, the discount on the above Notes changed for amortization of discounts in connection with the notes. The total discount on the Notes changed from $8,338,342 at inception to $3,848,016 at December 31, 2007, then to $2,852,779 at December 31, 2008. There was $3,006,498 of new discounts generated in 2008 in connection with valuing the Chatham Warrants issued with Chatham credit facility. Unamortized discounts totaling $4,490,326 were amortized to expense over the terms of the notes during the year ended 2007, and $3,711,578 was amortized to expense during the year ended December 31, 2008. Total amortization expense was $4,358,031 and $4,499,760 for the years ended December 31 2008 and 2007, respectively. In addition to the amortization of discounts in connection with the notes as discussed above, amortization expense also included amortization of intangible assets which totaled $646,453 and $9,434 for the years ended December 31, 2008 and 2007, respectively.

Note 8 — Commitments and Contingencies

Leases

On July 26, 2007, the Company entered into a 31 month lease for its Austin operations under a lease classified as an operating lease. Effective September 26, 2007, the Company assumed current operating leases for the three offices leased by USVD. On October 15, 2007, the Company entered into a 60 month lease for its headquarters in Clearwater, Florida effective December 1, 2007. Minimum lease obligations are as follows:


2009	$	557,543
2010		353,510
2011		169,138
2012		158,176
2013		—

Rental expense for operating leases for the years ended December 31, 2008 and 2007, was approximately $505,000 and $141,000, respectively

Liquidated Damages Under Registration Payment Arrangements

The Company has accrued $154,400 which is included in other current liabilities in the accompanying consolidated balance sheets for December 31, 2008 and December 31, 2007 related to expected liquidated damages that will be paid in cash or by issuance of additional common shares or warrants for common shares under various registration rights agreements related to common shares, conversion rights and warrants for preferred shares.

Litigation

The Company is not involved in any claims or legal actions, other than those that arise in the normal course of business.

F-31

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 7 —Long Term Debt (continued)

Risk Management

The Company maintains various forms of insurance that the Company’s management believes are adequate to reduce the exposure to property and general liability risks to an acceptable level.

Note 9 — Concentrations

Revenues are concentrated in the telecommunications industry, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies could adversely affect operating results. The Company is also dependent on a limited number of suppliers for telecommunications equipment.

During the years ended December 31, 2008 and 2007 sales and net receivables (receivables billed, plus unbilled receivables, less billings in excess of revenues) by customers with more than 10% of revenue or the total of accounts and unbilled receivables balances were as follows:

2008


Customer	Revenues				Receivables
Customer A	$	3,693,345	17.0	%	$	291,440	6.9	%

2007


Customer	Revenues				Receivables
Customer A	$	212,932	12.9	%	$	123,257	6.1	%

The Company is also dependent on a limited number of suppliers for telecommunications equipment, as follows:


Concentration		Activity and Balances
Ingram Micro		Supplies telephone equipment under the brand name Nortel Networks.
NEC		Supplies telephone equipment under the brand name NEC.
Mitel		Supplies telephone equipment under the brand names Mitel and Inter-tel.

N ote 10 — Related Party Transactions

The Company has notes payable to officers and shareholders of the Company. The balance of these notes payable was $1,732,305 and $3,305,105 at December 31, 2008 and December 31, 2007, respectively.

Note 11 — Series A 8% Convertible Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. The Company’s preferred stock may be divided into such series as may be established by the Board of Directors. The Board of Directors may fix and determine the relative rights and preferences of the shares of any series established.

The conversion price of the Preferred Stock and the exercise price of the Warrants are subject to adjustment in certain instances, including the issuance by the Company of securities with a lower conversion or exercise price, which occurred as part of the USVD financings and STN financings and acquisition. The Series A Stock has voting rights equivalent to the 407,223,867 shares of common stock into which it can convert. The Series A stockholders also must approve any change to the Company’s Articles of Incorporation.

Pursuant to the Vicis Agreement, all the outstanding warrants have been re-priced to $0.03 and all conversion prices on the Series A Stock have been reduced to $0.03.

F-32

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 11 — Series A 8% Convertible Preferred Stock (continued)

Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series A Stock shall be paid, before any payment shall be paid to the holders of common stock, or any other stock ranking on liquidation junior to the Series A Stock, an amount for each share of Series A Stock held by such holder equal to the sum of (1) the Stated Value thereof and (2) an amount equal to dividends accrued but unpaid thereon, computed to the date payment thereof is made available.

During the year ended December 31, 2008, certain Series A stockholders converted 484,990 shares of Series A Stock to 11,484,939 shares of the Company’s common stock.

On July 3, 2008, the Company entered into a Securities Purchase Agreement (the “Vicis Agreement”), pursuant to which Vicis acquired (a) 2,500,000 shares of Series A Stock; and (b) a warrant (the “Warrant”) to purchase 250,000,000 shares of common stock of the Company at $0.03 per share (the “Exercise Price”), for an aggregate purchase price of $2,500,000. Furthermore, pursuant to the Vicis Agreement, all of 3,000,000 shares of the Company’s Series B Stock previously owned by Vicis were converted into 3,000,000 shares of Series A Stock. Accordingly, the Company no longer has any outstanding shares of Series B Stock. The Exercise Price is subject to a price adjustment from time to time upon the occurrence of certain events set forth in the Warrant.

The Company evaluated the issuance of the $5,500,000 ($2,500,000 in cash and $3,000,000 in principal on the Series B Stock) for the 5,500,000 shares of Series A Stock and 250,000,0000 warrants to purchase common stock and assigned the values to the Series A Stock and the warrants based on the relative fair values. The warrants were valued using the Black-Scholes valuation model, 0.0% dividend yield, a risk free rate of return of 4.21%, volatility of 181.04% and a five year term. Under EITF No.00-27, ” Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments, ” the Company considered the effect of a beneficial conversion feature of the Series A shares issued and the conversion of the Series B Stock to Series A Stock. The Company has attributed no beneficial conversion feature to the Series A Stock because the fair value of the warrants issued were recorded as a derivative liability. The carrying value of the Series A Stock was reduced to zero. Since the redemption requirement of the Series A Stock is contingent on the occurrence of future events, the Company is not accreting the carrying value of the Series A Stock to redemption value and will not do so until the occurrence of any one of those future events becomes probable.

Additionally, Vicis purchased and assumed from Hilco, the Company’s prior senior lender, and from DD, the Company’s prior mezzanine lender, all their credit agreements, loans and promissory notes under which Hilco and DD had loaned to the Company representing an aggregate of $8,100,000 (“Vicis Debt”). In connection with the closing of the STN Acquisition and the Chatham Financing, Vicis and the Company entered into, and closed upon, a Securities Purchase and Loan Conversion Agreement, dated September 23, 2008, pursuant to which the Company, in full satisfaction of the Vicis Debt: (i) paid $2,250,000 in cash to Vicis; (ii) delivered to Vicis a subordinated note in the principal amount of $1,500,000, bearing interest at 10% and maturing on April 15, 2010; and (iii) converted the balance of the Vicis Debt (assumed from Hilco and DD), including all accrued interest of $676,384, in the combined aggregate amount of $5,026,384, into 5,026,384 shares of the Company’s Series A Stock. Vicis entered into a subordination agreement with Chatham, wherein Vicis agreed to subordinate the Vicis Subordinated Note to the Loans. As a result, all Prior Credit Documents have been terminated effective September 23, 2008.

F-33

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 12 — Income Taxes

Income taxes

Income tax provision (benefit) for the years ended December 31, 2008 and 2007 consists of the following:


	2008		2007

Current:
Federal	$	—	$	—
State and local		164,000		—

Total current		164,000		—

Deferred:
Federal	$	—	$	—
State and local		—		—

Total deferred		—		—


Income tax provision (benefit)	$	164,000	$	—

The following table provides a reconciliation of the income tax provision (benefit) at the statutory federal rate to the actual income tax provision (benefit) for the years ended December 31, 2008 and 2007:


	2008			2007

Tax at Federal Statutory rate of 34%	$	(1,639,644	)	$	(3,388,000	)
State and local income taxes, net of federal benefit		(342,033	)		(480,000	)
Non-deductible items and others		1,073,403			2,370,000
Increase in valuation allowance		1,072,274			538,000


Income tax provision (benefit)	$	164,000		$	—

F-34

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Significant temporary differences that give rise to the deferred tax assets (liabilities) as of December 31, 2008 and 2007 are as follows:

Note 12 — Income Taxes (continued)


	2008			2007

Net operating loss carryforwards for tax purposes	$	1,894,000		$	762,000
Billings in excess of revenues		377,000			337,000
Accounts receivable		—			(41,000	)
Property and equipment		(58,000	)		(5,000	)
Goodwill		(498,000	)		(119,000	)
Intangible assets		326,000			68,000
Deferred job costs		(11,000	)		(27,000	)
Other		17,000			—


Net deferred tax asset before valuation allowance		2,047,000			975,000
Valuation allowance on deferred tax assets		(2,047,000	)		(975,000	)


Net deferred tax asset	$	—		$	—

As of December 31, 2008, the Company has available federal and state net operating loss carryforwards totaling approximately $4.6 million and $5.6 million, respectively. These federal and state net operating loss carryforwards expire in 2027 and 2028. The Company files a U. S. federal income tax return and income tax returns in various state and local tax jurisdictions. The Company reduces its jurisdictional tax liabilities to the extent net operating loss carryforwards are available. Where state or local tax jurisdiction net operating loss carryforwards are not available or are limited, the Company pays income taxes. Tax returns for all years are subject to future examination by federal and state taxing authorities.

Note 13 — Cost of Sales

For the years ended December 31, 2008 and 2007, costs of sales consisted of the following:


	December 31,
	2008		2007

Equipment costs	$	9,120,527	$	2,583,803
Contract labor		134,629		139,177
Direct labor		1,099,785		268,109
Sales commissions and selling costs		228,486		34,176
Software assurances costs		286,075		—
Lite warranty costs		223,396		9,413
Other costs		67,350		139,449


	$	11,160,248	$	3,174,127

F-35

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 14 — General and Administrative Expenses


	December 31,
	2008		2007

Employee compensation and benefits	$	5,287,931	$	2,047,248
Bad Debt Expense		2,046		30,465
Telephone		220,302		89,158
Travel expense		424,806		166,082
Occupancy		373,451		103,966
Professional fees		676,332		288,463
Stock based compensation		165,237		915,000
Other		1,701,527		664,757


	$	8,851,632	$	4,305,139

Note 15 — Employee Benefit Plan

USVD, the Company’s subsidiary, has a 401(k) profit sharing plan (the Plan) and other employee health and benefit plans. The Plan allows all eligible employees to defer a portion of their income on a pretax basis through contributions to the Plan.

The Company has made 401(k) matching contributions of $142,783 and $40,094 for the years December 31, 2008 and 2007, respectively.

The Company provides group health and other benefits to its employees through plans that cover all employees that elect to be covered. The Company’s share of group health care costs was approximately $358,000 and $142,000 for the years ended December 31, 2008 and 2007, respectively, and such amounts have been included in employee compensation and benefits expense.

Note 16 — Acquisition of US Voice & Data, LLC

On September 26, 2007, the Company acquired all of the membership interest of USVD. The purchase price of $15,429,242 was paid through a combination of common stock, cash at closing and a seller note. Cash paid at closing was $9,938,690. The Company issued 7,000,000 shares of its common stock valued at $0.335 per share on September 14, 2007. Also, the Company issued the Sellers a note payable of $3,100,000 with a maturity date of December 31, 2010, and an additional amount paid to Sellers of $356,160 in February 2008 based on a “true-up” calculation of net worth at September 14, 2007. Additionally, the Purchase Agreement provides the Sellers with the opportunity to earn additional stock or cash consideration in the form of a three-year performance based earnout. The Sellers earned $227,091 pursuant to this earnout calculation based on the performance of USVD for the year ended December 31, 2008. This amount was added to goodwill and accrued at December 31, 2008. The amount is payable by April 30, 2009. During the year ended December 31, 2008, the Company has repaid $1,500,000 on the note. The amount due as of December 31, 2008 is $1,600,000.

Additionally, the Company caused USVD, its new subsidiary, to enter into employment agreements with Michael P. Fischer and M. Scott Diamond, with initial terms of three years, pursuant to which they will serve as USVD’s CEO and COO, respectively. The employment agreements contain standard terms and provisions, including non competition and confidentiality provisions, provisions relating to early termination and constructive termination, and provide for an annual base salary and certain standard benefits.

A summary of the acquisition is as follows:

The Acquisition of USVD was accounted for under the purchase method of accounting that requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair market value. The judgments made in determining the estimated fair values assigned to each class of assets acquired and liabilities

F-36

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 16 — Acquisition of US Voice & Data, LLC (continued)

assumed, as well as asset lives, can materially impact net income. Additional direct acquisition costs were unpaid at June 30, 2008 and may be paid in 2008 and 2009, if certain revenue targets are met. A total of $227,091 has been recognized for their contingent earn out as of December 31, 2008. The purchase price was allocated to the assets acquired and liabilities assumed, based on estimated fair values at the date of the acquisition.

Operating results from the acquired business is included in the condensed consolidated statements of operations from the date of acquisition. A summary of the purchase price allocation is as follows:


Purchase price -
Cash paid	$	9,938,690
Stock issued		2,345,000
Notes payable issued to seller, net of discount		2,747,934
Additional amount due to seller		356,160
EBITDA earnout based on 2008 operating results		227,091
Legal & other acquisition costs		41,458

Acquisition costs		15,656,333
Net fair value of assets acquired and liabilities assumed		(1,592,873	)

Excess of cost over fair value of tangible assets acquired	$	14,063,460
Value assigned to customer contracts acquired		(600,000	)

Goodwill acquired	$	13,463,460


Fair value of assets acquired and liabilities assumed -	$
Cash acquired		885,859
Accounts receivable		1,975,430
Inventory and work in progress		1,865,309
Property and equipment		203,249
Other assets		69,587
Accounts payable and accrued expenses		(529,903	)
Customer deposits and deferred income		(2,773,232	)
Other liabilities		(103,426	)

Net fair value of assets acquired and liabilities assumed	$	1,592,873

EBITDA Earnout to the Sellers of USVD:

Pursuant to the Stock Purchase Agreement the Company is required to pay the Seller’s (Scott Diamond and Mike Fischer) 50% of the amount of EBITDA earned by USVD in excess of $2,500,000 on an annual basis (Calendar Year) (the “EBITDA Earnout”). This EBITDA Earnout would be recorded as an increase to Goodwill, and a Current Liability. As of December 31, 2008, USVD has exceeded this target of $2,500,000, by $227,091. Therefore, the Company has accrued for it at December 31, 2008. In addition, the Company paid $100,000 for non-compete agreements.

F-37

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 17 — Acquisition of Standard Tel Networks, LLC

On September 23, 2008, the Company, through its Acquisition Sub, acquired STN, an independent distributor of high quality, turnkey converged voice and data business communications products and services with California offices in the San Francisco Bay Area, Sacramento, San Diego and headquartered in Huntington Beach. The acquisition was conducted pursuant to a previously-disclosed Stock and Membership Interest Purchase Agreement dated July 17, 2008 (the “Purchase Agreement”), and was structured as the acquisition of (a) all of the stock of Trans-West Network Solutions, Inc. (“Trans-West”) from the shareholders of Trans-West (the “Trans-West Shareholders”) and (b) all of the membership interest of STN owned by ProLogic Communication, Inc. (“ProLogic” and collectively with the Trans-West Shareholders, the “Seller Parties”). As previously reported, Trans-West, a holding company with no operations, owns eighty percent (80%) of the membership interest of STN and ProLogic owned the other twenty percent (20%), and, accordingly, the Company now owns (directly, in part, and indirectly through Trans West, in other part) one hundred percent (100%) of STN. Collectively, the forgoing transactions are referred to in this Current Report as the “STN Acquisition.” Prior to the STN Acquisition, the Company did not have any relationships with the Seller Parties.

At the closing of the STN Acquisition, the Company issued to the Seller Parties 40,843,376 shares of the Company’s common stock and paid to the Seller Parties $3,209,263 in cash. However, pursuant to the Purchase Agreement, one-half of such shares are being held in escrow subject to certain post-closing purchase price adjustments and indemnification obligations. On January 8 ^th , 2009, the Company and the Seller Parties completed the analysis of post closing adjustments. This resulted in a cash reduction of the purchase price of $247,059. As a result of the decrease in purchase price, the resulting goodwill has been adjusted down by the cash portion of this amount. The stock portion will be analyzed further subject to additional purchase price adjustments and indemnification obligations due September 23, 2009.

In connection with the STN acquisition, the Company entered into Restrictive Covenant Agreements with the Seller Parties, pursuant to which the Seller Parties, subject to certain limited exceptions, agree not to use or disclose confidential information belonging to the Company or STN and not to compete with the Company nor to solicit its customers or employees. Additionally, the Company caused STN to enter into an Employment Agreement with Michael Promotico, with an initial term of three years, pursuant to which he will serve as STN’s Chief Executive Officer (the “Employment Agreement”). The Employment Agreement contains standard terms and provisions, including non-competition and confidentiality provisions and provisions relating to early termination and constructive termination, and provides for an annual base salary, performance incentives, certain standard benefits and stock options at an exercise price equal to the fair market value of the shares on the closing date.

A summary of the acquisition is as follows:

The Acquisition of STN was accounted for under the purchase method of accounting that requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair market value. The judgments made in determining the estimated fair values assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income. Additional adjustments may be made to the purchase price based on EBITDA and net assets estimated at the time of acquisition. The purchase price was allocated to the assets acquired and liabilities assumed, based on estimated fair values at the date of the acquisition.

F-38

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 17 — Acquisition of Standard Tel Networks, LLC (continued)

An initial preliminary allocation has been made to intangible assets as of the December 31, 2008. Management will determine the proper value of intangible assets acquired from STN and allocate any additional adjustments of the goodwill to intangible assets within the twelve months after the acquisition date.

Operating results from the acquired business is included in the condensed consolidated statements of operations from the date of acquisition. A summary of the purchase price allocation is as follows:


Purchase price —
Cash paid	$	2,982,667
Stock issued		1,169,755
Legal & other acquisition costs		259,210

Acquisition costs		4,411,631
Net fair value of assets acquired and liabilities assumed		(56,696	)

Excess of cost over fair value of tangible assets acquired	$	4,354,936
Value assigned to customer contracts acquired		(900,000	)

Goodwill acquired	$	3,454,936


Fair value of assets acquired and liabilities assumed —	$
Cash acquired		522,319
Accounts receivable		1,176,392
Inventory and work in progress		902,777
Property and equipment		122,677
Other assets		42,593
Accounts payable and accrued expenses		(780,015	)
Customer deposits and deferred income		(1,842,579	)
Installment loan		(87,468	)

Net fair value of assets acquired and liabilities assumed	$	56,696

The following unaudited pro forma financial information presents the results of operations for the years ended December 31, 2008 and 2007 as if the acquisitions had occurred at the beginning of each period presented. The pro forma financial information has been adjusted for the effect of interest paid on the term loan and the reduced interest earned on cash used in the acquisitions of USVD and STN. The pro forma financial information for the combined entities has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisitions had taken place at the beginning of each period presented, or of future results. “


	(Unaudited)
	Year ended December 31,
	2008			2007
Pro forma net revenues	$	28,703,526		$	27,593,267
Pro forma net income (loss)		(6,823,225	)		(17,890,496	)

Pro forma net income per share:
Diluted	$	(0.047	)	$	(0.142	)

F-39

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 18 — Stock-Based Compensation

The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards in accordance with SFAS No. 123(R):

Stock options.

The Company grants stock options to employees that allow them to purchase shares of the Company’s common stock. Options are also granted to members of the Board of Directors. The Company determines the fair value of stock options at the date of grant using the Black-Scholes valuation model. Most options vest annually over a three-year service period. The Company will issue new shares upon the exercise of stock options.

2007 Stock Incentive Plan

Effective April 19, 2007, the Company adopted the Brookside Technology Holdings Corp. (formerly Cruisestock, Inc) 2007 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan is discretionary and allows for an aggregate of up to 35,000,000 shares of the Company’s common stock to be awarded through incentive and non-qualified stock options and stock appreciation rights. The Stock Incentive Plan is administered by the Board of Directors, which has exclusive discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted.

The Company recognized $165,237 and $915,000 compensation expense for options for the years ended December 31, 2008 and 2007, respectively.

A summary of the changes in the total stock options outstanding during the year ended December 31, 2008 follows:


				Weighted
				Average
	Options			Exercise Price
Outstanding at December 31, 2006		—		$	—
Granted During 2007		14,000,000		$	$0.186
Forfeited or expired		—			—
Exercised		—			—

Outstanding at December 31, 2007		14,000,000		$	$0.186
Cancelled during 2008		(14,000,000	)	$	0.186
Granted		19,200,000		$	0.03
Forfeited or expired		—			—
Exercised		—			—

Outstanding at December 31, 2008		19,200,000		$	0.03
Vested and exercisable at December 31, 2008		1,633,333		$	0.04

The weighted average remaining term of the options is approximately 9.7 years at December 31, 2008. Options issued in 2008 had an exercise price ranging from $0.03 to $0.05 per share. The grant date fair value for 2008 options were $0.03 to $0.05 per share. At December 31, 2008, there was $503,878 of total unrecognized compensation cost related to non-vested stock option awards that are expected to be recognized over a period of 2 years. The Company has stock options outstanding with an intrinsic value of $210,000 at December 31, 2008.

F-40

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 19 — Warrants

Warrants

The following is a summary of the warrants outstanding as of December 31, 2008.


	Outstanding		Exercise Price
Series A *		24,327,753	$	0.03
Series B		37,498,836	$	0.03
Series C		5,329,534	$	0.03
Series D **		25,080,000	$	0.03
Series E		61,273,835	$	0.03
Series F		250,000,000	$	0.03
Chatham		140,930,835	$	0.03

Total warrants		544,440,793


*		Includes 2,628,917 penalty warrants

**		Includes 1,080,000 penalty warrants.

The Company has warrants, common stock options and Series A Stock that could potentially convert to 1,111,085,033 shares of common stock. Currently, the Company has 1,000,000,000 shares authorized. EITF 00-19: Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock addresses issues relating to financial instruments that must be settled in with the Company’s common stock. In some circumstances if the Company does not have enough authorized shares, outstanding common stock warrants could be classified as liabilities. The Company has classified all warrants as permanent equity since the number of authorized shares is within the Company’s control. The Company can settle all convertible securities by settlement (including net share settlement) within the currently authorized shares. The Company’s Board of Directors may implement a reverse stock split or increase the number of authorized shares. This would require approval of the shareholders of the Company who own a majority of the outstanding shares of the Company’s common stock, and Series A Stock, voting as a single class on a converted basis.

Note 20 — Intangible Assets

Intangible assets represent amounts acquired in the acquisitions of USVD and STN and consist of the following as of December 31, 2008:


	Gross Carrying		Accumulated
	Amount		Amortization		Life (years)
Purchased customer contracts — USVD 1	$	600,000	$	600,000
Purchased customer contracts — STN 1		900,000		225,000
Non-compete agreements 3		100,000		43,290

	$	1,600,000	$	868,290


Estimated Amortization Expense
2009			$	708,336
2010				23,374

			$	731,710

F-41

BROOKSIDE TECHNOLOGY HOLDINGS CORP.
Notes to Consolidated Financial Statements

Note 21 — Subsequent Events

The Chatham Credit Agreement contains standard representations, warranties and covenants that require the Company, on a consolidated basis, to maintain at the end of each month: (1) a fixed charge coverage ratio for the 12 months then ended of at least 1.75:1; and (2) a leverage ratio as of the last day of such fiscal month and for the 12 months then ended of not more than 3:1, in each case calculated as set forth in the Credit Agreement. Although the Company was in compliance with all of their covenants at December 31, 2008, the Company is currently not in compliance with their leverage ratio, for the trailing twelve month period ending January 31, 2009. The leverage ratio for the 12 months ended January 31, 2009 was 3.20:1. In accordance with terms of the Chatham Senior Loan credit facility, the Company can only borrow up to three times its trailing twelve months EBITDA, calculated monthly. The Company is in discussions with Chatham to obtain a waiver of the default.

F-42

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