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Article by DailyStocks_admin    (02-21-13 01:48 AM)

Description

China Biologic. 10% Owner Private Equity Warburg Pincus bought 67521 shares on 5-19-2013 at $ 14.4

BUSINESS OVERVIEW

Business
Multiband Corporation (the Company), is a Minnesota corporation formed in September 1975.

The Company has three operating segments as follows: (1) Field Services (FS), where the Company provides installation services to pay television (satellite and broadband cable) providers, internet providers and commercial customers, (2) Multi-Dwelling Unit (MDU), where the Company bills voice, internet and video services to subscribers as owner/operator and also acts as a master service operator for DIRECTV, receiving net cash payments for managing video subscribers through its network of system operators; and (3) Engineering, Energy & Construction (EE&C) where the Company provides engineering and construction services for the wired and wireless telecommunications industry, including public safety networks., This segment also provides renewable energy services including wind and solar applications and other design and construction services, usually done on a project basis. All segments encompass a variety of different corporate entities.

The Company completed an initial public offering in June 1984. In November 1992, the Company became a non-reporting company under the Securities Exchange Act of 1934. In July 2000, the Company regained its reporting company status. In December 2000, the Company’s stock began trading on the NASDAQ stock exchange under the symbol VICM. In July 2004, the symbol was changed to MBND concurrent with the Company’s name change from Vicom, Incorporated to Multiband Corporation.

The Company’s website is located at: www.multibandusa.com . The information on the Company’s website is not part of this or any other report the Company files with, or furnishes to, the SEC.

From its inception until December 31, 1998, the Company operated as a telephone interconnect company only. Effective December 31, 1998, the Company acquired the assets of the Midwest region of Enstar Networking Corporation (ENC), a data cabling and networking company. In late 1999, in the context of a forward triangular merger, the Company, to expand its range of computer products and related services, purchased the stock of Ekman, Inc. d/b/a Corporate Technologies, and merged Ekman, Inc. into the newly-formed surviving corporation, Corporate Technologies USA, Inc. (MBS). MBS provided voice, data and video systems and services to business and government. The MBS business segment was sold effective April 1, 2005. The Company’s MDU segment (formally known as MCS) began in February 2000. MDU provides voice, data and video services to multi-dwelling units, including apartment buildings, condominiums and time share resorts. During 2004, the Company purchased video subscribers in a number of separate transactions, the largest one being Rainbow Satellite Group, LLC. During 2004, the Company also purchased the stock of Minnesota Digital Universe, Inc. (MNMDU), which made the Company the largest master service operator in MDU’s for DIRECTV satellite television in the United States. During 2006 and 2007, the Company strategically sold certain assets at multi-dwelling properties where only video services were primarily deployed. The Company continues to operate properties where multiple services are deployed. To remain competitive, the Company intends to continue to own and operate properties at locations where multiple services can be deployed and manage properties where one or more services are deployed. Consistent with that strategy, from 2006 to the present, the Company expanded its servicing of third party clients (other system operators) through its call center. On March 15, 2012, the Company had approximately 112,000 owned and managed subscriptions, with an additional 45,000 subscriptions supported by the call center.

During 2008, the Company became involved in the business of installing video services in single family homes by acquiring 51% of the outstanding stock of Multiband NC Incorporated (NC) (formerly Michigan Microtech, Incorporated) MMT, a former subsidiary of DirecTECH Holding Company Inc. (DTHC), a fulfillment agent for a national satellite television company, DIRECTV, which specializes in the providing of satellite TV to single family homes. This acquisition was followed up by the acquisition of an 80% interest in a group of companies which were the former operating subsidiaries of DTHC, (Multiband NE Incorporated (NE), Multiband SC Incorporated (SC), Multiband EC Incorporated (EC), Multiband DV Incorporated (DV) and Multiband Security Incorporated (Security)). The Company also purchased an additional 29% ownership interest in Multiband NC Incorporated, of which it previously owned 51%, effective on January 2, 2009. The remaining 20% of these operating entities were purchased in December 2009. As of December 31, 2011, the NC, SC, EC and NE entities were merged together with NE being the surviving entity. Effective February 20, 2012, NE has been renamed Multiband Field Services, Incorporated (MBFS).

This DTHC operating entities purchase was a significant event for the Company. The purchase materially increased the size and scope of the Company’s operations. The Company has now expanded its operations into 16 states with 32 field offices and is the second largest independent DIRECTV field services provider in the United States.

Effective September 1, 2011, the Company purchased from WPCS International, Inc. (WPCS), two of their subsidiary corporations named WPCS International- Sarasota, Inc. and WPCS International-St. Louis, Inc. Effective November 1, 2011, these entities have been renamed Multiband Engineering and Wireless, Southeast, Inc. (SE) and Multiband Engineering and Wireless, Midwest, Inc. (MW). These entities provide engineering and construction services for the wired and wireless telecommunications industry, including public safety networks, renewable energy services including wind and solar applications and other design and construction services. Later in 2011, and in early 2012, the Company also purchased certain assets from Groupware International, Inc. and entered the cable television fulfillment business.

Field Services Segment (FS)
The Company, through its FS segment, generates revenue from the installation and service of DIRECTV video programming for residents of single family homes under a contract with DIRECTV. DIRECTV is the largest provider of satellite television services in the United States with approximately 19 million subscribers. These video subscribers are owned and billed by DIRECTV. The FS segment functions as a fulfillment arm for DIRECTV. As a result, the Company does not directly compete with other providers for DIRECTV’s business. Although DIRECTV competes with DISH, the other leading satellite television provider and incumbent providers of phone and telephone services for pay television customers, DIRECTV has its own marketing and competitive programs of which the Company is merely an indirect and passive recipient. The FS segment also provides similar installation services for certain broadband cable and internet providers and commercial customers.

The United States markets for satellite television subscribers and cable television viewers are significant. According to the Satellite Broadcasting and Communications Association, there were approximately 33.8 million paying US satellite television subscribers in December 2011. According to the National Cable and Telecommunications Association, as of September 2011, the US cable industry had approximately 58.3 million basic video customers and approximately 46.4 million high speed internet customers. The Company believes that the demand for its outsourced installation and maintenance services will remain steady as leading national providers continue to upgrade technology and invest in competitive marketing efforts.

Multi-Dwelling Unit Segment (MDU)
The Company, through its MDU segment, bills customers for the voice, internet and video services it provides to residents of MDU facilities as an owner/operator of those subscribers. In addition, since 2004, the Company serves as a master system operator for DIRECTV, which allows us to offer satellite television services to residents of multi-dwelling-units through a network of affiliated operators.

Since 2000, as discussed above, the Company offers voice, data and video services directly to residents of the MDU market. Our experience in this market suggests that property owners and managers are always looking for a solution that will satisfy two market demands from customers. The first market demand from customers is how to satisfy the residents who desire to bring satellite television service to the unit without being visually unattractive or a structural/maintenance problem. The second is how to provide competitive access for local and long distance telephone, television and internet services. Our service offering addresses these demands and provides the consumer several benefits, including:

• Lower Cost Per Service
• Blended Satellite and Cable Television Package
• Multiple Feature Local Phone Services (features such as call waiting, call forwarding and three-way calling)
• Better than Industry Average Response Times
• One Number for Billing and Service Needs
• One Bill for Local, Long Distance Cable Television and Internet
• “Instant On” Service Availability

In late 2005, the Company began to use its internal support center and billing platform to service third party clients.

In late 2006, DIRECTV provided the Company with the right to bill DIRECTV services directly to end users.

As we develop and market this package, we keep a marketing focus on two levels of customers for this product. The primary decision-makers are the property owners/managers. Their concerns are focused on delivering their residents reliability, quality service, short response times, minimized disruptions on the property, minimized alterations to the property and value added services. Each of these concerns is addressed in our contracts with the property owner, which includes annual reviews and 10 year terms as service providers on the property. The secondary customer is the end-user. We provide the property with on-going marketing support for their leasing agents to deliver clear, concise and timely information about our services. This will include simple sign up options that should maximize our penetration of the property.

When taken as a whole, and based on the Company’s interpretations of U.S. Census Bureau statistics, cable television, telephone and internet services currently generate over $170 billion of revenues annually in the U.S, with an estimated 26 million households living in MDUs. We believe these statistics indicate stable markets with demand that is likely to deliver significant value to businesses that can obtain a subscriber base of any meaningful size.

MDU Consumer Industry Analysis and Strategy
MDU offers video and, in some cases, data and voice to residents of multi-dwelling units primarily throughout the Midwest and the Southeast. Our primary competition in this market comes from the local incumbent providers of telephone and cable television services. The leading competitors in these services are the former Bell System Companies such as Verizon Communications (Verizon) and Qwest Communications International, Inc. (Qwest) and national cable companies such as Comcast Corporation (Comcast) and Time Warner. These regional and national rivals have significant resources and are strong competitors. Nonetheless, we believe as a largely unregulated entity, we can be competitive on both price and service.

Regarding video services, we believe we have a significant consumer benefit in that we are establishing private rather than public television systems, which allows us to deliver a package not laden with local "public access" stations that clog the basic service package. In essence, we will be able to deliver a customized service offering to each property based upon pre-installation market research that we perform. The pricing of our service is also untariffed which allows for flexible and competitive "bundling" of services.

Regarding data services, the general concern among consumers is the quality of the connection and the speed of the download. We believe our design provides the highest broadband connection speeds currently available. The approach we market is "blocks of service". Essentially, we deliver the same high bit rate service in small, medium and large packages, with an appropriate per unit cost reduction for those customers that will commit to a higher monthly expenditure.

MDU Market Description
We are currently marketing our services to MDU properties primarily throughout the Midwest and Southeast. We will target properties that range from 50 to 150 units on a contiguous MDU property for television and internet access only. We will survey properties that exceed 150 units for the feasibility of local and long distance telephone services.

We are initially concentrating on middle to high-end rental complexes. We are also pursuing resort area condominiums. A recent U.S. Census Bureau table indicates there are more than 65,000 properties in the United States which fit this profile. Assuming an average of 100 units per complex, our focus is on a potential subscriber base of 6,500,000.

A recent Property Owners and Manager Survey, published by the U.S. Census Bureau, shows rental properties are focusing on improving services and amenities available to their tenants. These improvements are being undertaken to reduce tenant turnover, relieve pricing pressures on rents and attract tenants from competing properties. We believe most of these owners or managers are not interested in being "in the technology business" and will use the services that we are offering. Various iterations of this package will allow the owners to share in the residual income stream from the subscriber base.

MDU Number of Units/Customers
At March 15, 2012, the Company had approximately 112,000 owned and managed subscriptions, with an additional 45,000 subscribers supported by the support center.

Energy, Engineering & Construction Segment (EE&C)
Under this segment of the business, the Company provides engineering and construction services for the wired and wireless telecommunications industry, including public safety networks, renewable energy services including wind and solar applications and other design and construction services which are usually done on a project basis. We believe growth in public safety networks will continue as security and safety concerns, driven by, among other things, terrorism threats and weather emergencies, require further infrastructure buildouts. We also believe that research, development and investment in alternative and renewable energy sources will provide work for the Company as the United States looks to reduce its dependence on foreign oil imports.

Backlog (in thousands)
As of December 31, 2011, we had a backlog of unfilled orders of approximately $1,817 compared to approximately $0 at December 31, 2010. The Company’s acquisition of SE and MW in September 2011, accounted for all of this increase. We define backlog as the value of work-in-hand to be provided for customers as of a specific date where the following conditions are met (with the exception of engineering change orders): (i) the price of the work to be done is fixed; (ii) the scope of the work to be done is fixed, both in definition and amount; and (iii) there is an executed written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the customer to pay us for the work to be performed. These backlog amounts are based on contract values and purchase orders and may not result in actual receipt of revenue in the originally anticipated period or at all. We have experienced variances from time to time in the realization of our backlog because of project delays or cancellations resulting from external market factors and economic factors beyond our control and we may experience such delays or cancellations in the future. Backlog does not include new firm commitments which may be awarded to us by our customers from time to time in future periods. These new project awards could be started and completed in this same future period. Accordingly, our backlog does not necessarily represent the total revenue that could be earned by us in future periods.

Employees
As of March 15, 2012, Multiband Corporation employed 130 full-time employees, including 10 management employees, 36 finance personnel, 33 information technology employees, 14 employees in human resources, 16 in marketing and 37 employees in operational support positions. FS segment employed 3,259 full-time employees consisting of 72 management employees, 145 operational support personnel, 257 customer service employees, 2,785 technicians and 104 warehouse employees. As of that same date, MDU had 153 full-time employees, consisting of 11 in sales and marketing, 9 technicians, and 133 in customer service and related support. EE&C employed 70 full-time employees consisting of 47 technicians and 23 employees in operational support positions.

CEO BACKGROUND

James Mandel has been the Chief Executive Officer and a Director of Multiband since October 1, 1998. From October 1991 to October 1996, he was Vice President of Systems for Grand Casinos, Inc., a gaming company. Mr. Mandel serves on the board of GeoSpan Corporation, a geospatial imaging company, and is a director of the Independent Multi-Family Communications Council, a national trade group for the private cable industry. Mr. Mandel is a graduate of the Leed’s School of Business Administration at the University of Colorado at Boulder. Among other attributes, skills and qualifications, the Board believes that Mr. Mandel is qualified to serve as a Director based on his long service to Multiband both as its Chief Executive Officer and as a Director, and his resulting deep familiarity with Multiband’s operations and its industry. In addition, his prior executive management experience in the casino industry and his current experiences as a private company director of companies in industries different than Multiband’s industry provide the Board with a broad range of knowledge regarding management and operational strategies.

Steven M. Bell was General Counsel of Multiband from June 1985 through October 1994, at which time he also became Chief Financial Officer. He is a graduate of the University of Minnesota and William Mitchell College of Law. Among other attributes, skills and qualifications, the Board believes that Mr. Bell is qualified to serve as a Director based on his extensive service to Multiband as its General Counsel, Chief Financial Officer and as a Director, and his unique experience and knowledge of Multiband’s history, operations, and industry. Mr. Bell also brings significant financial and legal expertise to the Board.

Frank Bennett has been a Director of Multiband since 2002 and is the Chairman of Multiband’s Audit and Nominating and Governance Committees. Mr. Bennett is President of Artesian Management, Inc., a private equity investment firm. Prior to founding Artesian Management in 1989, he was a Vice President of Mayfield Corporation, a venture capital firm, and a Vice President of Corporate Finance of Piper Jaffray & Co. and a Vice President of Piper Jaffray Ventures, Inc. Previously, Mr. Bennett also served as an independent director of several large public companies including Fairfax Financial Holdings LTD. (FFH.TO/Toronto), a publicly-held multinational property and casualty insurance and investment company with $35 billion in assets, and Odyssey Re Holdings Corp., then a publicly-held multinational reinsurance company with $5 billion in assets; served as a director and Chairman of the Audit Committee of Crum and Forster Holdings Corp., then a publicly-reporting property and casualty insurance company with $5 billion in assets; and as a director of Northbridge Financial Corporation, then a publicly-held Canadian property and casualty insurance company with US $2 billion in assets. Among other attributes, skills and qualifications, the Board believes that Mr. Bennett is qualified to serve as a Director and as Chairman of Multiband’s Audit Committee based on his financial expertise and knowledge of investment banking, finance and raising capital. In particular, he has assisted management with structuring debt and equity offerings. The Board also believes that Mr. Bennett is qualified to serve on the Nominating and Governance Committee based on the diverse experience he has gained at companies throughout his career and through his service on Multiband’s Board.

Eugene Harris has been a Director of Multiband since April 2004 and is Chairman of the Compensation Committee and a member of the Audit and Nominating and Governance Committees. He is the Managing Member of Step Change Advisors, LLC, a portfolio management and financial consulting company. Prior to forming Step Change Advisors, LLC, Mr. Harris was Chief Operating Officer of Fulcrum Securities and President of Fulcrum Advisory Services. Mr. Harris joined Fulcrum in 2007 after spending four years at Flagstone Securities. Mr. Harris joined Flagstone after 10 years as the majority shareholder of Eidelman, Finger, Harris & Co., a registered investment advisor. Prior to joining Eidelman, Finger, Harris & Co., Mr. Harris held positions in general management and new business development for the Monsanto Company, an agricultural products company, from 1990 to 1994. He also was an Associate Consultant with Bain and Co. from 1986 to 1988. He is a Chartered Financial Analyst and is a member of the Financial Analysts Federation. In addition to Multiband, Mr. Harris serves on the Board of Directors of the Business Bank of St. Louis and eTab. Among other attributes, skills and qualifications, the Board believes that Mr. Harris is qualified to serve as a Director and as a member of the Audit Committee and to chair the Compensation Committee based on his financial expertise. The Board also believes that Mr. Harris is qualified to serve on the Nominating and Governance Committee based on the significant management and operational experience gained throughout his career across a range of industries, and through his service on Multiband’s Board and on other, private company boards.

Donald Miller has been a Director of Multiband since September 2001 and is Chairman of the Board of Directors and a member of the Audit and Compensation Committees. Mr. Miller worked for Schwan’s Enterprises from 1962 to 2007, primarily as Chief Financial Officer. He serves on the Board of Directors of Schwan’s Enterprises and is the Chairman of the Finance Committee and a member of the Audit and Risk Committees. Mr. Miller also serves on the Board of Directors of Bi-phase Technologies, LLC. Among other attributes, skills and qualifications, the Board believes that Mr. Miller is qualified to serve as Chairman of the Board based on his extensive business experience, financial literacy and tenure with Multiband. The Board also believes that Mr. Miller is qualified to serve on the Audit Committee due to his financial expertise, having served as the Chief Financial Officer of another company for several decades and his service on other audit committees, and that Mr. Miller is qualified to serve on the Compensation Committee due to his experience serving as a public and private company director.

Peter K. Pitsch has been a Director of Multiband since August 2011 and is a member of the Nominating and Governance Committee. Mr. Pitsch is the Executive Director of Communications Policy and Associate General Counsel for Intel Corporation. He is responsible for coordination of Intel’s global telecommunications policies. Prior to joining Intel, Pitsch was the president of Pitsch Communications from 1989 to 1998 which represented telecommunications clients before the FCC and Congress. Pitsch was the Chief of Staff to the Chairman of the Federal Communications Commission from 1987 to 1989 and Chief of FCC’s Office of Plans and Policy from 1981 to 1987. He was a senior attorney at Montgomery Ward, Inc. from 1979 to 1981. Prior to that, he worked for three years as an attorney at the Federal Trade Commission including as attorney-advisor to FTC Commissioner Calvin Collier. Mr. Pitsch received a B.A. in Economics from the University of Chicago in 1973 and his J.D. from Georgetown University Law Center in 1976. He is a member of the District of Columbia Bar, the Virginia State Bar, and the Federal Communications Bar Association. Among other attributes, skills and qualifications, the Board believes that Mr. Pitsch is qualified to serve as a Director and as a member of the Nominating and Governance Committee based on his extensive legal and business experience.

Dr. Martin Singer was appointed to serve as a Director in August 2012. Mr. Singer is expected to serve on the Compensation Committee. Mr. Singer was nominated to serve as a Director by a company shareholder. Dr. Singer serves as the Chief Executive Officer and Chairman of the Board for PCTEL, Inc., a position he has held since October 2001. Prior to that, he served as PCTEL, Inc.’s non-executive Chairman of the Board from February 2001 until October 2001, and he has been a director of PCTEL, Inc., since August 1999. From December 1997 to August 2000, Dr. Singer served as President and Chief Executive Officer of SAFCO Technologies, a wireless communications company. He left SAFCO in August 2000 after its sale to Agilent Technologies. From September 1994 to December 1997, Dr. Singer served as Vice President and General Manager of the wireless access business development division for Motorola, Inc., a communications equipment company. Prior to this period, Dr. Singer held senior management and technical positions in Motorola, Tellabs, AT&T and Bell Labs. Dr. Singer holds a Bachelor of Arts degree in psychology from the University of Michigan, and a Master of Arts degree and Ph.D. in Experimental Psychology from Vanderbilt University. He has served as the Chairman and Co-Chair of the Midwest Council of TechAmerica (formerly AeA) and has served on the Standing Advisory Group for the Public Company Accounting Oversight Board and Advisory Board for the MMM program at Kellogg School of Business. From March 2009 until September 2010 he also served on the Board of Directors of Westell Technologies, Inc., a leading provider of broadband products, gateways and conferencing services, and was Chair of Westell’s Compensation Committee. In 2006, Dr. Singer was appointed to the Board of Directors of ISCO International, a provider of spectrum conditioning solutions to wireless and cellular providers worldwide, where he also chaired the Compensation Committee until he left the board in 2007. Dr. Singer is a member of the Economic Club of Chicago and currently has served as the chair and co-chair of the Technology Nominating Committee. Recently, he served as a Commissioner on Illinois’ Economic Recovery Commission, appointed by Governor Quinn to that position. In March 2011, he was appointed by Governor Quinn to the Illinois Broadband Deployment Council. Dr. Singer has 8 patents in telecommunications and is the author of several essays on the telecommunications industry and technology competitiveness. He was awarded the Martin Sandler Achievement Award by the American Israel Chamber of Commerce in 2007 and the Executive Leadership Award by the AeA in 2008. Dr. Singer is a seasoned industry expert with strong knowledge of the Company’s business and technology. The Board believes that Mr. Singer is qualified to serve as a director due to his expertise in business strategy, intellectual property, strategic alliances and business technology.

Stephen Kezirian was appointed to serve as a Director in August 2012. Mr. Kezirian is expected to serve on the Nominating and Governance Committee. Mr. Kezirian was nominated to serve as a Director by a company shareholder, Red Oak Partners, LLC. Mr. Kezirian is currently the Chief Executive Officer of TRG Customer Solutions (TRG-CS), a diversified, global provider of outsourced contact center solutions with a focus on complex technology intensive applications. With over 6,000 associates and clients and operations in eight countries, TRG-CS provides services to a diverse range of clients, from small- and medium-sized enterprises to the Fortune 50. Prior to joining TRG-CS, Mr. Kezirian was Chief Operating Officer of Cantor Gaming, a wholly-owned subsidiary of Cantor Fitzgerald focused on revolutionizing the gaming experience. In his professional career, Mr. Kezirian has served in a variety of senior leadership roles at McKinsey & Co., Morgan Stanley &Co., J.H. Whitney & Co., Tickets.com and Sprint-Nextel Corporation. Mr. Kezirian holds a bachelor's degree in Economics from Harvard University and an MBA from Harvard Business School.

The Company knows of no arrangements or understandings between a director and any other person pursuant to which any person has been selected as a director. There is no family relationship between any of the directors or executive officers of the Company.

MANAGEMENT DISCUSSION FROM LATEST 10K

Revenues
Total revenues increased 13.0% from $265,594 in 2010 to $300,186 in 2011. FS segment revenues were $271,984 in 2011 and $242,592 in 2010, an increase of 12.1%. This increase was primarily due to an increase in DIRECTV work order volume of 4.8%, an increase in earned incentive revenue of $9,994 and amounts received from DIRECTV under a fuel subsidy program implemented in the second quarter of 2011 of $2,330. In 2012, the Company expects FS segment revenues to increase based on a consistent amount of revenue from its DIRECTV installation business together with increased revenues resulting from the Company’s new installation contracts with certain broadband cable and internet service providers. The MDU segment had revenues of $21,007 in 2011 and $21,663 in 2010, a decrease of 3.0%. This decrease was a result of a decrease in system operator revenues. The Company expects MDU revenues to increase in 2012 due to the planned increase in the number of owned subscribers, increases fueled by the acquisition of new rights of entry agreements or by acquiring subscribers from other operators. The EE&C segment revenues increased 437.3% from $1,339 in 2010 to $7,195 in 2011. The Company’s acquisition of SE and MW in September 2011, accounted for $3,894 of this increase with the remainder the result of increased MDU construction revenue from DIRECTV of $1,962. The Company expects revenues in this segment to increase in 2012 as it will include a full year of operations from SE and MW.

Costs of Products and Services (exclusive of depreciation and amortization)
Total costs of products and services were $214,559 in 2011 compared to $186,294 in 2010, an increase of 15.2%. For the FS segment, costs of products and services totaled $195,276 for the year ended December 31, 2011, compared to $171,625 for the year ended December 31, 2010, a 13.8% increase. As a percentage of FS revenue, costs of products and services for the FS segment were 71.8% and 70.7% for the years ended December 31, 2011 and 2010, respectively. During 2012, the Company expects FS segment costs of products and services to remain relatively constant in relation to FS segment revenue. For the MDU segment, costs of products and services were $13,753 for the year ended December 31, 2011, compared to $13,572 in the prior year, a 1.3% increase. As a percentage of MDU revenue, costs of products and services for the MDU segment were 65.5% and 62.7% for the years ended December 31, 2011 and 2010, respectively. In 2012, the Company expects MDU costs of products and services to remain relatively constant in relation to MDU segment revenue. For the EE&C segment, cost of products and services were $5,530 for the year ended December 31, 2011, compared to $1,097 in the prior year, a 404.1% increase. As a percentage of revenue, costs of products and services for the EE&C segment were 76.9% and 81.9% for the years ended December 31, 2011 and 2010, respectively. The Company’s acquisition of SE and MW in September 2011, accounted for $2,940 of this increase with the remainder the result of increased MDU construction costs from DIRECTV of $1,492. In 2012, the Company expects EE&C segment costs of products and services to remain relatively consistent in relation to EE&C segment revenue.

Selling, General and Administrative Expense
Selling, general and administrative expenses increased 11.8% to $63,939 in 2011, from $57,173 in 2010. Selling, general and administrative expenses were, as a percentage of revenues, 21.3% and 21.5% for 2011 and 2010, respectively. The Company anticipates that during 2012, selling, general and administrative expenses will remain consistent as a percentage of total revenues.

Depreciation and Amortization
Depreciation and amortization expense decreased 18.6% to $6,757 for the year ended December 31, 2011, as compared to $8,298 for the year ended December 31, 2010. Effective May 1, 2011, the Company signed a new HSP contract with DIRECTV (see Note 16). Due to the new contract, the amortization period of the DIRECTV contract-related intangibles was extended an additional seven months to April 30, 2016, bringing the amortization period to 88 months. During 2012, depreciation and amortization expense is expected to decrease due to the extension of the aforementioned amortization period.

Income from Operations
In 2011, the Company earned income from operations of $14,685, compared to $13,669 during 2010, an increase of 7.4%. For the year ended December 31, 2011, the FS segment had an income from operations of $23,230, compared to $20,707 for the year ended December 31, 2010, an increase of 12.2%. The FS segment is expected to maintain its profitability in 2012. The MDU segment incurred a loss from operations of $2,827 in 2011 compared to a loss from operations of $2,550 in 2010, an increase of 10.9%. The increased loss from 2010 to 2011 is the result of decreased system operator revenues which were partially offset by increases in owned subscriber and call center revenues. The Company plans to reduce its loss in the MDU segment in future periods by adding subscribers in concentrated, targeted geographic markets in order to service them more efficiently. The EE&C segment earned an income from operations of $701 in 2011, which represents an increase of 189.7% over the income from operations of $242 in 2010. In 2012, the Company expects income from operations in the EE&C segment to increase because the year will include a full year of operations from SE and MW. The MBCorp segment, which has no revenues, showed a loss from operations of $6,419 in 2011, compared to a loss of $4,730 for the same period last year, an increase of 35.7%. In 2012, the MBCorp segment loss is expected to remain consistent as a percentage of consolidated revenue.

Interest Expense
Total interest expense was $3,838 in 2011, compared to $4,202 in 2010, a decrease of 8.7%, primarily reflecting a decrease in the interest expense associated with a note payable related to a legal settlement that was paid in full in December 2010.

Proceeds from Life Insurance
Proceeds from life insurance, due to the death of the Company’s former chairman of the board during the first quarter of 2011, was $409 for the year ended December 31, 2011.

Gain on Bargain Purchase
For the year ended December 31, 2011, the Company recorded a gain on bargain purchase of $166 related to its acquisition of Multiband Engineering & Wireless, Southeast, Inc. (see Note 2).

Other-than-Temporary Impairment Loss
For the year ended December 31, 2011, the Company recorded an other-than-temporary impairment loss of $1,078 due to the decline in the fair value of the shares it holds in WPCS International, Inc. (see Note 1).

Other Income
Other income was $276 in 2011, compared to $103 in 2010, an increase of 168%.

Provision for (Benefit from) Income Taxes
We have recorded an income tax provision of $3,611 for the year ended December 31, 2011 compared to an income tax benefit of $5,116 for the year ended December 31, 2010. The Company regularly assesses the likelihood that our deferred tax assets will be recovered from future taxable income. The Company considers future taxable income and ongoing tax planning strategies then records a valuation allowance to reduce the carrying value of the net deferred tax assets for amounts that are expected to be unable to be realized. In 2011, the Company determined it was able to release a previously established valuation allowance against the deferred tax asset related to non-cash compensation in the amount of $900. In 2010, based on management’s assessment of all available evidence, including previous years’ income, estimates of future profitability and the overall prospects of our business, the Company determined that the Company would be able to realize a portion of our deferred tax assets in the future, and as a result recorded a $5,116 income tax benefit for the year ended December 31, 2010 which included a $12,400 release of the valuation allowance. Based on existing contracts, the Company used a discounted projection of revenue and expenses, over a five year period, which approximated the remaining life of our HSP contract with DIRECTV including the one year renewal term, to determine the level of existing net operating loss carryforward we would be able to offset against taxable income during that period. The Company will continue to assess the potential realization of our deferred tax assets on an annual basis, or on an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to increase or decrease the valuation allowance against our gross deferred tax assets. The Company would adjust its valuation allowance in the period the determination was made. At December 31, 2011 and 2010, the valuation allowance was $13,981 and $14,401, respectively.

Net Income
The Company earned a net income of $7,044 in 2011 and a net income of $14,694 in 2010, a decrease of 52.1%.

Revenues
Total revenues decreased 1.3% from $268,994 in 2009 to $265,594 in 2010. FS segment had revenues of $242,592 in 2010 and $244,482 in 2009, a decrease of 0.8%. This decrease is due to a reduction in DIRECTV work order volume of approximately 8.9% partially offset by an increase in earned incentive revenue of approximately $6,000. The MDU segment had revenues of $21,663 in 2010 and $23,555 in 2009, at a decrease of 8.0%. This decrease is primarily due to reduced DTV upgrade subsidies of approximately $1,950 and reduced DTV MDU subscriber activations as a result of more stringent DTV credit standards. The EE&C segment had revenues of $1,339 in 2010, and $957 in 2009. The increase of 39.8% represents construction of MDU head-end systems for third parties.

Costs of Products and Services (exclusive of depreciation and amortization)
Total costs of products and services were $186,294 in 2010 compared to $207,533 in 2009, a decrease of 10.2%. In the FS segment, costs of products and services was $171,625 for the year ended December 31, 2010, compared to $191,279 for the year ended December 31, 2009, a 10.3% decrease. This decrease is the result of reduced costs due to the decrease in work order volume and improvements in inventory controls. For the MDU segment, costs of products and services for the year ended December 31, 2010 were $13,572, compared to $15,555 in the prior year, a 12.7% decrease. The decrease is a result of fewer upgrade subsidy payments to dealers and fewer subscriber activations. EE&C segment costs of products and services were $1,097 for the year ended December 31, 2010 and were $699 for the year ended December 31, 2009.

Selling, General and Administrative Expense
Selling, general and administrative expenses decreased 1.0% to $57,173 in 2010, compared to $57,778 in 2009. Selling, general and administrative expenses were, as a percentage of revenues, 21.5% for both 2010 and 2009. Selling, general and administrative expenses as a percentage of revenue is comparable primarily due to decreased insurance and telephone expense of approximately $3,400 offsetting increases in salaries and wages and legal expense. In 2010, the Company renegotiated several contracts with telephone providers as well as changed its mobile phone policies. It also changed its workers’ compensation policy. The Company is self-insured for workers’ compensation claims up to $250 plus administrative expenses, for each occurrence involving workers’ compensation claims since the beginning of 2010.

Depreciation and Amortization
Depreciation and amortization expense decreased 23.9% to $8,298 for the year ended December 31, 2010, as compared to $10,906 for the year ended December 31, 2009. Effective October 1, 2010, the Company signed a new HSP contract with DIRECTV (see Note 16). Due to the new contract, the amortization period of the DIRECTV contract-related intangibles was extended an additional 17 months to September 30, 2015, bringing the amortization period to 81 months.

Income (Loss) from Operations
The Company, in 2010, earned an income from operations for its combined operating business segments of $13,669 compared to incurring a loss from operations of $7,223 in 2009. The FS segment for the year ended December 31, 2010 had an income from operations of $20,707, compared to a loss from operations of $2,241 for the year ended December 31, 2009. This improvement was primarily due to increased incentive revenue, improved inventory control and reduced technician training expense. The MDU segment incurred a loss from operations of $2,550 in 2010 compared to a loss from operations of $1,452 in 2009 primarily due to reduced DTV subsidies and reduced DTV MDU subscriber activations due to more stringent DIRECTV credit standards. The EE&C segment earned an income from operations of $242 for the year ended December 31, 2010 and $258 for the year ended December 31, 2009. The MBCorp segment, which has no revenues, showed a loss from operations of $4,730 in 2010 compared to a loss of $3,788 for the same period last year.

Interest Expense
Interest expense was $4,202 for 2010 versus $4,104 for 2009. Imputed interest discount was $0 and $35 for the years ended December 31, 2010 and 2009, respectively.

Noncontrolling Interest
The noncontrolling interest in subsidiaries on December 31, 2010 and 2009, was $0, respectively, after the Company purchased the remaining 20% of the issued and outstanding shares of common stock of all of the DTHC operating subsidiaries (DirecTECH) and reclassified $5,996 of noncontrolling interest to Multiband’s controlling interest on December 17, 2009. The net loss attributable to the noncontrolling interest in subsidiaries for the years ended December 31, 2010 and 2009 was $0 and $1,727, respectively.

Provision for (Benefit from) Income Taxes
We recorded an income tax benefit of $5,116 for the year ended December 31, 2010 compared to an income tax provision of $406 for the year ended December 31, 2009. The Company regularly assesses the likelihood that our deferred tax assets will be recovered from future taxable income. The Company considers future taxable income and ongoing tax planning strategies then records a valuation allowance to reduce the carrying value of the net deferred tax assets for amounts that are unable to be realized. Based on management’s assessment of all available evidence, including previous years’ income, estimates of future profitability and the overall prospects of our business, the Company determined that the Company would be able to realize a portion of our deferred tax assets in the future, and as a result recorded a $5,116 income tax benefit for the year ended December 31, 2010 which included a $12,400 release of the valuation allowance. Based on existing contracts, the Company used a discounted projection of revenue and expenses, over a five year period, which approximated the remaining life of our HSP contract with DIRECTV including the one year renewal term, to determine the level of existing net operating loss carryforward we will be able to offset against taxable income in that period. The Company will continue to assess the potential realization of our deferred tax assets on an annual basis, or on an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to increase or decrease the valuation allowance against our gross deferred tax assets. The Company would adjust its valuation allowance in the period the determination was made.

Year Ended December 31, 2011
During the years ended December 31, 2011 and 2010, the Company recorded a net income of $7,044 and $14,694, respectively. Net cash provided by operations in 2011 was $21,077 as compared to $11,745 in 2010. Principal payments on current long-term debt, short-term debt, short-term debt to a related party and capital lease obligations over the next 12 months are expected to total $5,717.

Cash and cash equivalents totaled $18,169 at December 31, 2011 versus $1,204 at December 31, 2010. Working capital at December 31, 2011 was $7,463 as compared to a deficit $10,374 at December 31, 2010. The Company’s cash balance and working capital position has been bolstered by the cash flow provided by operations as well as the net proceeds received by the Company from the common stock public offering on June 1, 2011 of $16,176.

Net cash used by investing activities totaled $6,773 for the year ended December 31, 2011, compared to $1,341 for the year ended December 31, 2010, related to property and equipment acquisitions, the acquisition of subsidiaries and the purchase of available for sale securities.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview
The Company has three operating segments: (1) Field Services Segment (FS), where the Company provides installation services to pay television (satellite and broadband cable) providers, internet providers and commercial customers, (2) Multi-Dwelling Unit Segment (MDU), where the Company bills voice, internet and video services to subscribers as owner/operator and also acts as a master system operator for DIRECTV, receiving net cash payments for managing video subscribers through its network of system operators; and (3) Engineering, Energy & Construction Segment (EE&C) where the Company provides engineering and construction services for the wired and wireless telecommunications industry, including public safety networks. This segment also provides renewable energy services including wind and solar applications and other design and construction services, usually done on a project basis. All segments encompass a variety of different corporate entities. We operate in 33 states with 33 field offices and employ approximately 3,700 people.

Field Services Segment (FS)
The Company, through its FS segment, generates revenue from the installation and service of DIRECTV video programming for residents of single family homes under a contract with DIRECTV. DIRECTV is the largest provider of satellite television services in the United States with approximately 20 million subscribers. These video subscribers are owned and billed by DIRECTV. The FS segment functions as a fulfillment arm for DIRECTV. As a result, the Company does not directly compete with other providers for DIRECTV’s business. Although DIRECTV competes with DISH, the other leading satellite television provider and incumbent providers of phone and telephone services for pay television customers, DIRECTV has its own marketing and competitive programs of which the Company is merely an indirect and passive recipient. The FS segment also provides similar installation services for certain broadband cable and internet providers and commercial customers.

Multi-Dwelling Unit Segment (MDU)
Through our MDU segment, we serve as a master system operator for DIRECTV, which allows us to offer satellite television services to residents of multi-dwelling units directly and through a network of affiliated operators. The MDU segment also offers bundled services for voice, data and video directly to residents in the MDU market. Our primary customers in the MDU segment are property owners/managers who are focused on delivering their residents (our end users) reliability, quality service, short response times, minimized disruptions and alterations on the property, and value added services. Our contracts with the property owner typically run three to ten years pursuant to right-of-entry agreements between property owners and us. Within this segment, we also offer our internal support center and billing platform to service third party clients. As of October 31, 2012, we had approximately 160,000 owned and managed subscribers, with an additional 38,000 subscribers supported by the support center.

Energy, Engineering & Construction Segment (EE&C)
The Company also provides engineering and construction services for the wired and wireless telecommunications industry, including public safety networks, renewable energy services including wind and solar applications and other design and construction services which are usually done on a project basis.

Backlog (in thousands)
As of September 30, 2012, we had a backlog of unfilled orders of approximately $1,725 compared to approximately $1,817 at December 31, 2011. We define backlog as the value of work-in-hand to be provided for customers as of a specific date where the following conditions are met (with the exception of engineering change orders): (i) the price of the work to be done is fixed; (ii) the scope of the work to be done is fixed, both in definition and amount; and (iii) there is an executed written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the customer to pay us for the work to be performed. These backlog amounts are based on contract values and purchase orders and may not result in actual receipt of revenue in the originally anticipated period or at all. We have experienced variances from time to time in the realization of our backlog because of project delays or cancellations resulting from external market factors and economic factors beyond our control and we may experience such delays or cancellations in the future. Backlog does not include new firm commitments which may be awarded to us by our customers from time to time in future periods. These new project awards could be started and completed in this same future period. Accordingly, our backlog does not necessarily represent the total revenue that could be earned by us in future periods.

FS segment revenues for the three months ended September 30, 2012 were $74,798 in comparison to $78,659 for the same period in 2011, a decrease of 4.9%. Revenue generated under the home services provider agreement with DIRECTV decreased $8,054, or 10.4%, as a result of a 9% decline in the number of closed work orders between periods. This decline was partially offset by a $1,241 (225%) increase in WildBlue fulfillment revenue and revenue from the cable fulfillment business (acquired in late 2011 and early 2012), which totaled $2,954 in the 2012 period. Revenues for the nine months ended September 30, 2012, for the FS segment, were $199,514 as compared to $203,135 for the same period in 2011, a decrease of 1.8%. Revenue generated under the home services provider agreement with DIRECTV decreased $14,819, or 7.4%, as a result of a 9% decline in the number of closed work orders between years. This decline was offset by a 3,404 (257%) increase in WildBlue fulfillment revenue and revenue from the cable fulfillment business, which totaled $8,497 in 2012. During the remainder of 2012, the Company expects FS segment revenues to seasonally decrease in the fourth quarter.

The MDU segment had revenues of $7,534 for the three months ended September 30, 2012, compared to $5,742 for the same period in 2011, an increase of 31.2%. Revenues for the nine month period ended September 30, 2012, increased 25.0% to $19,753 from $15,805 for the same period in 2011. During the three and nine months ended September 30, 2012, the Company increased its MDU revenue primarily via an increase in system operator related revenue. During the remainder of 2012, the Company expects MDU revenue to seasonally decrease in the fourth quarter.

The EE&C segment revenues increased from $1,965 for the three months ended September 30, 2011 to $3,363 for the three months ended September 30, 2012, an increase of 71.1%. The Company’s acquisition of SE and MW in September 2011, accounted for $1,659 of this increase which was partially offset by a decrease in MDU construction revenue of $261. Revenues for the nine month period ended September 30, 2012, for the EE&C segment, increased 129.7% to $8,460 from $3,683 for the same period in 2011. Revenues generated by SE and MW accounted for $5,960 of this increase which was partially offset by a decrease in MDU construction revenue of $1,183. During the remainder of 2012, the Company expects EE&C segment revenues to increase as the Company increases its sales and bidding efforts.

Cost of Products and Services (exclusive of depreciation and amortization)
The Company's cost of products and services increased by 4.2% to $62,893 for the quarter ended September 30, 2012, as compared to $60,332 for the same quarter last year. For the nine months ended September 30, 2012, cost of products and services were $167,750 compared to $160,201 in the prior year, a 4.7% increase.

Cost of products and services for the FS segment decreased by 0.1% for the three months ended September 30, 2012 to $54,871, compared to $54,947 in the prior year quarter. As a percentage of revenue, cost of products and services for the FS segment was 73.4% and 69.9% for the three months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012, cost of products and services were $148,302 for the FS segment compared to $147,051 in the prior year, a 0.9% increase. The increase in both periods is attributable to increased technician retention efforts and additional costs associated with our newly acquired cable fulfillment. As a percentage of revenue, cost of products and services for the FS segment was 74.3% and 72.4% for the nine months ended September 30, 2012 and 2011, respectively. For the remainder of 2012, the Company expects FS segment costs of products and services to remain relatively constant in relation to FS segment revenue.

Cost of products and services for the MDU segment increased by 37.7% for the current quarter to $5,370, compared to $3,901 in the same quarter last year. For the nine months ended September 30, 2012, cost of products and services were $12,684 for the MDU segment, compared to $10,440 in the prior year, a 21.5% increase. As a percentage of revenue, cost of products and services for the MDU segment was 64.2% and 66.1% for the nine months ended September 30, 2012 and 2011, respectively. The increase was due to system operator related costs. For the remainder of 2012, the Company expects MDU costs of products and services to be consistent as a percentage of revenues.

For the EE&C segment, cost of products and services were $2,652 for the quarter ended September 30, 2012, compared to $1,484 in the same quarter last year, a 78.7% increase. The acquisition of SE and MW in September 2011 accounted for $1,384 of this increase offset by a decline in MDU construction costs of $216. As a percentage of revenue, costs of products and services for the EE&C segment were 78.9% and 75.5% for the quarters ended September 30, 2012 and 2011, respectively. The increase in costs as a percentage of revenues between periods is due to economic conditions and the competitive marketplace in which this segment operates. For the nine months ended September 30, 2012, cost of products and services were $6,764 for the EE&C segment, compared to $2,710 in the prior year, a 149.6% increase. Costs associated with SE and MW accounted for $4,916 of this increase while MDU construction costs declined by $862. As a percentage of revenue, cost of products and services for the EE&C segment was 80.0% and 73.6% for the nine months ended September 30, 2012 and 2011, respectively. For the remainder of 2012, the Company expects EE&C segment costs of products and services to remain relatively consistent in relation to EE&C segment revenue.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $17,557 for the quarter ended September 30, 2012, compared to $17,014 in the prior year’s quarter, an increase of 3.2%. Costs associated with newly acquired operations accounted for the majority of the increase. Selling, general and administrative expenses were, as a percentage of revenues, 20.5% for the quarter ended September 30, 2012 and 19.7% for the same period a year ago. For the nine months ended September 30, 2012, selling, general and administrative expenses increased 13.5% to $51,218 compared to $45,131 for the nine months ended September 30, 2011. Costs associated with newly acquired operations accounted for $4,262 (70%) of the increase. The remainder of the increase was caused by an increase in benefit costs, which was driven by a variety of factors including an increase in health plan expenses due to an increase in the number of participants and certain significant medical claims incurred under the Company’s self-insured plan. The Company believes that offering improved benefits to employees will lead to improved retention, which will drive down recruitment and training costs. Workers compensation expense also increased due to an increase in the number of claims filed in 2012. As a percentage of revenue, selling general and administrative expenses were 22.5% for the nine months ended September 30, 2012, compared to 20.3% for the same period in 2011. The Company anticipates that during the remainder of 2012, selling, general and administrative expenses will decline as a percentage of total revenues.

Depreciation and Amortization
Depreciation and amortization expense of $1,789 for the quarter ended September 30, 2012, compared to $1,566 in the prior year’s quarter, an increase of 14.2%. For the nine months ended September 30, 2012, depreciation and amortization increased 5.8% to $5,277 compared to $4,986 for the nine months ended September 30, 2011.

Income from Operations
In the third quarter of 2012, the Company earned income from operations of $3,456, versus operating income of $7,454 during the prior year’s comparable period. Income from operations was $3,482 during the first nine months of 2012 compared to $12,305 during the first nine months of 2011.

For the third quarter of 2012, the FS segment earned income from operations of $3,771 compared to $9,934 in the same period last year, a decrease of 62.0%. The decrease in income from operations was primarily due to an increase in selling, general and administrative expense together with a $1,382 operating loss generated by the cable fulfillment business, which was acquired in late 2011 and early 2012. For the nine months ended September 30, 2012, income from operations was $4,913 for the FS segment, compared to $17,740 in the prior year, a decrease of 72.3%. This decrease in income from operations was primarily due to an increase in selling, general and administrative expense together with a $2,011 operating loss generated by the cable fulfillment business. The FS segment is expected to decrease its profitability through the balance of 2012 as seasonal decreases in work orders occurs.

The MDU segment showed income from operations of $329 for the three months ended September 30, 2012, compared to a loss of $669 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, income from operations was $1,201 for the MDU segment, compared to a loss from operations of $2,000 in the same period last year. The Company plans to continue its improvement in the MDU segment in future periods by increasing levels of activity in the managed subscriber divisions (the Master System Operator and call center divisions) and by reshaping its owned subscriber footprint in concentrated, targeted geographic markets in order to service the customers more efficiently.

The EE&C segment had a loss from operations of $81 for the third quarter of 2012, compared to income from operations of $269 in the third quarter of 2011. For the nine months ended September 30, 2012, loss from operations was $892 for the EE&C segment, compared to income from operations of $761 in the same period last year. For the balance of 2012, the Company expects this segment to improve its results as revenue increases with increased activity.

The MBCorp segment, which has no revenues, had loss from operations of $563 for the three months ended September 30, 2012, compared to a loss of $2,080 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, loss from operations was $1,740 compared to a loss from operations of $4,196 in the same period last year. The reduction in the loss from operations between years is a result of increased cost allocations to other business segments due to the acquisition of the cable fulfillment and energy, engineering and wireless businesses. The MBCorp segment is expected to show losses in future periods as corporate overhead is expected to remain consistent with current levels with no offsetting revenues or anticipated credits to expenses.

Interest Expense
Interest expense was $935 for the quarter ended September 30, 2012, versus $1,038 for the same period a year ago. Interest expense was $2,774 for the nine months ended September 30, 2012 and $2,989 for the same period last year.

Gain on Bargain Purchase
The Company recorded a gain on bargain purchase of $177 for both the three and nine months ended September 30, 2012, related to its acquisition of SE (see Note 3).

Losses Attributable to Available For-Sale Securities
For the three months ended September 30, 2012 and 2011, the Company recorded other-than-temporary impairment losses of $71 and $0, respectively. For the nine months ended September 30, 2012 and 2011, the Company recorded other-than-temporary impairment losses of $652 and $0, respectively. The losses were due to the decline in the fair value of the shares it held in WPCS International, Inc. (see Note 4). As of September 30, 2012, all shares of WPCS have been sold. The gross realized losses on sales of available-for-sale securities, which are included in losses attributable to available for-sale securities, were $71 and $121 for the three and nine months ended September 30, 2012, respectively and $0 for both the three and nine months ended September 30, 2011.

Provision for Income Taxes
The Company recorded an income tax provision of $1,015 (38.4% of net income before income taxes) and $2,869 (43.8% of net income before income taxes) for the three months ended September 30, 2012 and 2011, respectively. The Company recorded an income tax provision of $185 (60.5% of net income before income taxes) for the nine months ended September 30, 2012 and $4,369 (43.7% of net income before income taxes) for the nine months ended September 30, 2011. Due to the size of the taxable income, the provision for the nine months ended September 30, 2012, consists almost entirely of state income taxes that are based on factors other than earnings. The Company has no significant unrecognized tax benefits as of September 30, 2012 that would reasonably be expected to affect our effective tax rate.

Net Income
In the third quarter of fiscal 2012, the Company reported a net income of $1,627 compared to a net income of $3,679 for the third fiscal quarter of 2011. For the nine months ended September 30, 2012, the Company recorded a net income of $121 compared to a net income of $5,621 for the nine months ended September 30, 2011.

Liquidity and Capital Resources
During the nine months ended September 30, 2012 and 2011, the Company earned a net income of $121 and $5,621, respectively. Cash from operations during the nine months ended September 30, 2012 was $410, compared to $15,620 during the nine months ended September 30, 2011. During the first nine months, DIRECTV implemented certain changes in the way it prices, finances and sells equipment to the Company, resulting in a one-time reduction of cash of approximately $3,200. This change had no impact on operating income. A significant reduction in accounts receivable, inventory and accounts payable balances also resulted from the equipment price change. A reduction in DIRECTV workorder volumes plus losses from the cable fullfillment and energy, engineering and wireless businesses contributed to the decrease in cash from operations.

Net cash from investing activities totaled $4,636 for the nine months ended September 30, 2012, compared to $5,940 for the nine months ended September 30, 2011. During the first nine months of 2012, purchases of property and equipment totaled $3,618. The Company acquired cable fulfillment assets for $700 and increased restricted cash as security for a letter of credit in connection with the acquisition of land and a building for $1,682. In addition, the transaction to acquire land and a building resulted in proceeds of $685. The Company also received proceeds from the sale of available-for-sale securites of $335.

Net cash from financing activities was $3,814 for the nine months ended September 30, 2012, compared to $4,223 for the nine months ended September 30, 2011. Cash used during the nine months ended September 30, 2012 consisted of payments on short-term debt of $3,556 and payments on capital lease obligations of $400. Principle payments on current long-term debt, short-term debt, related party debt and capital lease obligations over the next 12 months are expected to total $37,055. At September 30, 2012, the Company was in compliance with its debt covenants. The Company intends to pay these maturing debt obligations via refinancing the debt and/or via a combination of the actions listed below.

Cash and cash equivalents totaled $10,129 at September 30, 2012, versus $18,169 at December 31, 2011. The Company has a working capital deficit of $22,935 at September 30, 2012, compared to positive working capital of $7,463 at December 31, 2011. The working capital deficit at September 30, 2012 is impacted by the fact that long-term debt totaling $34,369 is classified as a current liability as the maturity dates are within the next twelve months. The Company intends to refinance its current long-term debt prior to January 1, 2013.

In 2012, the Company intends to focus on maintaining profitability in its FS segment. With regards to its MDU segment, the Company believes it can also maintain profitability by growing owned subscriber revenues by acquiring new rights of entry agreements, increasing marketing and customer penetrations of previously built properties and by acquiring existing subscribers from other operators. In addition, the Company believes it can increase managed subscriber revenues by selling its support center services to its network of system operators and by providing ancillary programs for voice and data services to that same network. In the EE&C segment, the Company hopes to see improvements in operating results by: (i) a concentrated focus on the selling process results in increased bid activity which should result in increased revenues; (ii) governmental grants for alternate energy projects are extended to promote growth in wind projects; and (iii) 3G to 4G tower conversions increase based on the demand for higher capacity mobile infrastructure.

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