UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.
20549


Form 10-K




þ
              
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the year ended September 30, 2010.or ̈
              
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period
      from          to


Commission
File Number 000-31355




BEACON
ENTERPRISE SOLUTIONS GROUP, INC.


(Exact
name of registrant as specified in its charter)


Nevada
              
              81-0438093(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)9300
      Shelbyville Road, Suite 1000, Louisville, KY
              
              40222(Address
      of principal executive offices)
              
              (Zip
      Code)




Registrant’s
telephone number, including area code


(502) 657-3500


Securities
registered pursuant to Section 12(b) of the Act:


None


Securities
registered pursuant to Section 12(g) of the Act:


Common
Stock, $.001 par value.




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  ̈
      No þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  ̈
      No þ




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  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). 
Yes  ̈
     No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of 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.   ̈




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




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




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




The aggregate market value of the
voting and non-voting common equity held by non-affiliates was $13,732based on the price of BeaconEnterprise Solutions Group, Inc.’s common stock as of December 13,
2010, as reported on the OTC Bulletin Board.




The
number of shares outstanding of Beacon Enterprise Solutions Group, Inc.’s common
stock as of December 13, 2010 was 37,376,396.




DOCUMENTS
INCORPORATED BY REFERENCE






Documents
            
            Form
      10-K ReferenceNone
            
            Not
      Applicable









Beacon
Enterprise Solutions Group, Inc.


FORM 10-K


For
the fiscal year ended September 30, 2010





INDEX




PagePART
      IItem
      1
                                                                  Business
                                                                  3Item
      1A
                                                                  Risk
      Factors
                                                                  6Item
      2
                                                                  Properties
                                                                  10Item
      3
                                                                  Legal
      Proceedings
                                                                  10Item
      4
                                                                  Removed
      and Reserved
                                                                  10PART
      IIItem
      5
                                                                  Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                                  11Item
      7
                                                                  Management’s
      Discussion and Analysis of Financial Condition, Plans and Results of
      Operations
                                                                  12Item
      8
                                                                  Financial
      Statements and Supplementary Data
                                                                  18Item
      9
                                                                  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                                  51Item
      9A
                                                                  Controls
      and Procedures
                                                                  51Item
      9B
                                                                  Other
      Information
                                                                  52PART
      IIIItem
      10
                                                                  Directors,
      Executive Officers and Corporate Governance
                                                                  53Item
      11
                                                                  Executive
      Compensation
                                                                  55Item
      12
                                                                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                                  69Item
      13
                                                                  Certain
      Relationships and Related Transactions, and Director
      Independence
                                                                  70Item
      14
                                                                  Principal
      Accounting Fees and Services
                                                                  71PART
      IVItem
      15
                                                                  Exhibits,
      Financial Statement Schedules
                                                                  72Signatures
                                                                  76




Page
2





PART I






Item 1.
            Business




Beacon
Enterprise Solutions Group, Inc. and subsidiaries (collectively the“Company”) is a provider of
global design, implementation and management of high performance Information
Technology Systems (ITS) infrastructure solutions.  Beacon’s portfolio of
ITS infrastructure services spans all professional and construction requirements
for design, build and management of telecommunications, network and technology
systems infrastructure. Professional services offered include consulting,
engineering, program management, project management, construction services and
infrastructure management services. Beacon offers these services under a
comprehensive contract vehicle or unbundled to some global and regional clients.
Beacon also offers special services in support of qualified projects in the
smart buildings/campuses/cities and data center verticals. Finally, Beacon
provides managed information technology and telecommunications services in
selected local markets. In this report, the terms “Company,” “Beacon,” “we,”
“us” or “our” mean Beacon Enterprise Solutions Group, Inc. and all subsidiaries
included in our consolidated financial statements.




General




The
Company was originally formed to acquire companies that would allow it to serve
the small and medium-sized business enterprises (the “SME Market”) on an
integrated, turn-key basis from system design, procurement and installation
through all aspects of providing network service and designing and hosting
network applications.  In response to identification of a significant
un-served market, our business strategy has shifted to become a global leader in
the design, implementation and management of high performance ITS infrastructure
solutions.  Beacon’s portfolio of ITS infrastructure services spans all
professional and construction requirements for design, build and management of
telecommunications, network and technology systems infrastructure, while
continuing to provide managed information technology and telecommunications
services in selected local markets.




For the
purpose of this report on Form 10K, all amounts are in thousands except share
and per share data.  Beacon generated net sales of $13,996 for the year
ended September 30, 2010 as it pursued this new strategy. For the year
ended September 30, 2010, Beacon recognized a net loss of approximately
$18,555. Total assets were $12,071 as of September 30, 2010.




Operations




Services


Beacon
provides global, international and regional telecommunications and technology
systems infrastructure services, encompassing a comprehensive suite of
consulting, design, installation, and infrastructure management offerings.
Beacon’s portfolio of infrastructure services spans all professional and
construction requirements for design, build and management of
telecommunications, network and technology systems infrastructure. Professional
services offered include consulting, engineering, program management, project
management, construction services and infrastructure management services. Beacon
offers these services under either a comprehensive contract option or unbundled
to some global and regional clients.





Beacon
provides professional, construction and management services to clients who
require a global reach, proven experience and resources, and the consistent,
predictable results that can only be offered by a single global company. Today’s
global and international clients and international enterprises demand the
competitive advantage obtained through outsourcing, without the additional cost,
internal overhead and multiple points of failure that come from bidding for
services from small regional professional services firms or contractors. Beacon
offers these global, multi-national or regional companies a competitive,
single-source advantage for consulting, design, implementation, program
management, project management and managed services regardless of the location.
By overcoming the barriers to entry found in the telecommunications and
technology systems channels, Beacon is offering the Fortune 1000 client a
vehicle to more fully integrate global enterprise standards, reduce internal
pressure on scarce IT and Facilities resources, reduce the risk that comes with
multiple points of failure and increase operating income through the
efficiencies that accompany true global strategic sourcing. Beacon offers this
sourcing capability to our clients on a global, multi-national and regional
basis.




Page
3




Management Services.In
addition to offering consulting, design, engineering and installation of
telecommunications and technology systems infrastructure, Beacon offers our
clients infrastructure management services to address planning, moves, adds and
changes to their telecommunications and technology systems. This service
effectively bundles together all Beacon infrastructure services and offer them
to clients under a global, multi-national or regional umbrella agreement. To
protect client investments and reduce total cost of ownership; global,
multi-national or regional infrastructure management services are designed to:
(i) reduce internal cost and complexity for obtaining engineering,
installation or management related expenses, (ii) facilitate
enterprise-wide standardization, (iii) eliminate duplicated effort,
(iv) protect warranties, and (v) reduce costs associated with moves,
adds and changes. The previously unavailable data which may be extracted from
the Beacon management system can provide strategic planning insight and
empirical data for management decisions, including the viability of new
enterprise initiatives. Infrastructure management services also allow the
telecommunications and technology systems infrastructure to be maintained by a
planned and budgeted continuum, rather than as a reaction to a series of
disconnected projects. Although Beacon clients may begin by using one of our
discrete, project-oriented services (described below), the business model
indicates that they will frequently evolve into a global, multi-national or
regional infrastructure management client.
  Design, Engineering &
Construction Services.The increasing economic, regulatory and
environmental issues facing executives, IT and Facilities professionals mean
that there are an increasing number of complex technical and operational issues
that need to be solved for each customer. In order to address these issues,
Beacon has moved beyond the expected baseline of technical and educational
requirements (Professional Engineer, RCDD, PMP, CPP, CISSP, etc.) and into a new
paradigm of cross-disciplinary business and technical professionals who
understand the benefit of standardization, predictability and consistency when
provided within a process-driven solution. Companies can no longer rely on
ownership of the internal capabilities to contract for a wide variety of
services from a pool of subcontractors, but now must develop a smaller number of
global or regional relationships that allow them to control and make the most of
critical capabilities. Beacon provides each client with access to world-class
engineering, design and installation resources, but offers them within a manner
designed to permit a reduction in bottom line expenditures while reducing the
workload of scarce internal resources. This contrasts the traditional bid
mentality where clients lose any cost-benefit gained from the bid or proposal
process, through increased pressure on internal resources needed to maintain the
corporate standard while controlling the cost of administration of multiple
vendors for identical tasks across a global enterprise. Beacon’s solution to the
dramatic changes in world markets — geopolitical, macroeconomics, and
technology, is to make business capability portable by providing the processes
needed to make services delivery available on a global, multi-national or
regional basis.
  Special Services.There
are two vertical markets in FY 2010 that allow Beacon to leverage existing areas
of internal expertise and as such will qualify for designation as a Beacon
Special Service. They are data centers and smart (intelligent)
buildings/campuses/cities. Data Center Special Services rely on existing
expertise in consulting, design, project management, bid management and
construction of data centers. Service delivery for data centers range from one
or more compartmentalized professional services up to acting as the prime
contractor for the construction or retrofit of the entire data center. The
approach to smart or intelligent buildings/campuses/cities is primarily an
engineering or design service, but can involve design/build projects. Enabled by
the increasing availability of Internet compatible building systems, with demand
created by pressure on building developers and managers to become more sensitive
to energy management and reduction of carbon footprint for the built
environment, the experience and knowledge required to design the infrastructure
for the more than 15 low-voltage systems found in most offices are escalating in
demand. Beacon has this ability internally and offers these services in higher
demand areas such as the Middle East, Europe and some areas of the Pacific
Rim.
  Managed Information Technology and
Telecommunications Services. Beacon continues to provide information
technology and telecommunications services on a managed services basis in select
local markets. These services are typically not portable and do not scale in the
same manner as our Professional, Construction and Management Services as the
customer base is largely middle market businesses with localized needs. We
typically target medium sized businesses with limited information technology
resources and offer high margin, value added services that allow the customer to
concentrate on their business while we provide the tools necessary to supply
their information technology and telecommunications needs.
  Customers
  Because
Beacon provides infrastructure management services to global and multi-national
clients, the primary target clients can be defined as the Fortune 1000, or the
broader Forbes Global 2000. Global clients may also elect to use Beacon’s
services in an ala carte fashion, typically using Design & Engineering
services which are more portable when used outside of an infrastructure managed
services contract vehicle. The business model for global, multi-national and
regional clients who use one or more unbundled services allows for migration to
a fully managed services offering where all services are offered under a single
contractual umbrella.
 
 Suppliers
  Beacon
establishes manufacturer, distributor and subcontract relationships from the
global perspective. The lack of competitors offering infrastructure management
services with a global reach provides Beacon with a distinct advantage. In
addition, the global managed services business model provides an exclusive
client relationship which is also attractive to suppliers. Beacon has accounts
with various suppliers that provide products and materials necessary to fulfill
our services and the needs of our customers. Such products are typically
available from more than one supplier and we routinely review our supplier
relationships to determine the suppliers with the most attractive footprint,
logistics offerings and volume-based pricing. We use multiple criteria to
evaluate our suppliers and purchase with those that provide us with the best
service.
  Page
4
  Beacon
also engages professional and construction-related services firms as contractors
in specialized geographical areas, the qualification and selection of these
firms’ is based on the same stringent background, chemical screening (where
permissible by law) and technical assessments used in the hiring of our
employees. Contractors are held to the same high levels of service delivery,
knowledge of customer and industry standards, and compliance with Beacon and
industry best practices. Contractors are only used with customer knowledge and
consent and in those cases when geographical challenges or special skills are
needed and cannot be overcome with internal resources.
  Seasonality
  Due to
the breadth of services offered to Beacon clients, seasonality issues are
minimal. Some seasonality deltas are noted between professional and construction
services, however the volume core services and infrastructure management
services tend to mitigate the seasonal differences for the unbundled services
offered on a global or regional basis.
  Customer
Concentration
  For the
years ended September 30, 2010 and 2009, our largest customer accounted for
approximately 64% and 21% of sales. Although we expect we will continue to have
a high degree of customer concentration, our customer engagements are typically
covered by multi-year contracts or master service agreements under which we have
been operating for a number of years. In addition, current economic conditions
could harm the liquidity of and/or financial position of our customers or
suppliers, which could in turn cause such parties to fail to meet their
contractual or other obligations to us.
  Competition
  Beacon’s
service delivery offerings, and therefore its competitors, can be divided into
two broad categories. First, services that are offered individually, generally
in response to the client needs for a single service within a single project,
and secondly, services that are offered as a single source package (managed
services and outsourcing) and delivered as part of a regional, national,
multi-national or global contract, generally with a specified window of time vs.
for a single project or task. When offering a single service in response to a
single project, there are numerous competitors. These mid- to small-sized
competitors tend to be single site or confined to small geographic regions and
generally aggressively compete for private or publicly announced work. Further,
they typically specialize in and are good at only one service out of the 5 or 6
that the client may actually need. These smaller, single service competitors are
generally viewed as being commoditized. Beacon’s model allows us to successfully
leverage the bigger managed services offering and introduce scalability by
allowing our clients the option to expand the number of services offered and the
geography over which the service is delivered. By removing the business risk
associated with having only a single service to offer to new and existing
clients, it further allows Beacon to differentiate itself by offering a higher
level of service with a more predictable price. So by leveraging the
multi-service, global capabilities of Beacon, this provides a significant
competitive edge for the first category of competitors, but reduces the pool of
competitors for the full-spectrum managed infrastructure services offered across
broad geographic areas. There are several national infrastructure firms, such as
Black Box and Netservant that have the size and funding to become direct
competitors, but by nature of their size and current business models they would
experience significant internal resistance to change.
  Employees
 
 Beacon
currently employs 91 people in offices located in Louisville, KY, Columbus, OH,
Raritan, NJ, Cincinnati, OH and Prague, Czech Republic. None of Beacon’s
employees is subject to a collective bargaining agreement.
  Available
Information
  Our
Internet address iswww.askbeacon.com, where we make available, free of charge, our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and any amendments to those reports, as soon as practicable
after such reports are electronically filed with, or furnished to, the SEC. The
SEC reports can be accessed through the “SEC Reports” link in “Investor
Relations” section of our website. Other information found on our website is not
part of this or any other report we file with, or furnish to, the Securities and
Exchange Commission, or the SEC.
  Code
of Ethics
  We have
adopted a Code of Ethics that applies to all of our directors, officers and
employees. The Code is available on our website. If any waivers of the Code are
granted, the waivers will be disclosed in an SEC filing on Form 8-K. Our
website also includes the Charters of the Audit Committee and the Compensation
Committee. Stockholders may request free copies of these documents by writing to
Michael Grendi, 1961 Bishop Lane, Suite 101, Louisville, KY 40218, by calling
502-657-3500 or by sending an email request to
michael.grendi@askbeacon.com.
  Page
5
  The
public may also read and copy any materials we file with the SEC at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, atwww.sec.gov.
  Item 1A.
              Risk
      Factors
 
 You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this report that are not historic facts are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements. If
any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of Beacon
Common Stock could decline, and you may lose all or part of your
investment.
  Risks
Relating to the Business
  In this
discussion of the “Risks Relating to the Business,” unless otherwise noted or
required by the context, references to “us,” “we,” “our,” “Beacon” and similar
terms refer to Beacon, as defined above.
  Beacon
has a history of losses.
  Beacon
has incurred losses since its inception. While we expect to achieve a positive
cash flow basis there can be no assurance that this will occur. Our ability to
operate profitably is dependent upon our ability to operate the portfolio of ITS
infrastructure services, build and management of telecommunications, network and
technology systems infrastructure service offerings in an economically
successful manner but, no assurances can be given that we will be able to do
this. Our prospects must be considered in light of the numerous risks, expenses,
delays and difficulties frequently encountered in the competitive and high risk
telecommunications and ITS services industry, as well as the risks generally
inherent in the current economic environment. There can be no assurance that we
will ever achieve sustained recurring net sales and profitability on a
consistent and growing basis.
  Beacon
will require additional financing.
  Beacon
will require additional capital to implement its long-term business plan. There
can be no assurance that such financing will be available to Beacon or, if it
is, that it will be available on terms and at a valuation that would be
beneficial to the interests of current stockholders.  In this regard,
failure by Beacon to secure additional financing on favorable terms could have
severe adverse consequences relative to Beacon’s ability to grow and/or fully
leverage existing business relationships and agreements, which ultimately could
mean that Beacon may not be viable.
  Rapid
technological change and obsolescence could adversely affect Beacon’s
business.
  Our
business is subject to technological innovation, with such developments
potentially adversely affecting the business and operations of Beacon in the
future.
  Beacon’s
success depends upon agreements with third parties.
  Our
business plan contemplates working with third party vendors in multiple aspects
of the business. The success of our plan assumes successful relationships with
third party vendors for contractor services, network access and hardware and
software products which Beacon seeks to offer and sell. If Beacon is unable to
attract competent corporate partners, or if such partners’ efforts are
inadequate, Beacon’s business could be harmed.
 
 Beacon
has operations outside the United States.
  Part of
our growth strategy relies on further development of operations outside the
United States; such international operations are subject to additional risks,
including:
  •
              local
      political or economic instability;
  Page
6
  •
              changes
      in governmental regulation;
 
 •
              changes
      in import/export duties;
 
 •
              trade
      restrictions;
 
 •
              lack
      of experience in foreign markets;
 
 •
              difficulties
      and costs of staffing and managing operations in certain foreign
      countries;
 
 •
              work
      stoppages or other changes in labor
conditions;
 
 •
              difficulties
      in collecting accounts receivables on a timely basis or at
      all; and
 
 •
              adverse
      tax consequences or overlapping tax
structures.
  We plan
to continue to market and sell our products internationally to respond to
customer requirements and market opportunities. Establishing operations in any
foreign country or region presents risks such as those described above as well
as risks specific to the particular country or region. In addition, until a
payment history is established over time with customers in a new geography or
region, the likelihood of collecting receivables generated by such operations
could be less than our expectations. As a result, there is a greater risk that
reserves set with respect to the collection of such receivables may be
inadequate. If our operations in any foreign country are unsuccessful, we could
incur significant losses and we may not achieve profitability.
  Additionally,
changes in policies or laws of the United States or foreign governments
resulting in, among other things, changes in regulations and the approval
process, higher taxation, currency conversion limitations, restrictions on fund
transfers or the expropriation of private enterprises, could reduce the
anticipated benefits of our international expansion. If we fail to realize the
anticipated net sales growth of our future international operations, our
business and operating results could suffer.
  Beacon
does not manufacture the equipment that it relies upon.
  Beacon
does not and will not have any of its own equipment or manufacturing capacity
and must rely on agreements with third parties to supply all products used in
Beacon’s business. An interruption in the supply of such equipment could harm
the business of Beacon.
  Beacon’s
business is subject to inherent risks including those arising from customer
acceptance, lost customers, and market competition.
  Customer Acceptance.Beacon’s intended customers may be unfamiliar with the services and
technologies offered by Beacon for any number of reasons and therefore hesitant
to use Beacon’s products and services. As a result, the sales cycle involved in
obtaining new customers could be slower and more expensive than initially
budgeted. Beacon will need to educate customers as to the benefits of its
products and services, which education is costly and time consuming. Thus,
Beacon cannot accurately forecast the timing and recognition of net sales from
marketing of its products and services to new customers. Delays in market
acceptance of Beacon’s products and services could harm Beacon.
  Lost Customers.There
is no guarantee that customers will continue to use the products and services of
Beacon. The business is inherently very competitive on a price and service basis
and there can be no assurance that Beacon, as a new entrant, will be successful
with its business model in retaining customers.
  Competition.There are
many companies operating in certain areas of Beacon’s basic market niche that
have longer operating histories and greater financial, technical, marketing,
sales, or other resources when compared to Beacon. While Beacon intends to enter
into relationships with third parties to offset these competitive factors, there
is no guarantee that Beacon will respond more effectively than its competitors
to new or emerging products or changes in customer requirements. Increased
competition, either from individual firms or collaborative ventures may harm
Beacon’s ability to sell services on favorable terms, which in turn could lead
to price cuts, reduced gross margins, or loss of market share. These factors
could seriously harm Beacon’s business.
  Beacon
depends on its key employees.
  Beacon is
highly dependent on certain officers and employees. The loss of any of their
services or Beacon’s inability to attract and retain other qualified employees
would have an adverse impact on Beacon’s business and its ability to achieve its
objectives. Beacon has employment and non-compete agreements with all key
personnel. These agreements however will permit the employee to resign without
cause at any time. There can be no assurance that Beacon will be able to retain
existing employees or that it will be able to find, attract and retain other
skilled personnel on acceptable terms.
  Page
7
  Beacon
has no patent protection for its products and services.
  None of
Beacon’s products or services is proprietary to Beacon and, as a result, Beacon
enjoys no patent protection. As a result, Beacon has a limited ability to
protect what it does against infringement by others, including competitors who
are larger and better capitalized than Beacon.
  Economic
conditions could materially adversely affect us.
  Our
operations and performance depend significantly on national and worldwide
economic conditions. Uncertainty about current national and global economic
conditions poses a risk as consumers and businesses may postpone spending in
response to tighter credit, negative financial news and/or declines in income or
asset values, which could have a material negative effect on the demand for our
products and services. Other factors that could influence demand include
continuing increases in fuel and other energy costs, conditions in the
residential real estate and mortgage markets, labor and healthcare costs, access
to credit, consumer confidence, and other macroeconomic factors affecting
consumer spending behavior. These and other economic factors could have a
material adverse effect on demand for our products and services and on our
financial condition and operating results.
  The
current economic conditions have resulted in a tightening in the credit markets,
a low level of liquidity in many financial markets, and extreme volatility in
fixed income, credit, currency and equity markets. There could be a number of
follow-on effects from the credit crisis and current economic environment on our
business, including insolvency of key customers and suppliers and the inability
for us to raise additional working capital to support the growth of our
operations.
  Beacon’s
quarterly operating results may fluctuate significantly and will be difficult to
predict.
  Our
results of operations will fluctuate significantly from quarter to quarter as a
result of a number of factors, including our services development timeline and
the rate at which customers accept our service offerings. Accordingly, our
future operating results are likely to be subject to variability from quarter to
quarter and could be adversely affected in any particular quarter. It is
possible that our operating results will be below the expectations of investors.
As indicated above, Beacon has incurred losses since its inception.
  Catastrophic
events or geo-political conditions may disrupt our business.
  A
disruption or failure of our systems or operations in the event of a major
earthquake, weather event, cyber-attack, terrorist attack, or other catastrophic
event could cause delays in completing sales, providing services or performing
other mission-critical functions. A catastrophic event that results in the
destruction or disruption of any of our critical business or information
technology systems could harm our ability to conduct normal business operations
and our operating results. Abrupt political change, terrorist activity, and
armed conflict pose a risk of general economic disruption in affected countries,
which may increase our operating costs. These conditions also may add
uncertainty to the timing and budget for technology investment decisions by our
customers.
  Risks
Relating to Ownership of Beacon Common Stock
  No
Assurances of a Public Market; Restrictions on Resale.
  Although
Beacon Common Stock is eligible for quotation on the NASD Bulletin Board,
there is not and has never been a trading market for the Beacon Common Stock.
There can be no assurances that any trading market will ever develop in the
Beacon Common Stock at any time in the future. Investors must be prepared to
bear the economic risk of holding the securities for an indefinite period of
time.
  Potential
dilution of outstanding options and warrants could interfere with Beacon’s
ability to raise capital.
  Beacon
has outstanding options and warrants that are convertible into or exercisable
for shares of our common stock. To the extent that outstanding options or
warrants are exercised, dilution to the percentage ownership of Beacon’s
shareholders will occur. In addition, the terms on which Beacon will be able to
obtain additional equity capital may be adversely affected if the holders of
outstanding options and warrants exercise them at a time when Beacon is able to
obtain additional capital on terms more favorable to Beacon than those provided
in the outstanding options and warrants.
  Page
8
  The
price of Beacon Common Stock may fluctuate significantly.
  Stock of
public companies can experience extreme price and volume fluctuations. These
fluctuations often have been unrelated or out of proportion to the operating
performance of such companies. Beacon expects its stock price to be similarly
volatile. These broad market fluctuations may continue and could harm Beacon’s
stock price. Any negative change in the public’s perception of the prospects of
Beacon or companies in Beacon’s industry could also depress Beacon’s stock
price, regardless of Beacon’s actual results. Factors affecting the trading
price of Beacon’s common stock may include:
  •
              variations
      in operating results;
 
 •
              announcements
      of technological innovations, new products or product enhancements,
      strategic alliances or significant agreements by Beacon or by
      competitors;
 
 •
              recruitment
      or departure of key personnel;
 
 •
              litigation,
      legislation, regulation or technological developments that adversely
      affect Beacon’s business; and
 
 •
              market
      conditions in Beacon’s industry, the industries of their customers and the
      economy as a whole.
  Further,
the stock market in general, and securities of microcap companies in particular,
can experience extreme price and volume fluctuations. Continued market
fluctuations could result in extreme volatility in the price of the Beacon
Common Stock, which could cause a decline in the value of Beacon Common Stock.
You should also be aware that price volatility might be worse if the trading
volume of the Beacon Common Stock is low.
 
 Although
our Common Stock is currently traded on the OTC Bulletin Board (“OTC.BB”), trading may
be extremely sporadic. There can be no assurance that a more active market for
our common stock will develop.
  The
SEC may limit the number of shares of Beacon Common Stock that may be registered
for resale at any one time.
  The
Federal securities laws distinguish between a primary offering made by an issuer
and a secondary offering made by an issuer on behalf of a selling shareholder.
Recently, the SEC has made public statements indicating the SEC’s Division of
Corporation Finance will question the ability of issuers to register shares for
resale in a secondary offering where the number of shares offered exceed an
estimated one-third of the total number of shares held by non-affiliates prior
to the underlying private transaction. Although this position is not written or
settled law, it is possible the SEC staff will view any resale offering by
investors as an offering by Beacon and deem it a primary offering if the number
of shares Beacon seeks to register exceeds the estimated one-third threshold.
Even if the number of shares Beacon seeks to register is below the estimated
one-third threshold, the SEC staff may still take the position that the offering
is a primary offering rather than a secondary offering. In that event, Beacon
may seek to register only a portion of its Common Stock at any one time and will
only be able to register additional Common Stock after the passage of time and
the sale of substantially all of the Registrable Securities subject to the
previous registration statement.
  Beacon
Common Stock may be subject to Penny Stock Rules, which could affect
trading.
  Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by
certain rules adopted by the SEC. Penny stocks generally are equity securities
with a price of less than $5.00, subject to exceptions. The rules require that a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in connection with the transaction and monthly account statements
showing the market value of each penny stock held in the customer’s account. In
addition, the rules generally require that prior to a transaction in a penny
stock the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the liquidity of penny stocks. If the Beacon Common Stock
becomes subject to the penny stock rules, holders of Beacon Common Stock or
other Beacon securities may find it more difficult to sell their
securities.
  Page
9
  Beacon’s
operation as a public company subjects it to extensive corporate governance and
disclosure regulations that will result in additional operating
expenses.
  As a
public company, Beacon incurs significant legal and accounting expenses
associated with its public company reporting requirement and certain
requirements under the Sarbanes-Oxley Act of 2002. Like many smaller public
companies, Beacon faces a significant impact from required compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires
management of public companies to evaluate the effectiveness of internal control
over financial reporting. The SEC has adopted rules implementing
Section 404 for public companies as well as disclosure requirements. Any
failure to implement effective or improved internal controls, or to resolve
difficulties encountered in their implementation, could harm Beacon’s operating
results, or cause a failure to meet reporting obligations or result in
management assessing internal control over financial reporting as not
sufficient. Any such result could cause investors to lose confidence in Beacon’s
reported financial information, which could have a material adverse effect on
its stock price.
 
 Item 2.
              Properties
  Beacon’s
executive offices are located at 9300 Shelbyville Road, Suite 1000,
Louisville, KY 40222 in 2,142 square feet of office space leased on a month
to month basis. Additionally, we have offices in Louisville, KY consisting of
8,150 square feet of office space leased through December 31, 2010,
Cincinnati, OH consisting of 5,341 square feet of office space leased
through May 31, 2016, Columbus, OH consisting of 7,018 square feet leased
through December 31, 2014, and Prague, Czech Republic consisting of
approximately 2,100 square feet leased through June 30, 2011. We believe
our facilities are adequate for the continuing operations of our existing
business.
  Item 3.
              Legal
      Proceedings
  On September 7, 2010, Beacon was named a
party in a lawsuit filed in Jefferson Circuit Court in the State of Kentucky, seeking $270 plus other
costs, attorney's fees and damages, regarding the Company's alleged conduct
during the course of the purchase of the assets and assumption of certain
liabilities of Strategic Communications, LLC.  Although
the outcome of this matter can not be predicted at this time,Beacon believes this lawsuit is without merit.  No
provision has been made in the financial statements related to this action,
as the Company believes that the ultimate disposition of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.
 No other legal proceedings in the normal
course of business are required to be disclosed under this Item
3.
  Item 4.
              Removed and
      Reserved
  Page
10
  Part II
  Item 5.
              Market for Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities
  Market
Information
  Our
common stock, par value $.001 per share, has been traded on the OTC
Bulletin Board, first under the symbol “BESG.OB” subsequently changed to
the symbol “BEAC.OB,” since January 7, 2008. Prior to that time, our common
stock was traded on the OTC Bulletin Board under the symbol
“SGEG.OB.”
 
 The
public market for our stock is limited and sporadic. The following table sets
forth, for the period indicated, the high and low last sale price for our common
stock as reported on the OTC Bulletin Board:
 
 Quarter Ended
                      
                      High
                      
                      
                      LowFiscal
      2009December
      31, 2008
                      
                      $
                      1.52
                      
                      
                      $
                      0.55March
      31, 2009
                      
                      $
                      1.10
                      
                      
                      $
                      0.30June
      30, 2009
                      
                      $
                      1.65
                      
                      
                      $
                      0.69September
      30, 2009
                      
                      $
                      1.73
                      
                      
                      $
                      0.92Fiscal
      2010December
      31, 2009
                      
                      $
                      1.01
                      
                      
                      $
                      0.81March
      31, 2010
                      
                      $
                      1.50
                      
                      
                      $
                      1.02June
      30, 2010
                      
                      $
                      1.53
                      
                      
                      $
                      1.01September
      30, 2010
                      
                      $
                      1.10
                      
                      
                      $
                      0.35
 
 Holders
  As of
December 13, 2010, we had approximately 224 stockholders of
record.
  Dividends
  We have
not paid cash dividends on shares of our common stock and do not anticipate
doing so in the foreseeable future. The payment of dividends on shares of our
common stock will depend on earnings, financial condition and other business and
economic factors affecting us at such time as our board of directors may
consider relevant.
  Under our
Articles of Incorporation and the Certificate of Designation of Series B
Preferred Stock, without the consent of holders of a majority of each series of
the Series A, A-1 and B Preferred Stock, we may not pay any dividends upon
shares of Common Stock until we have paid the aggregate accrued dividends upon
such preferred stock and such amounts that the holders of such preferred stock
would receive if they were to convert their shares of preferred stock into
shares of common stock.
  Recent
Sales of Unregistered Securities
  Information
related to sales of unregistered securities has been included in our Quarterly
Reports on Form 10-Q for the periods ended December 31, 2008,
March 31, 2009 and June 30, 2009 as well as our Current Reports on
Form 8-K filed on October 7, 2008, October 9, 2008,
October 14, 2008, October 30, 2008, December 9, 2008,
January 5, 2009, January 22, 2009, January 28, 2009,
February 5, 2009, February 17, 2009, February 20, 2009,
February 23, 2009, February 24, 2009, March 11, 2009,
March 25, 2009, April 3, 2009, April 10, 2009, April 17,
2009, April 20, 2009, April 29, 2009, May 8, 2009, May 13,
2009, May 19, 2009, June 2, 2009, July 2, 2009, July 23,
2009, August 12, 2009, August 18, 2009, September 01, 2009,
October 2, 2009, October 15, 2009, October 19, 2009,
November 3, 2009, November 12, 2009, November 24, 2009 and
December 15, 2009 and incorporated herein by reference.
  Page
11
  Securities
Authorized for Issuance under Compensation Plans
  On
March 26, 2008, our Board of Directors reserved and authorized
1,000,000 shares of our Common Stock under the 2008 Long-Term Incentive
Compensation Plan. This plan was approved by the shareholders on April 16,
2009.
  Equity
Compensation Plan Information
  As of September 30, 2010
                        
                        (a)
                        
                        
                        (b)
                        
                        
                        (c)Number of securities to
                        
                        
                        Weighted-average
                        
                        
                        Number of securities remainingbe issued upon exercise
                        
                        
                        exercise price of
                        
                        
                        available for future issuance underof outstanding options,
                        
                        
                        outstanding options,
                        
                        
                        equity compensation plans (excludingwarrants and rights
                        
                        
                        warrants and rights
                        
                        
                        securities reflected in column (a))Equity
      compensation plans approved by security holders
                        
                        
                        370,200
                        
                        
                        $
                        1.22
                        
                        
                        
                        629,800
  Issuer
Purchases of Equity Securities
  None.
  Item 7.
              Management’s Discussion and
      Analysis of Financial Condition, Plans and Results of
      Operations
  Beacon
Enterprise Solutions Group, Inc. and subsidiaries (collectively the“Company”) is a provider of
global, international and regional telecommunications and technology systems
infrastructure services, encompassing a comprehensive suite of consulting,
design, installation, and infrastructure management offerings. Beacon’s
portfolio of infrastructure services spans all professional and construction
requirements for design, build and management of telecommunications, network and
technology systems infrastructure. Professional services offered include
consulting, engineering, program management, project management, construction
services and infrastructure management services. Beacon offers these services
under a comprehensive contract vehicle or unbundled to some global and regional
clients. Beacon also offers special services in support of qualified projects in
the smart buildings/campuses/cities and data center verticals. Finally, Beacon
provides managed information technology and telecommunications services in
selected local markets. In this report, the terms “Company,” “Beacon,” “we,”
“us” or “our” mean Beacon Enterprise Solutions Group, Inc. and all subsidiaries
included in our consolidated financial statements.
  Cautionary
Statements — Forward Outlook and Risks
  Certain
statements contained in this annual report on Form 10-K, including, without
limitation, statements containing the words “believes,” “anticipates,”
“intends,” “expects,” “assumes,” “trends” and similar expressions, constitute
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based upon our
current plans, expectations and projections about future events. However, such
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, among others,
the following:
  •
              Our
      business may be materially adversely affected by the current economic
      environment. The recent disruptions in both domestic and global financial
      and credit markets have significantly impacted domestic and global
      economic activity and led to an economic recession. As a result of these
      disruptions, our customers and markets have been adversely affected. If we
      experience reduced demand because of these disruptions in the
      macroeconomic environment, our business, results of operation and
      financial condition could be materially adversely affected. If we are
      unable to successfully anticipate changing economic and financial
      conditions, we may be unable to effectively plan for and respond to these
      changes and our business could be adversely
  affected;
  Page
12
  •
              effects
      of competition in the markets in which we
  operate;
 
 •
              liability
      and other claims asserted against
us;
 
 •
              ability
      to attract and retain qualified
personnel;
 
 •
              availability
      and terms of capital;
 
 •
              loss
      of significant contracts or reduction in net sales associated with major
      customers;
 
 •
              ability
      of customers to pay for services;
 
 •
              business
      disruption due to natural disasters or terrorist
  acts;
 
 •
              ability
      to successfully integrate the operations of acquired businesses and
      achieve expected synergies and operating efficiencies from the
      acquisitions, in each case within expected time-frames or at
      all;
 
 •
              changes
      in, or failure to comply with, existing governmental
      regulations; and
 
 •
              changes
      in estimates and judgments associated with critical accounting policies
      and estimates.
  For a
detailed discussion of these and other factors that could cause our actual
results to differ materially from the results contemplated by the
forward-looking statements, please refer to Item 1(A) Risk Factors in this
annual report on Form 10-K. The reader is encouraged to review the risk
factors set forth therein. The reader should not place undue reliance on
forward-looking statements, which speak only as of the date of this report.
Except as required by law, we assume no responsibility for updating
forward-looking statements to reflect unforeseen or other events after the date
of this report.
  Overview
  The
Company is a provider of global design, implementation and management of high
performance Information Technology Systems (ITS) infrastructure solutions. 
Beacon’s portfolio of ITS infrastructure services spans all professional and
construction requirements for design, build and management of
telecommunications, network and technology systems infrastructure. Professional
services offered include consulting, engineering, program management, project
management, construction services and infrastructure management services. Beacon
offers these services under a comprehensive contract vehicle or unbundled to
some global and regional clients. Beacon also offers special services in support
of qualified projects in the smart buildings/campuses/cities and data center
verticals. Finally, Beacon provides managed information technology and
telecommunications services in selected local markets.
  Organic Growth
Strategy
  With
respect to our plans to increase net sales organically, we have identified, and
are currently pursuing, several significant strategies, including:
 
 ·
              Expansion
      of our a la carte services offered to existing major national,
      multi-national and global clients who have not signed an infrastructure
      managed services agreement. This has been initiated reorganizing
      sales/marketing on the sale of individual infrastructure services and the
      global managed services offering.  With reorganization of the
      professional services team structure, it permits Beacon to accommodate
      branch level services delivery to potential global
  clients.
 
 ·
              Additionally
      we have added regional and major account sales resources in each business
      unit. This will facilitate the introduction of Fortune 1000, Global 2000
      and qualifying multi-national
firms.
  Page
13
  Results of
Operations
  For
the years ended September 30, 2010 and 2009
  In order
to best discuss and compare operations for the years ended September 30, 2010
and 2009 our North American and European operations will be presented and
discussed separately.
  North
American Operations
 
 2010
                      
                      
                      
                      
                      
                      2009North America
                      
                      
                      
                      
                      
                      North America
                      
                      
                      
                      
                      
                      changeNet
      Sales
                      
                      $
                      10,273
                      
                      
                      
                      100
                      %
                      
                      $
                      10,113
                      
                      
                      
                      100
                      %
                      
                      $
                      160Cost
      of goods sold
                      
                      
                      1,405
                      
                      
                      
                      14
                      %
                      
                      
                      4,393
                      
                      
                      
                      43
                      %
                      
                      
                      (2,988
                      )Cost
      of services
                      
                      
                      5,035
                      
                      
                      
                      49
                      %
                      
                      
                      2,905
                      
                      
                      
                      29
                      %
                      
                      
                      2,130Gross
      profit
                      
                      
                      3,833
                      
                      
                      
                      37
                      %
                      
                      
                      2,815
                      
                      
                      
                      28
                      %
                      
                      
                      1,018Operating
      expenseSalaries
      and benefits
                      
                      
                      5,139
                      
                      
                      
                      50
                      %
                      
                      
                      4,373
                      
                      
                      
                      43
                      %
                      
                      
                      766Selling,
      general and administrative
                      
                      
                      3,715
                      
                      
                      
                      36
                      %
                      
                      
                      4,242
                      
                      
                      
                      42
                      %
                      
                      
                      (527
                      )Net
      loss from operations
                      
                      
                      (5,021
                      )
                      
                      NM
                      
                      
                      
                      (5,800
                      )
                      
                      NM
                      
                      
                      
                      779Other
      expense
                      
                      
                      (244
                      )
                      
                      
                      
                      
                      
                      
                      (904
                      )
                      
                      
                      
                      
                      
                      
                      660Change
      in fair value of warrants
                      
                      
                      (4,373
                      )
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      (4,373
                      )Net
      loss before taxes
                      
                      
                      (9,638
                      )
                      
                      
                      
                      
                      
                      
                      (6,704
                      )
                      
                      
                      
                      
                      
                      
                      (2,934
                      )Income
      tax expense
                      
                      
                      (49
                      )
                      
                      
                      
                      
                      
                      
                      (58
                      )
                      
                      
                      
                      
                      
                      
                      9Net
      loss from continuing operations
                      
                      
                      (9,687
                      )
                      
                      
                      
                      
                      
                      
                      (6,762
                      )
                      
                      
                      
                      
                      
                      
                      (2,925
                      )Net
      loss from discontinued operations
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      -Net
      loss
                      
                      $
                      (9,687
                      )
                      
                      
                      
                      
                      
                      $
                      (6,762
                      )
                      
                      
                      
                      
                      
                      $
                      (2,925
                      )
  Net
sales from our North American operations the years ended September 30, 2010 and
2009 was $10,273, and $10,113, consisting of $3,443 and $3,281 of professional
services, $6,744 and $6,720 of time and material contracts, of which $614 and
$1,656 was revenue from multiple element arrangements and $86 and $112 from
maintenance contracts.
  Cost of
goods sold for the years ended September 30, 2010 and 2009 amounted to $6,440
and $7,299, and consisted of $1,405 and $4,393 of equipment and material costs
and $5,035 and $2,905 of costs of services which includes $2,744 and $1,027 of
subcontractor services.  The change in our cost of goods sold reflects our
maturation into a professional services firm whereby we are selling less of the
material intensive installation projects and focusing more on professional
services engagements around the implementation and management of ITS
infrastructure solutions.  To fully meet our internal and external
expectations on the professional services delivery we have increased the
utilization of sub-contractors in specialized geographical and technical
areas.
  Salaries
and benefits of $5,139 and $4,373 for the years ended September 30, 2010 and
2009 consisted of salaries and wages of $2,913 and $2,823, commissions and
bonuses of $167 and $330, benefits of $543 and $286, payroll taxes of $400 and
$377, and non-cash share-based compensation of $1,116 and $557 related primarily
to stock options granted during these periods.
  Selling,
general and administrative expense for years ended September 30, 2010 and 2009
of $3,715 and $4,242 include $1,352 and $1,825 of accounting, investor relations
and professional fees, $146 and $136 of bad debt expense, $300 and $285 of
office related expense, $345 and $259 of telecommunications and data related
expenses, $473 and $356 of travel related expenses, $205 and $174 of expenses
related to business insurance, $89 and $134 of miscellaneous outside services,
depreciation and amortization of $551 and $613, and $583 and $460 of other
administrative services.  These costs were offset by a corporate royalty of
$329 and $0 charged to the European business for administrative functions
provided and is eliminated upon consolidation.
  Other
expense for the years ended September 30, 2010 and 2009 of approximately $4,617
and $904 includes interest expense of $244 and $904 related to notes payable and
$4,373 and $0 of non-cash expense related to the change in fair value of
warrants with anti-dilution features.
  Page
14
  European
Operations
 2010
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2009Europe
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    EuropeNet
      Sales
                                                    
                                                    $
                                                    3,723
                                                    
                                                    
                                                    
                                                    100
                                                    %
                                                    
                                                    $
                                                    -Cost
      of goods sold
                                                    
                                                    
                                                    153
                                                    
                                                    
                                                    
                                                    4
                                                    %Cost
      of services
                                                    
                                                    
                                                    1,487
                                                    
                                                    
                                                    
                                                    40
                                                    %Gross
      profit
                                                    
                                                    
                                                    2,083
                                                    
                                                    
                                                    
                                                    56
                                                    %Operating
      expenseSalaries
      and benefits
                                                    
                                                    
                                                    897
                                                    
                                                    
                                                    
                                                    24
                                                    %Selling,
      general and administrative
                                                    
                                                    
                                                    1,844
                                                    
                                                    
                                                    
                                                    50
                                                    %Net
      loss from operations
                                                    
                                                    
                                                    (658
                                                    )
                                                    
                                                    NMOther
      expense
                                                    
                                                    
                                                    (15
                                                    )Net
      loss before taxes
                                                    
                                                    
                                                    (673
                                                    )Income
      tax expense
                                                    
                                                    
                                                    (14
                                                    )Net
      loss from continuing operations
                                                    
                                                    
                                                    (687
                                                    )Net
      (loss) income from discontinued operations
                                                    
                                                    
                                                    (8,181
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    492Net
      (loss) income
                                                    
                                                    $
                                                    (8,868
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    492
  Our
expansion into Europe began in the fourth quarter of the fiscal year ended
September 30, 2009, this initial phase has since been discontinued in the year
ended September 30, 2010 (see Note 4 for more details) with subsequent other
European expansion beginning in the fiscal year September 30, 2010.  The
chart above displays information pertaining to the continuing European
operations for the fiscal year ending September 30, 2010.
  Continuing
European operations have generated net sales of $3,723 for the year ended
September 30, 2010 consisting of approximately $2,202 of professional services,
and $1,521 of time and material services.
  Cost of
goods sold for the year ended September 30, 2010 amounted to $1,640 and
consisted primarily of material costs of $153, subcontractor costs of $1,060 and
other project related costs of $427.
  Salaries
and benefits of $897 consisted of $734 of salary expense, payroll taxes of $89,
benefits of $56 and other miscellaneous costs of $18.
  Selling,
general and administrative expense for the year ended September 30, 2010 was
approximately $1,843, including $283 of accounting and professional fees
primarily related to the organization of the European operations, $580 of bad
debt expense, $266 of travel related expenses, $81 of outside services, $115 of
rent and other office related supplies, $48 of telecommunications and data
related expenses, depreciation and amortization of $74 and $69 of miscellaneous
other administrative expenses. Additionally a corporate royalty of $327 charged
to the European business for administrative functions provided by the North
American corporate office is recorded and eliminated upon
consolidation.
  Liquidity and Capital
Resources
  We
incurred a net loss of approximately $18,555, which includes a loss from
discontinued operations of $8,181 (see Note 4 to the consolidated financial
statements), a mark to market adjustment on the fair value of common stock
purchase warrants of $4,373, non-cash expenses for share based compensations of
1,381, non-cash depreciation and amortization expense of $589 and cash used in
continuing operations amounting to $6,138 for the year ended September 30, 2010
which excludes $1,298 of cash provided by discontinued operations.  Our
accumulated deficit amounted to $39,711, while we had cash of $246 and a working
capital deficit of $7,060, which included $8,558 of liabilities from
discontinued operations.  As discussed in Note 17, a wholly-owned
subsidiary of the Company, which has been reporting discontinued operations, has
filed the relevant statutory notices with the local judge in Switzerland in
accordance with its fiduciary obligation under Swiss law.
  Financing
transactions we completed during the year ended September 30, 2010 include
the following:
  Page
15
  On
February 26, 2010, we received $500 in loan proceeds and issued a related
short-term, non-interest bearing promissory note, which was secured but
subordinate to all existing senior debt outstanding.  Terms of the note
included a principal payment of $250 on March 31, 2010 with the balance of $250,
in addition to a $10 origination fee, to be paid on April 30, 2010.  In
agreement with the note holder, the March 31, 2010 payment was extended through
and paid on April 1, 2010.  The remaining $250 plus $10 origination fee was
paid on April 30, 2010.
 
 On August
16, 2010, one of our directors agreed to provide a $4,000 credit facility. 
The term is up to 18 months with an annual interest rate of 7.73% on any
outstanding balance and a facility fee of the greater of $40 or 1% on any unused
balance.  In addition, this director will receive 15,000 warrants to
purchase shares of common stock (five year term at $1.00 per share) per month
for each month the facility is outstanding.  The facility is secured by a
pledge of common stock held by our Chief Executive Officer.
  Based on
the recent progress we made in the execution of our business plan, we believe
that our currently available cash, the proceeds of our equity financing
activities, availability of the aforementioned credit line and cash received
from the issuance of note payable subsequent to year end (see Note 17 to the
consolidated financial statements – Subsequent Events for information regarding
additional financing), and funds we expect to generate from operations will
enable us to operate our business and repay our debt obligations as they become
due through October 1, 2011. However, we will require additional capital in
order to execute our business plan. If we are unable to raise additional
capital, or encounter unforeseen circumstances that place constraints on our
capital resources, we will be required to take various measures to conserve
liquidity, which could include, but not necessarily be limited to, curtailing
our business development activities, suspending the pursuit of our business
plan, and controlling overhead expenses. We cannot provide any assurance that we
will raise additional capital. We have not secured any commitments for new
financing at this time, nor can we provide any assurance that new financing will
be available to us on acceptable terms, if at all.
  Off-Balance Sheet
Arrangements
  We have
five operating lease commitments for real estate used for office
space.
  Contractual Obligations as
of September 30, 2010:
  The
following is a summary of our contractual obligations as of September 30,
2010:
 
 Contractual Obligations
                        
                        Total
                        
                        
                        2011
                        
                        
                        2012
                        
                        
                        2013
                        
                        
                        2014
                        
                        
                        2015
                        
                        
                        ThereafterLong-term
      debt obligations
                        
                        
                        1,512
                        
                        
                        $
                        479
                        
                        
                        $
                        941
                        
                        
                        $
                        92
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Interest
      obligations (1)
                        
                        
                        111
                        
                        
                        
                        44
                        
                        
                        
                        66
                        
                        
                        
                        1
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Operating
      lease obligations (2)
                        
                        
                        708
                        
                        
                        
                        260
                        
                        
                        
                        116
                        
                        
                        
                        116
                        
                        
                        
                        89
                        
                        
                        
                        80
                        
                        
                        
                        47$
                        2,331
                        
                        
                        $
                        783
                        
                        
                        $
                        1,123
                        
                        
                        $
                        209
                        
                        
                        $
                        89
                        
                        
                        $
                        80
                        
                        
                        $
                        47
 
 (1)
                Interest
      obligations assume Prime Rate of 3.25% at September 30, 2010.
      Interest rate obligations are presented through the maturity dates of each
      component of long-term debt.
 
 (2)
                Operating
      lease obligations represent payment obligations under non-cancelable lease
      agreements classified as operating leases and disclosed pursuant to ASC
      840 “Accounting for Leases,” as may be modified or supplemented. These
      amounts are not recorded as liabilities as of the current balance sheet
      date.
  Dividends
on Series A and A-1 Preferred Stock are payable quarterly at an annual rate
of 10% and Series B Preferred Stock are payable quarterly at an annual rate
of 6% in cash or the issuance of additional shares of Series A, A-1 and B
Preferred Stock, at our option. If we were to fund dividends accruing during the
year ending September 30, 2010 in cash, the total obligation would be $153
based on the number of shares of Series A, A-1 and B Preferred Stock
outstanding as of September 30, 2010.
  We
currently anticipate the cash requirements for capital expenditures, operating
lease commitments and working capital will likely be funded with our existing
fund sources and cash provided from operating activities. In the aggregate,
total capital expenditures are not expected to exceed $240 for the year ended
September 30, 2011 and could be curtailed should we experience a shortfall
in expected financing.
  Page
16
  Working
Capital
  As of
September 30, 2010, our current liabilities exceed current assets by
approximately $7,060 primarily due to $8,558 of liabilities related to
discontinued operations (see Note 4).  The $100 bridge note recorded in
current liabilities is convertible into common stock and the note agreement
provides for vesting of additional warrants to purchase shares of common should
the holders continue to hold the debt and immediate vesting of the additional
warrants upon conversion.
  Page
17
  Item 8.
              Financial Statements and
      Supplementary Data
  Consolidated
Financial Statements of Beacon Enterprise Solutions Group, Inc.
  PageReport
      of Independent Registered Public Accounting Firm
                19Consolidated
      Balance Sheets as of September 30, 2010 and 2009
                20Consolidated
      Statements of Operations for the years ended September 30, 2010 and
      2009
                21Consolidated
      Statement of Stockholders’ Equity (Deficiency) for the years ended
      September 30, 2010 and 2009
                22Consolidated
      Statements of Cash Flows for the years ended September 30, 2010 and
      2009
                23Notes
      to Consolidated Financial Statements
                24
  Page
18
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Audit Committee of the
 Board of
Directors and Stockholders
 Beacon
Enterprise Solutions Group, Inc.
  We have
audited the accompanying consolidated balance sheets of Beacon Enterprise
Solutions Group, Inc. and Subsidiaries (the “Company”) as of September 30,
2010 and 2009, and the related consolidated statements of operations, changes in
stockholders’ equity (deficiency) 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 audit 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 audit 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Beacon Enterprise
Solutions Group, Inc. and subsidiaries, as of September 30, 2010 and 2009,
and the consolidated 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.
    
 
 New York,
NY
 December
16, 2010
  Page
19
  Beacon
      Enterprise Solutions Group, Inc. and SubsidiariesConsolidated
      Balance Sheets(all
      amounts in 000's except share and per share data)September 30,
                        
                        
                        September 30,2010
                        
                        
                        2009ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        246
                        
                        
                        $
                        227Accounts
      receivable, net
                        
                        
                        4,535
                        
                        
                        
                        3,069Inventory,
      net
                        
                        
                        557
                        
                        
                        
                        605Prepaid
      expenses and other current assets
                        
                        
                        357
                        
                        
                        
                        388Current
      assets of discontinued operations
                        
                        
                        133
                        
                        
                        
                        958Total
      current assets
                        
                        
                        5,828
                        
                        
                        
                        5,247Property
      and equipment, net
                        
                        
                        420
                        
                        
                        
                        336Goodwill
                        
                        
                        2,792
                        
                        
                        
                        2,792Other
      intangible assets, net
                        
                        
                        3,011
                        
                        
                        
                        3,342Other
      assets
                        
                        
                        20
                        
                        
                        
                        117Assets
      of discontinued operations
                        
                        
                        -
                        
                        
                        
                        980Total
      assets
                        
                        $
                        12,071
                        
                        
                        $
                        12,814LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
      liabilities:Short
      term credit obligations
                        
                        $
                        -
                        
                        
                        $
                        550Convertible
      notes payable
                        
                        
                        -
                        
                        
                        
                        298Bridge
      notes (net of $0 and $33 discounts)
                        
                        
                        100
                        
                        
                        
                        167Current
      portion of long-term debt
                        
                        
                        379
                        
                        
                        
                        475Accounts
      payable
                        
                        
                        2,971
                        
                        
                        
                        2,074Accrued
      expenses
                        
                        
                        880
                        
                        
                        
                        2,626Current
      liabilities of discontinued operations
                        
                        
                        8,558
                        
                        
                        
                        525Total
      current liabilities
                        
                        
                        12,888
                        
                        
                        
                        6,715Non-current
      line of credit - related party
                        
                        
                        630
                        
                        
                        
                        -Long-term
      debt, less current portion
                        
                        
                        403
                        
                        
                        
                        802Deferred
      tax liability
                        
                        
                        153
                        
                        
                        
                        103Total
      liabilities
                        
                        
                        14,074
                        
                        
                        
                        7,620Stockholders'
      equity (deficiency)Preferred
      Stock: $0.01 par value, 5,000,000 shares authorized, 1,041 and 3,436
      shares outstanding in the following classes:Series
      A convertible preferred stock, $1,000 stated value, 4,500 shares
      authorized, 30 and 1,984 shares issued and outstanding at September 30,
      2010 and 2009, respectively, (liquidation preference $93).
                        
                        
                        30
                        
                        
                        
                        1,984Series
      A-1 convertible preferred stock, $1,000 stated value, 1,000 shares
      authorized, 311 and 752 shares issued and outstanding, at September 30,
      2010 and 2009, respectively (liquidation preference $432).
                        
                        
                        311
                        
                        
                        
                        752Series
      B convertible preferred stock, $1,000 stated value, 4,000 shares
      authorized, 700 shares issued and outstanding at September 30, 2010 and
      2009, respectively (liquidation preference $967).
                        
                        
                        700
                        
                        
                        
                        700Common
      stock, $0.001 par value 70,000,000 shares authorized, 37,376,396 and
      24,655,990 shares issued and outstanding at September 30, 2010 and 2009,
      respectively.
                        
                        
                        37
                        
                        
                        
                        25Additional
      paid in capital
                        
                        
                        37,137
                        
                        
                        
                        17,977Accumulated
      deficit
                        
                        
                        (39,711
                        )
                        
                        
                        (16,254
                        )Accumulated
      other comprehensive (loss) income
                        
                        
                        (507
                        )
                        
                        
                        10Total
      stockholders' equity (deficiency)
                        
                        
                        (2,003
                        )
                        
                        
                        5,194Total
      liabilities and stockholders' equity (deficiency)
                        
                        $
                        12,071
                        
                        
                        $
                        12,814
  The
accompanying notes are an integral part of these consolidated financial
statements.
  Page
20
  Beacon
      Enterprise Solutions Group, Inc. and SubsidiariesConsolidated
      Statements of Operations(all
      amounts in 000's except share and per share data)For the
                              
                              
                              For theYear Ended
                              
                              
                              Year EndedSeptember 30,
                              
                              
                              September 30,2010
                              
                              
                              2009Net
      sales
                              
                              $
                              13,996
                              
                              
                              $
                              10,113Cost
      of goods sold
                              
                              
                              1,558
                              
                              
                              
                              4,393Cost
      of services
                              
                              
                              6,522
                              
                              
                              
                              2,905Gross
      profit
                              
                              
                              5,916
                              
                              
                              
                              2,815Operating
      expensesSalaries
      and benefits
                              
                              
                              6,036
                              
                              
                              
                              4,373Selling,
      general and administrative
                              
                              
                              5,559
                              
                              
                              
                              4,242Total
      operating expense
                              
                              
                              11,595
                              
                              
                              
                              8,615Loss
      from operations
                              
                              
                              (5,679
                              )
                              
                              
                              (5,800
                              )Other
      expensesOther
      expenses
                              
                              
                              (259
                              )
                              
                              
                              (904
                              )Change
      in fair value of warrants
                              
                              
                              (4,373
                              )
                              
                              
                              -Total
      other expenses
                              
                              
                              (4,632
                              )
                              
                              
                              (904
                              )Net
      loss before income taxes
                              
                              
                              (10,311
                              )
                              
                              
                              (6,704
                              )Income
      tax expense
                              
                              
                              (63
                              )
                              
                              
                              (58
                              )Loss
      from continuing operations
                              
                              
                              (10,374
                              )
                              
                              
                              (6,762
                              )(Loss)
      income from discontinued operations
                              
                              
                              (8,181
                              )
                              
                              
                              492Net
      loss
                              
                              
                              (18,555
                              )
                              
                              
                              (6,270
                              )Series
      A, A-1 and B Preferred Stock:Contractual
      dividends
                              
                              
                              (175
                              )
                              
                              
                              (548
                              )Deemed
      dividends related to beneficial conversion feature
                              
                              
                              (99
                              )
                              
                              
                              (266
                              )Net
      loss available to common stockholders
                              
                              $
                              (18,829
                              )
                              
                              $
                              (7,084
                              )Net
      loss per share to common stockholders - basic and dilutedNet
      loss per share from continuing operations
                              
                              $
                              (0.32
                              )
                              
                              $
                              (0.41
                              )Net
      (loss) income per share from discontinued operations
                              
                              
                              (0.25
                              )
                              
                              
                              0.03$
                              (0.57
                              )
                              
                              $
                              (0.38
                              )Weighted
      average shares outstanding basic and diluted
                              
                              
                              32,254,769
                              
                              
                              
                              16,482,449Other
      comprehensive loss, net of taxNet
      Loss
                              
                              $
                              (18,829
                              )
                              
                              $
                              (7,084
                              )Foreign
      currency translations adjustment
                              
                              
                              (28
                              )
                              
                              
                              -Comprehensive
      loss
                              
                              $
                              (18,857
                              )
                              
                              $
                              (7,084
                              )
  The
accompanying notes are an integral part of these consolidated financial
statements.
  Page
21
  Beacon
      Enterprise Solutions Group, Inc. and SubsidiariesConsolidated
      Statement of Stockholders' Equity (Deficiency)(all
      amounts in 000's except share data)Series A Convertible
                                      
                                      
                                      Series A-1 Convertible
                                      
                                      
                                      Series B Convertible
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      AccumulatedPreferred Stock
                                      
                                      
                                      Preferred Stock
                                      
                                      
                                      Preferred Stock
                                      
                                      
                                      Common Stock
                                      
                                      
                                      Additional
                                      
                                      
                                      
                                      
                                      
                                      Other$1,000 Stated
                                      
                                      
                                      
                                      
                                      
                                      $1,000 Stated
                                      
                                      
                                      
                                      
                                      
                                      $1,000 Stated
                                      
                                      
                                      
                                      
                                      
                                      $0.001 Par
                                      
                                      
                                      Paid-In
                                      
                                      
                                      Accumulated
                                      
                                      
                                      ComprehensiveShares
                                      
                                      
                                      Value
                                      
                                      
                                      Shares
                                      
                                      
                                      Value
                                      
                                      
                                      Shares
                                      
                                      
                                      Value
                                      
                                      
                                      Shares
                                      
                                      
                                      Value
                                      
                                      
                                      Capital
                                      
                                      
                                      Deficit
                                      
                                      
                                      Income
                                      
                                      
                                      TotalBalance
      at September 30, 2008
                                      
                                      
                                      4,000
                                      
                                      
                                      $
                                      4,000
                                      
                                      
                                      
                                      800
                                      
                                      
                                      $
                                      800
                                      
                                      
                                      
                                      400
                                      
                                      
                                      $
                                      400
                                      
                                      
                                      
                                      12,093,021
                                      
                                      
                                      $
                                      12
                                      
                                      
                                      $
                                      8,028
                                      
                                      
                                      $
                                      (9,171
                                      )
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      4,069Vested
      portion of share based payments to employee for services
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      558
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      558Conversion
      of debt to Preferred shares
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      300
                                      
                                      
                                      
                                      300
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      300Conversion
      of debt to common shares
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      833,334
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      499
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      500Conversion
      of Preferred shares to common
                                      
                                      
                                      (2,635
                                      )
                                      
                                      
                                      (2,635
                                      )
                                      
                                      
                                      (159
                                      )
                                      
                                      
                                      (159
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      3,724,854
                                      
                                      
                                      
                                      4
                                      
                                      
                                      
                                      2,790Common
      Stock issued in private placement
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      6,853,497
                                      
                                      
                                      
                                      7
                                      
                                      
                                      
                                      5,478
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      5,485Private
      placement offering costs
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (1,139
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (1,139
                                      )Warrants
      exercised for common shares
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      196,145Shares
      issued for Symbio - Tec acquistion
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      400,000
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      436
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      437Fair
      value of contingent shares related to Symbio - Tec
    acquistion
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      476
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      476Shares
      committed to Anti-dilution adjustment
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      285,139Common
      Stock issued for investor relations agreements
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      270,000
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      164
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      164Beneficial
      conversion feature - deemed preferred stock dividend
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      201
                                      
                                      
                                      
                                      (201
                                      )Discount
      on Convertible Notes Payable
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      74
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      74Vested
      contingent bridge warrants
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      57
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      57Warrants
      issued for equity financing agreement
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      289
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      289Series
      A Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (429
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (429
                                      )Series
      A Preferred Stock contractual dividends paid in kind
                                      
                                      
                                      619
                                      
                                      
                                      
                                      619
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      619Series
      A-1 Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (85
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (85
                                      )Series
      A-1 Preferred Stock contractual dividends paid in kind
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      111
                                      
                                      
                                      
                                      111
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      111Series
      B Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (32
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (32
                                      )Beneficial
      conversion feature - deemed Investor Warrant dividend
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      66
                                      
                                      
                                      
                                      (66
                                      )Net
      loss
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (6,270
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (6,270
                                      )Net
      change in accumulated other comprehensive income
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      10
                                      
                                      
                                      
                                      10Total
      comprehensive incomeBalance
      at September 30, 2009
                                      
                                      
                                      1,984
                                      
                                      
                                      $
                                      1,984
                                      
                                      
                                      
                                      752
                                      
                                      
                                      $
                                      752
                                      
                                      
                                      
                                      700
                                      
                                      
                                      $
                                      700
                                      
                                      
                                      
                                      24,655,990
                                      
                                      
                                      $
                                      25
                                      
                                      
                                      $
                                      17,977
                                      
                                      
                                      $
                                      (16,254
                                      )
                                      
                                      $
                                      10
                                      
                                      
                                      $
                                      5,194Cumulative
      effect of change in accounting principle - fair value of warrants with
      anti dilutive rights
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (4,628
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (4,628
                                      )Relcassification
      of derivative financial instruments
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      10,095
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      10,095Vested
      portion of share based payments to employee for services
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      1,082
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      1,082Common
      Stock issued in private placement
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      3,795,295
                                      
                                      
                                      
                                      4
                                      
                                      
                                      
                                      1,884
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      1,888Private
      placement offering costs
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (584
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (584
                                      )Warrants
      issued for extension of non-interest bearing note
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      64
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      64Warrants
      issued under consulting agreements
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      199
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      199Common
      Stock issued for contingent earnout
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      175,000Common
      Stock issued for investor relations agreements
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      100,000
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      66
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      66Amortization
      of non-employee stock optionsissued
      for performance of services
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      34
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      34Conversion
      of preferred shares to common stock
                                      
                                      
                                      (1,993
                                      )
                                      
                                      
                                      (1,993
                                      )
                                      
                                      
                                      (462
                                      )
                                      
                                      
                                      (462
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      3,286,372
                                      
                                      
                                      
                                      3
                                      
                                      
                                      
                                      2,452Common
      Stock issued upon exercise of warrants
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      4,738,966
                                      
                                      
                                      
                                      5
                                      
                                      
                                      
                                      3,659
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      3,664Shares
      issued in conversion of bridge note to common
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      183,620
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      110
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      110Cashless
      warrant exercises
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      441,153Series
      A Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (77
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (77
                                      )Series
      A Preferred Stock contractual dividends paid in in kind
                                      
                                      
                                      39
                                      
                                      
                                      
                                      39
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      39Series
      A-1 Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (56
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (56
                                      )Series
      A-1 Preferred Stock contractual dividends paid in in kind
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      21
                                      
                                      
                                      
                                      21
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      21Series
      B Preferred Stock contractual dividends
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (42
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (42
                                      )Beneficial
      conversion feature - deemed preferred stock dividend
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      99
                                      
                                      
                                      
                                      (99
                                      )Foreign
      currency translation adjustment
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (517
                                      )
                                      
                                      
                                      (517
                                      )Net
      loss
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (18,555
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (18,555
                                      )Balance
      at September 30, 2010
                                      
                                      
                                      30
                                      
                                      
                                      $
                                      30
                                      
                                      
                                      
                                      311
                                      
                                      
                                      $
                                      311
                                      
                                      
                                      
                                      700
                                      
                                      
                                      $
                                      700
                                      
                                      
                                      
                                      37,376,396
                                      
                                      
                                      $
                                      37
                                      
                                      
                                      $
                                      37,137
                                      
                                      
                                      $
                                      (39,711
                                      )
                                      
                                      $
                                      (507
                                      )
                                      
                                      $
                                      (2,003
                                      )
  The
accompanying notes are an integral part of these consolidated financial
statements.
  Page
22
  Beacon
      Enterprise Solutions Group, Inc. and SubsidiariesConsolidated
      Statements of Cash Flows(all
      amounts in 000's)For the
                              
                              
                              For theYear Ended
                              
                              
                              Year EndedSeptember, 30
                              
                              
                              September, 302010
                              
                              
                              2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                              
                              $
                              (18,555
                              )
                              
                              $
                              (6,270
                              )Add:
      Net loss (income) from discontinued operations
                              
                              
                              8,181
                              
                              
                              
                              (492
                              )Net
      loss from continuing operations
                              
                              
                              (10,374
                              )
                              
                              
                              (6,762
                              )Adjustments
      to reconcile net loss to net cash used in continuing operating
      activities:Change
      in reserve for obsolete inventory
                              
                              
                              (10
                              )
                              
                              
                              125Change
      in reserve for doubtful accounts
                              
                              
                              710
                              
                              
                              
                              91Depreciation
      and amortization
                              
                              
                              589
                              
                              
                              
                              613Non-cash
      interest
                              
                              
                              136
                              
                              
                              
                              591Share
      based payments
                              
                              
                              1,381
                              
                              
                              
                              722Change
      in fair value of warrants with anti-dilution rights
                              
                              
                              4,373
                              
                              
                              
                              -Change
      in deferred tax liability
                              
                              
                              50
                              
                              
                              
                              -Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              (2,176
                              )
                              
                              
                              (1,655
                              )Inventory
                              
                              
                              58
                              
                              
                              
                              (132
                              )Prepaid
      expenses and other assets
                              
                              
                              128
                              
                              
                              
                              (284
                              )Accounts
      payable
                              
                              
                              897
                              
                              
                              
                              847Accrued
      expenses
                              
                              
                              (1,900
                              )
                              
                              
                              1,301CASH
      USED FOR CONTINUING OPERATING ACTIVITIES
                              
                              
                              (6,138
                              )
                              
                              
                              (4,543
                              )CASH
      PROVIDED BY DISCONTINUED OPERATIONS
                              
                              
                              1,298
                              
                              
                              
                              177NET
      CASH USED FOR OPERATING ACTIVITIES
                              
                              
                              (4,840
                              )
                              
                              
                              (4,366
                              )CASH
      FLOWS FROM INVESTING ACTIVITIESCapital
      expenditures
                              
                              
                              (342
                              )
                              
                              
                              (133
                              )Capital
      expenditures of discontinued operations
                              
                              
                              (183
                              )
                              
                              
                              (41
                              )NET
      CASH USED IN INVESTING ACTIVITIES
                              
                              
                              (525
                              )
                              
                              
                              (174
                              )CASH
      FLOWS FROM CONTINUING FINANCING ACTIVITIESProceeds
      from sale of common stock, net of offering costs
                              
                              
                              2,398
                              
                              
                              
                              4,347Proceeds
      from warrant exercises, net of offering costs
                              
                              
                              3,631
                              
                              
                              
                              -Procceds
      from issuances of bridge and other short term notes
                              
                              
                              765
                              
                              
                              
                              700Proceeds
      from issuance of convertible notes
                              
                              
                              -
                              
                              
                              
                              500Procceds
      from lines of credit
                              
                              
                              630
                              
                              
                              
                              343Payment
      of note offering costs
                              
                              
                              -
                              
                              
                              
                              (75
                              )Payments
      under lines of credit
                              
                              
                              (50
                              )
                              
                              
                              (393
                              )Payments
      of other short term notes
                              
                              
                              (1,265
                              )
                              
                              
                              -Repayment
      of convertible notes
                              
                              
                              (298
                              )
                              
                              
                              (202
                              )Payments
      of notes payable
                              
                              
                              (496
                              )
                              
                              
                              (534
                              )Payments
      of capital lease obligation
                              
                              
                              -
                              
                              
                              
                              (12
                              )NET
      CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES
                              
                              
                              5,315
                              
                              
                              
                              4,674Effect
      of exchange rate changes on cash and cash equivalents
                              
                              
                              69
                              
                              
                              
                              (34
                              )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                              
                              
                              19
                              
                              
                              
                              100CASH
      AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                              
                              
                              227
                              
                              
                              
                              127CASH
      AND CASH EQUIVALENTS - END  OF PERIOD
                              
                              $
                              246
                              
                              
                              $
                              227Supplemental
      disclosuresCash
      paid for:Interest
                              
                              $
                              105
                              
                              
                              $
                              105Income taxes
                              
                              $
                              -
                              
                              
                              $
                              105Non-cash
      investing and financing activities:Conversion
      of debt to common stock
                              
                              $
                              110
                              
                              
                              $
                              499Settlement
      of account payable with common stock
                              
                              $
                              235
                              
                              
                              $
                              38Accrued
      dividends
                              
                              $
                              154
                              
                              
                              $
                              -
  The
accompanying notes are an integral part of these consolidated financial
statements
  Page
23




BEACON
ENTERPRISE SOLUTIONS GROUP, INC.
  NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 (amounts
in thousands, except share and per share data)
 
 NOTE 1 —
              ORGANIZATION
      AND DESCRIPTION OF BUSINESS
  Organization
  The
consolidated financial statements presented are those of Beacon Enterprise
Solutions Group, Inc., which was originally formed in the State of Indiana on
June 6, 2007 and combined with Suncrest Global Energy Corp. a Nevada
corporation, on December 20, 2007.  In these footnotes to the
consolidated financial statements, the terms “Company,” “Beacon,” “we,” “us” or
“our” mean Beacon Enterprise Solutions Group, Inc. and all subsidiaries included
in our consolidated financial statements.
  Beacon
provides global, international and regional telecommunications and technology
systems infrastructure services, encompassing a comprehensive suite of
consulting, design, installation, and infrastructure management offerings.
Beacon’s portfolio of infrastructure services spans all professional and
construction requirements for design, build and management of
telecommunications, network and technology systems infrastructure. Professional
services offered include consulting, engineering, program management, project
management, construction services and infrastructure management services. Beacon
offers these services under either a comprehensive contract option or unbundled
to some global and regional clients.
  NOTE 2 —
              LIQUIDITY
      AND FINANCIAL CONDITION
  We
incurred a net loss of approximately $18,555, which includes a loss from
discontinued operations of $8,181 (see Note 4), a mark to market adjustment on
the fair value of common stock purchase warrants of $4,373, non-cash expenses
for share based compensations of 1,381, non-cash depreciation and amortization
expense of $589 and cash used in continuing operations amounting to $6,138 for
the year ended September 30, 2010 which excludes $1,298 of cash provided by
discontinued operations.  Our accumulated deficit amounted to $39,711,
while we had cash of $246 and a working capital deficit of $7,060, which
included $8,558 of liabilities from discontinued operations.  As discussed
in Note 17, a wholly-owned subsidiary of the Company, which has been reporting
discontinued operations, has filed the relevant statutory notices with the local
judge in Switzerland in accordance with its fiduciary obligation under Swiss
law.
  Financing
transactions we completed during the year ended September 30, 2010 include
the following:
  On
February 26, 2010, we received $500 in loan proceeds and issued a related
short-term, non-interest bearing promissory note, which was secured but
subordinate to all existing senior debt outstanding.  Terms of the note
included a principal payment of $250 on March 31, 2010 with the balance of $250,
in addition to a $10 origination fee, to be paid on April 30, 2010.  In
agreement with the note holder, the March 31, 2010 payment was extended through
and paid on April 1, 2010.  The remaining $250 plus $10 origination fee was
paid on April 30, 2010.
 
 On August
16, 2010, one of our directors agreed to provide a $4,000 credit facility. 
The term is up to 18 months with an annual interest rate of 7.73% on any
outstanding balance and a facility fee of the greater of $40 or 1% on any unused
balance.  In addition, this director will receive 15,000 warrants to
purchase shares of common stock (five year term at $1.00 per share) per month
for each month the facility is outstanding.  The facility is secured by a
pledge of common stock held by our Chief Executive Officer.
 
 Based on
the recent progress we made in the execution of our business plan, we believe
that our currently available cash, the proceeds of our equity financing
activities, availability of aforementioned credit line and cash received
from the issuance of notes payable subsequent to year end (see Note 17
– Subsequent Events for information regarding additional financing), and funds
we expect to generate from operations will enable us to operate our business and
repay our debt obligations as they become due through October 1, 2011.
However, we will require additional capital in order to execute our business
plan. If we are unable to raise additional capital, or encounter unforeseen
circumstances that place constraints on our capital resources, we will be
required to take various measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing our business development
activities, suspending the pursuit of our business plan, and controlling
overhead expenses. We cannot provide any assurance that we will raise additional
capital. We have not secured any commitments for new financing at this time, nor
can we provide any assurance that new financing will be available to us on
acceptable terms, if at all.
  Page
24
  NOTE 3 —
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
  Principles of
Consolidation
  The
consolidated financial statements include the accounts of Beacon Enterprise
Solutions Group, Inc., a Nevada corporation and its wholly-owned subsidiaries
including Datacenter Contractors AG (formerly Beacon Solutions AG) acquired on
July 29, 2009 (see Note 4), BESG Ireland Ltd. and Beacon Solutions S.R.O.,
which began operations November 1, 2009 and January 1, 2010, respectively.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
  Reclassifications
 Certain
amounts in the prior period financial statement have been reclassified to
conform to the current period presentation.
 
 Use of
Estimates
  The
preparation of the consolidated financial statements in conformity with GAAP
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 dates of the financial statements and the reported amounts of
net sales and expenses during the reporting period. Actual results could differ
from those estimates. These estimates and assumptions include valuing equity
securities and derivative financial instruments issued as purchase consideration
in business combinations and/or in financing transactions and in share based
payment arrangements, accounts receivable reserves, inventory reserves, deferred
taxes and related valuation allowances, allocating the purchase price to the
fair values of assets acquired and liabilities assumed in business combinations
(including separately identifiable intangible assets and goodwill) and
estimating the fair values of long lived assets to assess whether impairment
charges may be necessary. Certain of our estimates, including accounts
receivable and inventory reserves and the carrying amounts of intangible assets
could be affected by external conditions including those unique to our industry
and general economic conditions. It is reasonably possible that these external
factors could have an effect on our estimates that could cause actual results to
differ from our estimates. We re-evaluate all of our accounting estimates at
least quarterly based on these conditions and record adjustments, when
necessary.
  Discontinued
Operations
  For
purposes of determining discontinued operations, the Company has determined
Datacenter Contractors AG, included with our European segment, is a component of
the Company within the context of ASC 205-20 Discontinued Operations.  A
component of an entity comprises operations and cash flows that can be clearly
distinguished operationally and for financial reporting purposes from the rest
of the Company (see Note 4).  Consequently, the Company has classified the
results of operations of Datacenter Contractors AG as discontinued operations
for all periods presented.
  Revenue and Cost
Recognition
  Beacon
applies the revenue recognition principles set forth under the Securities and
Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 with respect to all
of our net sales. Accordingly, we recognize net sales when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred,
(iii) the vendor’s fee is fixed or determinable, and (iv) collectability is
reasonably assured.  Accordingly, it is our policy to determine the method
of accounting for each of our contracts at the inception of the arrangement and
account for similar types of contracts using consistent methodologies of
accounting within the GAAP hierarchy. A discussion of our specific net sales
recognition policies by category is as follows:
  Construction Type
Contracts
  On
November 6, 2009 we entered into an approximately $25,000 fixed price
construction type contract, pursuant to which we have been engaged to act as the
general contractor in the construction of a data center that we expected to
complete in two phases through October 2010. The contract provided for a
contingent penalty of 0.3% per month if the contract is not completed by an
agreed upon date, not to exceed 10% of the total contract price. We evaluated
this contract at the inception of the arrangement to determine the proper method
of accounting based on the highest level of literature within the GAAP
hierarchy. We determined that the nature of our work under this contact falls
within the scope of a “construction type” contract for which net sales would
most appropriately be recognized using the percentage of completion method of
accounting.
  Page
25
  During
the year ended September 30, 2010 we recognized approximately $16,948 of net
sales under the aforementioned contract, which is reported as discontinued
operations in the accompanying Consolidated Statement of Operations and Note 4.
We measured our progress on this contract through September 30, 2010 under the
percentage-of-completion method of accounting in which the estimated sales value
is determined on the basis of physical completion to date (the total contract
amount multiplied by percent of performance to date less sales value recognized
in previous periods). We adopted this method of measurement because management
considers this method the most objective measurement of progress in this
circumstance.
  When
applicable we also record losses on contracts in progress during the period
in which it is determined that a loss would be incurred on a construction type
contract.
  Several
vendors providing materials to us under this contract requested that we direct
our customer to remit payments for these materials, which amount to $4,674
directly to them. Notwithstanding this arrangement, we are still the primary
obligor to our customer and have general inventory risk for such purchases,
which are being made under our purchase orders. Accordingly, we are recording
all net sales under this contract gross as a principal.  See Note 4,
Discontinued Operations for additional information.
  Time and Materials
Contracts
  Our time
and materials type contracts principally include business telephone and data
system installation contracts completed in time frames of several weeks to 60 or
90 days. Under these types of contracts, we generally design the system
using in-house engineering labor, provide non-proprietary materials supplied by
an original equipment manufacturer (“OEM”) and install the equipment using
in-house or subcontracted labor. We occasionally sell extended warranties on
certain OEM supplied equipment; however, the OEM is the primary obligor under
such warranty coverage and the amount of net sales we receive from such
warranties is insignificant to the arrangements. Our contracts clearly specify
deliverables, selling prices and scheduled dates of completion. We also
generally require our customers to provide us with a significant deposit that we
initially record as a liability and apply to subsequent billings. Title and risk
of loss on materials that we supply to our customers under these arrangements is
transferred to the customer at the time of delivery. Our contracts are
cancelable upon 60 days’ notice by either party; however, completion of the
work we perform under these contracts, which occurs in a predictable sequence,
is within our control at all times. Amounts we bill for delivered elements are
not subject to concession or contingency based upon the completion of
undelivered elements specified in our contracts.
  We
account for voice and data installation contracts as multiple—deliverable
arrangements. Prior to October 1, 2009 we accounted for
multiple-deliverable net sales arrangements using the relative fair value method
of accounting, which required companies to have vendor specific objective
evidence (“VSOE”) of fair value in order for deliverables to be considered a
unit of accounting and to use the residual method of allocating arrangement
consideration to undelivered elements. We recognize net sales for delivered
elements under these arrangements based on the amount of arrangement considered
allocated to the delivered element once all of the criteria for net sales
recognition have been met.
  In
October 2009, the Financial Accounting Standards Board (“FASB”) issued ASU
No. 2009-13 Revenue
Recognition (ASC Topic 605) Multiple-Deliverable Revenue Arrangements — a
consensus of the FASB EITF 00-21-1 (“ASU 2009-13”). ASU 2009-13, requires
the use of the relative selling price method of allocating arrangement
consideration to units of accounting in a multiple-deliverable net sales
arrangement and eliminates the residual method. This new accounting principle
establishes a hierarchy to determine the selling price to be used for allocating
arrangement consideration to deliverables as follows: (i) vendor-specific
objective evidence of selling price (“VSOE”), (ii) third-party evidence of
selling price (“TPE”), and (iii) best estimate of the selling price
(“ESP”). ASU 2009-13 is effective prospectively for net sales arrangements
entered into or materially modified in fiscal years beginning on or after
June 15, 2010.
  Effective
October 1, 2009, we elected to early adopt ASU No. 2009-13 for all
multiple-element net sales arrangements entered into on or after October 1,
2009. Using this method, we designate deliverables within the arrangement as
units of accounting when they are (a) deemed to have standalone value and
(b) if the arrangement includes a general right of return relative to the
delivered item, delivery or performance of the undelivered items is considered
probable and substantially in our control. ASU No. 2009-13 no longer
requires companies to have VSOE of fair value in order for a deliverable to be
considered a unit of accounting. The adoption of ASU No. 2009-13 has not
had a material effect on the manner in which we designate units of accounting or
allocate arrangement consideration to such units because the selling prices of
our deliverables, which is the principal factor that differentiates the two
accounting standards, generally approximates fair value.
  We
recognized approximately $614 and $1,656 from multiple element arrangements for
the years ended September 30, 2010 and 2009, respectively and $7,737 and $5,176
from time and material contacts that did not included multiple-element
arrangements for the years ended September 30, 2010 and 2009,
respectively.
  Page
26
  Professional Services
Sales
  We
generally bill our customers for professional telecommunications and data
consulting services based on hours of time spent on any given assignment at our
hourly billing rates. As it relates to delivery of these services, we recognize
sales under these arrangements as the work is performed and the customer has
indicated their acceptance of services by approving a completion order. We
generated approximately $5,645 and $3,281 of professional services sales during
the years ended September 30, 2010 and 2009, respectively. The Company accounts
for sales taxes collected on behalf of government authorities using the net
method. Pursuant to this method, sales taxes are included in the amounts
receivable and a payable is recorded for the amounts due to the government
agencies.
  Fair Value of
Financial Assets and Liabilities
  The
carrying amounts of cash and cash equivalents, accounts payable and accrued
liabilities approximate fair value due to the short-term nature of these
instruments. The carrying amounts of our short term credit obligations
approximate fair value because the effective yields on these obligations, which
include contractual interest rates taken together with other features such as
concurrent issuance of warrants and/or embedded conversion options, are
comparable to rates of returns for instruments of similar credit
risk.
  The
Company measures the fair value of financial assets and liabilities based on the
guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements.
  ASC 820
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820 also establishes a fair
value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 describes three levels of inputs that may be used to measure fair
value:
  Level 1 —
quoted prices in active markets for identical assets or liabilities
  Level 2 —
quoted prices for similar assets and liabilities in active markets or inputs
that are observable
  Level 3 —
inputs that are unobservable (for example cash flow modeling inputs based on
assumptions)
  No such
items existed as of September 30, 2010 or 2009.
 
 Foreign Currency
Reporting
  The
consolidated financial statements are presented in United States Dollars in
accordance with ASC 830, “Foreign Currency Matters”.  Accordingly, the
Company’s subsidiaries, BESG Ireland Ltd, Datacenter Contractors AG and Beacon
Solutions S.R.O. use the local currency (Euros, Swiss Francs and Czech Crowns,
respectively) as their functional currencies. Assets and liabilities are
translated at exchange rates in effect at the balance sheet date, and net sales
and expense accounts are translated at average exchange rates during the period.
Resulting translation adjustments of ($507) and $10 were recorded in
comprehensive (loss) income in the accompanying Consolidated Balance Sheets for
the years ended September 30, 2010 and 2009.
  Customer
Concentration
  For the
years ended September 30, 2010 and 2009, our largest customer accounted for
approximately 64%, net of a reserve of $606 as of September 30, 2010 due to a
contractual dispute, and 21% of sales, respectively. As of September 30, 2010
and 2009 the accounts receivable balance for this customer was $3,941 and $377,
respectively.  Although we expect we will continue to have a high degree of
customer concentration our customer engagements are typically covered by
multi-year contracts or master service agreements under which we have been
operating for a number of years. In addition, current economic conditions could
harm the liquidity and financial condition of our customers or suppliers, which
could in turn cause such parties to fail to meet their contractual or other
obligations to us.
  Advertising
Expense
  Advertising
costs are expensed as incurred. Advertising expense amounted to $38 and $50 for
the years ended September 30, 2010 and 2009.
  Cash and Cash
Equivalents
  Beacon
considers all highly liquid investments purchased with an original maturity date
of three months or less to be cash equivalents. Due to their short-term nature,
cash equivalents, when they are carried, are carried at cost, which approximates
fair value.
  Page
27
 
 Accounts
Receivable
  Accounts
receivable include customer billings on invoices issued by us after the service
is rendered or the sale earned. Credit is extended based on an evaluation of our
customer’s financial condition and advance payment for services is generally
required for many of our services. Credit losses have been provided for in the
financial statements and are within management’s expectations.
  We have
established an allowance for doubtful accounts as an estimate of potential
credit risk due to current market conditions. We perform ongoing credit
evaluation of our customers’ financial condition when we deem appropriate.
Beacon has a policy of reserving for uncollectible accounts based on its best
estimate of the amount of probable credit losses based on, among other things,
historical collection experience, a review of the current aging status of
customer receivables, a review of specific information for those customers
deemed to be higher risk and other external factors including the current
economic environment and conditions in the credit markets could affect the
ability of our customers to make payments. We evaluate the adequacy of the
allowance for doubtful account at least quarterly.
 
 Unfavorable
changes in economic conditions might impact the amounts ultimately collected
from our customers and therefore could result in changes to the estimated
allowance and future results of operations could be materially affected. 
Account balances deemed to be uncollectible or otherwise settled with a customer
are charged to the allowance for doubtful accounts after all means of collection
have been exhausted and the potential for recovery is considered remote. We
currently believe the majority of our receivables are collectible due to the
nature of the industry.  The allowance for doubtful accounts amounted to
$866 and $156 as of September 30, 2010 and 2009; the increase in the
allowance related to entry into new markets for the year ended September 30,
2010.
  Inventory
  Inventory,
which consists of business telephone systems and associated equipment and parts,
is stated at the lower of cost (first-in, first-out method) or market. In the
case of slow moving items, we may write down or calculate a reserve to reflect a
reduced marketability for the item. The actual percentage reserved will depend
on the total quantity on hand, its sales history, and expected near term sales
prospects. When we discontinue sales of a product, we will write down the value
of inventory to an amount equal to its estimated net realizable value less all
applicable disposition costs. Slow moving items include spare parts for older
phone systems that we use to repair or upgrade customer phone
systems.
  Property and
Equipment
  Property
and equipment is stated at cost, including any cost to place the property into
service, less accumulated depreciation. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the assets which
currently range from 3 to 5 years. Leasehold improvements are amortized
over the shorter of their estimated useful lives or the term of the lease.
Maintenance, repairs and minor replacements are charged to operations as
incurred; major replacements and betterments are capitalized. The cost of any
assets sold or retired and related accumulated depreciation are removed from the
accounts at the time of disposition, and any resulting profit or loss is
reflected in income or expense for the period.
  Concentration of Credit
Risk
  Financial
instruments that potentially expose the Company to concentrations of credit risk
consist principally of cash and cash equivalents. We maintain our cash accounts
at high quality financial institutions with balances, at times, in excess of
federally insured limits. As of September 30, 2010, we had no deposits in
excess of federally insured limits. Management believes that the financial
institutions that hold our deposits are financially sound and therefore pose
minimal credit risk.
  Goodwill and Intangible
Assets
  We
account for goodwill and intangible assets in accordance with ASC 350
Intangibles - Goodwill and Other. ASC 350 requires that goodwill and other
intangibles with indefinite lives should be tested for impairment annually or on
an interim basis if events or circumstances indicate that the fair value of an
asset has decreased below its carrying value.
  Goodwill
represents the excess of the purchase price over the fair value of net assets
acquired in business combinations. GAAP requires that goodwill be tested for
impairment at the reporting unit level (operating segment or one level below an
operating segment) on an annual basis and between annual tests when
circumstances indicate that the recoverability of the carrying amount of
goodwill may be in doubt. Application of the goodwill impairment test requires
judgment, including the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value. Significant judgment is required to estimate the
fair value of reporting units include estimating future cash flows, determining
appropriate discount rates and other assumptions. Changes in these estimates and
assumptions could materially affect the determination of fair value and/or
goodwill impairment.  Upon consideration of our operations, we have
determined Beacon operates a single reporting unit.
  Page
28
  We
reviewed goodwill for possible impairment by comparing the fair value of the
reporting unit to the carrying value of the assets. If the fair value exceeds
the carrying value of net asset, no goodwill impairment is deemed to exist. If
the fair value does not exceed the carrying value, goodwill is tested for
impairment and written down to its implied value if it is determined to be
impaired. Based on a review of the fair value of our reporting unit, no
impairment is deemed to exist as of September 30, 2010 or
2009.
 
 Given the
current economic environment and the uncertainties regarding the potential
impact on the Company’s business, if forecasted net sales and margin growth
rates of our reporting units are not achieved, it is at least reasonably
possible that triggering events could arise that would require us to evaluate
the carrying amount of our goodwill for possible impairment prior to the next
annual review that we would perform as of September 30, 2011. If a
triggering event causes an impairment review to be required before the next
annual review, it is not possible at this time to determine if an impairment
charge would result or if such charge would be material.
  Our
amortizable intangible assets consist of customer relationships and covenants
not to compete. These costs are being amortized using the straight-line method
over their estimated useful lives. We amortize customer relationships on a
straight line basis over a 15 year estimated useful life. The covenants not
to compete are amortized on a straight line basis over a twenty four month
estimated useful life. Amortization expense for the year ended
September 30, 2010 and 2009 was approximately $331 and $461.
 
 We review
the carrying value of intangibles and other long-lived assets for impairment at
least annually or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets is measured by comparing the carrying amount of the asset or asset group
to the undiscounted cash flows that the asset or asset group is expected to
generate. If the undiscounted cash flows of such assets are less than the
carrying amount, the impairment to be recognized is measured by the amount by
which the carrying amount of the property, if any, exceeds its fair market
value. No impairment was deemed to exist as of September 30, 2010 and 2009.
We intend to re-evaluate the carrying amounts of our amortizable intangibles at
least quarterly to identify any triggering events. As described above, if
triggering events require us to undertake an impairment review, it is not
possible at this time to determine whether it would be necessary to record a
charge or if such charge would be material.
  Preferred
Stock
  We apply
the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when
determining the classification and measurement of preferred stock. Preferred
shares subject to mandatory redemption (if any) are classified as liability
instruments and are measured at fair value. We classify conditionally redeemable
preferred shares (if any), which includes preferred shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control, as temporary equity. At all other times, we classify our preferred
shares in stockholders’ equity. Our preferred shares do not feature any
redemption rights within the holders control or conditional redemption features
not within our control as of September 30, 2010 and 2009. Accordingly all
issuances of preferred stock are presented as a component of consolidated
stockholders’ equity (deficit).
  Convertible
Instruments
  We
evaluate and account for conversion options embedded in convertible instruments
in accordance with ASC 815 “Derivatives and Hedging Activities”.
  Applicable
GAAP requires companies to bifurcate conversion options from their host
instruments and account for them as free standing derivative financial
instruments according to certain criteria. The criteria includes circumstances
in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under otherwise applicable generally accepted
accounting principles with changes in fair value reported in earnings as they
occur and (c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument. An exception
to this rule when the host instrument is deemed to be conventional as that term
is described under applicable GAAP.
  We
account for convertible instruments (when we have determined that the embedded
conversion options should not be bifurcated from their host instruments) as
follows. We record, when necessary, discounts to convertible notes for the
intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized over
the term of the related debt to their stated date of redemption. We also record,
when necessary, deemed dividends for the intrinsic value of conversion options
embedded in preferred shares based upon the differences between the fair value
of the underlying common stock at the commitment date of the transaction and the
effective conversion price embedded in the preferred shares.
  Page
29
  Common Stock Purchase
Warrants and Other Derivative Financial Instruments
  We
classify as equity any contracts that (i) require physical settlement or
net-share settlement or (ii) provides us a choice of net-cash settlement or
settlement in our own shares (physical settlement or net-share settlement) providing
that such contracts are indexed to the Company's own stock as defined in ASC
815-40 ("Contracts in Entity's Own Equity"). We classify as
assets or liabilities any contracts that (i) require net-cash settlement
(including a requirement to net cash settle the contract if an event occurs and
if that event is outside our control) or (ii) gives the counterparty a
choice of net-cash settlement or settlement in shares (physical settlement or
net-share settlement). We assess classification of our common stock purchase
warrants and other free standing derivatives at each reporting date to determine
whether a change in classification between assets and liabilities is
required.
  Our free
standing derivatives consist of warrants to purchase common stock that we issued
to three founding stockholders/directors and one independent qualified investor
in connection with the Bridge Financing Facility and Bridge Notes described in
Note 10, warrants issued pursuant to equity financing arrangements
furnished by one of our directors as described in Note 12, warrants issued
to the Series A and A-1 Preferred Stock stockholders, and warrants issued
to the placement agent and its affiliates in connection with various Private
Placements described in Note 14. We evaluated the common stock purchase
warrants to assess their proper classification in the balance sheet as of
September 30, 2010 and 2009 using the applicable classification criteria
enumerated under GAAP. We determined that the common stock purchase warrants do
not feature any characteristics permitting net cash settlement at the option of
the holders. Accordingly, these instruments have been classified in
stockholders’ equity in the accompanying consolidated balance sheet as of
September 30, 2010 and 2009.
  Share-Based
Payments
  We
account for share based payments in accordance with ASC 718 Compensation —
Stock Payments which results in the recognition of expense under applicable GAAP
and requires measurement of compensation cost for all share based payment awards
at fair value on the date of grant and recognition of compensation expense over
the service period for awards expected to vest. We calculate the fair value of
stock options using the Black-Scholes option pricing model. The fair value of
restricted stock is determined based on the number of shares granted and the
fair value of our common stock on date of grant. The recognized expense is net
of expected forfeitures.
  Income
Taxes
  We
account for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740
requires the recognition of deferred tax assets and liabilities for both the
expected impact of differences between the financial statements and tax basis of
assets and liabilities and for the expected future tax benefit to be derived
from tax loss and tax credit carry forwards. We also record a valuation
allowance when we determine that it is more likely than not that all or a
portion of deferred tax assets will not be realized. Under applicable GAAP it is
difficult to conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years. Therefore,
cumulative losses weigh heavily in the overall assessment. Accordingly, we have
recorded a full valuation allowance against our net deferred tax assets. In
addition, we expect to provide a full valuation allowance on future tax benefits
until we can sustain a level of profitability that demonstrates our ability to
utilize the assets, or other significant positive evidence arises that suggests
our ability to utilize such assets. We will continue to re-assess our reserves
on deferred income tax assets in future periods on a quarterly
basis.
  We also
periodically evaluate whether we have any uncertain tax positions requiring
accounting recognition in our financial statements. Under applicable GAAP,
companies may recognize a tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position should
be measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement. Applicable GAAP also provides
guidance on the de-recognition of income tax liabilities, classification of
interest and penalties on income taxes, and accounting for uncertain tax
positions in interim period financial statements. Our policy is to record
interest and penalties on uncertain tax provisions as a component of our income
tax expense.
  As
described in Note 14, we completed our assessment of uncertain tax
positions for the years ended September 30, 2010 and 2009, including the
effects of the Share Exchange Transaction described in Note 1 and business
combinations completed as described in Note 4. Based on this assessment, we
have determined that we have no material uncertain income tax positions
requiring recognition or disclosure for the years ended September 30, 2010
and 2009.
  In many
cases, our tax positions are related to tax years that remain subject to
examination by relevant tax authorities. We file income tax returns in the
United States (federal), Ireland and the Czech Republic as well as various state
and local jurisdictions. In most instances, we are no longer subject to federal,
state and local income tax examinations by taxing authorities for years prior to
2008.
  Page
30
 
 Net Loss Per
Share
  Basic net
loss per share is computed by dividing net loss per share available to common
stockholders by the weighted average shares of common stock outstanding for the
period and excludes any potentially dilutive securities. Diluted earnings per
share reflect the potential dilution that would occur upon the exercise or
conversion of all dilutive securities into common stock. The computation of loss
per share for the years ended September 30, 2010 and 2009 excludes
potentially dilutive securities because their inclusion would be
anti-dilutive.
  Shares of
common stock issuable upon conversion or exercise of potentially dilutive
securities at September 30, 2010 are as follows:
 TotalStock
                    
                    
                    Common
                    
                    
                    CommonOptions
      and
                    
                    
                    Stock
                    
                    
                    StockWarrants
                    
                    
                    Equivalents
                    
                    
                    EquivalentsSeries
      A Convertible Preferred Stock with Warrants
                    
                    
                    20,131
                    
                    
                    
                    40,263
                    
                    
                    
                    60,394Series
      A-1 Convertible Preferred Stock with Warrants
                    
                    
                    207,260
                    
                    
                    
                    414,518
                    
                    
                    
                    621,778Series
      B Convertible Preferred Stock with Warrants
                    
                    
                    350,000
                    
                    
                    
                    875,000
                    
                    
                    
                    1,225,000Common
      Stock Offering Warrants
                    
                    
                    2,807,322
                    
                    
                    
                    -
                    
                    
                    
                    2,807,322Placement
      Agent Warrants
                    
                    
                    2,847,497
                    
                    
                    
                    -
                    
                    
                    
                    2,847,497Affiliate
      Warrants
                    
                    
                    55,583
                    
                    
                    
                    -
                    
                    
                    
                    55,583Bridge
      Financings
                    
                    
                    285,500
                    
                    
                    
                    166,667
                    
                    
                    
                    452,167Convertible
      Notes Payable Warrants
                    
                    
                    50,000
                    
                    
                    
                    -
                    
                    
                    
                    50,000Compensatory
      Warrants
                    
                    
                    300,000
                    
                    
                    
                    -
                    
                    
                    
                    300,000Equity
      Financing Arrangements Warrants
                    
                    
                    716,662
                    
                    
                    
                    -
                    
                    
                    
                    716,662Consulting
      Warrants
                    
                    
                    2,500,000
                    
                    
                    
                    -
                    
                    
                    
                    2,500,000Employee
      Stock Options
                    
                    
                    3,468,533
                    
                    
                    
                    -
                    
                    
                    
                    3,468,533Non-Employee
      Stock Options
                    
                    
                    250,000
                    
                    
                    
                    -
                    
                    
                    
                    250,00013,858,488
                    
                    
                    
                    1,496,448
                    
                    
                    
                    15,354,936
  Recently
Adopted Accounting
Pronouncements
 
 In March
2010, the FASB issued Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition— Milestone
Method (Topic 605): Milestone Method of Revenue Recognition. This
standard provides that the milestone method is a valid application of the
proportional performance model for net sales recognition if the milestones are
substantive and there is substantive uncertainty about whether the milestones
will be achieved. Determining whether a milestone is substantive requires
judgment that should be made at the inception of the arrangement. To meet the
definition of a substantive milestone, the consideration earned by achieving the
milestone (1) would have to be commensurate with either the level of effort
required to achieve the milestone or the enhancement in the value of the item
delivered, (2) would have to relate solely to past performance, and
(3) should be reasonable relative to all deliverables and payment terms in
the arrangement. No bifurcation of an individual milestone is allowed and there
can be more than one milestone in an arrangement. The new standard is effective
for interim and annual periods beginning on or after June 15, 2010. Early
adoption is permitted.  The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial position and
results of operations.
  Other
accounting standards that have been issued or proposed by the FASB and SEC
and/or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated
financial statements upon adoption.
  Page
31
  NOTE 4 —
              DISCONTINUED
      OPERATIONS
  Symbiotec Solutions
AG
  On
July 29, 2009, BESG Ireland Ltd., a wholly owned subsidiary of Beacon,
acquired 100% of the outstanding shares of Symbiotec Solution AG (Symbiotec) in
exchange for 400,000 shares of Beacon common stock issued as of the date of
the acquisition, plus contingent consideration consisting of an additional
400,000 shares of Beacon common stock and up to $145 of cash subject to the
attainment of certain contractually defined earnings targets. We recorded the
contingent consideration as part of the purchase price on the date of the
acquisition since it is probable that the acquired business will meet its
earnings targets over the one year measurement period. Beacon acquired Symbiotec
as an integral part of our plan to establish a presence in Europe where we are
currently serving a significant customer. For the period July 29, 2009 to
September 30, 2009, we recognized net sales of $958 and net income of
approximately $492.
  The
following presents a summary of the purchase price consideration for the
purchase of Symbiotec:
 
 AmountShares
      issued at acquisition
                    
                    $
                    437Contingent
      shares pursuant to earn out
                    
                    
                    476Profit
      sharing earn out
                    
                    
                    145$
                    1,058Net
      cash acquired
                    
                    
                    (46
                    )Total
      purchase price consideration, net of cash received
                    
                    $
                    1,012
  The
purchase price has been allocated as follows:
 
 AmountAccounts
      receivable
                      
                      $
                      134Prepaid
      expenses and other current assets
                      
                      
                      27Property
      and equipment
                      
                      
                      15Goodwill
                      
                      
                      360Customer
      relationships
                      
                      
                      349Covenants
      not to compete
                      
                      
                      212Accounts
      payable and accrued liabilities
                      
                      
                      (39
                      )$
                      1,058Net
      tangible asset acquired (liabilities assumed)
                      
                      $
                      137
  As
previously disclosed in the Company’s Current Report on Form 8-K filed on
November 12, 2009, Datacenter Contractors AG (“DC”, formerly known as “Beacon
Solutions AG”), a wholly owned subsidiary of BESG Ireland Ltd., entered into a
project management services agreement for the design and construction of a data
center in Zurich, Switzerland.  Phase 1 of the agreement relates to the
first 2,500 square feet of the facility and the Company maintains that Phase 1
was completed in June 2010.  Phase 2 of the agreement relates to the
completion of the data center and was valued to the Company at approximately
$10,000 in net sales.  DC’s operations consist mostly of one significant
customer contract and have previously been presented in the Company’s European
operating segment.
 
 In June
2010, the customer notified the Company that it was terminating the agreement
and cancelling Phase 2 due to a claimed breach.  The Company and customer
entered into negotiations regarding the possible continuation of the agreement,
but as of the date of the filing of this report, the negotiations to continue
the agreement have ceased.  As a result of DC’s inability to reach a
settlement, the DC Board has elected to discontinue DC’s operations, and has
filed the relevant statutory notices with the local judge in Switzerland in
accordance with its fiduciary obligations under Swiss law.  As a result,
the net sales and expenses associated with DC have been reclassified as
discontinued operations for all periods presented in the consolidated financial
statements (see Note 17).
  The
assets and liabilities of DC have been classified on the Consolidated Balance
Sheets as Current assets and liabilities of discontinued operations.  The
assets and liabilities comprising the balances, as classified in our
Consolidated Balance Sheets, consist of:
  Page
32
  As of
                    
                    
                    As ofSeptember 30,
                    
                    
                    September 30,2010
                    
                    
                    2009ASSETSCash
                    
                    $
                    46
                    
                    
                    $
                    37Accounts
      receviable
                    
                    
                    87
                    
                    
                    
                    911Other
      current assets
                    
                    
                    -
                    
                    
                    
                    10Total
      current assets
                    
                    
                    133
                    
                    
                    
                    958Property
      and equipment, net
                    
                    
                    
                    
                    
                    
                    59Goodwill
                    
                    
                    -
                    
                    
                    
                    360Other
      intangible assets, net
                    
                    
                    -
                    
                    
                    
                    561Total
      assets
                    
                    $
                    133
                    
                    
                    $
                    1,938LIABILITIESAccounts
      payable
                    
                    $
                    7,554
                    
                    
                    $
                    104Accrued
      expenses
                    
                    
                    1,004
                    
                    
                    
                    421Total
      liabilities
                    
                    $
                    8,558
                    
                    
                    $
                    525
  The
following table presents the results of the discontinued
operations.
 For the Year
                        
                        
                        For the YearEnded
                        
                        
                        EndedSeptember 30,
                        
                        
                        September 30,2010
                        
                        
                        2009Net
      Sales
                        
                        $
                        16,948
                        
                        
                        $
                        958Net
      loss before taxes
                        
                        
                        (8,181
                        )
                        
                        
                        394Income
      taxes
                        
                        
                        -
                        
                        
                        
                        98Net
      (loss) income from discontinued operations
                        
                        $
                        (8,181
                        )
                        
                        $
                        492
  As part
of the discontinued operations, goodwill and intangible assets recorded as a
result of the acquisition of Symbiotec Solutions AG were deemed impaired and
therefore written off as of September 30, 2010 in the amount of $254 and $396,
respectively.
 
 NOTE 5 —
              ACCOUNTS
      RECEIVABLE
  Accounts
receivable consists of the following:
 As of
                      
                      
                      As ofSeptember 30,
                      
                      
                      September 30,2010
                      
                      
                      2009Accounts
      receivable
                      
                      $
                      5,401
                      
                      
                      $
                      3,225Less:
      Allowance for doubtful accounts
                      
                      
                      (866
                      )
                      
                      
                      (156
                      )Accounts
      receivable, net
                      
                      $
                      4,535
                      
                      
                      $
                      3,069
  Additions
and charges to the allowance for doubtful accounts consist of the
following:
 
 As of
                      
                      
                      As ofSeptember 30,
                      
                      
                      September 30,2010
                      
                      
                      2009Opening
      balance
                      
                      
                      (156
                      )
                      
                      $
                      (50
                      )Add:
      Additions to reserve
                      
                      
                      (752
                      )
                      
                      
                      (136
                      )Less:
      charges
                      
                      
                      42
                      
                      
                      
                      30Ending
      balance
                      
                      $
                      (866
                      )
                      
                      $
                      (156
                      )
  Page
33
  NOTE 6 —
              INVENTORY,
      NET
  Inventory
consists of the following:
 
 As of
                      
                      
                      As ofSeptember 30,
                      
                      
                      September 30,2010
                      
                      
                      2009Inventory
      (principally parts and system components)
                      
                      $
                      707
                      
                      
                      $
                      765Less:
      reserve for obsolete inventory
                      
                      
                      (150
                      )
                      
                      
                      (160
                      )Inventory
                      
                      $
                      557
                      
                      
                      $
                      605
  Additions
and charges to the reserve for obsolete inventory:
 
 As of
                    
                    
                    As ofSeptember 30,
                    
                    
                    September 30,2010
                    
                    
                    2009Opening
      balance
                    
                    $
                    (160
                    )
                    
                    $
                    (35
                    )Add:
      additions to reserve
                    
                    
                    (56
                    )
                    
                    
                    (144
                    )Less:
      charges
                    
                    
                    66
                    
                    
                    
                    19Ending
      balance
                    
                    $
                    (150
                    )
                    
                    $
                    (160
                    )
  NOTE 7 —
              PROPERTY
      AND EQUIPMENT, NET
  Property
and equipment consist of the following as of September 30, 2010 and
2009:
 
 September 30,
                    
                    
                    September 30,2010
                    
                    
                    2009Equipment
                    
                    $
                    500
                    
                    
                    $
                    290Vehicles
                    
                    
                    82
                    
                    
                    
                    81Furniture
      and Fixtures
                    
                    
                    58
                    
                    
                    
                    58Software
                    
                    
                    240
                    
                    
                    
                    111Leasehold
      Improvements
                    
                    
                    19
                    
                    
                    
                    17$
                    899
                    
                    
                    $
                    557Less:
      Accumulated Depreciation
                    
                    
                    (479
                    )
                    
                    
                    (221
                    )Net
      Book Value Fixed Assets
                    
                    $
                    420
                    
                    
                    $
                    336
  Depreciation
amounted to approximately $258 and $153 for the years ended September 30,
2010 and 2009.
  Page
34
  NOTE 8 —
              INTANGIBLE
      ASSETS, NET
  The
following table is a summary of intangible assets:
 
 As of
                        
                        
                        As ofSeptember 30,
                        
                        
                        September 30,2010
                        
                        
                        2009Total
                        
                        
                        TotalConsideration
                        
                        
                        ConsiderationGoodwill
                        
                        $
                        2,792
                        
                        
                        $
                        2,792Customer
      relationships
                        
                        $
                        3,804
                        
                        
                        $
                        3,662Covenants
      not to compete
                        
                        
                        500
                        
                        
                        
                        6424,304
                        
                        
                        
                        4,304Less:
      Accumulated amortization
                        
                        
                        (1,293
                        )
                        
                        
                        (962
                        )Intangibles,
      net
                        
                        $
                        3,011
                        
                        
                        $
                        3,342
  The above
noted intangible assets are being amortized on a straight-line basis. Customer
relationships are being amortized over a 15 year useful life; contracts not
to compete had been amortized over a 2 year useful life based on the
estimated economic benefit. Amortization expense for the years ended
September 30, 2010 and 2009 was $331 and $461.
  The
following is a summary of amortization expense for the next five fiscal years
and thereafter:
 
 Fiscal Year endedSeptember 30,2011
                    
                    $
                    2582012
                    
                    
                    2582013
                    
                    
                    2582014
                    
                    
                    2582015
                    
                    
                    258Thereafter
                    
                    
                    1,721$
                    3,011
  NOTE 9 —
              ACCRUED
      EXPENSES
  Accrued
expenses consist of the following:
 
 As of
                      
                      
                      As ofSeptember 30,
                      
                      
                      September 30,2010
                      
                      
                      2009Compensation
      related
                      
                      $
                      483
                      
                      
                      $
                      541Dividends
                      
                      
                      153
                      
                      
                      
                      38Interest
                      
                      
                      50
                      
                      
                      
                      123Goods
      received not invoiced
                      
                      
                      -
                      
                      
                      
                      1,092Other
                      
                      
                      194
                      
                      
                      
                      832$
                      880
                      
                      
                      $
                      2,626
  Page
35
  NOTE 10 —
              NOTES PAYABLE
      AND LONG TERM DEBT
  The
following is a summary of our notes payable and long term debt:
  As of
                    
                    
                    As ofSeptember 30,
                    
                    
                    September 30,2010
                    
                    
                    2009Short-Term
      Lines of Credit and Notes Payable
                    
                    $
                    -
                    
                    
                    $
                    550Convertible
      Notes Payable
                    
                    $
                    -
                    
                    
                    $
                    298Bridge
      Note
                    
                    $
                    100
                    
                    
                    $
                    167Integra
      Bank
                    
                    $
                    323
                    
                    
                    $
                    439Acquistion
      notes (payable to the sellers of the acquired businesses)ADSnetcurve
                    
                    
                    -
                    
                    
                    
                    81Bell-Haun
                    
                    
                    -
                    
                    
                    
                    44CETCON
                    
                    
                    290
                    
                    
                    
                    416Strategic
      Secured Note
                    
                    
                    169
                    
                    
                    
                    297782
                    
                    
                    
                    1,277Less:
      current portion
                    
                    
                    (379
                    )
                    
                    
                    (475
                    )Non-current
      portion
                    
                    $
                    403
                    
                    
                    $
                    802Long
      term Line of Credit - related party
                    
                    $
                    630
                    
                    
                    $
                    -
  Short-Term Lines of Credit
and Notes Payable
  On
December 16, 2009, we repaid the remaining principal balance of $50 due under a
line of credit with a maturity date previously extended through
December 30, 2009.
  On
August 7, 2009, we entered into a non-interest bearing note with one of our
directors in the amount of $500 with a due date of September 9, 2009.
Subsequently we exercised a contractual right to convert the note into a demand
obligation that would become payable within a 5 day period following written
notice of such demand. We paid a fee equal to $88 in cash and issued an
additional 112,500 common stock purchase warrants exercisable for $1.00 per
share to the lender/director upon the occurrence of this event, for which we
recognized non-cash interest of $64 for the fair value of the warrants. The note
was paid in full on December 17, 2009.
 
 On
February 8, 2010, we received $40 in loan proceeds and issued a related
short-term promissory note with a 4% per annum interest rate and 1% origination
fee.  The note was paid in full on March 19, 2010.
  On
February 26, 2010, we received $500 in loan proceeds and issued a related
short-term, non-interest bearing promissory note, which was secured but
subordinate to all existing senior debt outstanding.  Terms of the note
included a principal payment of $250 on March 31, 2010 with the balance of $250,
in addition to a $10 origination fee, to be paid on April 30, 2010.  In
agreement with the note holder, the March 31, 2010 payment was extended through
and paid on April 1, 2010.  The remaining $250 plus $10 origination fee was
paid on April 30, 2010.
  Convertible Notes
Payable
  On
January 22, 2009, Beacon entered into convertible notes payable with a
group of private investors (the “Notes”) facilitated by a broker/dealer.
Proceeds of the Notes were $500in the aggregate. The Notes had an original
maturity date of July 21, 2009 with interest payable at a fixed annual rate
of 12.5% due monthly. The maturity date of the Notes was extended to January 21,
2010 with interest payable at a fixed annual rate of 15% per annum on the unpaid
balance due on the note, which amounted to $298 at September 30,
2009.  Each of the note holders also received a five-year warrant to
purchase one share of Beacon Common Stock (the “Note Warrants”) at a purchase
price of $1.00 per share per $10 of note principal (50,000 shares in the
aggregate).  We recorded aggregate discounts of $74 to the face value of
the Notes based upon the relative fair values of the notes and the warrants and
the effects of a beneficial conversion feature. The discount is being accreted
over the life of the Notes which amounted to $74 through September 30, 2009
and is included as a component of interest expense in the accompanying Statement
of Operations.
  Page
36
  During
the year ended September 30, 2010 we repaid the remaining principal and $1 of
interest expense.
  Bridge
Notes
 
 On
July 16, 2007, Beacon entered into a $500,000 Bridge Financing Facility
provided by two of our founding stockholders who are also directors of our
Company. In connection with the issuance of the Bridge Financing Facility, we
issued warrants to purchase shares of our common stock (the “Warrants”). The
Warrants allow the holders to purchase up to 865,000 shares of our common
stock at an exercise price of $1.00 per share.  On September 9, 2009,
the holders of the Bridge Financing Facility exercised their right to convert
the entire amount of the principal due under these notes into
833,334 shares of common stock.
  On
November 15, 2007, we issued $200 of convertible notes payable (the “Bridge
Notes”) in a separate debt financing. Of this amount, $100 of the Bridge Notes
was issued to one of our directors. The holders of the Bridge Notes pursuant to
three separate amendments completed through November 20, 2008, agreed
unconditionally not to demand repayment of the notes before June 30, 2010.
On March 31, 2010, the non-director Bridge Note holder elected to convert the
unpaid principal and accrued interest of $110 to 183,620 common shares. 
Accordingly, the remaining $100 note is presented as a current liability in our
Consolidated Balance Sheet as of September 30, 2010.
  We
recorded contractual interest expense of approximately $5 and $25 for the years
ended September 30, 2010 and 2009, respectively. We recorded aggregate accretion
of the discount on these notes of approximately $33 and $96 for years ended
September 30, 2010 and 2009, respectively which is classified as a component of
interest expense in the accompanying Consolidated Statement of Operations. The
discount relating to a beneficial conversion feature was recorded upon the
original issuance of these notes and is fully amortized.
  Integra
Bank
  On March
14, 2008, Beacon and Integra Bank entered into a credit facility, under which we
borrowed $600 at a 6.25% annual interest rate with monthly payments of $12 over
a 60 month term that matures March 12, 2013 and collateralized by all business
assets of the Company.  We recorded contractual interest expense of
approximately $24 and $31 for the years ended September 30, 2010 and 2009,
respectively.
  Long Term Line of Credit –
Related Party
  On August
17, 2010 we entered into a long term line of credit facility with one of our
directors for $4,000, the facility has an annual interest rate of 7.73% on any
outstanding balance and a facility fee of the greater of $40 or 1% of the unused
balance.  Additionally, 15,000 warrants, with a five year term at $1.00 per
share, per month will be paid for each month the facility is outstanding. As of
September 30, 2010, we have an outstanding balance of $630, leaving an unused
amount of $3,370, which is presented as a non-current liability in our
Consolidated Balance Sheet, as terms of the facility call for an 18 month
maturity date.
  Term
Debt
 
 During
the years ended September 30, 2010 and 2009, Beacon paid approximately $379
and $351in principal payments on our term debt. We recorded interest expense of
approximately $73 and $88 for our term loans and paid approximately $88 and $75
for the years ended September 30, 2010 and 2009, respectively.
  The
following table summarizes the remaining debt principal payment obligations by
year for the long-term debt other than the Bridge Financing Facility, Bridge
Notes, and short term line of credit which are presumed to be paid within the
next twelve months:
 2011
                    
                    $
                    3792012
                    
                    
                    3112013
                    
                    
                    922014
                    
                    
                    -2015
                    
                    
                    -$
                    782
  Page
37
  NOTE 11 —
              RELATED
      PARTY TRANSACTIONS
  On
May 15, 2008, we entered into an equity financing arrangement with one of
our directors that provided up to $500 of additional funding, the terms of which
provided for issuance of warrants to purchase 33,333 shares of common stock
at $1.00 per share per month for the period the financing arrangement is in
effect. The warrants have a five-year term. The financing arrangement terminates
upon the close of a $3,000 equity financing event. On August 19, 2008, we
modified the agreement to increase the commitment to $3,000 of additional
funding that decreases on a dollar for dollar basis as we raise capital in
subsequent equity financing transactions up to $3,000, upon mutual agreement of
our director and us, or on December 31, 2008. In consideration for this
financing arrangement, we agreed to issue a five year warrant to purchase
100,000 shares of common stock at an exercise price of $1.00 per share in
addition to the ongoing warrants earned under the original agreement.
Accordingly, we recognized $289 of interest expense for the year ended September
30, 2009 based on the fair value of the warrants as they were earned. The fair
values were calculated using the Black-Scholes option pricing model with the
following assumptions:
 
 Expected
                                            
                                            
                                            
                                            
                                            
                                            Fair
      Value
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            Risk-Free
                                            
                                            
                                            Value
                                            
                                            
                                            Charge
      toDate
                                            
                                            Quantity
                                            
                                            
                                            Life
                                            
                                            
                                            Strike
                                            
                                            
                                            of
      Common
                                            
                                            
                                            Volatility
                                            
                                            
                                            Dividend
                                            
                                            
                                            Interese
                                            
                                            
                                            per
                                            
                                            
                                            InterestEarned
                                            
                                            Earned
                                            
                                            
                                            (days)
                                            
                                            
                                            Price
                                            
                                            
                                            Stock
                                            
                                            
                                            Rate
                                            
                                            
                                            Yield
                                            
                                            
                                            Rate
                                            
                                            
                                            Warrant
                                            
                                            
                                            Expense10/15/2008
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.20
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.90
                                            %
                                            
                                            $
                                            0.74
                                            
                                            
                                            $
                                            2511/15/2008
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            0.85
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.33
                                            %
                                            
                                            $
                                            0.45
                                            
                                            
                                            $
                                            1512/15/2008
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.52
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.50
                                            %
                                            
                                            $
                                            0.99
                                            
                                            
                                            $
                                            3312/31/2008
                                            
                                            
                                            16,667
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.01
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.55
                                            %
                                            
                                            $
                                            0.57
                                            
                                            
                                            $
                                            101/9/2009
                                            
                                            
                                            100,000
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            0.80
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.51
                                            %
                                            
                                            $
                                            0.41
                                            
                                            
                                            $
                                            412/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            0.80
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.99
                                            %
                                            
                                            $
                                            0.41
                                            
                                            
                                            $
                                            143/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            0.54
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.90
                                            %
                                            
                                            $
                                            0.23
                                            
                                            
                                            $
                                            84/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            0.75
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            1.90
                                            %
                                            
                                            $
                                            0.37
                                            
                                            
                                            $
                                            125/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.19
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.09
                                            %
                                            
                                            $
                                            0.72
                                            
                                            
                                            $
                                            246/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.35
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.73
                                            %
                                            
                                            $
                                            0.86
                                            
                                            
                                            $
                                            297/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.61
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.31
                                            %
                                            
                                            $
                                            1.08
                                            
                                            
                                            $
                                            368/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.20
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.75
                                            %
                                            
                                            $
                                            0.74
                                            
                                            
                                            $
                                            249/9/2009
                                            
                                            
                                            33,333
                                            
                                            
                                            
                                            1,825
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            
                                            66.34
                                            %
                                            
                                            
                                            0
                                            %
                                            
                                            
                                            2.38
                                            %
                                            
                                            $
                                            0.57
                                            
                                            
                                            $
                                            18For
      year ended September 30, 2009
                                            
                                            
                                            $
                                            289
  In
addition, contingent upon the drawdown of any part of the equity financing
commitment, the director would earn the right to purchase up to
1,655,425 shares of their stock owned by the investors for a purchase price
of $0.01 per share. The equity financing arrangement expired on
December 16, 2009 upon closing of a $3,000 of equity financing at which
time the directors contingent right to acquire the shares of the founding
shareholders was terminated.
 
 On
January 7, 2009, we entered into a note payable with a principal amount of
$200 payable on or before December 31, 2009, bearing interest at 12% per
annum with one of our directors. The director concurrently authorized us to
issue 300 shares of preferred stock in exchange for this note and an
additional $100 note issued prior to December 31, 2009. We are permitted,
but not required, to redeem these shares at a 1% per month premium beginning
30 days from the date of their issuance at our discretion.
  On
January 9, 2009, we entered into an equity financing arrangement with one
of our directors that provided a commitment of up to $2,200 of additional
funding. This arrangement superseded the existing equity financing arrangement
between the same director and the Company that had been entered into on
May 15, 2008 and amended August 19, 2008. Under the terms of this
equity financing arrangement, under certain circumstances the Company was
permitted to sell shares of its common stock to this director at the same price
per share and other terms as the most recent sale of shares of its Common Stock
to a third party in a transaction intended to raise capital. On August 10,
2009, we renewed the existing equity financing arrangement to provide a
commitment of up to $3,000 of additional funding.  This arrangement was
terminated on December 15, 2009 upon close of the $3,000 equity financing
event.
  Under a
marketing agreement with a company owned by the wife of Beacon’s former
president, we provide procurement and installation services as a subcontractor.
We earned net sales of approximately $323 and $1,697 for procurement and
installation services provided under this marketing agreement, of which $198 and
$1,402 is recorded as accounts receivable in the accompanying Consolidated
Balance Sheets as of September 30, 2010 and 2009.
  On
August 7, 2009, we entered into a non-interest bearing demand note with one
of our directors in the amount of $500. See Note 10 for further
information.
  Page
38
  The
Company has obtained insurance through an agency owned by one of its founding
stockholders/directors.  Insurance expense of $150 was paid to the agency
for each of the years ended September 30, 2010 and 2009,
respectively.
  NOTE 12 —
              COMMITMENTS
      AND CONTINGENCIES
 Litigation
  On September 7, 2010, Beacon was named a
party in a lawsuit filed in Jefferson Circuit Court in
the State of Kentucky, seeking $270 plus other costs,
attorney's fees and damages, regarding the Company's alleged conduct during the
course of the purchase of the assets and assumption of certain liabilities of
Strategic Communications, LLC.  Although
the outcome of this matter can not be predicted at this time,Beacon believes this lawsuit is without merit.  No
provision has been made in the financial statements related to this action,
as the Company believes that the ultimate disposition of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.
 Employment
Agreements
  The
Company has entered into at will employment agreements with five of its key
executives with no specific expiration dates that provide for aggregate annual
compensation of $840 and up to $1,320 of severance payments for termination
without cause.
 
 Operating
Leases
  The
Company has entered into operating leases for office facilities in Louisville,
KY, Columbus, OH, Cincinnati, OH, and Prague, Czech Republic. Rent expense for
the years ended September 30, 2010 and 2009 amounted to $274 and $190,
respectively. A summary of the minimum lease payments due on these operating
leases exclusive of the Company’s share of operating expenses and other
costs:
 2011
                      
                      $
                      2602012
                      
                      
                      1162013
                      
                      
                      1162014
                      
                      
                      892015
                      
                      
                      80Thereafter
                      
                      
                      47$
                      708
  Engagement of Investor
Relations Firms
  On
January 20, 2009, we engaged an investor relations firm to aid us in
developing a marketing plan directed at informing the investing public as to our
business and increasing our visibility to FINRA registered broker/dealers, the
investing public and other institutional investors and fund managers. On
June 5, 2009, our Board of Directors authorized us to issue 150,000 shares
of common stock to the same investor relations firm subject to the attainment of
certain performance conditions. The performance based arrangement supersedes the
previous agreement entered into on January 20, 2009.  For the year
ended September 30, 2010 a total of 50,000 shares with an aggregate fair value
of $44 were deemed to have been earned as of the date of issuance. The common
stock issued under this agreement was recorded as professional fees expense
using the measurement principles enumerated under ASC 505 “Equity-Based Payment
to Non-Employees”.
  On
December 17, 2009, we engaged another investor relations firm for a twenty
four month period, the commitment date being November 1, 2009, providing for
compensation payable in 50,000 shares of fully vested non-forfeitable common
stock with an aggregate fair value of $45.  For year ended September 30,
2010, we recorded approximately $22 of investor relations expense related to
this agreement.
  Engagement for Advisory
Services
  On
January 1, 2009, we entered into a three year advisory agreement with a
stockholder, whereby the party will provide corporate finance and business
strategy advisory services pertaining to Beacon’s business affairs in the areas
of business combinations, financing, etc. The agreement provides for
compensation of $25 per month, any part of which can be prepaid. For the year
end September 30, 2009 we have recognized $225 of professional fees expense
under this agreement and have recorded a prepayment of $320 for future services
which has been classified as prepaid expense in the accompanying Consolidated
Balance Sheet as of September 30, 2009.  During the year ended September
30, 2010 the agreement was extended to a total of 5 years, as such we recorded
$167 of professional fees expense under this agreement for the year ended
September 30, 2010.
 
 Page
39
  Consulting
Agreement
  On
December 1, 2009, we entered into two 36 month consulting agreements,
which were subsequently extended to 60 months in April 2010, issuing an
aggregate of 2,500,000 consulting warrants. The warrants, issued on
December 1, 2009 were fully vested upon issuance and have a fair value of
$915, determined using the Black Scholes model with assumptions indicated in the
table below. We will recognize investor relations expense ratably over a
60 month term. For the year ended September 30, 2010, we recorded
approximately $191of investor relation expense related to these
agreements.
  Expected
                        
                        
                        
                        
                        
                        Fair Value
                        
                        
                        
                        
                        
                        
                        
                        
                        Risk-Free
                        
                        
                        Value
                        
                        
                        Amount toIssuance
                        
                        Quantity
                        
                        
                        Life
                        
                        
                        Strike
                        
                        
                        of Common
                        
                        
                        Volatility
                        
                        
                        Dividend
                        
                        
                        Interese
                        
                        
                        per
                        
                        
                        be chargedDate
                        
                        Vested
                        
                        
                        (days)
                        
                        
                        Price
                        
                        
                        Stock
                        
                        
                        Rate
                        
                        
                        Yield
                        
                        
                        Rate
                        
                        
                        Warrant
                        
                        
                        to compensation12/1/2009
                        
                        
                        1,500,000
                        
                        
                        
                        1,825
                        
                        
                        $
                        1.00
                        
                        
                        $
                        0.81
                        
                        
                        
                        66.34
                        %
                        
                        
                        0
                        %
                        
                        
                        2.03
                        %
                        
                        $
                        0.42
                        
                        
                        $
                        62812/1/2009
                        
                        
                        250,000
                        
                        
                        
                        1,825
                        
                        
                        $
                        1.50
                        
                        
                        $
                        0.81
                        
                        
                        
                        66.34
                        %
                        
                        
                        0
                        %
                        
                        
                        2.03
                        %
                        
                        $
                        0.34
                        
                        
                        
                        8612/1/2009
                        
                        
                        250,000
                        
                        
                        
                        1,825
                        
                        
                        $
                        2.00
                        
                        
                        $
                        0.81
                        
                        
                        
                        66.34
                        %
                        
                        
                        0
                        %
                        
                        
                        2.03
                        %
                        
                        $
                        0.29
                        
                        
                        
                        7212/1/2009
                        
                        
                        250,000
                        
                        
                        
                        1,825
                        
                        
                        $
                        2.25
                        
                        
                        $
                        0.81
                        
                        
                        
                        66.34
                        %
                        
                        
                        0
                        %
                        
                        
                        2.03
                        %
                        
                        $
                        0.27
                        
                        
                        
                        6712/1/2009
                        
                        
                        250,000
                        
                        
                        
                        1,825
                        
                        
                        $
                        2.50
                        
                        
                        $
                        0.81
                        
                        
                        
                        66.34
                        %
                        
                        
                        0
                        %
                        
                        
                        2.03
                        %
                        
                        $
                        0.25
                        
                        
                        
                        622,500,000
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        915
  On March
2, 2010, we engaged another investor relations firm for a four month period, the
commitment date being April 1, 2010, providing for compensation payable in cash
plus 10,000 warrants to purchase common stock.  For the year ended
September 30, 2010, we recorded $8 of investor relations expense related to this
agreement.
  NOTE
      13 —
              STOCKHOLDERS’
      EQUITY
  Authorized
Capital
  Beacon is
currently authorized to issue up to 70,000,000 shares of common stock, par
value $0.001 per share, and 5,000,000 shares of preferred stock, par value
$0.01 per share, of which three series have been designated: 4,500 shares
of Series A Convertible Preferred Stock, 1,000 shares of
Series A-1 Convertible Preferred Stock, and 4,000 shares of
Series B Convertible Preferred Stock.
  Preferred
Stock
  Each
share of Series A, Series A-1 and Series B preferred has voting
rights equal to an equivalent number of common shares into which it is
convertible. The holders of the Series A and Series A-1 are entitled
to receive contractual cumulative dividends in preference to any dividend on the
common stock at the rate of 10% per annum on the initial investment amount
commencing on the date of issue. The holders of the Series B are entitled
to receive contractual cumulative dividends in preference to any dividend on the
common stock (but subject to the rights of the Series A and
Series A-1) at the rate of 6% per annum on the initial investment amount
commencing on the date of issue. Such dividends are payable on January 1,
April 1, July 1 and October 1 of each year. Dividends accrued but unpaid on
September 30, 2010 are $44 for Series A, $35 for Series A-1 and $74
for Series B, respectively.
  The
Series A, A-1 and B Preferred Stock also contains a right of redemption in
the event of liquidation or a change in control. The redemption feature provides
for payment of 125% of the face value plus any accrued unpaid dividends in the
event of bankruptcy, change of control, or any actions to take the Company
private. The amount of the redemption preference is $93, $432 and $967 for the
Series A, A-1, and B preferred, respectively, as of September 30,
2010.
  The
Company applies the classification and measurement principles enumerated in ASC
815 with respect to accounting for its issuances of the Series A, A-1, and
B preferred stock. The Company is required, under Nevada law, to obtain the
approval of its Board of Directors in order to effectuate a merger,
consolidation or similar event resulting in a more than 50% change in control or
a sale of all or substantially all of its assets.
  We
evaluate convertible preferred stock at each reporting date for appropriate
balance sheet classification.
  Preferred Stock Conversions
to Common Stock
  For the
years ended September 30, 2010 and 2009, respectively 1,993 and
2,635 shares of Series A and 462 and 159 shares of Series A-1 were
converted into 3,286,372 and 3,724,854 of common stock.
  The
Series A and A-1 are convertible into common stock at any time, at the
option of the holder at a conversion price of $.75 per share. The conversion
price is subject to adjustment for stock splits, stock dividends,
recapitalizations, dilutive issuances and other anti-dilution provisions,
including circumstances in which we, at our discretion, issue equity securities
or convertible instruments that feature prices lower than the conversion price
specified in the Series A Preferred shares. The Series A and A-1 are
also automatically convertible into shares of our common stock, at the then
applicable conversion price.
  Page
40





As
described in Note 3, we evaluated the conversion options embedded in the Series
A and A-1securities to determine (in accordance ASC 815) whether they should be
bifurcated from their host instruments and accounted for as separate derivative
financial instruments. We determined the risks and rewards of the common shares
underlying the conversion feature are clearly and closely related to those of
the host instrument. Accordingly the conversion features are being accounted for
as embedded conversion options.




We follow
the guidelines of ASC 505 Dividends and Stock Splits when accounting for
pay-in-kind (“PIK”) dividends that are settled in convertible securities with
beneficial conversion features.  Therefore, we recorded $82 and $191
as deemed dividends for the years ended September 30, 2010 and 2009,
respectively, related to the conversion feature based on the difference between
the effective conversion price of the conversion option and the fair value of
the common stock on the PIK election dates.




As
described in Note 3, we apply the classification and measurement principles
enumerated in ASC 815 with respect to accounting for our issuances of the Series
A and A-1 preferred stock. We are required, under Nevada law, to obtain the
approval of our board of directors in order to effectuate a merger,
consolidation or similar event resulting in a more than 50% change in control or
a sale of all or substantially all of our assets. The board of directors is then
required to submit proposals to enter into these types of transactions to our
stockholders for their approval by majority vote. The preferred stockholders do
not currently (i) control or have representation on our Board of Directors
and/or (ii) have sufficient voting rights to control redemption of these shares
by either of these events. In addition the effectuation of any transaction or
series of transactions resulting in a more than 50% change in control can be
made only by us in our sole discretion. Based on these provisions, we classified
the Series A preferred shares as permanent equity in the accompanying
consolidated balance sheet because the liquidation events are deemed to be
within our sole control.





We
evaluate the Series A and A-1 convertible preferred stock at each reporting date
for appropriate balance sheet classification.





Series B
Preferred Stock Placement





On July
14, 2008, we issued 400 shares of Series B Preferred Stock and 200,000 (“Series
B Offering Warrants”) five year common stock purchase warrants exercisable at
$1.20 per share in a Private Placement transaction for proceeds of $400 from one
of our directors. The Series B Preferred Stock is convertible into common stock
at any time, at the option of the holder at a conversion price of $.80 per
share. The Series B Preferred Stock is also automatically convertible into
shares of our common stock, at the then applicable conversion
price.





On
January 7, 2009, we entered into a note payable with a principal amount of $200
payable on or before December 31, 2009, bearing interest at 12% per annum with
one of our directors. The director concurrently authorized us to issue 300
shares of preferred stock in exchange for this note and an additional $100 note
issued prior to December 31, 2009. We completed our administrative issuance of
the Series B Preferred Stock on February 16, 2009, at which time we and the
director agreed that we shall be permitted, but not required to redeem these
shares at a 1% per month premium beginning 30 days from the date of their
issuance at our discretion





The
Series B Offering Warrants have a five year exercise period and an exercise
price of $1.20 per share of the Company’s common stock, payable in cash on the
exercise date. The exercise price is subject to adjustment upon certain
occurrences specified in the Series B Offering Warrants. The shares of Series B
Preferred Stock have terms similar to those of the shares of Series A and A-1
Preferred Stock, but are junior to those shares with respect to dividend rights,
liquidation preferences and registration rights.  The Company has used
the proceeds of the closing to pay certain expenses and for working
capital.





As
described in Note 3, we evaluated the conversion options embedded in the Series
B securities to determine (in accordance with ASC 815) whether they should be
bifurcated from their host instruments and accounted for as separate derivative
financial instruments. We determined the risks and rewards of the common shares
underlying the conversion feature are clearly and closely related to those of
the host instrument. Accordingly the conversion features are being accounted for
as embedded conversion options.




We follow
the guidelines of ASC 505 Dividends and Stock Splits when accounting for
pay-in-kind (“PIK”) dividends that are settled in convertible securities with
beneficial conversion features.  Therefore, we recorded $17 and $10 as
deemed dividends for the years ended September 30, 2010 and 2009, respectively,
related to the conversion feature based on the difference between the effective
conversion price of the conversion option and the fair value of the common stock
on the PIK election dates.





At our
option, we can redeem the Series B Preferred Stock, and any dividends issued
there under, for a 1% origination fee and 1% interest per month on the
outstanding face value of the Series B preferred stock. As of September 30,
2010, we have not redeemed any Series B Preferred Stock.


Page
41


As
described in Note 3, we apply the classification and measurement principles
enumerated in ASC 815 with respect to accounting for our issuances of the Series
B preferred stock. We are required, under Nevada law, to obtain the approval of
our board of directors in order to effectuate a merger, consolidation or similar
event resulting in a more than 50% change in control or a sale of all or
substantially all of our assets. The board of directors is then required to
submit proposals to enter into these types of transactions to our stockholders
for their approval by majority vote. The preferred stockholders do not currently
(i) control or have representation on our Board of Directors and/or (ii) have
sufficient voting rights to control redemption of these shares by either of
these events. In addition the effectuation of any transaction or series of
transactions resulting in a more than 50% change in control can be made only by
us in our sole discretion. Based on these provisions, we classified the Series B
preferred shares as permanent equity in the accompanying consolidated balance
sheet because the liquidation events are deemed to be within our sole
control.





We
evaluate the Series B convertible preferred stock at each reporting date for
appropriate balance sheet classification.





Preferred Stock
Dividends





We follow
the guidelines of ASC 505 Dividends and Stock Splits when accounting for
pay-in-kind dividends that are settled in convertible securities with beneficial
conversion features. Therefore, we recorded deemed dividend related to the
conversion feature based on the difference between the effective conversion
price of the conversion option and the fair value of the common stock on the
date of election which is considered the commitment date. The following table
contains information related to the contractual dividends issued pursuant to our
preferred stock:





Fair Value of
                                                  
                                                  
                                                  DividendDate of
                                                  
                                                  Contractual
                                                  
                                                  
                                                  Conversion
                                                  
                                                  
                                                  Common
                                                  
                                                  
                                                  Closing
                                                  
                                                  
                                                  Fair Value
                                                  
                                                  
                                                  Contractual
                                                  
                                                  
                                                  Related toPreferred
                                                  
                                                  Date of
                                                  
                                                  Election
                                                  
                                                  Preferred
                                                  
                                                  
                                                  Price Per
                                                  
                                                  
                                                  Shares
                                                  
                                                  
                                                  Price on
                                                  
                                                  
                                                  of Underlying
                                                  
                                                  
                                                  Preferred
                                                  
                                                  
                                                  BeneficialStock
                                                  
                                                  Contractual
                                                  
                                                  (Commitment
                                                  
                                                  Stock
                                                  
                                                  
                                                  Common
                                                  
                                                  
                                                  Underlying
                                                  
                                                  
                                                  Date of
                                                  
                                                  
                                                  Common
                                                  
                                                  
                                                  Stock
                                                  
                                                  
                                                  ConversionSeries
                                                  
                                                  Dividend
                                                  
                                                  Date)
                                                  
                                                  Dividend
                                                  
                                                  
                                                  Share
                                                  
                                                  
                                                  Dividend
                                                  
                                                  
                                                  Election
                                                  
                                                  
                                                  Stock
                                                  
                                                  
                                                  Dividend
                                                  
                                                  
                                                  FeatureA
                                                  
                                                  10/1/2008
                                                  
                                                  10/7/2008
                                                  
                                                  $
                                                  100
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  133
                                                  
                                                  
                                                  $
                                                  1.24
                                                  
                                                  
                                                  $
                                                  165
                                                  
                                                  
                                                  $
                                                  100
                                                  
                                                  
                                                  $
                                                  65A
                                                  
                                                  1/1/2009
                                                  
                                                  1/9/2009
                                                  
                                                  $
                                                  100
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  133
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  $
                                                  106
                                                  
                                                  
                                                  $
                                                  100
                                                  
                                                  
                                                  $
                                                  7A
                                                  
                                                  4/1/2009
                                                  
                                                  2/17/2009
                                                  
                                                  $
                                                  126
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  168
                                                  
                                                  
                                                  $
                                                  0.55
                                                  
                                                  
                                                  $
                                                  92
                                                  
                                                  
                                                  $
                                                  126
                                                  
                                                  
                                                  $
                                                  -A
                                                  
                                                  7/1/2009
                                                  
                                                  6/5/2009
                                                  
                                                  $
                                                  104
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  139
                                                  
                                                  
                                                  $
                                                  1.37
                                                  
                                                  
                                                  $
                                                  190
                                                  
                                                  
                                                  $
                                                  104
                                                  
                                                  
                                                  $
                                                  86A-1
                                                  
                                                  10/1/2008
                                                  
                                                  10/7/2008
                                                  
                                                  $
                                                  20
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  27
                                                  
                                                  
                                                  $
                                                  1.24
                                                  
                                                  
                                                  $
                                                  33
                                                  
                                                  
                                                  $
                                                  20
                                                  
                                                  
                                                  $
                                                  13A-1
                                                  
                                                  1/1/2009
                                                  
                                                  1/9/2009
                                                  
                                                  $
                                                  20
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  27
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  $
                                                  22
                                                  
                                                  
                                                  $
                                                  20
                                                  
                                                  
                                                  $
                                                  1A-1
                                                  
                                                  4/1/2009
                                                  
                                                  2/17/2009
                                                  
                                                  $
                                                  23
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  31
                                                  
                                                  
                                                  $
                                                  0.55
                                                  
                                                  
                                                  $
                                                  17
                                                  
                                                  
                                                  $
                                                  23
                                                  
                                                  
                                                  $
                                                  -A-1
                                                  
                                                  7/1/2009
                                                  
                                                  6/5/2009
                                                  
                                                  $
                                                  22
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  29
                                                  
                                                  
                                                  $
                                                  1.37
                                                  
                                                  
                                                  $
                                                  40
                                                  
                                                  
                                                  $
                                                  22
                                                  
                                                  
                                                  $
                                                  18B
                                                  
                                                  10/1/2008
                                                  
                                                  10/7/2008
                                                  
                                                  $
                                                  5
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  6
                                                  
                                                  
                                                  $
                                                  1.24
                                                  
                                                  
                                                  $
                                                  7
                                                  
                                                  
                                                  $
                                                  5
                                                  
                                                  
                                                  $
                                                  3B
                                                  
                                                  1/1/2009
                                                  
                                                  1/9/2009
                                                  
                                                  $
                                                  6
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  8
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  $
                                                  6
                                                  
                                                  
                                                  $
                                                  6
                                                  
                                                  
                                                  $
                                                  0B
                                                  
                                                  4/1/2009
                                                  
                                                  2/17/2009
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  14
                                                  
                                                  
                                                  $
                                                  0.55
                                                  
                                                  
                                                  $
                                                  8
                                                  
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  -B
                                                  
                                                  7/1/2009
                                                  
                                                  6/5/2009
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  14
                                                  
                                                  
                                                  $
                                                  1.37
                                                  
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  7Total
      For year end September 30, 2009
                                                  
                                                  $
                                                  548
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  729
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  705
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  200A
                                                  
                                                  10/1/2009
                                                  
                                                  9/9/2009
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  25
                                                  
                                                  
                                                  $
                                                  1.00
                                                  
                                                  
                                                  $
                                                  66
                                                  
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  17A
                                                  
                                                  1/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  50
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  67
                                                  
                                                  
                                                  $
                                                  1.07
                                                  
                                                  
                                                  $
                                                  71
                                                  
                                                  
                                                  $
                                                  50
                                                  
                                                  
                                                  $
                                                  32A
                                                  
                                                  4/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  7
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  9
                                                  
                                                  
                                                  $
                                                  1.38
                                                  
                                                  
                                                  $
                                                  15
                                                  
                                                  
                                                  $
                                                  7
                                                  
                                                  
                                                  $
                                                  7A
                                                  
                                                  7/1/2010
                                                  
                                                  6/3/2010
                                                  
                                                  $
                                                  1
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  $
                                                  1.03
                                                  
                                                  
                                                  $
                                                  1
                                                  
                                                  
                                                  $
                                                  1
                                                  
                                                  
                                                  $
                                                  -A-1
                                                  
                                                  10/1/2009
                                                  
                                                  9/9/2009
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  25
                                                  
                                                  
                                                  $
                                                  1.00
                                                  
                                                  
                                                  $
                                                  25
                                                  
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  6A-1
                                                  
                                                  1/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  25
                                                  
                                                  
                                                  $
                                                  1.07
                                                  
                                                  
                                                  $
                                                  27
                                                  
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  9A-1
                                                  
                                                  4/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  13
                                                  
                                                  
                                                  $
                                                  1.38
                                                  
                                                  
                                                  $
                                                  19
                                                  
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  9A-1
                                                  
                                                  7/1/2010
                                                  
                                                  6/3/2010
                                                  
                                                  $
                                                  8
                                                  
                                                  
                                                  $
                                                  0.75
                                                  
                                                  
                                                  
                                                  11
                                                  
                                                  
                                                  $
                                                  1.03
                                                  
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  8
                                                  
                                                  
                                                  $
                                                  3B
                                                  
                                                  10/1/2009
                                                  
                                                  9/9/2009
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  14
                                                  
                                                  
                                                  $
                                                  1.00
                                                  
                                                  
                                                  $
                                                  13
                                                  
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  3B
                                                  
                                                  1/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  14
                                                  
                                                  
                                                  $
                                                  1.07
                                                  
                                                  
                                                  $
                                                  14
                                                  
                                                  
                                                  $
                                                  11
                                                  
                                                  
                                                  $
                                                  3B
                                                  
                                                  4/1/2010
                                                  
                                                  2/4/2010
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  13
                                                  
                                                  
                                                  $
                                                  1.38
                                                  
                                                  
                                                  $
                                                  18
                                                  
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  7B
                                                  
                                                  7/1/2010
                                                  
                                                  6/3/2010
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  0.80
                                                  
                                                  
                                                  
                                                  13
                                                  
                                                  
                                                  $
                                                  1.03
                                                  
                                                  
                                                  $
                                                  13
                                                  
                                                  
                                                  $
                                                  10
                                                  
                                                  
                                                  $
                                                  3Total
      For year end September 30, 2010
                                                  
                                                  $
                                                  175
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  230
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  292
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  99





Restricted Stock
Grant




Prior to
adoption of the 2008 Incentive Plan, on December 5, 2007, we issued 782,250
shares of restricted common stock with an aggregate fair value of $667 to our
then president in exchange for $156. We account for share-based compensation
under ASC 718 “Compensation — Stock Compensation,” which requires us to
expense the fair value of grants made under the share based compensation
programs over the vesting period of each individual agreement. We recognize
non-cash share-based compensation expense ratably over the requisite service
period which generally equals the vesting period of awards, adjusted for
expected forfeitures. Immediately upon the sale, 150,000 shares vested with the
remaining shares vesting in quantities of 210,750 shares on each of December 20,
2008, 2009 and 2010. As of May 2010 upon the president’s termination of
employment, the remaining non-vested shares immediately vested and the expense
recognized.  We recognized $221 and $179 of share-based compensation
expense during the years ended September 30, 2010 and 2009, respectively, in
connection with this grant.


Page
42


Sales of Common Stock and
Warrants





On
November 12, 2008, we engaged the Placement Agent in a private placement (the
“November Common Offering”) of up to 3,750,000 Common Units for an aggregate
purchase price of $3,000, with each Common Unit comprised of (i) one share of
Common Stock, and (ii) a five year warrant to purchase one-half share of $ .80
per unit Common Stock (each, an “Common Offering Warrant “). For the year ended
September 30, 2009 an anti-dilution provision of the stock offering resulted in
a requirement to issue an additional 285,139 shares of common stock at par value
$0.001 or $285.





On June
10, 2009 Beacon commenced a Private Placement of up to $600 of common units at a
price of $.80 per unit. Each Unit consists of (i) one share of Common Stock, and
(ii) a five year warrant to purchase one-half share of Common Stock (each, an
“Common Offering Warrant”) at a purchase price of $1.00 per share (collectively
the “Common Offering”).





On
September 18, 2009 Beacon commenced a Private Placement of up to $3,000 of
common units at a price of $.80 per unit. Each Unit consists of (i) one share of
Common Stock, and (ii) a five year warrant to purchase one-half share of Common
Stock (each, an “Common Offering Warrant”) at a purchase price of $1.00 per
share (collectively the “Common Offering”).




The
Common Offering Warrants issued to agents and investors in this transaction each
have a five year exercise period and an exercise price of $1.00 per share of
Common Stock, payable in cash on the exercise date or cashless conversion if a
registration statement or current prospectus covering the resale of the shares
underlying the Common Offering Warrants is not effective or available at any
time more than six months after the date of issuance of the Common Offering
Warrants. The warrants feature standard anti-dilution provisions for stock
splits, stock dividends and similar types of recapitalization events. These
warrants also featured weighted average price protection for subsequent
issuances of equity securities at prices more favorable than the exercise price
stipulated in these warrants.  The anti-dilution provision was
rescinded on March 31, 2010, for additional information see the Derivative
Financial Instruments disclosure below.  In addition, the Company has
agreed to use its best efforts to file a registration statement for the resale
of any shares issued and shares underlying common stock purchase warrants issued
in these private placements.




These
registration rights do not provide for the Company to incur any penalties for
its failure to file, cause or maintain the effectiveness of such registration
statements; however, the Company is subject to a penalty in the amount of 2% of
the gross proceeds per month in the event it fails to maintain compliance with
the Exchange Act reporting requirements. The Company believes it is probable
that it will not incur any such penalties.





During
the year ended September 30, 2009, we sold an aggregate of 6,853,497 Common
Units, under all of these offerings, to accredited investors for net proceeds of
$4,347 (gross proceeds of $5,485 less offering costs of $1,138). Offering costs
included fees paid to the placement agent of $859, a fee for the successful
completion of the placement of $157 paid to a consultant and $122 legal and
related fees in addition to warrants to purchase 3,422,103 shares of our common
stock at $1.00 per share with a 5 year term. We used the proceeds of the Common
Offering to provide working capital.





During
the year ended September 30, 2009 549,918 warrants were exercised into 196,145
shares of common stock.




During
the year ended September 30, 2010, we sold 3,795,295 Common Units to accredited
investors for net proceeds of $2,398 (gross proceeds of $2,982, less offering
costs of $584). We issued to certain agents who represented us in sales of the
units, warrants to purchase 448,500 shares of our common stock.




Cashless Warrant
Conversions




For the
year ended September 30, 2010 holders of 1,566,065 Common Stock Warrants elected
to exercise the cashless conversion options thereby redeeming 441,153 shares,
including 423,336 shares issued upon the exercise of 1,481,965 warrants as
described below.




Derivative Financial
Instruments




In
December 2008, the FASB issued ASC 815-40 “Contracts in Entity’s own Equity”.
This issue addresses the determination of whether an instrument (or an embedded
feature) is indexed to an entity’s own stock. This issue is effective for
financial statements issued for fiscal years beginning after December 15, 2008
and interim periods within those fiscal years. Under this guidance, instruments
which do not have fixed settlement provisions are deemed to be derivative
instruments.


Page
43




As such,
we were required to (i) reclassify certain common stock purchase warrants we
issued in financing transaction completed prior to October 1, 2009 from
stockholders equity to liabilities at fair value as of October 1, 2009, (ii)
record all new issuances of derivatives that do not have fixed settlement
provisions as liabilities and (iii) mark to market all such derivatives to fair
value through March 30, 2010, which immediately precedes the date on which the
removal of anti-dilution provisions in our derivative financial instruments
became effective.




Effective
October 1, 2009, the Company reclassified the fair value of all common stock
purchase warrants issued prior to October 1, 2009 from equity to liabilities at
their aggregate fair value of $4,628. We recorded a corresponding charge to the
accumulated deficit to recognize the cumulative effects of having adopted this
accounting policy. We calculated the adoption date fair values for these
derivatives using the Black-Scholes option pricing model with the following
weighted average assumptions:





October 12009Expected
      Life
                            
                            
                            3.72Risk-free
      interest rate
                            
                            
                            2.20
                            %Dividend
      Yield
                            
                            
                            0
                            %Volatility
                            
                            
                            66.34
                            %Warrants
      issued with private placements
                            
                            
                            9,979,577Fair
      value of warrants
                            
                            $
                            4,628




We also
performed a classification assessment of the common stock warrants issued to
investors and agents in the common units offering described above on their
respective dates of issuance. We determined that the common stock purchase
warrants, as originally issued, did not contain fixed settlement provisions
because the strike price was subject to adjustment in the event we subsequently
issued equity securities or equity linked securities with exercise prices lower
than the exercise price of these warrants. Accordingly, we allocated $1,094 of
the offering proceeds to the fair value of the warrants on their respective
dates of issuance and recorded them as liabilities in our Consolidated Balance
Sheet through the date on which the removal of anti-dilution provisions in our
derivative financial instruments became effective. We calculated the issuance
date fair values of these derivatives using the Black-Scholes option pricing
model with the following weighted average assumptions:





Expected
      Life
                        
                        
                        5Risk-free
      interest rate
                        
                        
                        2.69
                        %Dividend
      Yield
                        
                        
                        0
                        %Volatility
                        
                        
                        66.34
                        %Weighted
      average unit fair value
                        
                        $
                        0.47Warrants
      issued
                        
                        
                        2,312,250Fair
      Value
                        
                        $
                        1,094




On March
8, 2010, the Company announced an offer to the holders of its warrants that
contain anti-dilution protection providing them with the option of (i)
exercising their warrants for cash at discount of $0.10 off the contractual
exercise price, (ii) exercising their warrants pursuant to a cashless exercise
provision at the contractual exercise price (which results in a net share
settlement), or (iii) consent to the elimination of the anti-dilution protection
clause that caused the warrants not to be indexed to the Company’s own stock. As
of March 31, 2010, a required majority of warrant holders consented to the
removal of anti-dilutions provisions which resulted in the elimination of such
anti-dilution provisions.




On March
30, 2010, immediately prior to the completion of our offer to the warrant
holders, we marked all remaining derivative financial instruments to fair value,
including the warrants exercised for cash at a discount of $0.10 off the
contractual exercise price. The aggregate fair value of all such warrants
amounted to $10,095. We calculated the fair values of these derivatives using
the Black-Scholes option pricing model (which management determined is not
materially different from a binomial valuation model), with the
following weighted average assumptions:


Page
44





March 30,2010Expected
      Life
                  
                  
                  3.88Risk-free
      interest rate
                  
                  
                  2.55
                  %Dividend
      Yield
                  
                  
                  0
                  %Volatility
                  
                  
                  65.40
                  %Warrants
      issued with private placements (including 3,375,375 with a discounted
      exercise price of $0.10 per share)
                  
                  
                  12,291,827Fair
      value of warrants
                  
                  $
                  10,095




On March
31, 2010, we reclassified the warrant liability on our balance sheet to
stockholders’ equity. The change in the fair value of the warrants
reclassified to liabilities on October 1, 2009, and additional warrants issued
between October 1, 2009 and March 30, 2010 amounted to approximately $4,373 and
is reflected as the change in fair value of warrants in the accompanying
Consolidated Statement of Operations for the year ended September 30,
2010.




As of
September 30, 2010, pursuant to this offer, the Company issued 4,738,966 shares
of common stock.  Those warrant holders who elected to exercise these
instruments for cash at a $0.10 discount from the contractual exercise price.
Net proceeds from these exercises amounted $3,664 (gross proceeds of $4,369 less
costs of $705).  The Company also issued 423,336 net shares of common
stock to warrant holders electing to exercise 1,481,965 warrants pursuant to the
cashless exercise alternative.




Issuance of non-employee
compensatory options




During
the fiscal year ended September 30, 2010, in consideration for services, we have
granted options to purchase 250,000 shares of Common Stock vesting ratably over
a 36 month period.  We calculated the fair value of the options using
the Black-Scholes option pricing model with the following assumptions: Stock
price — $.54, Volatility — 66.34%, Risk —free interest rate — 2.09%, Expected
life — 120 months and Dividend yield — 0.00%, resulting in a fair value
determination of $188, to be recognized over a 36 month period. For the year
ended September 30, 2010 we recognized share based compensation of $34 related
to these options.





NOTE 14 —
            INCOME
      TAXES




We
compute the tax provision or benefit related to items we report separately and
recognize the items net of their related tax effect in the interim periods in
which they occur. We also recognize the effect of changes in enacted tax laws or
rates in the interim periods in which the changes occur.




In
computing the annual estimated effective tax rate we make certain estimates and
judgments, such as estimated annual taxable income or loss, the nature and
timing of permanent and temporary differences between taxable income for
financial reporting and tax reporting, and the recoverability of deferred tax
assets. Our estimates and assumptions may change as new events occur, additional
information is obtained, or as the tax environment changes.





Page
45




The
income tax (provision) benefits consist of the following:





2010
                                    
                                    
                                    2009Federal:Current
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Deferred
                                    
                                    
                                    1,780
                                    
                                    
                                    
                                    2,217Total
      federal
                                    
                                    
                                    1,780
                                    
                                    
                                    
                                    2,217State:Current
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Deferred
                                    
                                    
                                    204
                                    
                                    
                                    
                                    254Total
      state
                                    
                                    
                                    204
                                    
                                    
                                    
                                    254Foreign:Current
                                    
                                    
                                    (18
                                    )
                                    
                                    
                                    -Deferred
                                    
                                    
                                    171
                                    
                                    
                                    
                                    -153
                                    
                                    
                                    
                                    -2,137
                                    
                                    
                                    
                                    2,471Change
      in valuation allowance
                                    
                                    
                                    (2,200
                                    )
                                    
                                    
                                    (2,529
                                    )Total
      provision
                                    
                                    $
                                    (63
                                    )
                                    
                                    $
                                    (58
                                    )





A
reconciliation of the statutory federal income tax rate to our effective tax
rate follows:





For the
                  
                  
                  For theyear ended
                  
                  
                  year endedSeptember 30,
                  
                  
                  September 30,2010
                  
                  
                  2009Tax
      benefit at statutory rate
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %State
      income taxes, net of federal benefit
                  
                  
                  3.9
                  
                  
                  
                  3.9Foreign
      income taxes
                  
                  
                  (0.1
                  )
                  
                  
                  0Non-deductible
      meals & entertainment
                  
                  
                  (17.1
                  )
                  
                  
                  (0.5
                  )Increase
      in valuation allowance
                  
                  
                  (21.3
                  )
                  
                  
                  (38.2
                  )Effective
      income tax rate
                  
                  
                  (0.6
                  )%
                  
                  
                  (0.8
                  )%




Page
46




The
components of deferred tax assets and liabilities are as follows:




As of
                  
                  
                  As ofSeptember 30,
                  
                  
                  September 30,2010
                  
                  
                  2009Deferred
      tax assetsCapitalized
      start up and organization costs
                  
                  $
                  41
                  
                  
                  $
                  43Other
      intangibles amortization
                  
                  
                  176
                  
                  
                  
                  135Accrued
      expenses
                  
                  
                  67
                  
                  
                  
                  80Bad
      debt reserve
                  
                  
                  99
                  
                  
                  
                  59Inventory
      obsolescence reserve
                  
                  
                  57
                  
                  
                  
                  67Share
      based payments
                  
                  
                  824
                  
                  
                  
                  401Net
      operating loss carryforwards
                  
                  
                  5,723
                  
                  
                  
                  4,002Total
      deferred tax assets
                  
                  
                  6,987
                  
                  
                  
                  4,787Less
      valuation allowance
                  
                  
                  (6,987
                  )
                  
                  
                  (4,787
                  )Net
      deferred tax assets
                  
                  
                  -
                  
                  
                  
                  -Deferred
      tax liabilitiesIntangible
      assets
                  
                  
                  (153
                  )
                  
                  
                  (103
                  )Total
      deferred tax liabilities
                  
                  
                  (153
                  )
                  
                  
                  (103
                  )Total
      net deferred tax liability
                  
                  $
                  (153
                  )
                  
                  $
                  (103
                  )





As of
September 30, 2010, we have $14,659 of federal and state net operating loss
carryforwards available to offset future taxable income, if any. These
carryforwards expire in 2023 through 2030.  As of September 30, 2010,
we have $683 of foreign net operating loss carryforwards available to offset
future taxable income, which relates to our operations in Ireland. These losses
may be carried forward indefinitely. Furthermore, as of September 30, 2010, we
have $8,181 of foreign net operating loss carryforwards with respect to our
Switzerland operations that were discontinued during the fiscal year ended
September 30, 2010. This carryforward expires in 2017.





After
considering all available evidence, we established a 100% valuation allowance
for our net deferred tax asset since it is more likely than not that the
benefits of such deferred tax assets will not be realized in future periods.
Deferred tax liabilities represent the difference between the financial
reporting and income tax bases of tax deductible goodwill, which is an asset
with an indefinite life and therefore cannot be used to offset net deferred tax
assets for purposes of establishing a valuation allowance.





We
periodically evaluate whether or not we have undergone any ownership changes for
income tax purposes that could trigger annual limitations on the use of our net
operating losses under section 382 of the Internal Revenue Code and similar
state income tax regulations. As of September 30, 2010 we had not triggered any
significant limitations on the use of our Net Operating Losses.  We
adopted ASC 740 “Income Taxes” effective June 6, 2007 (date of inception). ASC
740 requires companies to recognize the impact of a tax position in their
financial statements if that position is more likely than not of not being
sustained on audit based on the technical merits of the position. ASC 740
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. ASC 740 provides guidance on de-recognition,
classification, interest, and penalties, accounting in interim periods, and
disclosure. The company is subject to audits by federal and state income tax
authorities for reporting periods ending in 2008, 2009, and 2010 and by foreign
tax authorities for 2009 and 2010.  For the years ended September 30,
2009 and 2010, we had no material unrecognized tax positions. Significant tax
jurisdictions that we file income tax returns in include the Commonwealth of
Kentucky and the State of Ohio. We record penalties and interest if it is more
likely than not that a tax position will not be sustained on audit based on the
technical merits of the position. We record penalties in selling, general and
administrative expenses and interest as interest expense when such expenses are
incurred.




Page
47





NOTE 15 —
            EMPLOYEE
      BENEFIT PLANS





Stock
Options and Other Equity Compensation Plans





In March
2008, our Board of Directors adopted the 2008 Long Term Incentive Plan, subject
to stockholder approval, referred to as the 2008 Incentive Plan. The 2008
Incentive Plan was approved by the stockholders on April 16, 2009. We
reserved 1,000,000 shares of our common stock under the 2008 Incentive Plan
and for other compensatory equity grants for the issuance of stock options,
restricted stock awards, stock appreciation rights and performance awards,
pursuant to which certain options will be granted. The terms and conditions of
such awards are determined at the sole discretion of our board of directors or a
committee designated by the Board to administer the plan. Previously unissued
shares of our common stock are provided to a participant upon a participant’s
exercise of vested options.





A summary
of stock options that we granted during the years ended September 30, 2010 and
2009, respectively, is as follows:





Expected
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Risk-Free
                    
                    
                    ValueDate
                    
                    Quantity
                    
                    
                    Life
                    
                    
                    Strike
                    
                    
                    
                    
                    
                    Dividend
                    
                    
                    Interest
                    
                    
                    Per
                    
                    
                    Share
      BasedEarned
                    
                    Issued
                    
                    
                    (days)
                    
                    
                    Price
                    
                    
                    Volatility
                    
                    
                    Yield
                    
                    
                    Rate
                    
                    
                    Option
                    
                    
                    Compensation10/7/2008
                    
                    
                    25,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.24
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    2.45
                    %
                    
                    $
                    0.79
                    
                    
                    $
                    201/9/2009
                    
                    
                    285,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    0.80
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    1.99
                    %
                    
                    $
                    0.50
                    
                    
                    $
                    1435/8/2009
                    
                    
                    2,500,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.19
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    2.09
                    %
                    
                    $
                    0.75
                    
                    
                    $
                    1,8756/5/2009
                    
                    
                    50,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.37
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    2.85
                    %
                    
                    $
                    0.87
                    
                    
                    $
                    447/9/2009
                    
                    
                    250,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.61
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    2.33
                    %
                    
                    $
                    1.02
                    
                    
                    $
                    25411/12/2009
                    
                    
                    100,000
                    
                    
                    
                    3,650
                    
                    
                    $
                    0.90
                    
                    
                    
                    66.34
                    %
                    
                    
                    0
                    %
                    
                    
                    2.28
                    %
                    
                    $
                    0.30
                    
                    
                    $
                    301/22/2010
                    
                    
                    60,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.07
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    2.23
                    %
                    
                    $
                    0.67
                    
                    
                    $
                    402/5/2010
                    
                    
                    200,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.07
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    2.65
                    %
                    
                    $
                    0.67
                    
                    
                    $
                    1343/8/2010
                    
                    
                    25,000
                    
                    
                    
                    2,373
                    
                    
                    $
                    1.38
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    2.36
                    %
                    
                    $
                    0.86
                    
                    
                    $
                    225/27/2010
                    
                    
                    450,000
                    
                    
                    
                    2,628
                    
                    
                    $
                    1.40
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    2.18
                    %
                    
                    $
                    0.91
                    
                    
                    $
                    4106/1/2010
                    
                    
                    400,000
                    
                    
                    
                    2,738
                    
                    
                    $
                    1.36
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    2.09
                    %
                    
                    $
                    0.90
                    
                    
                    $
                    3606/6/2010
                    
                    
                    100,000
                    
                    
                    
                    2,008
                    
                    
                    $
                    1.60
                    
                    
                    
                    65.40
                    %
                    
                    
                    0
                    %
                    
                    
                    1.95
                    %
                    
                    $
                    0.75
                    
                    
                    $
                    75





Shares
granted vest 33% annually as of the anniversary of the grant through 2012 and
carry a ten year contractual term.





We
calculate the fair value of stock options using the Black-Scholes option-pricing
model. The option-pricing model requires the input of subjective assumptions,
such as those included in the table above. The volatility rates are based on
historical stock prices of similarly situated companies and expectations of the
future volatility of our common stock. The expected life of options granted is
based upon the average of the vesting and contractual term. The risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of
grant. The total expense to be recorded in future periods will depend on several
variables, including the number of share-based awards.





The
weighted average grant date fair value of options we granted during the years
ended September 30, 2010 and 2009 amounted to $0.81 and $0.75 per share
respectively.




We
recognized non-cash share-based employee compensation expenses as
follows:




For the
                  
                  
                  For theyear ended
                  
                  
                  year endedSeptember 30,
                  
                  
                  September 30,2010
                  
                  
                  2009Non-Cash
      Share-Based Compensation ExpenseRestricted
      Stock
                  
                  $
                  221
                  
                  
                  $
                  179Stock
      Options
                  
                  
                  861
                  
                  
                  
                  379Total
      Stock Compensation Expense
                  
                  $
                  1,082
                  
                  
                  $
                  558


Page
48


A summary
of the status of our stock option plan and the changes during the years ended
September 30, 2010 and 2009,
respectively, is presented in the table below:





WeightedAverageWeighted
                    
                    
                    Remaining
                    
                    
                    AggregateNumber
                    
                    
                    Average
                    
                    
                    Contractual
                    
                    
                    IntrinsicOf Options
                    
                    
                    Exercise Price
                    
                    
                    Life
                    
                    
                    ValueOptions
      Outstanding at October 1, 2008
                    
                    
                    90,900
                    
                    
                    $
                    1.13Granted
                    
                    
                    3,110,000
                    
                    
                    $
                    1.19Forfeited
                    
                    
                    -
                    
                    
                    $
                    -Options
      Outstanding at October 1, 2009
                    
                    
                    3,200,900
                    
                    
                    $
                    1.19Granted
                    
                    
                    1,335,000
                    
                    
                    $
                    1.31Forfeited
                    
                    
                    (817,367
                    )
                    
                    $
                    (1.03
                    )Options
      Outstanding at September 30, 2010
                    
                    
                    3,718,533
                    
                    
                    $
                    1.47
                    
                    
                    
                    4.05
                    
                    
                    $
                    0Options
      Exercisable, September 30, 2010
                    
                    
                    1,293,465
                    
                    
                    $
                    1.18
                    
                    
                    
                    8.52
                    
                    
                    $
                    0





of
September 30, 2010, there was $1,674 in unamortized share-based compensation
cost. This cost is expected to be recognized over the remaining weighted average
vesting period of 2 years.





NOTE
      16 —
            Segment
      Reporting




In
accordance with ASC 280 “Segment Reporting,” our operating segments are those
components of our business for which separate and discrete financial information
is available and is used by our chief operating decision makers, or
decision-making group, in making decisions on how we allocate resources and
assess performance.




In
accordance with ASC 280, the Company reports two operating segments, as a result
of having completed the Symbiotec acquisition on July 29, 2009 and opening the
BESG Ireland Ltd. office. Prior to the Symbiotec Solutions AG acquisition, we
operated as a single segment.  The Company’s chief decision-makers
review financial information presented on a consolidated basis, accompanied by
disaggregated information about net sales and operating profit each year by
operating segment. This information is used for purposes of allocating resources
and evaluating financial performance.




The
accounting policies of the segments are the same as those described in the
“Summary of Significant Accounting Policies.” Segment data includes segment net
sales, segment operating profitability, and total assets by segment. Shared
corporate operating expenses are reported in the United States (“U.S.”)
segment.




The
Company is organized primarily on the basis of operating units which are
segregated by geography in the U.S. and Europe.  For the year ended
September 30, 2010 our segment results, net of Discontinued Operations (see Note
4 for more details) are as follows:





UnitedStates
                  
                  
                  Europe
                  
                  
                  TotalNet
      sales
                  
                  $
                  10,273
                  
                  
                  $
                  3,723
                  
                  
                  $
                  13,996Loss
      from operations
                  
                  
                  (5,021
                  )
                  
                  
                  (658
                  )
                  
                  
                  (5,679
                  )Other
      expense
                  
                  
                  (244
                  )
                  
                  
                  (15
                  )
                  
                  
                  (259
                  )Change
      if fair value of warrants
                  
                  
                  (4,373
                  )
                  
                  
                  -
                  
                  
                  
                  (4,373
                  )Depreciation
      and amortization
                  
                  
                  (551
                  )
                  
                  
                  (73
                  )
                  
                  
                  (624
                  )Net
      loss from continuing operations
                  
                  
                  (9,687
                  )
                  
                  
                  (687
                  )
                  
                  
                  (10,374
                  )Net
      loss from discontinued operations
                  
                  
                  -
                  
                  
                  
                  (8,181
                  )
                  
                  
                  (8,181
                  )Assets
                  
                  
                  9,374
                  
                  
                  
                  2,697
                  
                  
                  
                  12,071Capital
      expenditures
                  
                  
                  223
                  
                  
                  
                  119
                  
                  
                  
                  342Capital
      expenditures of discontinued operations
                  
                  
                  -
                  
                  
                  
                  183
                  
                  
                  
                  183Goodwill
                  
                  
                  2,792
                  
                  
                  
                  -
                  
                  
                  
                  2,792Intangible
      Assets
                  
                  
                  3,011
                  
                  
                  
                  -
                  
                  
                  
                  3,011


Page
49




In our
European operations 96% of the net sales were generated by one customer for the
year ended September 30, 2010.





NOTE 17 —
            SUBSEQUENT
      EVENTS




On
November 23, 2010, we initiated a private placement (the “Placement”) of up to
$3,000 of 12 month Senior Secured Notes (“Notes”) with warrants to purchase 100
shares of Beacon’s common stock at $1.00 per share for every $1 in principal
invested.  The Notes bear interest at 9% APR.  The Placement
will be made on a "best efforts" basis with a Minimum of $600 and a Maximum of
$3,000.  Net proceeds will be used to repay and replace an existing
Senior Secured Bank Note totaling approximately $300 and for additional working
capital.  The Placement will expire on the sooner of (a) January 31,
2011 if the Minimum has not been met or (b) the date that the Maximum has been
raised.  This funding is in addition to the $4,000 unsecured director
credit facility announced in August of 2010, of which $15 is currently utilized.
The Notes have not been and will not be registered under the 1933 Act and may
not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.




On
December 14, 2010 Datacenter Contractors AG (“DC”, formerly known as “Beacon
Solutions AG”), a wholly owned subsidiary of BESG Ireland, Ltd., announced that,
as a result of DC’s inability to reach a settlement of unpaid invoices by its
largest debtor, the DC Board has authorized the filing of the relevant statutory
notices with the local judge in Switzerland in accordance with its fiduciary
obligations under Swiss law. DC's operations were discontinued in
the financial statements during the quarter ended June 30,
2010.  Based on DC’s previously recorded
financial results, we anticipate this action will have no additional material
financial impact on the parent company, Beacon Enterprise Solutions Group,
Inc.




Management
has evaluated all subsequent events or transactions occurring through December
16, 2010, the date of the financial statements were available to be
issued.


Page
50





Item 9.  Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure





None.





Item 9A. Controls and
Procedures





Evaluation
of Disclosure Controls and Procedures





The
Company’s management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) that is designed to ensure that information required to
be disclosed by the Company in the reports that the Company files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer’s management, including its principal executive
officer or officers and principal financial officer or officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.





In
accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was
completed under the supervision and with the participation of the Company’s
management, including the Company’s Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures as of the end of the period covered
by this annual report. Based on that evaluation, the Company’s management
including the Principal Executive Officer and Principal Financial Officer,
concluded that the Company’s disclosure controls and procedures were not
effective in providing reasonable assurance that information required to be
disclosed in the Company’s reports filed or submitted under the Exchange Act was
recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms.





Evaluation
of Internal Controls and Procedures





Our
management is also responsible for establishing and maintaining adequate
internal control over financial reporting.  The Company’s internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.





Our
internal control over financial reporting 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
      Company;





•
            Provide reasonable assurance that
      transactions are recorded as necessary to permit preparation of financial
      statements in accordance with generally accepted accounting principles,
      and that our receipts and expenditures are being made only in accordance
      with authorizations of the Company’s management and directors;
      and





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





As of
September 30, 2010, we carried out an assessment of the effectiveness of our
internal control over financial reporting based on the framework in “Internal
Control-Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation, our
management concluded that our internal control over financial reporting was not
effective as of September 30, 2010.





As
of September 30, 2010, we had identified certain matters that constituted
material weaknesses in our internal controls over financial reporting, specific
material weaknesses include the fact that we have limited segregation of duties
and have experienced difficulty in applying complex accounting principles
including those relating to income taxes, complex warrant derivative issues
and business combinations.  During the year ended September 30,
2010, we have taken certain steps in an effort to correct these material
weaknesses, including hiring of a Chief Financial Officer and Corporate
Controller, both of which have significant experience with publicly held
companies.  The addition of the Corporate Controller has allowed us to
implement more complete segregation of duties while also dedicating a resource
solely to financial and SEC reporting.


Page
51


Although
we believe that these steps have enabled us to improve our internal controls,
additional time is still required to fully document our systems, implement
control procedures and test their operating effectiveness before we can
definitively conclude that we have remediated our deficiencies.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to the exemption provided to issuers that are
neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer
Protection Act.




Changes
in Internal Control Over Financial Reporting





Except as
discussed above, there were no changes in our internal controls over financial
reporting during our last fiscal quarter that materially affect or are
reasonably likely to materially affect our internal control over financial
reporting.





Item 9B.Other
Information





None.


Page
52




Item 10.Directors,
Executive Officers, and Corporate Governance





Directors and Officers of
Beacon Enterprise Solutions Group, Inc.





Information
concerning each of our directors and executive officers as of September 30,
2010, is as follows:





Name
                    
                    Age
                    
                    TitleBruce
      Widener
                    
                    49
                    
                    Director,
      Chairman, Chief Executive OfficerJ.
      Sherman Henderson III
                    
                    67
                    
                    DirectorJohn
      D. Rhodes III
                    
                    56
                    
                    DirectorGerald
      Bowman
                    
                    52
                    
                    Chief
      Operating OfficerMichael
      Grendi
                    
                    44
                    
                    Chief
      Financial Officer, Treasurer and SecretaryVictor
      Agruso
                    
                    50
                    
                    Chief
      Human Resource OfficerMark
      Gervasoni
                    
                    51
                    
                    Chief
      Marketing and Sales
Officer





Bruce Widener, Director, Chairman
and Chief Executive Officer.  Mr. Widener possesses over 19
years of industry experience. Prior to developing and forming Beacon, Mr.
Widener served as Chief Operating Officer of US Wireless Online, a provider of
wireless internet access and related applications during 2006. From 2004 to 2006
Mr. Widener served as Senior Vice President of Corporate Development of UniDial
Communications / Lightyear Network Solutions. Mr. Widener was an independent
contractor with PTEK in 2002 and became Senior Vice President of Indirect
Channel Sales in 2003 through 2004.





J. Sherman “Sherm” Henderson III,
Director.  Mr. Henderson has more than 35 years of business
experience, including company ownership, sales, marketing and management. He has
served as president and CEO of Lightyear Network Solutions, LLC since its
inception in 2003. Lightyear Network Solutions, LLC is the successor to
Lightyear Communications, Inc. following its reorganization in April 2004 under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Henderson served as President and
CEO of Lightyear Communications, Inc. since its formation in 1993. In 2004, he
was voted chairman of COMPTEL, the leading communications trade association,
made up of more than 300 member companies. Mr. Henderson is a graduate of
Florida State University, with a B.A. degree in Business
Administration.





John D. Rhodes, III, M.D.,
Director.  Dr. Rhodes practiced as a physician and has been
Board Certified in Internal Medicine and Cardiovascular Diseases serving as
Chief Fellow in Cardiology at the University of Louisville School of Medicine
from 1984-1985 and was elected a Fellow of the American College of Cardiology.
Dr. Rhodes retired from his private practice in 2005. In his retirement, Dr.
Rhodes has been an active investor in the telecom, restaurant and real estate
industries. Dr. Rhodes was a founding investor in Texas Roadhouse and served as
a member of its advisory board until its initial public offering in
2004.





Gerald Bowman, Chief Operating
Officer.  On November 18, 2009, the Company appointed Gerald
Bowman to the officer position of Senior Vice President of Global Services and
subsequently promoted him to the position of Chief Operating Officer on April
20, 2010. Mr. Bowman brings over 20 years of experience in the IT industry
serving in roles which included: Managing Director/Vice President of Enterprise
Global Services for CommScope, a $4 billion manufacturer of connectivity
solutions for communications networks; Chief Operating Officer for Superior
Systems Technologies; Vice President of Engineering at Riser Management Systems,
and Vice President and General Manager at VARtek.




Michael Grendi, Chief Financial
Officer, Treasurer and Secretary. On February 17, 2010, the Company
appointed Michael Grendi to the officer position of Chief Financial Officer,
Treasurer and Secretary. Mr. Grendi brings over 20 years of experience with
publicly traded companies in the fields of finance and
accounting.  His prior roles have included: Chief Financial Officer of
the Americas Division for Travelex, a UK based global technology company
specializing in foreign exchange, Head of Domestic Corporate Finance Group for
Yum! Brands, which operates and licenses such well known chains as Taco Bell,
Pizza Hut and KFC; Head of North American M&A and Private Placement Group at
ABN AMRO and Vice President of the Corporate Finance Group at Societe
Generale.


Page
53




Victor Agruso, Chief Human Resource
Officer.  On April 15, 2010, the company appointed Victor
Agruso to the officer position of Chief Human Resource Officer.  Mr.
Agruso brings over 20 years of corporate leadership and international experience
in strategic planning, organization development, talent management and related
information technologies in a variety of public and private sector industries,
in both union and non-union environments, and with organizations ranging in size
from emerging growth to Fortune 100 companies.  Victor started his
career providing retained executive search services to venture capital funded
start-ups in Boston’s high-tech community.  He then held increasingly
responsible HR executive positions with Nike, Hallmark Cards, Humana and
Maritz.  Most recently, he has defined and implemented wide-ranging HR
capabilities as an advisor to marquee companies seeking to accelerate profitable
growth strategies, including Beacon since 2008.




Mark Gervasoni, Chief Marketing and
Sales Officer.  On June 2, 2010, the company appointed Mark
Gervasoni to the officer position of Chief Marketing and Sales
Officer.  Mr. Gervasoni brings 15 of years of experience in
infrastructure sales, training, and management in both the Fortune 1000 and
government markets.  As a CommScope Sales Director he managed the
accounts of such diverse clients as Capital One, The U.S. House of
Representatives, Carilion Health System, University of Virginia and DLA Piper
Rudnick.  Most recently he served as President of New Media
Development Corporation, a media and marketing firm specializing in the creation
and implementation of leading edge sales and marketing programs and collateral
for technology firms such as Multilink, SMP (now OCC), and Gridlogix (now
Johnson Controls).





Messrs.
Widener and Henderson were elected as Directors based on their extensive
industry experience while Mr. Rhodes has a unique blend of public company and
telecom private investor experience to provide a fresh perspective to the
Board.  We have chosen to combine the CEO and Board Chair positions
primarily due to the size of the organization and to fully utilize the vast
industry experience of Mr. Widener.  We seek to establish a diverse
Board and have accomplished this through a Board comprised of varying levels of
experience, both within and outside the industry, and a mix of public and
private company exposure.





Audit
Committee





Our board
of directors has an Audit Committee, the purpose of which is to review and
evaluate the results and scope of the audit and other services provided by our
independent registered public accounting firm, as well as our accounting
principles and system of internal accounting controls, and to review and approve
any transactions between us and our directors, officers or significant
shareholders. In fulfilling its responsibility, the Audit Committee
pre-approves, subject to stockholder ratification, the selection of our
independent registered public accounting firm. The Audit Committee also reviews
our consolidated financial statements and the adequacy of our internal controls
particularly given our risk environment. The Audit Committee meets at least
quarterly with our management and our independent registered public accounting
firm to review and discuss the results of audits or reviews of our consolidated
financial statements, the evaluation of our internal controls and risk
mitigation, and the overall quality of our financial reporting and our critical
accounting policies. The Audit Committee meets separately, at least quarterly,
with the independent registered public accounting firm. In addition, the Audit
Committee oversees our existing procedures for the receipt, retention and
handling of complaints related to auditing, accounting and internal control
issues, including the confidential, anonymous submission by employees of
concerns on questionable accounting and auditing matters. The board of directors
has determined the Audit Committee to be comprised of John D. Rhodes III and J.
Sherman Henderson III. As of the date of filing, J. Sherman Henderson III is
independent in accordance with Nasdaq Marketplace Rules and regulations
established by the Securities and Exchange Commission, or SEC Regulations,
governing audit committee member independence.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the
directors, executive officers, and persons who own more than 10 percent of a
registered class of a company’s equity securities to file with the SEC initial
reports of ownership (Form 3) and reports of changes in ownership (Forms 4 and
5) of such securities. Such officers, directors, and greater than 10 percent
shareholders of a company are required by SEC Regulations to furnish us with
copies of all such Section 16(a) reports that they file.





To our
knowledge, with the exception of the following, based solely on our review of
the copies of such reports furnished to us during the year ended September 30,
2010, all Section 16(a) filing requirements applicable to our executive
officers, directors and greater than 10 percent beneficial owners were met. Due
to miscommunication, although all disclosures were appropriately reflected
within Current Reports on Form 8-K and Quarterly Reports on Form 10-Q,
submission of Forms 4 for Victor Agruso, Gerald Bowman, and Michael Grendi
regarding issued stock options, will be filed prior to
December 31, 2010.  Additionally submission of a Form 4 for J.
Sherman Henderson III for warrant conversions will be filed prior to
December 31, 2010.  Disclosure controls have been implemented to
mitigate future errors in miscommunication.





Code
of Ethics





Pursuant
to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of
Ethics for all employees including the Chief Executive Officer and Principal
Financial Officer. The Code of Ethics is posted on our website,
www.askbeacon.com (under the caption Investor Relations/Management). We intend
to satisfy the disclosure requirement regarding any amendment to, or waiver of,
a provision of the Code of Ethics for the Chief Executive Officer and Principal
Financial Officer by posting such information on our website. We undertake to
provide to any person a copy of this Code of Ethics upon request to our
Corporate Secretary at our principal executive offices.


Page
54




Item 11.Executive
Compensation





COMPENSATION
DISCUSSION AND ANALYSIS





In this
section, we will give an overview and analysis of our compensation program and
policies, the material compensation decisions we have made under those programs
and policies, and the material factors that we considered in making those
decisions. Later in this Part III under the heading “Additional Information
Regarding Executive Compensation,” you will find tables containing specific
information about the compensation earned by, and equity awards granted to, the
following individuals, whom we refer to as our “named executive
officers”:


·
            Bruce
      Widener, Chairman, Chief Executive Officer and
  Director


·
            Gerald
      Bowman, Chief Operating Officer


·
            Michael
      Grendi, Chief Financial Officer, Treasurer and
  Secretary


·
            Victor
      Agruso, Chief Human Resource
Officer


·
            Mark
      Gervasoni, Chief Marketing and Sales
Officer





The
discussion below is intended to help you understand the detailed information
provided in those tables and put that information into context within our
overall compensation program.





Overview
of Compensation Philosophy





The goal
of our compensation program for our named executive officers is the same as our
goal for operating Beacon — to create long-term value for our stockholders.
Toward this goal, we have designed and implemented our compensation programs for
our named executive officers to reward them for sustained financial and
operating performance and leadership excellence, to align their interests with
those of our stockholders and to encourage them to remain with us for long and
productive careers. Most of our compensation elements simultaneously fulfill one
or more of our performance, alignment and retention objectives, as described
below. These elements consist of salary, annual bonus and share-based incentive
compensation. In deciding on the type and amount of compensation for each named
executive, we focus on both current pay and the opportunity for future
compensation. We combine the compensation elements for each named executive in a
manner we believe optimizes the executive’s contribution to us.





Overview
of Compensation Objectives





Performance.





The
amount of compensation for each named executive officer reflects his superior
management experience, continued high performance and exceptional career of
service to us. Key elements of compensation that depend upon the named executive
officer’s performance include:





•
            Base
      salary, which provides fixed compensation based on competitive market
      practice and in accordance with the terms of the executive’s employment
      agreement.





•
            Bonus,
      which is discretionary and payable in cash or equity incentives based on
      an assessment of each executives’ performance against pre-determined
      quantitative and qualitative measures within the context of our overall
      performance.





•
            Equity
      incentive compensation in the form of stock options and/or restricted
      stock subject to vesting schedules that require continued service with
      us.





•
            Other
      benefits.


Page
55


Base
salary and bonus are designed to reward annual achievements and be commensurate
with the executive’s scope of responsibilities, demonstrated leadership
abilities, and management experience and effectiveness. Share-based compensation
is focused on motivating and challenging the executive to achieve superior,
longer-term, sustained results.





Alignment.





We seek
to align the interests of our named executive officers with those of our
stockholders, and provide them with an opportunity to acquire a proprietary
interest in us, by evaluating executive performance on the basis of key
financial measurements, which we believe closely correlate to long-term
stockholder value, including net sales, operating profit and cash flow from
operating activities. Key elements of compensation that align the interests of
the named executives with stockholders include equity incentive compensation,
which links a significant portion of compensation to stockholder value because
the total value of those awards corresponds to stock price appreciation that
correlates strongly with meeting company performance goals.





Retention.





Due to
extensive management experience, our senior executives are on occasion presented
with other professional opportunities, including ones at potentially higher
compensation levels. We attempt to retain our executives by using continued
service as a determinant of total pay opportunity. Key elements of compensation
that require continued service to receive any, or maximum, payout include the
vesting terms in our equity-based compensation programs, including stock option
and restricted stock awards.





Implementing
Our Objectives





Determining
Appropriate Pay Levels.





We
compete with many other companies for experienced and talented executives. As
such, market information regarding pay practices at peer companies (as provided
in the public reports filed by such companies with the SEC) is reviewed and
considered in assessing the reasonableness of compensation and ensuring that
compensation levels remain competitive in the marketplace.





We rely
upon our subjective judgment in making compensation decisions, after reviewing
our performance and carefully evaluating an executive’s performance during the
year against established goals, leadership qualities, operational performance,
business responsibilities, and such individual’s career with us, current
compensation arrangements and long-term potential to enhance stockholder value.
Specific factors affecting compensation decisions for our named executive
officers include:





•
            Key
      financial measurements such as net sales, operating profit and cash flow
      from operating activities.





•
            Strategic
      objectives such as acquisitions, dispositions or joint
      ventures.





•
            Promoting
      commercial excellence by launching new or continuously improving services,
      and attracting and retaining
customers.





•
            Achieving
      specific operational goals for us including improved productivity,
      simplification and risk management.





•
            Achieving
      excellence in their organizational structure and among their
      employees.





We
generally do not adhere to rigid formulas or necessarily react to short-term
changes in business performance in determining the amount and mix of
compensation elements. Although we consider competitive market compensation paid
by other companies, we do not attempt to maintain a certain target percentile
within a peer group or otherwise rely on those data to determine executive
compensation. We incorporate flexibility into our compensation programs and in
the assessment process to respond to and adjust for the evolving business
environment.





Allocation
of Compensation.





There is
no pre-established policy or target for the allocation of compensation, other
than the employment agreements as previously referenced. We strive to achieve an
appropriate mix between equity incentive awards and cash payments in order to
meet our objectives. Any apportionment goal is not applied rigidly and does not
control our compensation decisions; we use it as another tool to assess an
executive’s total pay opportunities and whether we have provided the appropriate
incentives to accomplish our compensation objectives. Our mix of compensation
elements is designed to reward recent results and motivate long-term performance
through a combination of cash and equity incentive awards. We believe the most
important indicator of whether our compensation objectives are being met is our
ability to motivate our named executive officers to deliver superior performance
and retain them on a cost-effective basis.


Page
56


Timing
of Compensation.





As
discussed elsewhere, compensation (including salary base adjustments, stock
options and restrictive stock awards, incentive plan eligibility, incentive plan
goal specifications and incentive plan payments, for our named executive
officers) are typically reviewed annually.





Minimum
Stock Ownership Requirements.





We do not
have any minimum stock ownership guidelines. All of our named executive
officers, however, currently beneficially own either one, or a combination, of
shares of common stock, shares of our restricted stock, or stock options to
purchase our common stock.





Role
of Compensation Committee.





The
Compensation Committee of our Board has primary responsibility for assisting the
Board in developing and evaluating potential candidates for executive positions,
including the CEO, and for overseeing the development of executive succession
plans. As part of this responsibility, the Compensation Committee oversees the
design, development and implementation of the compensation program for the CEO
and the other named executive officers. The Compensation Committee evaluates the
performance of the CEO and determines CEO compensation in light of the goals and
objectives of the compensation program.





Role
of Executive Officers in Determining Compensation.





The CEO
and the Compensation Committee together assess the performance of the other
named executives and determine their compensation, based on initial
recommendations from the CEO. Our CEO assists the Compensation Committee in
reaching compensation decisions with respect to the named executives other than
the CEO. The other named executives do not play a role in their own compensation
determination, other than discussing individual performance objectives with the
CEO. Our CEO is not involved with any aspect of determining his own
compensation. The Compensation Committee makes all compensation decisions for
our CEO. Although our CEO assists the Compensation Committee in reaching
compensation decisions with respect to the other named executive officers, the
Compensation Committee has final discretionary authority to approve compensation
of all named executive officers, including our CEO.





Role
of Compensation Consultant.





The
Compensation Committee engaged a compensation consultant to assist in fiscal
year 2009 and 2010 compensation consideration. In the future, the Compensation
Committee will rely on input from the Chief Human Resource Officer, who was
hired during the fiscal year ended September 30, 2010.





Equity
Grant Practices.





The
exercise price of each stock option awarded to our named executive officers, as
non-qualified stock options or under our long-term incentive plan, is equal to
the closing price of our stock on the date of grant. The Compensation Committee
has no pre-set schedule as to when, or if, such grants shall occur.





Annual
Compensation Objectives





Base
Salary.





Base
salaries for our named executive officers depend on the scope of their
responsibilities, their performance, and the period over which they have
performed those responsibilities. Decisions regarding salary increases take into
account the executive’s current salary and the amounts paid to the executive’s
peers within and outside Beacon. Base salaries are reviewed periodically, but
are not automatically increased if the Compensation Committee believes that
other elements of compensation are more appropriate in light of our stated
objectives. This strategy is consistent with our primary intent of offering
compensation that is contingent on the achievement of performance
objectives.





Beacon
entered into employment agreements with five of its key executives with no
specific expiration dates that provide for aggregate annual compensation of $840
and up to $1,320 of severance payments for termination without cause. We discuss
the terms and conditions of these agreements elsewhere in this Part III under
“Additional Information Regarding Executive Compensation — Employment
Agreements.”


Page
57


Bonus.





Each
September, the CEO reviews with the Compensation Committee our estimated
full-year financial results against the financial, strategic and operational
goals established for the year, and our financial performance in prior periods.
Based on that review, the Compensation Committee determines on a preliminary
basis whether each named executive officer has achieved the objectives upon
which the bonus is evaluated. After reviewing the final full-year results, the
Compensation Committee approves total bonuses to be awarded. Bonuses will be
approved subject to the results of our year-end financial audit and paid shortly
thereafter.





The
Compensation Committee, with input from the CEO with respect to the other named
executive officers, uses discretion in determining the current year’s bonus for
each named executive officer. It evaluates our overall performance, the
performance of the business unit or function that the named executive officer
leads and conducts an assessment of each executive officer’s performance against
expectations, which is reviewed at the end of the year. The bonuses also reflect
(and are proportionate to) the consistently increasing and sustained annual
financial results of Beacon. We believe that the annual bonus rewards the
executives who drive these results and incentivizes them to sustain this
performance.





Whether
or not a bonus is in fact earned by an executive is based on both an objective
analysis (predetermined operating profit targets based on budgeted operating net
sales) and a subjective analysis (based on the individual’s contribution to us
or the business unit), The financial objective for each named executive officer
for fiscal year 2010 and 2009 are discussed below. In making the subjective
determinations, the Compensation Committee does not base its determination on
any single performance factor nor does it assign relative weights to factors,
but considers a mix of factors, including evaluations of superiors, and
evaluates an individual’s performance against such mix in absolute terms in
relation to our other executives.





The
salaries paid and the annual bonuses awarded to the named executive officers for
fiscal years 2010 and 2009 are discussed below and disclosed in the Summary
Compensation Table.





Equity
Awards





Our
equity incentive compensation program is designed to recognize scope of
responsibilities, reward demonstrated performance and leadership, motivate
future superior performance, align the interests of the executive with our
stockholders and retain the executives through the vesting period established
for the awards. All of our officers and key employees (including our named
executive officers) and our directors are eligible for grants of stock options
and other stock-based awards (including restricted stock). We consider the grant
size and the appropriate combination of stock options, common stock and
restricted stock when making award decisions. Equity incentive compensation
granted for fiscal 2010 and 2009 is discussed below and disclosed in the Summary
Compensation Table. Existing ownership levels are not a factor in award
determination, as we do not want to discourage executives from holding our
stock.





We have
expensed stock option grants. When determining the appropriate combination of
stock options and restricted stock, our goal is to weigh the cost of these
grants with their potential benefits as a compensation tool. We believe that
providing combined grants of stock options and restricted stock effectively
balances our objective of focusing the named executive officers on delivering
long-term value to our stockholders, with our objective of providing value to
the executives with the equity awards. Stock options only have value to the
extent the price of our stock on the date of exercise exceeds the exercise price
on the grant date, and thus are an effective compensation element only if the
stock price grows over the term of the award. In this sense, stock options are a
motivational tool. Unlike stock options, restricted stock offers executives the
opportunity to receive shares of our stock on the date the restricted stock
vests. In this regard, restricted stock serves both to reward and retain
executives, as the value of the restricted stock is linked to the price of our
stock on the date the restricted stock vests.





401(k)
Plan





We have a
401(k) Savings Plan qualified under Section 401(k) of the Internal Revenue Code,
as amended, which is available to all our employees on date of hire. Employees
may contribute their salary, up to the statutory level, to the plan through
voluntary salary deferred payments. We matched 100% of the first 1% and 50% of
the next 5% of each employee’s contribution up to 6% of the employee’s salary
until November 9, 2008 at which time the Board of Directors voted to revise the
matching contribution to a performance based, profit sharing match.





Other
Compensation.





We
provide our named executive officers with medical, dental and vision insurance
coverage that is consistent with those provided to our other employees. In
addition, we provide certain perquisites, which are described in the Summary
Compensation Table, to our named executive officers, as a component of their
total compensation.





Compensation for Named Executive
Officers in Fiscal 2010 and 2009.  The specific compensation
decisions made for each of the named executive officers for the years ended
September 30, 2010 and 2009 reflect our performance against key financial
and operational measurements. A more detailed analysis of our financial and
operational performance is contained in the Management’s Discussion &
Analysis contained elsewhere in this Annual Report on Form 10-K. Net sales
and earnings before interest, taxes, depreciation and amortization (EBITDA) for
the years ended September 30, 2010 and 2009 fell below expectations.
However, we achieved significant increases in business as we launched our
Infrastructure Management Services and international operations in Fiscal 2010
and 2009.


Page
58


CEO Compensation. In
determining Mr. Widener’s compensation for the years ended
September 30, 2010 and 2009, the Compensation Committee considered his
performance against financial, strategic and operational goals for this year as
follows:





Financial
Objectives




Net sales
and EBITDA fell short of our projections for the years ended September 30,
2010 and 2009.





Strategic
and Operational Goals





Retain
      Excellent Team
              
              Mr. Widener
      continued to attract and retain a strong management team with expertise at
      all levels of the organization.Launched
      Foreign Operations
              
              Mr. Widener
      successfully launched foreign operations through the acquisition of
      Symbiotec Solution AG.





Mr. Widener’s
salary for the years ended September 30, 2010 and 2009 was $281 and $235
which unpaid retro-pay of $32 related to an increase received during the year,
respectively.





Other Named Executive Officers’
Compensation. In determining the compensation of
Messrs. Bowman, Grendi, Agruso, Gervasoni, Mills and Mohr for the years
ended September 30, 2010 and 2009, the Compensation Committee compared
their achievements against the performance objectives established for each of
them at the beginning of the year and discussed with each individual at the
beginning of the year by the CEO. The Compensation Committee evaluated our
overall performance and the contributions of each of the other named executive
officers to that performance, as well as the performance of the departments that
each individual leads when relevant. Each of the other named executive officers
has an employment agreement which defines their base salaries. Based on our
shortfall from our planned net sales and EBITDA, the base salaries remained the
same as in Fiscal 2009 for Fiscal 2010 but were evaluated based on achieving
specific goals for the fiscal year 2010.





COMPENSATION
COMMITTEE REPORT





The
Compensation Committee of the Board of Directors has reviewed and discussed with
management the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K. Based on the review and discussion referred to above, the
Compensation Committee recommended to the Board that the Compensation Discussion
and Analysis be included in this Annual Report on Form 10-K.


The
Compensation Committee





J.
Sherman Henderson III


John D.
Rhodes III


Page
59





ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION





The
following table sets forth a summary of the compensation of our named executive
officers for the year ended September 30, 2010.





Summary
Compensation Table





Change
      inPensionValue
      andNonquali-Non-
                                                                          
                                                                          fiedEquity
                                                                          
                                                                          Deferred
                                                                          
                                                                          AllName
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          Incentive
                                                                          
                                                                          Compen-
                                                                          
                                                                          Otherand
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          Stock
                                                                          
                                                                          
                                                                          Option
                                                                          
                                                                          
                                                                          Plan
                                                                          
                                                                          sation
                                                                          
                                                                          Compen-Principal
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          Bonus ($)
                                                                          
                                                                          
                                                                          Awards ($)
                                                                          
                                                                          
                                                                          Awards ($)
                                                                          
                                                                          
                                                                          Compensation
                                                                          
                                                                          Earnings
                                                                          
                                                                          sation
                                                                          
                                                                          
                                                                          TotalPosition
                                                                          
                                                                          Year
                                                                          
                                                                          Salary($)
                                                                          
                                                                          
                                                                          (1)
                                                                          
                                                                          
                                                                          (2)
                                                                          
                                                                          
                                                                          (3)
                                                                          
                                                                          
                                                                          ($)
                                                                          
                                                                          ($)
                                                                          
                                                                          ($)
                                                                          
                                                                          
                                                                          ($)(A)
                                                                          
                                                                          (B)
                                                                          
                                                                          (C)
                                                                          
                                                                          
                                                                          (D)
                                                                          
                                                                          
                                                                          (E)
                                                                          
                                                                          
                                                                          (F)
                                                                          
                                                                          
                                                                          (G)
                                                                          
                                                                          (H)
                                                                          
                                                                          (I)
                                                                          
                                                                          
                                                                          (J)Bruce
      Widener
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          281
                                                                          (4)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          255
                                                                          (5)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          12
                                                                          (6)
                                                                          
                                                                          
                                                                          548Chairman,
      Chief Executive
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          203
                                                                          (7)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          105
                                                                          (8)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          13
                                                                          (9)
                                                                          
                                                                          
                                                                          321Gerald
      BowmanChief
      Operating Officer
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          160
                                                                          (10)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          67
                                                                          (11)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          12
                                                                          (12)
                                                                          
                                                                          
                                                                          239Senior
      Vice President of
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          6
                                                                          (13)
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          6Global
      ServicesMichael
      Grendi
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          105
                                                                          (14)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          39
                                                                          (15)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          5
                                                                          (16)
                                                                          
                                                                          
                                                                          149Chief
      Financial Officer
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Treasurer
      and SecretaryVictor
      Agruso
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          31
                                                                          (17)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          35
                                                                          (18)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          6
                                                                          (19)
                                                                          
                                                                          
                                                                          72Chief
      Human Resource Officer
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Mark
      Gervasoni
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          43
                                                                          (20)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          18
                                                                          (21)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          61Chief
      Marketing and Sales Officer
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Richard
      C. Mills
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          105
                                                                          (22)
                                                                          
                                                                          
                                                                          40
                                                                          (23)
                                                                          
                                                                          
                                                                          221
                                                                          (24)
                                                                          
                                                                          
                                                                          244
                                                                          (25)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          6
                                                                          (26)
                                                                          
                                                                          
                                                                          616Former
      President
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          156
                                                                          (27)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          179
                                                                          (28)
                                                                          
                                                                          
                                                                          105
                                                                          (29)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          13
                                                                          (30)
                                                                          
                                                                          
                                                                          453Robert
      Mohr
                                                                          
                                                                          2010
                                                                          
                                                                          
                                                                          159
                                                                          (31)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          63
                                                                          (32)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          12
                                                                          (33)
                                                                          
                                                                          
                                                                          234Former
      Chief Accounting Officer,
                                                                          
                                                                          2009
                                                                          
                                                                          
                                                                          150
                                                                          (34)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          64
                                                                          (35)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          4
                                                                          (36)
                                                                          
                                                                          
                                                                          218Treasurer
      and Secretary







1.
            For
      purposes of this Summary Compensation Table, the cash incentive awards to
      the named executive officers, which are discussed in further detail under
      the heading “Compensation Discussion and Analysis — Compensation for
      Named Executive Officers for Fiscal Year 2010 have been characterized as
      “Non-Equity Incentive Plan Compensation” under column
  (G).





2.
            The
      amounts in Column (E) represent the proportionate amount of the total
      fair value of restricted stock recognized by us as an expense in fiscal
      years 2010 and 2009 for financial accounting purposes, disregarding for
      this purpose the estimate of forfeitures related to service-based vesting
      conditions. The fair values of these awards and the amounts expensed in
      fiscal years2010 and 2009 were determined in accordance with ASC 718. The
      awards for which expense is shown in column (E) include awards
      described in the Grants of Plan-Based Awards table included elsewhere in
      this section. The assumptions used in determining the grant date fair
      values of these awards are set forth in Note 16 to our consolidated
      financial statements included elsewhere in this annual report on
      Form 10-K.


Page
60


3.
            The
      amounts in column (F) represent the proportionate amount of the total
      fair value of stock options recognized by us as an expense in fiscal years
      2010 and 2009 for financial accounting purposes, disregarding for this
      purpose the estimate of forfeitures related to service-based vesting
      conditions. The fair value of these awards and the amounts expensed in
      fiscal years 2010 and 2009 were determined in accordance with ASC 718. The
      awards for which expense is shown in column (F) include the awards
      described in the Grants of Plan-Based Awards table included elsewhere in
      this section. The assumptions used in determining the grant date fair
      values of these awards are set forth in Note 16 to our consolidated
      financial statements included elsewhere in this annual report on
      Form 10-K.





4.
            Amount
      includes $240,000 annual salary under the terms of Mr. Widener’s
      employment agreement and amounts agreed upon with Board of Directors
      (“Board”) prior to execution of the employment
  agreement.





5.
            Amount
      relates to unrestricted stock option grant which is discussed in further
      detail in Note 16 to our consolidated financial statements included
      elsewhere in this annual report on Form 10-K.  See ‘Grants
      of Awards’ table for aggregate grant date fair value of options
      awarded.





6.
            Amount
      paid for medical, dental and vision
insurance.





7.
            Amount
      includes $240,000 annual salary under the terms of Mr. Widener’s
      employment agreement and amounts agreed upon with the Board prior to
      execution of the employment
agreement.





8.
            Amount
      relates to unrestricted stock option grant which is discussed in further
      detail in Note 16 to our consolidated financial statements included
      elsewhere in this annual report on Form 10-K. See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





9.
            Amount
      paid for medical, dental and vision
insurance.





10.
            Amount
      includes $180,000 annual salary under the terms of Mr. Bowman’s
      employment agreement and amounts agreed upon with the Board prior to
      execution of the employment
agreement.





11.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





12.
            Amount
      paid for medical, dental and vision
insurance.





13.
            Amount
      includes $150,000 annual salary under the terms of Mr. Bowman’s
      employment agreement and amounts agreed upon with the Board prior to
      execution of the employment agreement for partial year since execution of
      the agreement.





14.
            Amount
      includes $180,000 annual salary under the terms of Mr. Grendi’
      s employment agreement and amounts agreed upon with the Board prior
      to execution of the employment agreement for partial year since execution
      of the agreement.





15.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





16.
            Amount
      paid for medical, dental and vision
insurance.





17.
            Amount
      includes $90,000 annual salary under the terms of Mr. Agruso’s
      employment agreement and amounts agreed upon with the Board prior to
      execution of the employment agreement for partial year since execution of
      the agreement.


Page
61


18.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





19.
            Amount
      paid for medical, dental and vision
insurance.





20.
            Amount
      includes $150,000 annual salary under the terms of Mr. Gervasoni’ s
      employment agreement and amounts agreed upon with the Board prior to
      execution of the employment agreement for partial year since execution of
      the agreement.





21.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





22.
            Amount
      includes $150,000 annual salary under the terms of Mr. Mills’
      employment agreement and amounts agreed upon with Board prior to execution
      of the employment agreement for partial
year.





23.
            Amount
      represents a bonus paid during the
year.





24.
            Amount
      relates to restricted stock grant which is discussed in further detail in
      Note 14 to our consolidated financial statements included elsewhere in
      this annual report on
Form 10-K.





25.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





26.
            Amount
      paid for medical, dental and vision
insurance.





27.
            Amount
      includes $150,000 annual salary under the terms of Mr. Mill’s
      employment agreement for partial year since execution of the employment
      agreement.





28.
            Amount
      relates to restricted stock grant which is discussed in further detail in
      Note 14 to our consolidated financial statements included elsewhere in
      this annual report on
Form 10-K.





29.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





30.
            Amount
      paid for medical, dental and vision
insurance.





31.
            Amount
      includes $150,000 annual salary under the terms of Mr. Mohr’s
      employment agreement and amounts agreed upon with Board prior to execution
      of the employment agreement for partial
year.





32.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





33.
            Amount
      paid for medical, dental and vision
insurance.





34.
            Amount
      includes $150,000 annual salary under the terms of Mr. Mohr’s
      employment agreement and amounts agreed upon with Board prior to execution
      of the employment agreement.





35.
            Amount
      relates to unrestricted stock grant which is discussed in further detail
      in Note 16 to our consolidated financial statements included elsewhere in
      this annual report on Form 10-K.  See ‘Grants of Awards’
      table for aggregate grant date fair value of options
    awarded.





36.
            Amount
      paid for medical, dental and vision
insurance.


Page
62


Employment
Agreements





Beacon
has entered into employment agreement with each of Bruce Widener, Gerald Bowman,
Michael Grendi, Victor Agruso and Mark Gervasoni, each effective throughout the
year ended September 30, 2010. Each executive officer has agreed not to compete
with us within the United States during the term of his employment and for a
period of one year following his termination of employment, nor to solicit our
employees for a period of two years following the termination of his
employment.





Bruce
Widener, Chairman of the Board and Chief Executive Officer, was granted a base
salary of $240,000 per year, with a bonus potential of an additional $240,000
based on achievement of an increase in EBITDA of $5,000 for the fiscal year
ended September 30, 2010.  In addition, the agreement includes a
provision for three years severance pay for termination without cause, upon a
change in control or if the executive resigns for good reason, including 50% of
all unearned bonus opportunity for the remaining term of the agreement,
immediate vesting of all unearned options, outplacement services and office
expenses of up to $2,000 per month during the severance period.





Gerald
Bowman, Chief Operating Officer, was granted a base salary of $180,000 per year
with a bonus potential of an additional amount targeted at 50% of base salary
upon achievement of company and personal goals.  In addition, the
agreement includes a provision for 12 months’ severance pay for termination
without cause, upon a change in control or if the executive resigns for good
reason.  Additionally, the agreement provides for a grant of option to
purchase up to 400,000 shares of Beacon common stock.





Michael
Grendi, Chief Financial Officer, was granted a base salary of $180,000 per year
with a bonus potential of an additional amount targeted at 50% of base salary
upon achievement of company and personal goals.  In addition, the
agreement includes a provision for 12 months’ severance pay for termination
without cause, upon a change in control or if the executive resigns for good
reason.  Additionally, the agreement provides for a grant of option to
purchase up to 400,000 shares of Beacon common stock.





Victor
Agruso, Chief Human Resource Officer, was granted a base salary of $90,000 per
year with a bonus potential of an additional amount targeted at 50% of base
salary upon achievement of company and personal goals.  In addition,
the agreement includes a provision for 12 months’ severance pay for termination
without cause, upon a change in control or if the executive resigns for good
reason.  Additionally, the agreement provides for a grant of option to
purchase up to 100,000 shares of Beacon common stock.





Mark
Gervasoni, Chief Marketing and Sales Officer, was granted a base salary of
$150,000 per year with a bonus potential of an additional amount targeted at
100% of base salary upon achievement of company and personal
goals.  In addition, the agreement includes a provision for 12 months’
severance pay for termination without cause, upon a change in control or if the
executive resigns for good reason.  Additionally, the agreement
provides for a grant of option to purchase up to 400,000 shares of Beacon common
stock.


Page
63




Grants
of Awards




All OtherAll
                                                                                
                                                                                
                                                                                Option
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                GrantOther
                                                                                
                                                                                
                                                                                Awards:
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                DateStock
                                                                                
                                                                                
                                                                                Number
                                                                                
                                                                                
                                                                                Exercise
                                                                                
                                                                                
                                                                                FairAwards:
                                                                                
                                                                                
                                                                                of
                                                                                
                                                                                
                                                                                or Base
                                                                                
                                                                                
                                                                                Value
      ofEstimated Future Payouts
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                Number
                                                                                
                                                                                
                                                                                Securities
                                                                                
                                                                                
                                                                                Price of
                                                                                
                                                                                
                                                                                StockUnder Non-Equity Incentive
                                                                                
                                                                                Estimated Future Payouts Under
                                                                                
                                                                                
                                                                                of Shares
                                                                                
                                                                                
                                                                                Under-
                                                                                
                                                                                
                                                                                Option
                                                                                
                                                                                
                                                                                andPlanAwards
                                                                                
                                                                                Equity Incentive Plan Awards
                                                                                
                                                                                
                                                                                of Stock
                                                                                
                                                                                
                                                                                lying
                                                                                
                                                                                
                                                                                Awards
                                                                                
                                                                                
                                                                                OptionGrant
                                                                                
                                                                                Threshold
                                                                                
                                                                                Target
                                                                                
                                                                                Maximum
                                                                                
                                                                                Threshold
                                                                                
                                                                                
                                                                                Target
                                                                                
                                                                                
                                                                                Maximum
                                                                                
                                                                                
                                                                                Or Units (#)
                                                                                
                                                                                
                                                                                Options
                                                                                
                                                                                
                                                                                ($/Sh)
                                                                                
                                                                                
                                                                                Awards
      ($)Name
                                                                                
                                                                                Date
                                                                                
                                                                                ($)
                                                                                
                                                                                ($)
                                                                                
                                                                                ($)
                                                                                
                                                                                (#)
                                                                                
                                                                                
                                                                                (#)
                                                                                
                                                                                
                                                                                (#)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                (1)
                                                                                
                                                                                
                                                                                (2)
                                                                                
                                                                                
                                                                                (3)(A)
                                                                                
                                                                                (B)
                                                                                
                                                                                (C)
                                                                                
                                                                                (D)
                                                                                
                                                                                (E)
                                                                                
                                                                                (F)
                                                                                
                                                                                
                                                                                (G)
                                                                                
                                                                                
                                                                                (H)
                                                                                
                                                                                
                                                                                (I)
                                                                                
                                                                                
                                                                                (J)
                                                                                
                                                                                
                                                                                (K)
                                                                                
                                                                                
                                                                                (L)Bruce
      Widener
                                                                                
                                                                                5/8/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                1,000,000
                                                                                
                                                                                
                                                                                $
                                                                                1.19
                                                                                
                                                                                
                                                                                $
                                                                                750Gerald
      Bowman
                                                                                
                                                                                7/9/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                150,000
                                                                                
                                                                                
                                                                                $
                                                                                1.61
                                                                                
                                                                                
                                                                                $
                                                                                153Gerald
      Bowman
                                                                                
                                                                                5/27/2010
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                250,000
                                                                                
                                                                                
                                                                                $
                                                                                1.40
                                                                                
                                                                                
                                                                                $
                                                                                227Michael
      Grendi
                                                                                
                                                                                2/5/2010
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                200,000
                                                                                
                                                                                
                                                                                $
                                                                                1.07
                                                                                
                                                                                
                                                                                $
                                                                                134Michael
      Grendi
                                                                                
                                                                                5/27/2010
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                200,000
                                                                                
                                                                                
                                                                                $
                                                                                1.40
                                                                                
                                                                                
                                                                                $
                                                                                183Victor
      Agruso
                                                                                
                                                                                11/12/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                100,000
                                                                                
                                                                                
                                                                                $
                                                                                1.07
                                                                                
                                                                                
                                                                                $
                                                                                31Victor
      Agruso
                                                                                
                                                                                6/7/2010
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                100,000
                                                                                
                                                                                
                                                                                $
                                                                                1.60
                                                                                
                                                                                
                                                                                $
                                                                                75Mark
      Gervasoni
                                                                                
                                                                                6/1/2010
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                400,000
                                                                                
                                                                                
                                                                                $
                                                                                1.36
                                                                                
                                                                                
                                                                                $
                                                                                358Richard
      C. Mills
                                                                                
                                                                                12/20/2007
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                782,250
                                                                                (4)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                $
                                                                                664Richard
      C. Mills
                                                                                
                                                                                5/8/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                1,000,000
                                                                                
                                                                                
                                                                                $
                                                                                1.19
                                                                                
                                                                                
                                                                                $
                                                                                750Robert
      Mohr
                                                                                
                                                                                3/26/2008
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                60,000
                                                                                
                                                                                
                                                                                $
                                                                                1.20
                                                                                
                                                                                
                                                                                $
                                                                                43Robert
      Mohr
                                                                                
                                                                                1/9/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                75,000
                                                                                
                                                                                
                                                                                $
                                                                                0.80
                                                                                
                                                                                
                                                                                $
                                                                                38Robert
      Mohr
                                                                                
                                                                                5/8/2009
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                250,000
                                                                                
                                                                                
                                                                                $
                                                                                1.19
                                                                                
                                                                                
                                                                                $
                                                                                188





The table
above details options granted to company officers to purchase our commons stock,
the strike price and the fair value of the options, columns (1), (2) and (3)
respectively, on the date of grant under ASC 718.





Additionally
column (4) discusses the December 20, 2007, granted of 782,250 shares
of Beacon restricted stock to Mr. Mills, of which 150,000 shares vested
immediately and 632,250 shares vest in equal amounts annually on each of
December 21, 2008, 2009, and 2010. The full grant date fair value of this
restricted stock award under ASC 718 is $666,874





There
were no other equity or share-based awards granted during the years ended
September 30, 2010 and 2009 to the named executive officers.





Outstanding
Equity Awards at Fiscal Year-End





The
following table details the equity incentive awards outstanding as of September
30, 2010. For additional information about the option awards, see “Equity
Awards” and “Compensation for Named Executive Officers in Fiscal Year 2010”
under “Compensation Discussion and Analysis.”


Page
64





Outstanding
Equity Awards at Fiscal Year-End





Option Awards
                                                
                                                Stock AwardsEquityIncentiveEquity
                                                
                                                PlanIncentive
                                                
                                                Awards:Equity
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                Plan
                                                
                                                Market orIncentive
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                Awards:
                                                
                                                PayoutPlan
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                Number of
                                                
                                                Value ofAwards:
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                Market
                                                
                                                Unearned
                                                
                                                UnearnedNumber of
                                                
                                                
                                                
                                                
                                                
                                                Number
                                                
                                                Value of
                                                
                                                Shares,
                                                
                                                Shares,Number of
                                                
                                                
                                                Number of
                                                
                                                Unearned
                                                
                                                
                                                
                                                
                                                
                                                of Shares
                                                
                                                Shares or
                                                
                                                Units or
                                                
                                                Units orSecurities
                                                
                                                
                                                Securities
                                                
                                                Securities
                                                
                                                
                                                
                                                
                                                
                                                or Units
                                                
                                                Units of
                                                
                                                Other
                                                
                                                OtherUnderlying
                                                
                                                
                                                Underlying
                                                
                                                Underlying
                                                
                                                
                                                
                                                
                                                
                                                of Stock
                                                
                                                Stock
                                                
                                                Rights
                                                
                                                RightsUnexercised
                                                
                                                
                                                Unexercised
                                                
                                                Unexercised
                                                
                                                
                                                
                                                
                                                
                                                That Have
                                                
                                                That Have
                                                
                                                That Have
                                                
                                                That HaveOptions
                                                
                                                
                                                Options
                                                
                                                Options
                                                
                                                Option
                                                
                                                Option
                                                
                                                Not
                                                
                                                Not
                                                
                                                Not
                                                
                                                Not(#)
                                                
                                                
                                                (#)
                                                
                                                (#)
                                                
                                                Exercise
                                                
                                                Expiration
                                                
                                                Vested
                                                
                                                Vested
                                                
                                                Vested
                                                
                                                VestedName
                                                
                                                Exercisable
                                                
                                                
                                                Unexercisable
                                                
                                                Unexercisable
                                                
                                                Price
                                                
                                                Date
                                                
                                                (#)
                                                
                                                ($)
                                                
                                                (#)
                                                
                                                ($)(A)
                                                
                                                (B)
                                                
                                                
                                                (C)
                                                
                                                (D)
                                                
                                                (E)
                                                
                                                (F)
                                                
                                                (G)
                                                
                                                (H)
                                                
                                                (I)
                                                
                                                (J)Bruce
      Widener
                                                
                                                
                                                333,333
                                                
                                                
                                                
                                                666,667
                                                
                                                
                                                
                                                $
                                                1.19
                                                
                                                5/8/2019
                                                
                                                
                                                
                                                
                                                -Gerald
      Bowman
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                $
                                                1.61
                                                
                                                7/9/2019Gerald
      Bowman
                                                
                                                
                                                
                                                
                                                
                                                
                                                250,000
                                                
                                                
                                                
                                                $
                                                1.40
                                                
                                                5/27/2020Michael
      Grendi
                                                
                                                
                                                
                                                
                                                
                                                
                                                200,000
                                                
                                                
                                                
                                                $
                                                1.07
                                                
                                                2/5/2020Michael
      Grendi
                                                
                                                
                                                
                                                
                                                
                                                
                                                200,000
                                                
                                                
                                                
                                                $
                                                1.40
                                                
                                                5/27/2020Victor
      Agruso
                                                
                                                
                                                25,000
                                                
                                                
                                                
                                                75,000
                                                
                                                
                                                
                                                $
                                                1.07
                                                
                                                11/12/2019Victor
      Agruso
                                                
                                                
                                                
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                $
                                                1.60
                                                
                                                6/7/2020Mark
      Gervasoni
                                                
                                                
                                                
                                                
                                                
                                                
                                                400,000
                                                
                                                
                                                
                                                $
                                                1.36
                                                
                                                6/1/2020Richard
      C. Mills
                                                
                                                
                                                500,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                1.19
                                                
                                                5/8/2019Robert
      Mohr
                                                
                                                
                                                40,000
                                                
                                                
                                                
                                                20,000
                                                
                                                
                                                
                                                $
                                                1.20
                                                
                                                3/26/2018Robert
      Mohr
                                                
                                                
                                                75,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                0.80
                                                
                                                1/9/2019Robert
      Mohr
                                                
                                                
                                                83,333
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                1.19
                                                
                                                5/8/2019





Options
Exercises and Stock Vested





Pursuant
to a grant of 782,250 shares of restricted stock to Mr. Mills, our former
president, awarded on December 20, 2007, 150,000 shares vested on that date when
the stock was valued at $0.85 per share. Subsequent vesting occurred in equal
amounts annually totaled 421,500 shares vesting at a value of $1.20 per share as
of December 31, 2009, for a total vested number of shares of
571,500.  On May 15, 2010, pursuant to the separation agreement with
the Company, the remaining 210,750 shares were vested.





Potential
Payments Upon Termination or Change in Control





The
following table summarizes the value of the termination payments and benefits
Messrs. Widener, Bowman, Grendi, Agruso and Gervasoni would receive if they had
terminated employment on September 30, 2010 under the circumstances shown
pursuant to the terms of the employment agreements we have entered into with
each of them. For further description of the employment agreement governing
these payments, see “Employment Agreements.” Other than the employment
agreements with our named executives, there is no formal policy with respect to
payments to named executive officers upon a termination of such officer or
change in control of the Company. In addition, the employment agreements with
our named executives do not provide for any payments upon a change in control.
The tables exclude (i) amounts accrued through September 30, 2010 that would be
paid in the normal course of continued employment, such as accrued but unpaid
salary and earned annual bonus for fiscal year 2010 and reimbursed business
expenses and (ii) vested account balances under our 401(k) Plan that is
generally available to all of our employees.


Page
65




Bruce
Widener




Terminationby Company
                        
                        
                        Terminationwithout Cause
                        
                        
                        following oror Executive
                        
                        
                        prior to awith Good
                        
                        
                        Change inRetirement
                        
                        
                        Death
                        
                        
                        Disability
                        
                        
                        Reason
                        
                        
                        ControlBenefit
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)Cash
      Severance
                        
                        
                        -
                        
                        
                        $
                        240
                        (1)
                        
                        $
                        240
                        (1)
                        
                        $
                        720
                        (1)
                        
                        
                        -
                        (2)Acceleration
      ofRestricted
      Stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Acceleration  ofStock
      Options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Health
      & WelfareBenefits
                        
                        
                        -
                        (3)
                        
                        
                        -
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        -
                        (2)




Gerald
Bowman


Terminationby Company
                        
                        
                        Terminationwithout Cause
                        
                        
                        following oror Executive
                        
                        
                        prior to awith Good
                        
                        
                        Change inRetirement
                        
                        
                        Death
                        
                        
                        Disability
                        
                        
                        Reason
                        
                        
                        ControlBenefit
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)Cash
      Severance
                        
                        
                        -
                        
                        
                        $
                        180
                        (1)
                        
                        $
                        180
                        (1)
                        
                        $
                        180
                        (1)
                        
                        
                        -
                        (2)Acceleration
      ofRestricted
      Stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Acceleration  ofStock
      Options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Health
      & WelfareBenefits
                        
                        
                        -
                        (3)
                        
                        
                        -
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        -
                        (2)


Page
66




Michael Grendi




Terminationby Company
                        
                        
                        Terminationwithout Cause
                        
                        
                        following oror Executive
                        
                        
                        prior to awith Good
                        
                        
                        Change inRetirement
                        
                        
                        Death
                        
                        
                        Disability
                        
                        
                        Reason
                        
                        
                        ControlBenefit
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)Cash
      Severance
                        
                        
                        -
                        
                        
                        $
                        180
                        (1)
                        
                        $
                        180
                        (1)
                        
                        $
                        180
                        (1)
                        
                        
                        -
                        (2)Acceleration
      ofRestricted
      Stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Acceleration  ofStock
      Options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Health
      & WelfareBenefits
                        
                        
                        -
                        (3)
                        
                        
                        -
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        -
                        (2)










Mark
Gervasoni




Terminationby Company
                        
                        
                        Terminationwithout Cause
                        
                        
                        following oror Executive
                        
                        
                        prior to awith Good
                        
                        
                        Change inRetirement
                        
                        
                        Death
                        
                        
                        Disability
                        
                        
                        Reason
                        
                        
                        ControlBenefit
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)Cash
      Severance
                        
                        
                        -
                        
                        
                        $
                        150
                        (1)
                        
                        $
                        150
                        (1)
                        
                        $
                        150
                        (1)
                        
                        
                        -
                        (2)Acceleration
      ofRestricted
      Stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Acceleration  ofStock
      Options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Health
      & WelfareBenefits
                        
                        
                        -
                        (3)
                        
                        
                        -
                        (3)
                        
                        
                        (3
                        )
                        
                        
                        (3
                        )
                        
                        
                        -
                        (2)


Page
67




Victor
Agruso




Terminationby Company
                        
                        
                        Terminationwithout Cause
                        
                        
                        following oror Executive
                        
                        
                        prior to awith Good
                        
                        
                        Change inRetirement
                        
                        
                        Death
                        
                        
                        Disability
                        
                        
                        Reason
                        
                        
                        ControlBenefit
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)
                        
                        
                        ($)Cash
      Severance
                        
                        
                        -
                        
                        
                        $
                        90
                        (1)
                        
                        $
                        90
                        (1)
                        
                        $
                        90
                        (1)
                        
                        
                        -
                        (2)Acceleration
      ofRestricted
      Stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Acceleration  ofStock
      Options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        (2)Health
      & WelfareBenefits
                        
                        
                        -
                        (3)
                        
                        
                        -
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        12
                        (3)
                        
                        
                        -
                        (2)









(1)
            Excluding
      accrued, but unpaid, base salary, annual bonus, accrued vacation and
      unreimbursed business expenses.





(2)
            Executive
      is not entitled to any specific payments upon a change in control, other
      than such payment that Executive would otherwise be entitled to if
      termination upon a change in control is by reason of death or disability
      or by the Company without Cause or the Executive for Good Reason, as
      provided in the related columns.





(3)
            Executive
      is entitled to continued participation in our group health plan, assuming
      he makes a timely election of continuation coverage under COBRA, at the
      Company’s expense.


Page
68




DIRECTOR
COMPENSATION





Compensation for Non-Management
Directors.  Our directors have agreed to serve on our board of
directors based on their existing equity position in Beacon. John D. Rhodes III
was issued 300,000 Warrants to purchase Beacon common stock in exchange for his
service on the board by unanimous vote in a Board Meeting on March 26, 2008. On
January 9, 2009, the Compensation Committee resolved to pay directors $1 per
meetings via telephone and $3 per meeting in person but the directors
unanimously agreed to waive this compensation until such time as the company
achieved positive net income.





The
following table provides summary information of compensation of directors for
the year ended September 30, 2010.





Director
Compensation





Change
      inPensionValue
      andFees
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    Non-
                                                    
                                                    Non-Earned
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    Equity
                                                    
                                                    Qualifiedor
                                                    
                                                    Stock
                                                    
                                                    
                                                    
                                                    Incentive
                                                    
                                                    Deferred
                                                    
                                                    AllPaid
      in
                                                    
                                                    Awards
                                                    
                                                    Options
                                                    
                                                    Plan
                                                    
                                                    Compensation
                                                    
                                                    OtherCash
                                                    
                                                    ($)
                                                    
                                                    Awards
                                                    
                                                    Compensation
                                                    
                                                    Earnings
                                                    
                                                    Compensation
                                                    
                                                    TotalName
      and Principal Position
                                                    
                                                    ($)
                                                    
                                                    (1)
                                                    
                                                    ($)
                                                    
                                                    ($)
                                                    
                                                    ($)
                                                    
                                                    ($)
                                                    
                                                    ($)(A)
                                                    
                                                    (B)
                                                    
                                                    (C)
                                                    
                                                    (D)
                                                    
                                                    (E)
                                                    
                                                    (F)
                                                    
                                                    (G)
                                                    
                                                    (H)—
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    —





Item 12.Security Ownership of Certain
Beneficial Owners and Management





The
following table sets forth certain information regarding the ownership of our
common stock as of December 16, 2010 by (i) any person who is known to us
to be the beneficial owner of more than five percent of our common stock,
(ii) all directors, (iii) all executive officers named in the Summary
Compensation Table herein and (iv) all directors and executive officers as
a group. Warrants and options to acquire our common stock included in the
amounts listed below are currently exercisable or will be exercisable within
60 days after December 16, 2010, and are deemed outstanding for computing
the ownership percentage of the stockholder holding such warrants and/or
options, but are not deemed outstanding for computing the ownership percentage
of any other stockholder.





BeneficialCommon Share
                    
                    
                    % ofName
                    
                    Ownership
                    
                    
                    ClassBruce
      Widener
                    
                    
                    3,000,833
                    
                    
                    
                    6
                    %John
      D. Rhodes III (1)
                    
                    
                    3,006,606
                    
                    
                    
                    6
                    %Richard
      C. Mills (2)
                    
                    
                    2,769,500
                    
                    
                    
                    5
                    %J.
      Sherman Henderson III (3)
                    
                    
                    1,035,000
                    
                    
                    
                    2
                    %Michael
      Grendi
                    
                    
                    68,167
                    
                    
                    
                    0
                    %Gerry
      Bowman
                    
                    
                    50,000
                    
                    
                    
                    0
                    %Directors
      and Named ExecutivesOfficers
      (as a group)
                    
                    
                    9,930,106
                    
                    
                    
                    19
                    %





As
shareholders with greater than 5% ownership of the company, the address of
Messrs. Widener and Rhodes address is 9300 Shelbyville Road, Suite 1000,
Louisville, KY 40222


Page
69





1.
            Includes
      the 166,666 shares into which the Exchange Bridge Note held by
      Dr. Rhodes is convertible, 285,500 shares for which the
      Exchanged Bridge Warrants held by Dr. Rhodes are exercisable within
      60 days of the date hereof, 300,000 warrants to purchase shares in
      exchange for his representation on the Board of
      Directors, 777,777 shares into which the Series B Preferred
      Stock is convertible, 350,000 Warrants issued pursuant to the
      Series B Preferred Stock purchase, and 716,662 warrants issued in
      exchange for an equity financing
arrangement





2.
            Mr.
      Mills and his wife are beneficial owners of 482,500 shares of Beacon
      Common Stock. Pursuant to a grant of 782,250 shares of restricted
      stock to Mr. Mills, our former president, awarded on
      December 20, 2007, 150,000 shares vested on that date when the
      stock was valued at $0.85 per share. Subsequent vesting occurred in equal
      amounts annually totaled 421,500 shares vesting at a value of $1.20
      per share as of December 31, 2009, for a total vested number of shares of
      571,500.  On May 15, 2010, pursuant to the separation agreement
      with the Company, the remaining 210,750 shares were
  vested.





3.
            Includes
      30,000 shares held by LANJK, LLC (a limited liability company wholly
      owned by Mr. Henderson).





Item 13.Certain Relationships and Related
Transactions, and Director Independence




On May
15, 2008, we entered into an equity financing arrangement with one of our
directors that provided up to $500 of additional funding, the terms of which
provided for issuance of warrants to purchase 33,333 shares of common stock at
$1.00 per share per month for the period the financing arrangement is in effect.
The warrants have a five-year term. The financing arrangement terminates upon
the close of a $3,000 equity financing event; on August 19, 2008, we modified
the agreement to increase the commitment to $3,000 of additional funding that
decreases on a dollar for dollar basis as we raise capital in subsequent equity
financing transactions up to $3,000, upon mutual agreement of our director and
us, or on December 31, 2008. In consideration for this financing arrangement, we
agreed to issue a five year warrant to purchase 100,000 shares of common stock
at an exercise price of $1.00 per share in addition to the ongoing warrants
earned under the original agreement. Accordingly, we recognized $289 of interest
expense for the year ended September 30, 2009 based on the fair value of the
warrants as they were earned. The fair values were calculated using the
Black-Scholes option pricing model with the following assumptions:





Expected
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        Fair
      Value
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        Risk-Free
                                                        
                                                        
                                                        Value
                                                        
                                                        
                                                        Charge
      toDate
                                                        
                                                        Quantity
                                                        
                                                        
                                                        Life
                                                        
                                                        
                                                        Strike
                                                        
                                                        
                                                        of
      Common
                                                        
                                                        
                                                        Volatility
                                                        
                                                        
                                                        Dividend
                                                        
                                                        
                                                        Interese
                                                        
                                                        
                                                        per
                                                        
                                                        
                                                        InterestEarned
                                                        
                                                        Earned
                                                        
                                                        
                                                        (days)
                                                        
                                                        
                                                        Price
                                                        
                                                        
                                                        Stock
                                                        
                                                        
                                                        Rate
                                                        
                                                        
                                                        Yield
                                                        
                                                        
                                                        Rate
                                                        
                                                        
                                                        Warrant
                                                        
                                                        
                                                        Expense10/15/2008
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.20
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.90
                                                        %
                                                        
                                                        $
                                                        0.74
                                                        
                                                        
                                                        $
                                                        2511/15/2008
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        0.85
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.33
                                                        %
                                                        
                                                        $
                                                        0.45
                                                        
                                                        
                                                        $
                                                        1512/15/2008
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.52
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.50
                                                        %
                                                        
                                                        $
                                                        0.99
                                                        
                                                        
                                                        $
                                                        3312/31/2008
                                                        
                                                        
                                                        16,667
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.01
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.55
                                                        %
                                                        
                                                        $
                                                        0.57
                                                        
                                                        
                                                        $
                                                        101/9/2009
                                                        
                                                        
                                                        100,000
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        0.80
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.51
                                                        %
                                                        
                                                        $
                                                        0.41
                                                        
                                                        
                                                        $
                                                        412/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        0.80
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.99
                                                        %
                                                        
                                                        $
                                                        0.41
                                                        
                                                        
                                                        $
                                                        143/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        0.54
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.90
                                                        %
                                                        
                                                        $
                                                        0.23
                                                        
                                                        
                                                        $
                                                        84/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        0.75
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        1.90
                                                        %
                                                        
                                                        $
                                                        0.37
                                                        
                                                        
                                                        $
                                                        125/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.19
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.09
                                                        %
                                                        
                                                        $
                                                        0.72
                                                        
                                                        
                                                        $
                                                        246/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.35
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.73
                                                        %
                                                        
                                                        $
                                                        0.86
                                                        
                                                        
                                                        $
                                                        297/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.61
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.31
                                                        %
                                                        
                                                        $
                                                        1.08
                                                        
                                                        
                                                        $
                                                        368/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.20
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.75
                                                        %
                                                        
                                                        $
                                                        0.74
                                                        
                                                        
                                                        $
                                                        249/9/2009
                                                        
                                                        
                                                        33,333
                                                        
                                                        
                                                        
                                                        1,825
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        $
                                                        1.00
                                                        
                                                        
                                                        
                                                        66.34
                                                        %
                                                        
                                                        
                                                        0
                                                        %
                                                        
                                                        
                                                        2.38
                                                        %
                                                        
                                                        $
                                                        0.57
                                                        
                                                        
                                                        $
                                                        18For
      year ended September 30, 2009
                                                        
                                                        
                                                        $
                                                        289





In
addition, contingent upon the drawdown of any part of the equity financing
commitment, the director would earn the right to purchase up to 1,655,425 shares
of their stock owned by the CEO and another shareholder for a purchase price of
$0.01 per share. The equity financing arrangement expired on December 16, 2009
upon closing of a $3,000 of equity financing at which time the director’s
contingent right to acquire the shares of the founding shareholders was
terminated.


Page
70


On
January 7, 2009, we entered into a note payable with a principal amount of $200
payable on or before December 31, 2009, bearing interest at 12% per annum with
one of our directors. The director concurrently authorized us to issue 300
shares of preferred stock in exchange for this note and an additional $100 note
issued prior to December 31, 2009. We are permitted, but not required, to redeem
these shares at a 1% per month premium beginning 30 days from the date of their
issuance at our discretion.





On
January 9, 2009, we entered into an equity financing arrangement with one of our
directors that provided a commitment up to $2,200 of additional funding. This
arrangement superseded the existing equity financing arrangement between the
same director and the Company that had been entered into on May 15, 2008 and
amended August 19, 2008. Under the terms of this equity financing arrangement,
under certain circumstances the Company may sell shares of its common stock to
this director at the same price per share and other terms as the most recent
sale of shares of its Common Stock to a third party in a transaction intended to
raise capital. On August 10, 2009, we renewed the existing equity financing
arrangement to provide a commitment of up to $3,000 of additional
funding.  This arrangement was terminated on December 15, 2009 upon
close of $3,000 financing event.





Under a
marketing agreement with a company owned by the wife of Beacon’s former
president, we provide procurement and installation services as a subcontractor.
We earned net sales of approximately $323 and $1,697 for procurement and
installation services provided under this marketing agreement, of which $198 and
$1,402 is recorded as accounts receivable in the accompanying balance sheet for
the years ended September 30, 2010 and 2009.





On August
7, 2009, we entered into a non-interest bearing demand note with one of our
directors in the amount of $500. See Note 10 for further
information.




The
Company has obtained insurance through an agency owned by one of its founding
stockholders/directors.  Insurance expense of $150 was paid to the
agency for the years ended September 30, 2010 and 2009
respectively.




The
Company contracted with our former Chief Accounting Officer for consulting
services upon their resignation, we recognized $24 for the year ended September
30, 2010 for these services.





Item 14.Principal Accountant Fees and
Services





The
following table presents fees for professional services rendered by Marcum LLP
for the audit of our annual financial statements for the years ended September
30, 2010 and 2009:




For the year
                  
                  
                  For the yearended
                  
                  
                  endedSeptember 30,
                  
                  
                  September 30,2009
                  
                  
                  2010Audit
      fees
                  
                  $
                  203
                  
                  
                  $
                  297Tax
      fees
                  
                  
                  -
                  
                  
                  
                  -Other
      fees
                  
                  
                  -
                  
                  
                  
                  -$
                  203
                  
                  
                  $
                  297





In
accordance with its written charter, the Audit Committee reviews and discusses
with Marcum LLP, on a periodic basis, any disclosed relationships or services
that may impact the objectivity and independence of the independent registered
accounting firm and pre-approves all audit and permitted non-audit services
(including the fees and terms thereof) to be performed for us by our independent
registered public accounting firm.


Page
71





Item 15.Exhibits, Financial Statement
Schedules





2.1
              
              Non-Interest-Bearing
      Promissory Note dated February 26, 2010 (incorporated by reference to
      Exhibit 2.03.A to the Company’s Current Report on Form 8-K filed March 2,
      2010).2.2
              
              Subordinated
      Security Agreement dated February 26, 2010 (incorporated by reference to
      Exhibit 2.03.B to the Company’s Current Report on Form 8-K filed March 2,
      2010).3.1
              
              Amended
      and Restated Articles of Incorporation of the Company (incorporated by
      reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed
      January 13, 2009).3.2
              
              Certificate
      of Designation of the Series B Preferred Stock (incorporated by reference
      to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed August
      19, 2008).3.3
              
              Restated
      Bylaws (Incorporated by reference to Exhibit 3.2 to Form 10-KSB dated
      October 16, 2003).4.1
              
              Form
      of warrant to purchase common stock granted in connection with August 19,
      2008 financing arrangement between the Company and one of its directors
      (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report
      on Form 10-K filed January 13, 2009).4.2
              
              Registration
      Rights Agreement dated November 12, 2008 by and between the Company and
      the placement agent for the November 2008 offering of Common Stock
      (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report
      on Form 10-K filed January 13, 2009).4.3
              
              Form
      of warrant to purchase common stock granted in connection with November
      2008 offering of Common Stock (incorporated by reference to Exhibit 4.3 to
      the Company’s Annual Report on Form 10-K filed January 13,
      2009).4.4
              
              Form
      of convertible promissory notes and warrants granted in connection with
      the 2007 convertible debt financing (incorporated by reference to Exhibit
      10.1 to the Company’s Current Report on Form 8-K dated December 28,
      2007).4.5
              
              Form
      of warrant to purchase common stock granted in connection with the
      offering of Series A and Series A-1 Preferred Stock, as amended and
      recirculated July 30, 2008 (incorporated by reference to Exhibit 4.5 to
      the Company’s Annual Report on Form 10-K filed January 13,
      2009).4.6
              
              Form
      of warrant to purchase common stock granted to the placement agent
      retained in connection with the offering of Series A and Series A-1
      Preferred Stock (incorporated by reference to Exhibit 10.3 to the
      Company’s Current Report on Form 8-K dated December 28,
    2007).4.7
              
              Form
      of warrant to purchase common stock granted to affiliates of placement
      agent retained in connection with the offering of Series A and Series A-1
      Preferred Stock (incorporated by reference to Exhibit 10.4 to the
      Company’s Current Report on Form 8-K dated December 28,
    2007).4.8
              
              Form
      of warrant to purchase common stock granted in connection with the
      offering of Series B Preferred Stock (incorporated by reference to Exhibit
      4.1 to the Company’s Quarterly Report on Form 10-Q filed August 19,
      2008).4.9
              
              Form
      of warrant to purchase common stock granted in connection with the July
      2008 offering of Common Stock (incorporated by reference to Exhibit 4.2 to
      the Company’s Quarterly Report on Form 10-Q filed August 19,
      2008).4.10
              
              Form
      of warrant to purchase common stock issued to J. Sherman Henderson and
      Robert A. Clarkson on July 10, 2008 (incorporated by reference to Exhibit
      4.3 to the Company’s Quarterly Report on Form 10-Q filed August 19,
      2008).4.11
              
              Form
      of the Convertible Promissory Notes, dated January 22, 2009, made and
      issued by the Company to various investors, in the aggregate principal
      amount of $500,000 (incorporated by reference to Exhibit 4.1 to the
      Company’s Quarterly Report on Form 10-Q filed February 23,
      2009).4.12
              
              Form
      of the Warrants, dated January 22, 2009, made and issued by the Company to
      various investors (incorporated by reference to Exhibit 4.2 to the
      Company’s Quarterly Report on Form 10-Q filed February 23,
      2009).


Page
72





4.13
              
              Form
      of warrant to purchase common stock granted to the investors in connection
      with the June 2009 offering of Common Stock (incorporated by reference to
      Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed August
      12, 2009).4.14
              
              Form
      of warrant to purchase common stock granted to the investors in connection
      with the September 2009 Private Placement (incorporated by reference to
      Exhibit 4.1 to the Company’s Annual Report on Form 10-Kfiled December 29,
      2010).10.1
              
              Placement
      Agency Agreement dated July 25, 2008 by and between the Company and the
      Placement Agent (incorporated by reference to Exhibit 10.1 to the
      Company’s Annual Report on Form 10-K filed January 13,
    2009).10.2
              
              Letter
      Agreement dated July 25, 2008 by and between the Company and the Placement
      Agent (incorporated by reference to Exhibit 10.2 to the Company’s Annual
      Report on Form 10-K filed January 13, 2009).10.3
              
              Letter
      Agreement dated August 19, 2008 by and between the Company and one of its
      directors (incorporated by reference to Exhibit 10.3 to the Company’s
      Annual Report on Form 10-K filed January 13, 2009).10.4
              
              Loan
      Agreement dated September 4, 2008 by and between the Company and First
      Savings Bank (incorporated by reference to Exhibit 10.4 to the Company’s
      Annual Report on Form 10-K filed January 13, 2009).10.5
              
              Letter
      Agreement dated January 9, 2009, by and between the Company and John
      Rhodes, relating to an equity financing agreement (incorporated by
      reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
      filed February 23, 2009).10.6
              
              Form
      of the Note Purchase Agreement, dated January 22, 2009, by and between the
      Company and various investors (incorporated by reference to Exhibit 10.2
      to the Company’s Quarterly Report on Form 10-Q filed February 23,
      2009).10.7
              
              Work
      Order dated December 19, 2008, by and between the Company and Johnson
      & Johnson Services, Inc. (incorporated by reference to Exhibit 10.3 to
      the Company’s Quarterly Report on Form 10-Q filed February 23,
      2009).10.8
              
              Promissory
      Note, dated January 7, 2009, made and issued by the Company to John Rhodes
      (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly
      Report on Form 10-Q filed February 23, 2009).10.9
              
              Beacon
      Solutions 2008 Long Term Incentive Plan (incorporated by reference to
      Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed May 13,
      2009.)10.10
              
              Letter
      Agreement dated August 10, 2009 by and between the Company and John Rhodes
      (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly
      Report on Form 10-Q filed August 12, 2009).10.11
              
              Promissory
      Note dated August 10, 2009 made and issued by the Company to John Rhodes
      Family Limited Partnership (incorporated by reference to Exhibit 10.6 to
      the Company’s Quarterly Report on Form 10-Q filed August 12,
      2009).10.12
              
              Selling
      Agency Agreement dated June 12, 2009 by and between the Company and the
      selling agent named therein (incorporated by reference to Exhibit 10.1 to
      the Company’s Quarterly Report on Form 10-Q filed August 12,
      2009).10.13
              
              Secured
      Promissory Note, dated December 20, 2007, issued by Beacon to ADSnetcurve
      (incorporated by reference to Exhibit 10.6 to the Company’s Current Report
      on Form 8-K dated December 28, 2007).10.14
              
              Asset
      Purchase Agreement, dated October 15, 2007, by and between Beacon and
      CETCON, Incorporated (“CETCON”) (incorporated by reference to Exhibit 10.7
      to the Company’s Current Report on Form 8-K dated December 28,
      2007).10.15
              
              Secured
      Promissory Note, dated December 20, 2007, issued by Beacon to CETCON
      (incorporated by reference to Exhibit 10.8 to the Company’s Current Report
      on Form 8-K dated December 28,
2007).


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10.16
              
              Asset
      Purchase Agreement, dated October 15, 2007, by and between Beacon and
      Strategic Communications, LLC (incorporated by reference Exhibit 10.9 to
      the Company’s Current Report on Form 8-K dated December 28,
      2007).10.17
              
              Promissory
      Note, dated December 20, 2007, issued by Beacon to Strategic (incorporated
      by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K
      dated December 28, 2007).10.18
              
              Asset
      Purchase Agreement, dated October 15, 2007, by and between Beacon and RFK
      Communications, LLC (“RFK”) (incorporated by reference to Exhibit 10.11 to
      the Company’s Current Report on Form 8-K dated December 28,
      2007).10.19
              
              Secured
      Promissory Note, dated December 20, 2007, issued by Beacon to RFK
      (incorporated by reference to Exhibit 10.12 to the Company’s Current
      Report on Form 8-K dated December 28, 2007).10.20
              
              Agreement
      and Plan of Merger, dated October 15, 2007, by and among Beacon, BH
      Acquisition Sub, Inc., Bell Haun Systems, Inc. (“BHS”) and BHS
      shareholders (incorporated by reference to Exhibit 10.13 to the Company’s
      Current Report on Form 8-K dated December 28, 2007).10.21
              
              Promissory
      Note, dated December 20, 2007, issued by Beacon to the BHS shareholders
      (incorporated by reference to Exhibit 10.14 to the Company’s Current
      Report on Form 8-K dated December 28, 2007).10.22
              
              Promissory
      Notes, dated December 20, 2007, issued by Beacon to Thomas O. Bell and
      Michael T. Haun (incorporated by reference to Exhibit 10.15 to the
      Company’s Current Report on Form 8-K dated December 28,
    2007).10.23
              
              Registration
      Rights Agreement, dated December 20, 2007, between Beacon, the placement
      agent for the Preferred Stock offerings and certain investors
      (incorporated by reference to Exhibit 10.16 to the Company’s Current
      Report on Form 8-K dated December 28, 2007).10.24**
              
              Employment
      Agreement , dated December 2007, between the Company and Bruce
      Widener  (incorporated by reference to Exhibit 99.8 to the
      Company’s Quarterly Report on Form 10-Q filed February 19,
      2008).10.25**
              
              Employment
      Agreement, dated December 2007, between the Company and Richard C. Mills
      (incorporated by reference to Exhibit 99.6 to the Company’s Quarterly
      Report on Form 10-Q filed February 19, 2008).10.26**
              
              Employment
      Agreement, dated December 2007, between the Company and Robert R. Mohr
      (incorporated by reference to Exhibit 99.5 to the Company’s Quarterly
      Report on Form 10-Q filed February 19, 2008).10.27**
              
              Employment
      Agreement dated May 12, 2009 by and between the Company and Bruce Widener
      (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
      Report on Form 10-Q filed August 12, 2009).10.28**
              
              Employment
      Agreement dated May 22, 2009 by and between the Company and Richard C.
      Mills (incorporated by reference to Exhibit 10.3 to the Company’s
      Quarterly Report on Form 10-Q filed August 12, 2009).10.29**
              
              Employment
      Agreement dated May 22, 2009 by and between the Company and Robert Mohr
      (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly
      Report on Form 10-Q filed August 12, 2009).10.30**
              
              Executive
      Employment Agreement dated as of June 1, 2010 by and between the Company
      and Mark A. Gervasoni (incorporated by reference to Exhibit 99.1 to the
      Company’s Current Report on Form 8-K filed June 2,
  2010).10.31
              
              Documents
      related to the Integra Bank Credit Facility (incorporated by reference to
      Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB dated May
      15, 2008).10.32
              
              Registration
      Rights Agreement dated July 25, 2008 by and between the Company and the
      placement agent retained in the July 2008 offering of Common Stock
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q filed August 19, 2008).10.33
              
              Project
      Management Services Agreement dated November 6, 2009 by and between Beacon
      Solutions AG, a wholly owned subsidiary of the Company, and Interxion
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q filed February 16,
2010).


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74





10.34
              
              Placement
      Agency Agreement dated September 28, 2009 by and between the Company and
      the Placement Agent (incorporated by reference to Exhibit 10.33 to the
      Company’s Annual Report on Form 10-Kfiled December 29,
    2009).14.1
              
              Code
      of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s
      Annual Report on Form 10-K filed January 13, 2009).21.1*
              
              Subsidiaries
      of the Registrant.31.1*
              
              Certification
      of Principal Executive Officer, pursuant to Rule 13a-14(a) of the
      Sarbanes-Oxley Act of 2002.31.2*
              
              Certification
      of Principal Executive Officer, pursuant to Rule 13a-14(a) of the
      Sarbanes-Oxley Act of 2002.32.1*
              
              Certification
      of Principal 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 Principal Executive Officer, pursuant to 18 U.S.C Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*







*
            Denotes
      filed herein.





**
            Denotes
      compensatory plan or management
contract.


Page
75




SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on December 16,
2010.





BEACON
      ENTERPRISE SOLUTIONS GROUP, INC.By:
                      /s/BRUCE
      WIDENERBruce
      WidenerChief
      Executive Officer and Chairman of theBoard
      of
Directors





Date:
December 16, 2010





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.





Signature
              
              Title
              
              Date/s/ BRUCE
    WIDENER
              
              Chief
      Executive Officer and
              
              December
      16, 2010Chairman
      of the BoardBruce
      Widener
              
              (Principal
      Executive Officer)/s/ J. SHERMAN HENDERSON
      III
              
              Director
              
              December
      16, 2010J.
      Sherman Henderson III/s/ DR.JOHN D. RHODES
      III
              
              Director
              
              December
      16, 2010Dr. John
      D. Rhodes III/s/ MICHAEL
    GRENDI
              
              Chief
      Financial Officer
              
              December
      16, 2010(Principal
      Financial & Accounting Officer)Michael
      Grendi


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