UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION 
  Washington, D.C. 20549

FORM 10-Q

|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2009

|    |                                                                                          | 
|--- | ---------------------------------------------------------------------------------------- | 
|[_] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to _____________________

BEACON ENTERPRISE SOLUTIONS GROUP, INC.


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(Name of registrant in its charter)


|                                |  |                                     
|------------------------------- |  | ------------------------------------
|Nevada                          |  | 81-0438093                          
|                                |  |                                     
|(State or other jurisdiction of |  | (I.R.S. Employer Identification No.)
|incorporation or organization)  |  |                                     




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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See 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
x
|(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 Exchange Act). Yes [  ] No [X]

As of August 12, 2009, Beacon Enterprise Solutions Group, Inc. had a total of 19,924,323 shares of common stock issued and outstanding.

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|           |                                                                                       |   
|---------- | ------------------------------------------------------------------------------------- | --
|           | PART I: FINANCIAL INFORMATION                                                        
|Item 1.    | Financial Statements                                                                  | 3 
|Item 2.    | Managements Discussion and Analysis of Financial
Condition and Results of Operations | 30
|Item 4T.   | Controls and Procedures                                                               | 39
|          
|           | PART II: OTHER INFORMATION                                                           
|          
|Item 1.    | Legal Proceedings                                                                     | 41
|Item 4.    | Submission of Matters to a Vote of Security Holders.                                  | 41
|Item 5.    | Other Information                                                                     | 41
|Item 6.    | Exhibits                                                                              | 42
|Signatures |                                                                                       | 43

2

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Beacon Enterprise Solutions Group, Inc. and SubsidiariesCondensed Consolidated Balance Sheet

June 30,
      
      September 30,2009
      
      2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
      $
      548,205
      
      $
      127,373Accounts receivable, net
      
      2,458,075
      
      
      1,505,162Inventory, net
      
      522,109
      
      
      597,794Prepaid expenses and other current assets
      
      598,583
      
      
      44,745Total current assets
      
      4,126,972
      
      
      2,275,074Property and equipment, net
      
      320,189
      
      
      310,703Goodwill
      
      2,791,648
      
      
      2,791,648Other intangible assets, net
      
      3,456,972
      
      
      3,802,717Inventory, less current portion
      
      160,610
      
      
      160,610Security deposits
      
      6,050
      
      
      15,639Other Non-Current assets
      
      5,197Total assets
      $
      10,867,638
      
      $
      9,356,391LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short term credit obligations
      $
      50,000
      
      $
      200,000Convertible Note Payable (net of $8,625 discount)
      
      491,375Current portion of long-term debt
      
      491,829
      
      
      495,595Current portion of capital lease obligations
      
      
      
      
      11,928Bridge notes (net of $57,051 discount)
      
      642,949
      
      
      Accounts payable
      
      1,598,422
      
      
      1,225,509Accrued expenses
      
      1,477,441
      
      
      1,105,078Accrued dividends
      
      56,592
      
      
      220,354Customer deposits
      
      39,737
      
      
      95,767Deferred tax liability
      
      45,472
      
      
      45,472Total current liabilities
      
      4,893,817
      
      
      3,399,703Long-term debt, less current portion
      
      922,449
      
      
      1,316,477Bridge notes (net $128,840 discount)
      
      
      
      
      571,160Total liabilities
      
      5,816,266
      
      
      5,287,340Stockholders equityPreferred Stock: $0.01 par value, 5,000,000 shares authorized, 5,706 and5,200 shares outstanding, respectively, in the following classes:Series A convertible preferred stock, $1,000 stated value, 4,500 sharesauthorized, 4,145 and 4,000 shares issued and outstanding, respectively,(liquidation preference $5,221,646 and $5,243,630, respectively)
      
      4,145,613
      
      
      4,000,000Series A-1 convertible preferred stock, $1,000 stated value, 1,000 sharesauthorized, 885 and 800 shares issued and outstanding, respectively,(liquidation preference $1,111,248 and $1,031,813, respectively)
      
      885,465
      
      
      800,000Series B convertible preferred stock, $1,000 stated value, 4,000 sharesauthorized, 700 and 400 shares issued and outstanding, respectively,(liquidation preference $902,068 and $500,000, respectively)
      
      700,000
      
      
      400,000Common stock, $0.001 par value 70,000,000 shares authorized,19,196,907 and 12,093,021 shares issued and issued andoutstanding, respectively
      
      19,196
      
      
      12,093Additional paid in capital
      
      13,120,564
      
      
      8,027,602Accumulated deficit
      
      (13,819,466
      )
      
      (9,170,644
      )Total stockholders equity
      
      5,051,372
      
      
      4,069,051Total liabilities and stockholders equity
      $
      10,867,638
      
      $
      9,356,391


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

3

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Beacon Enterprise Solutions Group, Inc. and SubsidiariesCondensed Consolidated Statements of Operations(Unaudited)

For the three
      
      For the three
      
      For the nine
      
      For the ninemonths ended
      
      months ended
      
      months ended
      
      months endedJune 30,
      
      June 30,
      
      June 30,
      
      June 30,2009
      
      2008
      
      2009
      
      2008Net sales
      $
      3,038,999
      
      $
      2,364,605
      
      $
      7,118,084
      
      $
      4,073,435Cost of goods sold
      
      1,280,622
      
      
      1,444,807
      
      
      2,892,075
      
      
      2,318,564Cost of services
      
      836,981
      
      
      
      
      
      1,934,372
      
      
      2,117,603
      
      
      1,444,807
      
      
      4,826,447
      
      
      2,318,564Gross profit
      
      921,396
      
      
      919,798
      
      
      2,291,637
      
      
      1,754,871Operating expenseSalaries and benefits
      
      1,185,951
      
      
      1,116,705
      
      
      3,108,538
      
      
      2,623,239Selling, general and administrative
      
      894,530
      
      
      531,562
      
      
      2,117,260
      
      
      1,589,322Depreciation Expense
      
      37,693
      
      
      23,571
      
      
      109,132
      
      
      44,749Amortization of intangible assets
      
      115,248
      
      
      160,101
      
      
      345,745
      
      
      341,256Total operating expense
      
      2,233,422
      
      
      1,831,939
      
      
      5,680,675
      
      
      4,598,566Loss from operations
      
      (1,312,026
      )
      
      (912,141
      )
      
      (3,389,038
      )
      
      (2,843,695
      )Other expensesInterest expense
      
      (221,849
      )
      
      (120,068
      )
      
      (661,818
      )
      
      (321,921
      )Interest income
      
      227
      
      
      3,222
      
      
      589
      
      
      5,911Total other expenses
      
      (221,622
      )
      
      (116,846
      )
      
      (661,229
      )
      
      (316,010
      )Net loss
      
      (1,533,648
      )
      
      (1,028,987
      )
      
      (4,050,267
      )
      
      (3,159,705
      )Preferred Stock:Contractual dividends
      
      (160,264
      )
      
      (93,019
      )
      
      (411,416
      )
      
      (100,354
      )Deemed dividends related to beneficial conversion feature
      
      
      
      
      (60,212
      )
      
      (187,139
      )
      
      (3,955,809
      )Net loss available to common stockholders
      $
      (1,693,912
      )
      $
      (1,182,218
      )
      $
      (4,648,822
      )
      $
      (7,215,868
      )Net loss per share to common stockholders - basic and diluted
      $
      (0.11
      )
      $
      (0.11
      )
      $
      (0.32
      )
      $
      (0.81
      )Weighted average shares outstandingbasic and diluted
      
      16,066,243
      
      
      10,468,021
      
      
      14,581,935
      
      
      8,926,307


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

4

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Beacon Enterprise Solutions Group, Inc. and SubsidiariesCondensed Consolidated Statement of Stockholders Equity(Unaudited)

|                                             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|-------------------------------------------- | ------------------------------------------- | - | --------------------------------------- | --------- | ------------------------------------------- | --- | ---------------------------- | - | ------- |  | ---------------------------- |  | ------ | ------- | -------------------------------- | ---------- | ---------------------------------------- | - | -------------------------- |  | ----- | ---------- | - | - | ----------- | - | - | ---------- | -
|                                             | Series A Convertible 
      Preferred Stock |   | Series A-1 Convertible
 Preferred Stock |           | Series B Convertible 
      Preferred Stock |     | Common  Stock                |   |         |  |                              |  |        |         |                                  |            |                                         
|                                             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                         
|                                             | Shares                                      |   | $1,000 Stated
         Value            |           | Shares                                      |     | $1,000 Stated
         Value |   | Shares  |  | $1,000 Stated
         Value |  | Shares |         | $0.001 
      Par   
      Value |            | Additional 
      Paid-In 
      Capital |   | Accumulated 
      Deficit |  | Total |           
|                                             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |           
|Balance at September 30, 2008                | 4,000                                       |   | $                                       | 4,000,000 |                                             | 800 |                              | $ | 800,000 |  | 400                          |  | $      | 400,000 |                                  | 12,093,021 |                                          | $ | 12,093                     |  | $     | 8,027,602  |   | $ | (9,170,644  | ) | $ | 4,069,051  |  
|Vested portion of share based                |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|payments to employee for services            |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 318,028    |   |   |             |   |   | 318,028    |  
|Conversion of debt to Preferred shares       |                                             |   |                                         |           |                                             |     |                              |   |         |  | 300                          |  |        | 300,000 |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   | 300,000    |  
|Conversion of Preferred shares to common     | (344                                        | ) |                                         | (343,800  | )                                           |     |                              |   |         |  |                              |  |        |         |                                  | 458,397    |                                          |   | 458                        |  |       | 343,342    |   |   |             |   |   |           |  
|Common Stock issued                          |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|in private placement                         |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  | 5,960,350  |                                          |   | 5,960                      |  |       | 4,763,778  |   |   |             |   |   | 4,769,738  |  
|Private placement offering costs             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | (996,783   | ) |   |             |   |   | (996,783   | )
|Shares committed to Anti-dilution adjustment |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  | 285,139    |                                          |   | 285                        |  |       | (285       | ) |   |             |   |   | 0          |  
|Common Stock issued                          |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|for investor relations agreements            |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  | 250,000    |                                          |   | 250                        |  |       | 123,550    |   |   |             |   |   | 123,800    |  
|Common Stock issued for
investor             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|relations agreements subject to conditions   |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  | 150,000    |                                          |   | 150                        |  |       | (150       | ) |   |             |   |   |           |  
|Vested portion of share based                |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|payments to non-employee for services        |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 13,700     |   |   |             |   |   | 13,700     |  
|Beneficial conversion feature -              |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|deemed preferred stock dividend              |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 175,274    |   |   | (175,274    | ) |   |           |  
|Discount on Convertible Notes Payable        |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 74,334     |   |   |             |   |   | 74,334     |  
|Vested contingent bridge warrants            |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 56,840     |   |   |             |   |   | 56,840     |  
|Warrants issued for equity financing         |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|agreement                                    |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 209,469    |   |   |             |   |   | 209,469    |  
|Series A Preferred Stock contractual         |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|dividends                                    |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   | (326,214    | ) |   | (326,214   | )
|Series A Preferred Stock contractual         |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|dividends paid in kind                       | 489                                         |   |                                         | 489,413   |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   | 489,413    |  
|Series A-1 Preferred Stock contractual       |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|dividends                                    |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   | (63,549     | ) |   | (63,549    | )
|Series A-1 Preferred Stock contractual       |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|dividends paid in kind                       |                                             |   |                                         |           |                                             | 85  |                              |   | 85,465  |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   | 85,465     |  
|Series B Preferred Stock contractual         |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|dividends                                    |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   | (21,653     | ) |   | (21,653    | )
|Beneficial conversion feature -              |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   |             |   |   |            |  
|deemed Investor Warrant dividend             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       | 11,865     |   |   | (11,865     | ) |   |           |  
|                                            
|Net loss                                     |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |            |   |   | (4,050,267  | ) |   | (4,050,267 | )
|                                             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |           
|Balance at June 30, 2009 (unaudited)         | 4,145                                       |   | $                                       | 4,145,613 |                                             | 885 |                              | $ | 885,465 |  | 700                          |  | $      | 700,000 |                                  | 19,196,907 |                                          | $ | 19,196                     |  | $     | 13,120,564 |   | $ | (13,819,466 | ) | $ | 5,051,372  |  
|                                             |                                             |   |                                         |           |                                             |     |                              |   |         |  |                              |  |        |         |                                  |            |                                          |   |                            |  |       |           

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

5

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Beacon Enterprise Solutions Group, Inc. and SubsidiariesConsolidated Statements of Cash Flows(unaudited)

For the nine
      
      For the nineMonths Ended
      
      Months EndedJune 30,
      
      June 30,2009
      
      2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
      $
      (4,050,267
      )
      $
      (3,159,750
      )Adjustments to reconcile net loss to net cash used in operating activities:Change in reserve for obsolete inventory
      
      98,536
      
      
      20,000Change in reserve for doubtful accounts
      
      79,729
      
      
      50,000Depreciation and Amortization
      
      454,815
      
      
      386,005Non-cash interest
      
      428,508
      
      
      170,904Share based payments
      
      455,528
      
      
      447,255Changes in operating assets and liabilities:Accounts receivable
      
      (1,032,642
      )
      
      (759,259
      )Inventory
      
      (22,851
      )
      
      (98,004
      )Prepaid expenses and other current assets
      
      (503,838
      )
      
      22,238Accounts payable
      
      372,913
      
      
      570,351Customer deposits
      
      (56,030
      )
      
      (193,408
      )Other assets
      
      4,392
      
      
      110,015Accrued expenses
      
      372,362
      
      
      589,136NET CASH USED IN OPERATING ACTIVITIES
      
      (3,398,845
      )
      
      (1,844,517
      )CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
      
      (118,556
      )
      
      (69,244
      )Acquisition of businesses, net of acquired cash
      
      
      
      
      (2,186,611
      )NET CASH USED IN INVESTING ACTIVITIES
      
      (118,556
      )
      
      (2,255,855
      )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuances of bridge notes
      
      
      
      
      422,000Proceeds from sale of preferred stock, net of offering costs
      
      343,000
      
      
      3,876,460Proceeds from sale of common stock, net of offering costs
      
      3,772,955Proceeds from issuance of convertible notes
      
      500,000Payment of referral finance costs
      
      (75,000
      )Payments under lines of credit
      
      
      
      
      (250,000
      )Net proceeds under lines of credit
      
      150,000
      
      
      200,000Proceeds from note payable
      
      
      
      
      600,000Payments of notes payable
      
      (740,794
      )
      
      (675,205
      )Payments of capital lease obligations
      
      (11,928
      )
      
      (8,312
      )NET CASH PROVIDED BY FINANCING ACTIVITIES
      
      3,938,233
      
      
      4,164,943NET INCREASE IN CASH AND CASH EQUIVALENTS
      
      420,832
      
      
      64,571CASH AND CASH EQUIVALENTS- BEGINNING OF PERIOD
      
      127,373
      
      
      62,211CASH AND CASH EQUIVALENTS- END OF PERIOD
      $
      548,205
      
      $
      126,782Supplemental disclosuresCash paid for:Interest
      $
      141,953
      
      $
      85,368Income taxes
      
      
      
      $
      Acquisition of businessesAccounts receivable
      
      
      
      $
      689,001Inventory
      
      
      
      
      639,410Prepaid expenses and other current assets
      
      
      
      
      55,283Property and equipment
      
      
      
      
      226,743Goodwill
      
      
      
      
      2,750,696Customer relationships
      
      
      
      
      3,704,074Non-compete agreements
      
      
      
      
      500,000Tradenames
      
      
      
      
      100,000Security deposits
      
      
      
      
      27,591Line of credit
      
      
      
      
      (250,000
      )Accounts payable and accrued expenses
      
      
      
      
      (832,132
      )Customer deposits
      
      
      
      
      (292,692
      )Long-term debt assumed
      
      
      
      
      (354,199
      )Capital lease obligations
      
      
      
      
      (25,490
      )Less: common stock issued as purchase consideration
      
      
      
      
      (2,741,250
      )Less: acquisition notes issued to sellers of acquired businesses
      
      
      
      
      (1,973,500
      )Less: accrued acquisition costs
      
      
      
      
      (36,924
      )Cash used in acquisition of businesses (net of $148,283 of cash acquired)
      
      
      
      $
      2,186,611Accrued Offering Costs
      
      
      
      $
      481,407Bridge note warrants
      
      
      
      $
      72,000


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

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BEACON ENTERPRISE SOLUTIONS GROUP, INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements(Unaudited)

NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The condensed consolidated financial statements presented are those of Beacon Enterprise Solutions Group, Inc. (Beacon or the Company), which was originally formed in the State of Indiana on June
6, 2007 and combined with Suncrest Global Energy Corp. (Suncrest), a Nevada corporation, on December 20, 2007 in a share exchange transaction accounted for as a reverse merger and recapitalization of Beacon.

The Company is a unified, single source information technology and telecommunications enterprise that provides professional services and sales of information technology and telecommunications products to commercial
enterprises, state and local government agencies, and educational institutions.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2009 and 2008, and for the three and nine month periods then ended have been prepared in accordance with the accounting principles
generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (SEC) and on the same basis as
the annual audited consolidated financial statements. The unaudited condensed consolidated balance sheet as of June 30, 2009, condensed consolidated statements of operations for the three and nine months ended June 30, 2009 and 2008, and the
condensed consolidated statements of stockholders equity and cash flows for the nine months ended June 30, 2009 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which Beacon considers necessary for a
fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and nine months ended June 30, 2009 are not necessarily indicative of results to be expected for the year ending
September 30, 2009 or for any future interim period. The accompanying condensed consolidated financial statements should be read in conjunction with Beacons consolidated financial statements and notes thereto included in Beacons Annual
Report on Form 10-K, which was filed with the SEC on January 13, 2009.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Beacon Enterprise Solutions Group, Inc., a Nevada corporation (formerly Suncrest) and its wholly-owned subsidiaries the original Beacon formed in
Indiana in June 2007 and BH Acquisition Corp. All significant inter-company accounts and transactions have been eliminated in consolidation.

Revenue and Cost Recognition

The Company applies the revenue recognition principles set forth under the Securities and Exchange Commissions Staff Accounting Bulletin (SAB) 104 with respect to all of its revenue. Accordingly, the
Company

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recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectability is probable.

Business Telephone System and Computer Hardware Product Revenues -The Company requires its hardware product sales to be supported by a written contract or other evidence of a sale transaction that clearly
indicates the selling price to the customer, shipping terms, payment terms (generally 30 days) and refund policy, if any. Since the Companys hardware sales are supported by a contract or other document that clearly indicates the terms of the
transaction, and the selling price is fixed at the time the sale is consummated, the Company records revenue on these sales at the time at which it receives a confirmation that the goods were tendered at their destination when shipped FOB
destination, or upon confirmation that shipment has occurred when shipped FOB shipping point.

For product sales, the Company applies the factors discussed in Emerging Issues Task Force (EITF) issue 99-19 Reporting Revenue Gross as a Principal vs. Net as an Agent, (99-19), in
determining whether to recognize product revenue on a gross or net basis. In a substantial majority of these transactions, the Company acts as principal because the Company: (i) has latitude in establishing selling prices; (ii) takes title to the
products; and (iii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns. For these transactions, the Company recognizes revenue based on the gross amounts billed to customers.

Professional Services Revenue -The Company generally bills its customers for professional telecommunications and data consulting services based on hours of time spent on any given assignment at its hourly
billing rates. As it relates to delivery of these services, the Company recognizes revenue under these arrangements as the work is completed and the customer has indicated their acceptance of services by approving a work order milestone or
completion order. For certain engagements, the Company enters into fixed bid contracts, and recognizes revenue as phases of the project are completed and accepted by the client. We generated approximately $909,000 and $1,042,000 of
professional services revenue during the three months ended June 30, 2009 and 2008, respectively. We generated approximately $2,644,000 and $2,075,000 of professional services revenue during the nine months ended June 30, 2009 and 2008,
respectively.

Time and Materials Contracts Time and materials contracts, which generally include product sales and installation services, are billed when services are completed based on fixed labor rates plus materials
or based on the terms and conditions of the contract. A substantial majority of the Companys services in this category are completed in short periods of time. The Company may, on occasion, enter into long-term contracts in which it would be
appropriate to recognize revenue using long-term contract accounting such as the percentage of completion method. We generated revenue of approximately $2,101,000 and $1,314,000 from short-term time and materials contracts for the three
months ended June 30, 2009 and 2008, respectively. We generated revenue of approximately $4,378,000 and $1,964,000 from short-term time and materials contracts for the nine months ended June 30, 2009 and 2008, respectively.

Maintenance Contracts The Company, as a representative of various original equipment manufacturers, sells extended maintenance contracts on equipment it sells and also acts as an authorized servicing agent
with respect to these contracts. These contracts, which are sold as separate agreements from other products and services, are individually negotiated and are generally not bundled with other products and services. For maintenance contract sales, the
Company applies the factors discussed in EITF 99-19 in determining whether to recognize product revenue on a gross or net basis. Maintenance contracts are typically manufacturer maintenance contracts that are sold to the customer on a reseller
basis. Based on an analysis of the factors set forth in EITF 99-19, the Company has determined that it acts as an agent in these situations, and therefore recognizes revenue on a net basis. The Companys share of revenue that it earns from
originating these contracts is deferred and recognized over the life of the contract. Material and labor is charged for any service calls under these maintenance contracts on a time and materials basis which is charged to either the customer or
manufacturer. We recognized approximately $29,000 and $9,000 of net maintenance revenue during both the three months ended June 30, 2009 and 2008, respectively. We recognized approximately $95,000 and $35,000 of net maintenance
revenue during both the nine months ended June 30, 2009 and 2008, respectively.

For the nine months ended June 30, 2009 and 2008, revenue of approximately $0 and $166,000 was recorded related to certain contracts for which the customer requested the Company bill and hold materials to secure
the price of the materials from further price increases related to inflation in commodities underlying the materials.

Sales Tax- 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.

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Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could
differ materially 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. As of June 30, 2009, our reserve for bad debt was approximately
$130,000 and our reserve for obsolete inventory was approximately $97,000. As of June 30, 2009, management believes the reserve balances are sufficient. These reserves are included in accounts receivable, net and Inventory, net in the
accompanying June 30, 2009 condensed consolidated balance sheet, respectively.

Goodwill and Intangible Assets

Beacon accounts for goodwill and intangible assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets, (SFAS 142). SFAS 142
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.

Our amortizable intangible assets include customer relationships and covenants not to compete. These costs are being amortized using the straight-line method over their estimated useful lives of 15 and 2 years,
respectively. In accordance with SFAS 144 Accounting for the Impairment or Disposal of Long-Lived Assets, 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.

Management considered the Companys loss for the three months ended June 30, 2009 as part of an evaluation of the carrying amounts of the Companys intangible assets as of June 30, 2009 and has determined that
no impairment charges are necessary at this time.

Share-Based Payments

We account for stock-based compensation using Statement of Financial Accounting Standards (SFAS) No. 123(R), Accounting for Stock-Based Compensation (SFAS 123(R)). SFAS 123(R)
requires measurement of compensation cost for all share based payment awards based on their fair values on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is
determined using the Black-Scholes valuation model. The recognized expense is net of expected forfeitures and restatement of prior periods is not required. The fair value of restricted stock is determined based on the number of shares granted and
the fair value of the Companys common stock on date of grant.

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Net Loss Per Share

Net loss per share is presented in accordance with SFAS No. 128 Earnings Per Share. (SFAS 128) Under SFAS 128, basic net loss per share is computed by dividing net loss 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 reflects 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 three and nine months ended June 30, 2009 and 2008 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 June 30, 2009 are as follows:

TotalStock
      
      Common
      
      CommonOptions and
      
      Stock
      
      StockWarrants
      
      Equivalents
      
      EquivalentsSeries A Convertible Preferred Stock
      2,666,666
      
      5,527,484
      
      8,194,150Series A-1 Convertible Preferred Stock
      533,333
      
      1,180,620
      
      1,713,953Series B Convertible Preferred Stock
      350,000
      
      875,000
      
      1,155,274Common Stock Offering Warrants
      3,790,577
      
      
      
      3,790,577Placement Agent
      2,385,176
      
      
      
      2,385,176Affiliate Warrants
      600,000
      
      
      
      600,000Bridge Financings
      1,211,000
      
      1,166,666
      
      2,377,666Convertible Notes Payable
      50,000
      
      666,666
      
      716,667Compensatory
      300,000
      
      
      
      300,000Equity Financing Arrangements
      666,663
      
      
      
      666,663Employee Stock Options
      2,980,900
      
      
      
      2,980,90015,534,315
      
      9,416,436
      
      24,881,025


Subsequent to June 30, 2009, we issued warrants to purchase an aggregate of 163,708 shares of our common stock referred to as Common Stock Offering Warrants, warrants to purchase an aggregate of 35,050 shares of our common stock referred to as Placement Agent Warrants, warrants to purchase 66,666 shares of our common stock as compensation for an Equity Financing Arrangement and issued options to purchase 350,000 shares of common stock. Additionally 25,000 warrants were issued in conjunction with the August 2009 Bridge Note.

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Recently Adopted Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a market based framework for measuring fair value and expands
disclosure of fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 did not have a material effect on the Companys consolidated financial statements.

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). The guidance in SFAS 159 allows reporting entities to choose to
measure many financial instruments and certain other items at fair value. The objective underlying the development of this literature is to improve financial reporting by providing reporting entities with the opportunity to reduce volatility in
reported earnings that results from measuring related assets and liabilities differently without having to apply complex hedge accounting provisions, using the guidance in SFAS 133, as amended. The provisions of SFAS 159 are applicable to all
reporting entities and are effective as of the beginning of the first fiscal year that begins subsequent to November 15, 2007. The adoption of SFAS 159 did not have a material effect on the Companys condensed consolidated financial
statements.

In June 2007, the EITF reached a consensus on EITF Issue No. 06-11, Accounting for Income Tax Benefits on Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 addresses share-based
payment arrangements with dividend protection features that entitle employees to receive (a) dividends on equity-classified nonvested shares, (b) dividend equivalents on equity-classified nonvested share units, or (c) payments equal to the dividends
paid on the underlying shares while an equity-classified share option is outstanding, when those dividends or dividend equivalents are charged to retained earnings under SFAS 123R and result in an income tax deduction for the employer. A realized
income tax benefit from dividends or dividend equivalents that are charged to retained earnings are paid to employees for equity-classified nonvested shares, nonvested equity share units, and outstanding equity share options should be recognized as
an increase in additional paid in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb potential
future tax deficiencies on share-based payments for fiscal years beginning after December 15, 2007. The adoption of this pronouncement did not have a material impact on the condensed consolidated financial statements prospectively. SFAS 160 will
have an impact on the presentation and disclosure of the noncontrolling interests of any non wholly-owned businesses after the effective date of this pronouncement

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 Disclosure about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (SFAS
161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows.
This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company is evaluating the impact of this pronouncement on the Companys condensed consolidated financial position, results of
operations and cash flows. The adoption of this pronouncement did not have a material impact on the condensed consolidated financial statements.

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In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 is effective 60 days following the
SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The effective date for SFAS No. 162 is November
15, 2008. The adoption of SFAS No. 162 did not have a material impact on our financial position or results of operations.

In May 2009, the FASB issued FASB Statement No. 165, Subsequent Events,which establishes general standards of and accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or
are available to be issued. This FASB was effective for interim and annual periods ending after June 15, 2009. The Company has complied with the requirements of FASB 165.

Recent Accounting Pronouncements Requiring Adoption in Future Periods

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141R, Business Combinations (SFAS 141R),
which replaces SFAS No. 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business
combination, including noncontrolling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized
as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.
SFAS 141R will have an impact on the accounting for any businesses acquired after the effective date of this pronouncement.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  An Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary (previously referred to as minority interests). SFAS 160 also requires that a retained noncontrolling interest upon the deconsolidation of a subsidiary be initially measured at its
fair value. Upon adoption of SFAS 160, the Company would be required to report any noncontrolling interests as a separate component of stockholders equity. The Company would also be required to present any net income allocable to
noncontrolling interests and net income attributable to the stockholders of the Company separately in its consolidated statements of operations. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied

In December 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets (FSP 132(R)-1). FSP
132(R)-1 provides guidance on a plan sponsors disclosures about plan assets of defined benefit pension and postretirement plans. Required disclosures include information about categories of plan assets, fair value measurements of plan assets,
and significant concentrations of risk, as well as investment policies and strategies. FSP 132(R)-1 is effective for fiscal years ending after December 15, 2009. Except for additional disclosures, we do not expect the adoption of FSP132(R)-1 to have
an impact on our financial statements

In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP 115-2 and 124-2). FSP 115-2 and 124-2 amends the guidance
on other-than-temporary impairment for debt securities and modifies the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP is effective for interim and annual periods
ending after June 15, 2009. We are evaluating the impact of FSP 115-2 and 124-2 on our financial statements.

In April 2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value under Statement of Financial Accounting Standard No. 157, Fair Value Measurements, when there is an inactive market

12

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or the market is not orderly. This FSP is effective for interim and annual periods ending after June 15, 2009. We are evaluating the impact of FSP 157-4 on our financial statements.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1 and 28-1). This FSP requires disclosure about fair
value of financial instruments in interim periods, as well as annual financial statements. FSP 107-1 and 28-1 is effective for interim periods ending after June 15, 2009. We are evaluating the impact of this FSP on our financial statements.

In February 2008, SFAS 157 was amended by FSP 157-2, Effective Date of FASB Statement No. 157: Fair Value Measurements (FSP 157-2). As such, SFAS 157 (as amended) is partially effective for
measurements and disclosures of financial assets and liabilities for fiscal years beginning after November 15, 2007 and is fully effective for measurement and disclosure provisions on all applicable assets and liabilities for fiscal years beginning
after November 15, 2008. We are currently evaluating the impact of FSP 157-2 on our condensed consolidated financial statements.

In December 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock. This issue addresses the determination of whether an
instrument (or an embedded feature) is indexed to an entitys own stock, which is the first part of the scope exception in paragraph 11(a) of Statement 133. This issue is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact of EITF 07-5 on our condensed consolidated financial statements.

In June 2009, the FASB issued FASB Statement No. 166, Accounting for Transfers of Financial Assets  an amendment of FASB Statement No. 140to improve the reporting for the transfer of financial assets resulting from 1) practices that
have developed since the issuance of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,that are not consistent with the original intent and key requirements of that
Statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. This Statement must be applied
as of the beginning of each reporting entitys first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier
application is prohibited. The Company will review the requirements of FASB No. 166 and comply with its requirements. The Company does not expect that the adoption of this Statement will have a material impact on the Companys consolidated
financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R)to amend certain requirements of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entitiesto improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. The Statement is effective as of the beginning of
each reporting entitys first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is
prohibited. The Company will review the requirements of FASB No. 167 and comply with its requirements. The Company does not expect that the adoption of this Statement will have a material impact on the Companys consolidated financial
statements.

In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162.Under the Statement,
The FASB Accounting Standards Codification(Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all
then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. In the FASBs view, the issuance of this Statement and the Codification will not change GAAP, except for those nonpublic nongovernmental entities that must now apply the American
Institute of Certified Public Accountants Technical Inquiry Service Section 5100, Revenue Recognition, paragraphs 3876. The Company does not expect that the adoption of this Statement will have a material impact on the
Companys consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Companys condensed consolidated
financial statements upon adoption.

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NOTE 2  LIQUIDITY, FINANCIAL CONDITION AND MANAGEMENTS PLANS

We incurred a net loss of approximately ($4,050,000) and used approximately ($3,400,000) of cash in our operating activities for the nine months ended June 30, 2009. At June 30, 2009, our accumulated deficit
amounted to approximately ($13,819,000). We had cash of $548,205 and a working capital deficit of approximately $767,000 at June 30, 2009.

We experienced certain conditions that compressed our gross profit margins during the three and nine month periods ended June 30, 2009 principally related to competition and price pressure due to external market
conditions and our efforts to expand the business.

As widely reported, the financial markets have been experiencing significant disruption in recent months, including, among other things, volatility in securities prices, diminished liquidity and credit availability and
declining valuations. Among other risks we face, the current tightening of credit in financial markets may adversely affect our ability to obtain financing in the future, including, if necessary, to fund strategic acquisitions, and/or refinance our
debt as it comes due.

Our financing transactions to date include:

On July 25, 2008, we engaged a registered broker-dealer (the Placement Agent) in a private placement ( $.80 per unit) (the July
Common Offering) of up to 3,750,000 units (the Common Units), for an aggregate purchase price of $3,000,000, with each Common
Unit comprised of (i) one share of Common Stock, and (ii) a five year warrant to purchase one-half share of Common Stock (each, a
 Common
Offering Warrant ).  During the nine months ended June 30, 2009 we sold 367,099 units for net proceeds of $239,290 (gross proceeds
of $293,679 less offering costs of $54,389).

On October 29, November 17 and November 19, 2008, Beacon and Midian Properties, LLC, entered into short term credit facilities in the amounts of $100,000, $120,000 and $70,000 that the Company repaid as of
March 31, 2009. On March 27, 2009, Beacon and Midian, entered into a short term credit facility in the amount of $53,000, the principal of which was due and payable to the holder within seven (7) days of issuance along with a 1% origination fee.
The credit facility has been fully repaid.

On November 12, 2008, Beacon engaged a registered broker-dealer in a private placement of Common Stock and Warrants to raise $3.0 million of equity financing with an option to raise an additional $450,000 if the
offering is oversubscribed. At May 27, 2009 we closed the private placement at $3.4 million in gross proceeds.

On January 7, 2009, we entered into a note payable with a principal amount of $200,000 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 $100,000 note issued prior to December 31, 2008. 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.

On January 9, 2009, we entered into an equity financing arrangement with one of our directors that provided up to $2.2 million of additional funding, the terms of which provide for compensation of a one-time grant
of warrants to purchase 100,000 shares of common stock at $1.00 per share and ongoing grants of warrants to purchase 33,333 shares of common stock at $1.00 per share each month that the financing arrangement is in effect. The warrants have a
five year term. The commitment will be reduced on a dollar for dollar basis as we raise additional equity capital in private offerings, described above, and terminating upon completion of equity financing of $2.2 million, upon mutual agreement
or on January 1, 2010. On May 13, 2009, the director agreed to increase the equity financing arrangement to $1.8 million available in exchange for a continuation of the ongoing grants of warrants to purchase 33,333 shares of common stock at
$1.00 per share each month which is all available on August 11, 2009. Subsequently on August 10, 2009 an agreement was made to increase to $3.0 million.

On January 22, 2009, Beacon entered into $500,000 of convertible notes payable with a group of private investors (the Notes) facilitated by a broker/dealer. On July 15, 2009 $53,000 was repaid to a holder of the convertible notes
payable upon their request.

On March 31, 2009, we executed an extension of our demand note with First Savings Bank, the terms of which are substantially the same as the original agreement, with payments due May 15 and June 15, 2009 in the amount of $50,000 each plus
accrued interest. On July 24, 2009 an addition extension was executed through August 31, 2009.

On June 5, 2009, Beacon engaged a registered broker-dealer in a private placement of Common Stock and Warrants to raise $600,000 of equity financing with an option to raise an additional $400,000 if the offering is oversubscribed.  As of June 30, 2009 we sold 1,316,201 units for net proceeds of $891,200 (gross proceeds of $1,054,419 less offering costs of $163,219).

On July 9, 2009 we opted to increase the offering to $2.5 million.  On July 17, 2009 we issued an additional 327,416 units under the offering
for net proceeds of $235,740 (gross proceeds of $261,933 less offering costs of $26,193).

We believe that our currently available cash, the proceeds of our equity financing activities, the equity financing arrangement, further debt financing and refinancing, and funds we expect to generate from operations
will enable us to effectively operate our business and pay our debt obligations as they become due through April 1, 2010. However, we will require additional capital in order to execute our business plan. If we are unable to raise additional
capital, 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.

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NOTE 3  BUSINESS COMBINATIONSPhase I Acquisitions

On December 20, 2007, Beacon acquired four operating companies (i) ADSnetcurve, (ii) Bell-Haun Systems, Inc., (iii) CETCON, Inc., and (iv) Strategic Communications, Inc.

The aggregate purchase price paid by Beacon, inclusive of direct transaction expenses, in connection with the ADSnetcurve acquisition amounted to $1,647,548, including 700,000 shares of common stock valued at $.85 per share, $666,079 of cash, a $220,000 secured promissory note (ADS Note), and estimated direct transaction expenses of $172,345 net of $5,876 of cash acquired.

The aggregate purchase price paid by Beacon, inclusive of direct transaction expenses, in connection with the Bell-Haun acquisition amounted to $794,100, including 500,000 shares of common stock valued at $.85 per share, $155,048 of cash, notes payable (the Bell-Haun Notes) in the amount $119,000, and future payments in the amount of $50,000 related to non-compete agreements that are included in the direct transaction costs of $95,052.

The aggregate purchase price paid by Beacon, inclusive of direct transaction expenses, in connection with the CETCON acquisition amounted to $2,158,111, including 900,000 shares of common stock valued at $.85 per share, $700,000 of cash, a $600,000 secured promissory note (the CETCON Note) and direct transaction costs of $235,519 net of cash acquired of $142,407.

The aggregate purchase price paid by Beacon, inclusive of direct transaction expenses, in connection with the Strategic acquisition amounted to $2,208,526, including 1,125,000 shares of common stock valued at $.85 per share, $220,500 of cash, a $562,500 secured promissory note (the Strategic Secured Note), a $342,000 promissory note (the Strategic Escrow Note) and direct transaction expenses of $127,276.

The following table provides a breakdown of the purchase prices of each of the acquired businesses including the fair value of purchase consideration issued to the sellers of the acquired business and direct transaction expenses incurred by the Company in connection with consummating these transactions:

ADSnetcurve
      
      
      Bell-HaunSystems
      
      CETCON
      
      
      StrategicCommunications
      
      TotalConsiderationCash paid
      $
      666,079
      
      
      $
      155,048
      
      $
      700,000
      
      
      $
      220,500
      
      $
      1,741,627Direct acquisition costs
      
      172,345
      
      
      
      95,052
      
      
      235,518
      
      
      
      127,276
      
      
      630,191Net of cash acquired
      
      (5,876
      )
      
      
      
      
      
      (142,407
      )
      
      
      -
      
      
      (148,283
      )Cash used in acquisitions
      $
      832,548
      
      
      $
      250,100
      
      $
      793,111
      
      
      $
      347,776
      
      $
      2,223,535Notes payable
      
      220,000
      
      
      
      119,000
      
      
      600,000
      
      
      
      904,500
      
      
      1,843,500Common stock issued
      
      595,000
      
      
      
      425,000
      
      
      765,000
      
      
      
      956,250
      
      
      2,741,250$
      1,647,548
      
      
      $
      794,100
      
      $
      2,158,111
      
      
      $
      2,208,526
      
      $
      6,808,285


Under the purchase method of accounting, the total purchase price was allocated to each of the acquired entities, net tangible and identifiable intangible assets based on their estimated fair values as of December 20, 2007. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.

15

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ADSnetcurve
      
      
      Bell-HaunSystems
      
      
      CETCON
      
      
      StrategicCommunications
      
      
      TotalConsiderationAccounts receivable
      $
      151,208
      
      
      $
      71,335
      
      
      $
      466,458
      
      
      $
      
      
      
      $
      689,001Inventory
      
      -
      
      
      
      168,065
      
      
      
      
      
      
      
      450,536
      
      
      
      618,601Prepaid expenses and other current assets
      
      13,430
      
      
      
      34,522
      
      
      
      5,516
      
      
      
      1,815
      
      
      
      55,283Property and equipment
      
      47,500
      
      
      
      19,243
      
      
      
      20,000
      
      
      
      140,000
      
      
      
      226,743Goodwill
      
      524,396
      
      
      
      451,252
      
      
      
      994,007
      
      
      
      821,994
      
      
      
      2,791,649Customer relationships
      
      862,027
      
      
      
      843,760
      
      
      
      927,887
      
      
      
      1,240,400
      
      
      
      3,874,074Covenants not to compete
      
      100,000
      
      
      
      30,000
      
      
      
      200,000
      
      
      
      100,000
      
      
      
      430,000Security deposits
      
      21,541
      
      
      
      
      
      
      
      
      
      
      
      6,050
      
      
      
      27,591Line of credit obligation
      
      
      
      
      
      (250,000
      )
      
      
      
      
      
      
      
      
      
      
      (250,000
      )Accounts payable and accrued liabilities
      
      (40,103
      )
      
      
      (319,911
      )
      
      
      (55,278
      )
      
      
      (516,984
      )
      
      
      (932,276
      )Customer deposits
      
      (32,451
      )
      
      
      (44,914
      )
      
      
      (205,532
      )
      
      
      (9,795
      )
      
      
      (292,692
      )Capital lease obligations
      
      
      
      
      
      
      
      
      
      
      
      
      
      (25,490
      )
      
      
      (25,490
      )Long-term debt
      
      
      
      
      
      (159,252
      )
      
      
      (194,947
      )
      
      
      
      
      
      
      (354,199
      )Other acquisition liability
      
      
      
      
      
      (50,000
      )
      
      
      
      
      
      
      
      
      
      
      (50,000
      )$
      1,647,548
      
      
      $
      794,100
      
      
      $
      2,158,111
      
      
      $
      2,208,526
      
      
      $
      6,808,285Net tangible asset acquired (liabilities assumed)
      $
      161,125
      
      
      $
      (530,912
      )
      
      $
      36,217
      
      
      $
      46,132
      
      
      $
      (287,438
      )


Beginning December 21, 2007, the day immediately following the effective date of the transaction, the financial results of Strategic were consolidated with those of our business. The acquisition was accounted for under the purchase method of accounting.

NOTE 4  CONDENSED CONSOLIDATED BALANCE SHEET

Accounts Receivable

Accounts receivable consisted of the following:

As ofJune 30,2009
      
      
      As ofSeptember 30,2008(unaudited)Accounts receivable
      $
      2,587,804
      
      
      $
      1,555,162Less: Allowance for doubtful accounts
      
      (129,729
      )
      
      
      (50,000
      )Accounts receivable, net
      $
      2,458,075
      
      
      $
      1,505,162


Inventory
       Inventory consisted of the following:

As ofJune 30,2009
      
      
      As ofSeptember 30,2008(unaudited)Inventory (principally parts and system components)
      $
      816,313
      
      
      $
      793,462Less: reserve for obsolete inventory
      
      (133,594
      )
      
      
      (35,058
      )Less: current portion
      
      (522,109
      )
      
      
      (597,794
      )Inventory, non-current
      $
      160,610
      
      
      $
      160,610


16

---



Inventory includes parts and system components for phone systems that we use to fulfill repair, maintenance services and/or upgrade requirements. A portion of these items, which are stated at their net realizable value, are likely to be used after the next twelve months and are therefore presented as non-current inventory in the accompanying balance sheet. A portion of the inventory on hand at June 30, 2009 was acquired in the business combinations completed on December 20, 2007, which are stated at net realizable value using the purchase method of accounting.

Intangible Assets

The following table is a summary of the intangible assets acquired in business combinations as described in Note 3 as of June 30, 2009:

ADSnetcurve
      
      
      Bell-HaunSystems
      
      
      CETCON
      
      
      StrategicCommunications
      
      
      TotalConsiderationGoodwill
      $
      524,396
      
      
      $
      451,252
      
      
      $
      994,007
      
      
      $
      821,993
      
      
      $
      2,791,648ADSnetcurve
      
      
      
      Bell-HaunSystems
      
      
      
      CETCON
      
      
      
      StrategicCommunications
      
      
      
      TotalConsiderationCustomer relationships
      
      862,027
      
      
      
      843,760
      
      
      
      927,887
      
      
      
      1,240,400
      
      
      
      3,874,074Contracts not to compete
      
      100,000
      
      
      
      30,000
      
      
      
      200,000
      
      
      
      100,000
      
      
      
      430,000962,027
      
      
      
      873,760
      
      
      
      1,127,887
      
      
      
      1,340,400
      
      
      
      4,304,074Less: Accumulated amortization
      
      (188,994
      )
      
      
      (152,648
      )
      
      
      (267,839
      )
      
      
      (237,621
      )
      
      
      (847,102
      )Intangibles, net
      
      773,033
      
      
      
      721,112
      
      
      
      860,048
      
      
      
      1,102,779
      
      
      
      3,456,972


Amortization expense for the three months ended June 30, 2009 and 2008 was approximately $115,000 and $160,000 respectively. Amortization expense for the nine months ended June 30, 2009 and 2008 was approximately $346,000 and $341,000, respectively.

17

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Debt

Below is a summary of the current and non-current debt outstanding:

As ofJune, 302009
      
      
      As ofSeptember 30,2008(unaudited)Lines of Credit and Short-Term Notes
      $
      50,000
      
      
      $
      200,000Integra Bank
      
      467,199
      
      
      
      548,541Acquistion notes (payable to the sellersof the acquired businesses)ADSnetcurve
      
      102,008
      
      
      
      156,617Bell-Haun
      
      65,541
      
      
      
      119,000CETCON
      
      444,125
      
      
      
      515,627Strategic Secured Note
      
      335,405
      
      
      
      399,617Strategic Escrow Note
      
      
      
      
      
      72,6701,414,278
      
      
      
      1,812,072Less: current portion
      
      (491,829
      )
      
      
      (495,595
      )Non-current portion
      $
      922,449
      
      
      $
      1,316,477Bridge notes - Current
      $
      642,949
      
      
      $
      571,160Convertibile Notes - Current
      $
      491,375
      
      
      $
      


Lines of Credit and Short-Term Notes

On December 29, 2008, Beacon and First Savings Bank refinanced a short term line of credit that had matured and was converted into a demand note in the amount of $100,000. The Note was originally due in two payments of $50,000 each on January 15, 2009 and February 15, 2009 and bears interest at a rate of 5.00% per annum. On March 31, 2009, we executed an extension of this note due in two payments of $50,000 each on May 15, 2009 and June 15, 2009. On July 24, 2009 the remaining $50,000 balance of this note was extended until August 31, 2009.

Interest expense on short term debt and lines of credit amounted to approximately $1,700 and $0 of which we paid approximately $2,000 and $0 for the three months ended June 30, 2009 and 2008, respectively. Interest expense on short term debt and lines of credit amounted to approximately $17,500 and $0 of which we paid approximately $6,000 and $0 for the nine months ended June 30, 2009 and 2008, respectively.

On October 29, November 17 and November 19, 2008, Beacon and Midian Properties, LLC, entered into short term credit facilities in the amounts of $100,000, $120,000 and $70,000, respectively, the principal of which was due and payable to the holder within seven (7) days of issuance along with a 0.5% origination fee. These amounts were paid back in full. On March 27, 2009, Beacon and Midian, entered into a short term credit facility in the amount of $53,000, the principal of which was due and payable to the holder within seven (7) days of issuance along with a 1% origination fee. This credit facility has been fully repaid.

18

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Term Debt

During the nine months ended June 30, 2009 and 2008, Beacon paid approximately $398,000 and $495,000 in principal payments on our term debt. We recorded interest expense of approximately $85,000 and $7,600 for our term loans and paid approximately $19,000 and $0 for the nine months ended June 30, 2009 and 2008, respectively.

Bridge Notes

During the nine months ended June 30, 2009, the Bridge note holders agreed not to demand repayment of these Bridges Notes prior to June 30, 2010. The aggregate principal balance of these notes amounts to $700,000 as of June 30, 2009. Accordingly, the Bridge Notes are presented as current liabilities in the accompanying balance sheet at June 30, 2009.

We recorded contractual interest expense of approximately $5,700 and $6,240 for the three months ended June 30, 2009 and 2008, respectively. We recorded contractual interest expense of approximately $18,400 and 21,000 for the nine months ended June 30, 2009 and 2008, respectively. Further, we recorded aggregate accretion of the discount on these Bridge Notes which relates to warrants and the beneficial conversion feature of the notes of approximately $23,930 and $15,999 for the three months ended June 30, 2009 and 2008. We recorded aggregate accretion of the discount on these notes which relates to warrants and the beneficial conversion feature of the notes of approximately $71,790 and $24,533 for the nine months ended June 30, 2009 and 2008. The unamortized discount relating to the beneficial conversion feature amounts to $57,051 as of June 30, 2009.

The Bridge Notes contained a provision to earn additional warrants to purchase Beacon common stock during the term the note holder refrained from demanding repayment until the maturity of the notes. As the note holders have agreed unconditionally not to demand payment of the notes before June 30, 2010 and that date is after the original maturity of the Bridge Notes, these warrants are deemed to have been fully earned as of June 30, 2009. For the three and nine months ended June 30, 2009 we recorded non-cash interest expense of $56,840 for warrants earned in connection with the Bridge Notes as follows:

VestingDate
      
      QuantityVested
      
      ExpectedLife(days)
      
      StrikePrice
      
      Fair Valueof CommonStock
      
      VolatilityRate
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperWarrant
      
      Charge toInterestExpense10/15/2008
      
      14,000
      
      1,582
      
      
      $1.00
      
      
      $1.20
      
      66.34
      %
      
      0%
      
      2.90
      %
      
      
      $0.70
      
      
      $9,800.0011/15/2008
      
      14,000
      
      1,551
      
      
      $1.00
      
      
      $0.85
      
      66.34
      %
      
      0%
      
      2.33
      %
      
      
      $0.42
      
      
      $5,880.0011/20/2008
      
      196,000
      
      1,546
      
      
      $1.00
      
      
      $0.55
      
      66.34
      %
      
      0%
      
      1.94
      %
      
      
      $0.21
      
      
      $41,160.00


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 $500,000 in the aggregate of which the broker/dealer received a cash commission of $50,000 and a non-accountable expense reimbursement of $25,000. The proceeds were used to repay certain
other short term credit obligations and for working capital purposes. The Notes have a maturity date of July 21, 2009 and bear
interest at a fixed annual rate of 12.5% due monthly. The Notes have been extended by Beacon to January 21, 2010 and as such bear interest
 at a fixed annual rate of 15% from the original maturity date to the extended maturity date due monthly along with principal payments of
 16.67% of the principal due monthly from the original maturity date through the extended maturity date until paid in full. The Notes can
be prepaid at any time on or after March 21, 2009 in whole or
in part upon 30 days prior written notice to the holders without penalty. The holder may convert the Notes into shares of Beacon Common Stock, par value $0.001, at the rate of $0.75 per share in minimum increments of $5,000. Each of 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). The Notes contain certain provisions in the event of default that could result in acceleration of payment of the entire balance including accrued and unpaid interest. Acceleration of the Note in the event of default would also result in the interest rate increasing by 0.4166% per event. On July 15, 2009 $53,000 of the outstanding Convertible Notes was repaid.

19

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The fair value of the Note Warrants which amounted to approximately $20,500, was calculated using the Black-Scholes option pricing model. Assumptions relating to the estimated fair value of the Note Warrants are as follows: fair value of common stock of
$.80 on the commitment date of January 22, 2009; risk-free interest rate of 1.61%; expected dividend yield of zero percent; expected
life of 1,825 days through January 30, 2014; and current volatility of 66.34%. Accordingly, we recorded aggregate discounts of $74,334
to the face value of the Notes which includes the relative fair value of the warrants in accordance with Accounting Principle Board Opinion
No. 14 Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, (APB 14) and the effects of a beneficial conversion feature. The effective conversion price is $.72 per share calculated in accordance with the guidelines of EITF 00-27. The discount is being accreted
over the estimated life of the Notes of 6 months from the date of issuance on January 22, 2009. Accretion amounted to $65,710 through June 30, 2009 and is included as a component of interest expense in the accompanying Statement of Operations.

We evaluated the conversion options embedded in the Notes to determine (in accordance with SFAS 133 and EITF 00-19) whether they should be bifurcated from their host instruments and accounted for as separate derivative financial instruments. We determined that the debt is conventional debt as that term is defined in EITF 05-2. Accordingly the conversion feature is being accounted for as an embedded conversion option in accordance with EITF 98-5 and EITF 00-27.

NOTE 5  RELATED PARTY TRANSACTIONS

The Company has obtained insurance through an agency owned by one of its founding stockholders/directors. Insurance expense paid through the agency for the three months ended June 30, 2009 and 2008 was approximately $22,500 and $6,000 respectively, and $88,000 and $44,000 for the nine months ended June 30, 2009 and 2008, respectively, and is partly deferred and partly included in selling, general and administrative expense in the accompanying condensed consolidated statement of operations.

On May 15, 2008, subsequently amended on August 19, 2008, we entered into an equity financing arrangement with one of our directors that provided up to $3,000,000 of additional funding, 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 equity financing arrangement expired on December 31, 2008. Accordingly, we recognized $82,166 of interest expense for the three and nine months ended June 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:

DateEarned
      
      QuantityEarned
      
      ExpectedLife(days)
      
      StrikePrice
      
      Fair Valueof CommonStock
      VolatilityRate
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperWarrant
      
      Charge toInterestExpense10/15/2008
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $1.20
      66.34
      %
      
      0
      %
      
      2.90
      %
      
      
      $0.74
      
      
      $24,66611/15/2008
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $0.85
      66.34
      %
      
      0
      %
      
      2.33
      %
      
      
      $0.45
      
      
      $15,00012/15/2008
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $1.52
      66.34
      %
      
      0
      %
      
      1.50
      %
      
      
      $0.99
      
      
      $33,00012/31/2008
      
      16,667
      
      1,825
      
      
      $1.00
      
      
      $1.01
      66.34
      %
      
      0
      %
      
      1.55
      %
      
      
      $0.57
      
      
      $9,500


20

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On January 9, 2009, we entered into an equity financing arrangement with one of our directors that provided a commitment up to $2.2 million 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 May 13, 2009, the director agreed to increase the equity financing
 arrangement to $1.8 million available in exchange for a continuation of the ongoing grants of warrants to purchase 33,333 shares of common
 stock at $1.00 per share each month during the term of the agreement. The financing available under this
agreement will be reduced on a dollar for dollar basis by the amount of the proceeds of the ongoing private placements of the Companys securities or any additional placements of equity financing.

This arrangement will terminate upon the earliest of: April 1, 2010; the date on which an aggregate of $1.8 million of proceeds from the ongoing private placements of the Companys securities has been raised; acceleration of indebtedness of, or a judgment against, the Company in an amount greater than $25,000; the bankruptcy or insolvency of the Company; or the mutual consent of the Company and the director.

In addition, in the event that the equity financing arrangement is drawn upon by the Company, then the director will have the right to purchase shares of common stock from two of the founding stockholders at a purchase price of $0.001 per share.

We recognized $64,969 and $127,303 of interest expense for the three and nine months ended June 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:

DateEarned
      
      QuantityEarned
      
      ExpectedLife(days)
      
      StrikePrice
      
      Fair Valueof CommonStock
      
      VolatilityRate
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperWarrant
      
      Charge toInterestExpense1/9/2009
      
      100,000
      
      1,825
      
      
      $1.00
      
      
      $0.80
      
      66.34
      %
      
      0
      %
      
      1.51
      %
      
      
      $0.41
      
      
      $41,0002/9/2009
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $0.80
      
      66.34
      %
      
      0
      %
      
      1.99
      %
      
      
      $0.41
      
      
      $13,6673/9/2009
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $0.54
      
      66.34
      %
      
      0
      %
      
      1.90
      %
      
      
      $0.23
      
      
      $7,6674/9/2009
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $0.75
      
      66.34
      %
      
      0
      %
      
      1.90
      %
      
      
      $0.37
      
      
      $12,3335/9/2009
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $1.19
      
      66.34
      %
      
      0
      %
      
      2.09
      %
      
      
      $0.72
      
      
      $23,9706/9/2009
      
      33,333
      
      1,825
      
      
      $1.00
      
      
      $1.35
      
      66.34
      %
      
      0
      %
      
      2.73
      %
      
      
      $0.86
      
      
      $28,666


Under a marketing agreement with a company owned by the wife of Beacons president, we provide procurement and installation services as a subcontractor. We earned revenue of approximately $424,000 and $0 for procurement and installation services provided under this marketing agreement for the three months ended June 30, 2009 and 2008, respectively. For the nine months ended June 30, 2009 and 2008, we earned approximately $818,000 and $0 under this agreement.

21

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NOTE 6  COMMITMENTS AND CONTINGENCIESEmployment Agreements

The Company has entered into employment agreements with three of its key executives with no specific expiration dates that provide for aggregate annual compensation of $540,000 and up to $300,000 of severance
payments for termination without cause. In addition, the Company entered into employment agreements with five key employees of certain of the acquired businesses upon its completion of the business combinations described in Note 3, two of which were
terminated in January of 2009. Aggregate compensation under the three remaining agreements amounts to $380,000. The remaining agreements have no specified expiration date. These agreements also provide for aggregate severance payments of up to
$126,000 for termination without cause.

Operating Leases

The Company has entered into operating leases for office facilities in Louisville, KY, Columbus, OH and Cincinnati, OH. A summary of the minimum lease payments due on these operating leases exclusive of the
Companys share of operating expenses and other costs:

2009
      $
      52,6022010
      
      49,068$
      101,670


Placement Agent Warrants

Pursuant to a consulting agreement with a placement agent, we committed to issue warrants to purchase 1.5 million shares of common stock at exercise prices ranging from $1.00 to $2.50 per share. As the business
of the placement agent is in transition, we are uncertain as to the distribution of these warrants to the parties involved. Accordingly, we have not issued these warrants as of June 30, 2009 and are uncertain as to whether any services will be
provided to us under this agreement or the timing of the issuance of any warrants at this time.

Engagement of Investor Relations Firm

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 and fund managers. In exchange for providing
such services, the firm will receive $10,000 per month for the duration of the agreement, 10,000 shares of
our restricted common stock per month for the first six months and 15,000 shares of our restricted common
stock per month for the remaining six months for an aggregate of 150,000 shares of restricted stock. Through
June 30, 2009 we paid $50,000 and issued 50,000 shares of restricted common stock, with aggregate fair value
of $43,800, under the terms of this agreement.    The common stock issued under this agreement was recorded
as professional fees expense using the measurement principles enumerated under EITF 96-18 Accounting for
Equity Instruments that are issued to Other than Employees for Acquiring or in Conjunction with Selling Goods
or Services (EITF 96-18). The contract has a 12 month term and can be terminated upon 30 days notice.

On June 5, 2009,   our Board of Directors authorized us to issue an additional 150,000 shares of common
stock to the same investor relations firm subject to the attainment of certain performance conditions, to
be performed within a six month time period ending November 5, 2009.  On June 30, 2009,  10,000 shares with
an aggregate fair value of $13,700 were deemed to have been earned as of the date of issuance.  The common
stock issued was recorded as professional fees expense using the measurement principles enumerated under
EITF 96-18.

On March 13, 2009, we engaged an investor relations firm to further 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 and fund managers. In exchange for providing such services, the firm will receive $10,000 per month for the duration of the agreement. Concurrent with executing the agreement, we paid $10,000 and issued 200,000
shares of fully vested and non-forfeitable restricted common stock with a fair value of $80,000 on date of grant recorded as professional fees expense using the measurement principles enumerated under EITF 96-18.   The term of the agreement is 12 months, terminable upon 30 days notice after 6 months.

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NOTE 7  STOCKHOLDERS EQUITYAuthorized Capital

The Company 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 Series A and A-1 Preferred Stock 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 and A-1 preferred shares, subsequently adjusted to $.80 per share. The Series B Preferred Stock is
convertible into common stock at any time, at the option of the holder at a conversion price of $.90 per share. The Series A, A-1 and B are also automatically convertible into shares of our common stock, at the then applicable conversion price
upon the closing of a firm commitment underwritten public offering of shares of our common stock yielding aggregate proceeds of not less than $20 million or under certain other circumstances when the trading volume and average trading prices of
the stock attain certain specified levels. 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.

Cumulative contractual dividends with respect to all preferred shares amounted to $521,117, $88,999, and $21,354 as of June 30, 2009 for the Series A, A-1, and B preferred, respectively. During the nine months ended June 30, 2009
dividends of $489,413 and $85,465 were paid in additional preferred shares for the Series A and A-1 respectively. The net result consists of accrued but unpaid dividends in the amounts of $31,704, $3,534 and $21,354 for the
Series A, A-1, and B preferred. Contractual dividends recorded as an increase to the net loss available to the common stockholders amounted to $160,264 and $411,416 for the three and nine months ended June 30, 2009, respectively.

The Series A, A-1 and B Preferred Stock designation contains certain restrictive covenants including restrictions against: the declaration of dividend distributions to common stockholders; certain mergers,
consolidations and business combinations; the issuance of preferred shares with rights or provisions senior to each of the Series A, A-1, and B Preferred Stock; and restrictions against incurring or assuming unsecured liabilities or indebtedness
unless certain minimum performance objectives are satisfied. The Series A Preferred Stock is senior to the Series A-1 Preferred Stock, and the Series A and A-1 are senior to the Series B Preferred Stock.

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The Series A, A-1 and B Preferred Share also feature a right of redemption in the event of liquidation or change in control. The redemption feature provides for payment of 125% of the face value and 125% of any accrued
unpaid dividends in the event of bankruptcy, change of control, or any actions to take the Company private. The amount of the liquidation preference was amounted to $5,221,646, $1,111,248, and $902,068 for the Series A, A-1, and B
preferred shares, respectively, as of June 30, 2009.

The Company, by resolution of the Board of Directors, may designate additional series of Preferred Stock (blank check preferred stock) and to fix or alter the rights, preferences, privileges and restrictions
granted to or imposed upon such blank check preferred stock, and the number of shares constituting any such series of such blank check preferred stock. The rights, privileges and preferences of any such blank check preferred stock shall be
subordinate to the rights, privileges and preferences to the existing Series A and Series A-1 Preferred Stock. The Series B Preferred Stock was issued as blank check preferred stock and as such is subordinate to the rights, privileges
and preferences of the Series A and Series A-1 Preferred Stock.

The Board of Directors may also increase or decrease the number of shares of any series (other than the Series A Preferred Stock or the Series A-1 Preferred Stock), prior or subsequent to the issue of that series, but
not below the number of shares of such series then outstanding.

As described in Note 1, the Company applies the classification and measurement principles enumerated in EITF Topic D-98 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. The board of directors is then required to submit proposals to enter into these types of transactions to its stockholders for their approval by majority vote. The preferred stockholders do not currently (i) control or have representation on
the Companys Board of Directors and/or (ii) have sufficient voting rights to control a 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 the Company in its sole discretion. Based on these provisions, we classified the Series A, A-1, and B preferred shares as permanent equity in the accompanying condensed consolidated balance sheet because the
liquidation events are deemed to be within the Companys sole control in accordance with the provisions of EITF Topic D-98. We evaluate our convertible preferred stock at each reporting date for appropriate balance sheet classification.

On May 8, 2009 the Series B Preferred Shareholder relinquished his right to full ratchet dilution in exchange for a reduction of the contractual conversion price from $.90 to $.80 per common share. This
conversion price adjustment resulted in a beneficial conversion feature deemed dividend in the amount of $87,500, which was recognized in the three and nine months ended June 30, 2009.

Additionally, the Company agreed to adjust the exercise price of the Series B warrants from $1.20 to $1.00 per share, for which the company recorded an additional deemed dividend in the amount of $11,865
during the nine months ended June 30, 2009.

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Preferred Stock Dividend

On October 7, 2008, January 9, 2009 and April 9, 2009, the Company elected to pay the contractual dividends due the Series A, A-1, and B preferred stock holders in additional shares of preferred stock. The Company
follows the guidelines of EITF 00-27 when accounting for pay-in-kind dividends that are settled in convertible securities with conversion features. For the three and nine months ended June 30, 2009 the Company recorded deemed dividends of $0 and
$87,774, respectively for the beneficial conversion features and dividends paid in kind. The deemed dividends represent the difference between the conversion price of the conversion option of $0.75 per share and the fair value of the common
stock of $1.24 per share on the date of election which is considered the commitment date. For the three months ended June 30, 2009 no deemed dividends were recorded because the conversion price of $0.75 per share was equal to or greater than
the fair value of the commons stock on the date of election. During the nine months ended June 30, 2009 the following shares were issued in settlement of the accrued dividends: 489 Series A and 85.465 Series A-1 shares.

Preferred Stock Conversion to Common Stock

On January 29, 2009, holders of our Preferred Stock elected to convert 343.8 shares of Series A and A-1 Preferred Stock into 458,397 shares of our common stock.

Offerings of Common Stock

On July 25, 2008, we engaged a registered broker-dealer (the Placement Agent) in a private placement( $.80 per unit) (the July Common Offering) of up to 3,750,000 units (the 
Common Units), for an aggregate purchase price of $3,000,000, with each Common Unit comprised of (i) one share of Common Stock, and (ii) a five year warrant to purchase one-half share of Common Stock (each, a  Common
Offering Warrant).

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 $3,000,000, 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  nine months ended June 30, 2009 an
anti-dilution provision of the stock offering of resulted in a requirement to issue an additional 148,929 and 285,139 shares of common stock at par value $0.001 or  $285.14.

On June 10, 2009 Beacon issued a Private Placement Memorandum of up to $600,000 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 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. All of the warrants issued in the June 2008, November 2008 and June 2009 private placements feature standard anti dilution provisions for stock splits, stock dividends and similar types of recapitalization events. These warrants also feature weighted average price protection for subsequent issuances of equity securities at prices more favorable than the exercise price stipulated in these warrants.  In addition, the Company has agreed to use its best efforts to file a registration statement for the resale of any all 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 nine months ended June 30, 2009, we sold an aggregate of 5,960,350 Common Units, under all
of these offerings, to accredited investors for net proceeds of $3,772,955 (gross proceeds of $4,769,738
less offering costs of $996,783). Offering costs included fees paid to the placement agent of $769,745,
a fee for the successful completion of the placement of $135,548 paid to a consultant and $91,490 legal
and related fees in addition to warrants to purchase 2,975,466 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.

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Exchange of Notes for Series B Preferred Stock

On January 7, 2009, we entered into a note payable with a principal amount of $200,000 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 $100,000 note issued prior to December 31, 2008. 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.

NOTE 8  INCOME TAXES

As of September 30, 2008, we had incurred net operating losses since inception totaling $3,504,977 which expire in 2023 through 2028. After considering all available evidence, we fully reserved for our deferred tax
assets since it is more likely than not that the benefits of such deferred tax assets will not be realized in future periods. The acquired net operating losses are subject to internal revenue code section 382 and similar state income tax
regulations, which could result in limitations on the amount of such losses that could be recognized during any taxable year.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48), which we adopted effective June 6, 2007
(date of inception). FIN 48 requires companies to recognize in their financial statements the impact of a tax position if that position is more likely than not of being sustained on audit based on the technical merits of the position. FIN 48
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. FIN 48 provides guidance on derecognition, classification,
interest, and penalties, accounting in interim periods, and disclosure. For the three and six months ended March 31, 2009 we had no material uncertain 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 of being 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.

NOTE 9  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 shareholder approval, referred to as the 2008 Incentive Plan. The 2008 Incentive Plan was approved by the shareholders 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. Of the 1,000,000 shares authorized, 950,000 are available for future grants as of June 30, 2009.

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On October 7, 2008, January 9, 2009, May 8, 2009 and June 5, 2009, our Board of Directors authorized Beacon to grant employee stock options to purchase 25,000 and 285,000 and 2,500,000 and 50,000 shares of common stock, respectively, of which the 50,000 issued on June 5, 2009 were issued under the provisions of our Long Term Incentive Plan.

In accordance with SFAS 123(R), we recognized non-cash share-based compensation expenses as follows:

Three MonthsEndedJune 30,2009
      
      Three MonthsEndedJune 30,2008
      
      Nine MonthsEndedJune, 302009
      
      Nine MonthsEndedJune 30,2008Non-Cash Share-Based Compensation ExpenseRestricted Stock
      $
      45,101
      
      $
      44,610
      
      $
      134,321
      
      $
      221,593Stock Options
      
      121,839
      
      
      6,306
      
      
      183,707
      
      
      6,662Total Stock Compensation Expense
      $
      166,940
      
      $
      50,916
      
      $
      318,028
      
      $
      228,255


We determine the fair value of our stock options using the Black-Scholes option-pricing model. In determining the expected term, we separate groups of employees that have historically exhibited similar behavior with regard to option exercises and post-vesting cancellations. The option-pricing model requires the
input of subjective assumptions, such as those listed below. The volatility rates are based on historical stock prices of similarly
 situated companies and expectations of the future volatility of the Companys common stock. The expected life of options granted
are based on historical data, which, as of June 30, 2009 is a partial option life cycle, adjusted for the remaining option life cycle by
assuming ratable exercise of any unexercised vested options over the remaining 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 fair values of options granted and outstanding were estimated on the date of grant using the following assumptions:

DateEarned
      
      QuantityIssued
      
      ExpectedLife(days)
      
      StrikePrice
      
      Volatility
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperOption
      
      Share BasedCompensation3/26/2008
      
      90,000
      
      2,373
      
      
      $1.20
      
      66.34
      %
      
      
      0%
      
      2.55
      %
      
      
      $0.72
      
      $64,9805/8/2008
      
      30,900
      
      2,373
      
      
      $1.00
      
      66.34
      %
      
      
      0%
      
      2.99
      %
      
      
      $0.64
      
      $19,77610/7/2008
      
      25,000
      
      2,373
      
      
      $1.24
      
      66.34
      %
      
      
      0%
      
      2.45
      %
      
      
      $0.79
      
      $19,7501/9/2009
      
      285,000
      
      2,373
      
      
      $0.80
      
      66.34
      %
      
      
      0%
      
      1.99
      %
      
      
      $0.50
      
      $142,5005/8/2009
      
      2,500,000
      
      2,373
      
      
      $1.19
      
      66.34
      %
      
      
      0%
      
      2.09
      %
      
      
      $0.75
      
      $1,875,0006/5/2009
      
      50,000
      
      2,373
      
      
      $1.37
      
      66.34
      %
      
      
      0%
      
      2.85
      %
      
      
      $0.95
      
      $47,500


The closing price of the Companys common stock was $1.65 per share on June 30, 2009. The
Company has 108,967 fully vested  stock options with a weighted average exercise  price of
$.90  per share and an aggregate intrinsic value of approximately $92,000 as of June 30, 2009.
The  weighted average exercise of options granted during the nine month periods ended June 30,
2009 and 2008 amounted to $1.15 per share in each reporting period. The aggregate intrinsic
value of options outstanding amounts to approximately $1,400,000 as of June 30, 2009.

Shares granted vest 33% annually as of the anniversary of the grant through 2011 and carry a ten year contractual term. As of June 30, 2009, there was approximately $2,187,905 in non-cash share-based compensation cost related to non-vested awards not yet recognized in our condensed consolidated statements of operations. This cost is expected to be recognized over the weighted average remaining vesting period of 2.3 years. Options to purchase an aggregate of 115,300 shares of common stock were vested at June 30, 2009. For the three and nine months ended June 30, 2009, no shares were forfeited and no options were exercised.

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Restricted Stock

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 $666,873 to our president in exchange for $156. 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. We recognized $45,101 and $44,610 of share-based compensation expense during the three months
ended June 30, 2009 and 2008, respectively, in connection with this grant. We recognized $134,320 and $221,593 of share-based compensation expense during the nine months ended June 30, 2009 and 2008, respectively, in connection with this
grant. Unamortized compensation under this arrangement amounted to $266,192 as of June 30, 2009 and will be amortized over the remaining vesting period through December 20, 2010. The shares vest immediately upon our termination without cause or
the Executives resignation if in response to certain defined actions taken by us adverse to Executives employment which constitute good reason as defined in the Executives employment agreement. In the event of termination for
cause, or resignation without good reason, we have the right to repurchase any unvested shares for nominal consideration.

Beacon Solutions 401(k) Plan

During the three months ended December 31, 2007, we established a retirement benefits plan, referred to as the Beacon Solutions 401(k) Plan, intended to meet the requirements of section 401(k) of the Internal Revenue
Code of 1986. Under the Beacon Solutions 401(k) Plan, employees may contribute up to the maximum allowable under federal law, and we will match up to 100% of the first 1% contributed by the employee and up to 50% of the next 5% contributed by the
employee, in cash subject to a vesting schedule based on years of service. As of November 30, 2008, we adopted a profit sharing match and terminated the automatic matching contribution. Our board of directors or the compensation committee will
determine the match based on previously defined operating targets. All employees are eligible to enroll on date of hire. Employees are automatically enrolled at 3% employer contribution but can change their election at any time.

Total contributions under the Beacon Solutions 401(k) Plan, recorded as salaries and benefits expense, totaled approximately $0 and $36,900 for the three and nine months ended June 30, 2009. Total contributions
under the Beacon Solutions 401(k) Plan, recorded as salaries and benefits expense, totaled $36,883 and $77,918 for the three and nine months ended June 30, 2008, respectively.

NOTE 10  SUBSEQUENT EVENTS

On July 29, 2009, Beacon, through its wholly owned subsidiary BESG Ireland Ltd., acquired 100% of the outstanding stock of SymbioTec Solution AG, a professional services company located in Switzerland, in exchange for
400,000 shares of Beacon Common Stock with a fair value of $1.19 per share or $476,000 in the aggregate based on the July 29, 2009 closing price. In addition to the consideration provided at closing, the sellers, who will continue to manage
the business on a day to day basis, have the opportunity to earn up to an additional 400,000 shares of Beacon Common Stock if the continuing operations achieve certain performance targets measured in pre-tax income during the two years following the
anniversary of the transaction. SymbioTec Solution AG has performed services for several of our large customers providing instant synergies. The acquisition provides Beacon with a base of operations for our customers located throughout Europe, the
Middle East and Africa, commonly referred to as EMEA.

On July 24, 2009, an additional extension was executed through August 15, 2009 to pay the remaining balance on a short term line of credit with First Savings Bank that had matured and was converted into a demand note in
the amount of $100,000. The Note was originally due in two payments of $50,000 each on January 15, 2009 and February 15, 2009 and bears interest at a rate of 5.00% per annum. On March 31, 2009, we executed an extension of this note due in
two payments of $50,000 each on May 15, 2009 and June 15, 2009. On July 24, 2009 the remaining $50,000 balance of this note was extended until August 31, 2009.

The Convertible Notes Payable have been extended by Beacon to January 21, 2010 and as such bear interest at a fixed annual rate of 15% from the original maturity date to the extended maturity date due monthly along with
principal payments of 16.67% of the principal due monthly from the original maturity date through the extended maturity date until paid in full. On July 15, 2009 $53,000 was repaid to a holder of the convertible notes payable upon their
request

On August 7, 2009, we entered into a non-interest bearing Bridge Note arrangement with one of our directors in the amount of $500,000 with a payment date of September 6, 2009 and a commitment fee of $25,000 paid
on August 10, 2009. The Bridge Note also contained 25,000 warrants immediately exercisable into common shares at $1.00.

On August 10, 2009,  we renewed the existing equity financing arrangement with one of our directors that
provides a commitment up to $3.0 million of additional funding. 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. The financing available under this agreement will be
reduced on a dollar for dollar basis by the amount of the proceeds of the ongoing private placements of the
Companys securities or any additional placements of equity financing.  This arrangement will terminate July
1, 2010.

On July 9, 2009,  the Board of Directors authorized a total of 350,000 Grants of Options to Purchase
Common Stock to two new key employees, these options will be subject to a standard three year vesting.

On July 29, 2009,  we issued a Supplement (No. 1), to the Private Placement Offering Memorandum dated June
10, 2009 which increased the allowable proceeds to $2,500,000.   On July 17, 2009, the Company sold an aggregate
of 327,416 Common Units for an aggregate purchase price of $261,933. Concurrently, the Placement Agents earned
aggregate cash commissions of $26,193 and warrants to purchase an aggregate of 35,050 shares of Common Stock.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Beacon Enterprise Solutions Group, Inc.and subsidiaries (collectively the Company) is a unified, single source information technology and telecommunications enterprise that provides
professional services and sales of information technology and telecommunications products to mid-market commercial businesses, state and local government agencies, and educational institutions. 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 quarterly report on Form 10-Q, 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 the
Companys current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company
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:

- general economic and business conditions, such as the current global recession, that may affect demand for our services and products and the ability of our customers to pay for such services and products;
- effects of competition in the markets in
which the Company operates;
- liability and other claims asserted against the Company;
- ability to attract and retain qualified personnel;
- availability and terms of capital;
- loss of significant contracts or reduction in revenue 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 the Companys actual results to differ materially from the results contemplated by the forward-looking statements, please refer to Item 2.01
Risk Factors in the Companys Current Report on Form 8-K filed on December 28, 2007. 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, the Company assumes no responsibility for updating forward-looking statements to reflect unforeseen or other events after the date of this report.

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Overview

We were formed for the purpose of acquiring and consolidating regional telecom businesses and service platforms into an integrated, national provider of high quality voice, data and VOIP communications to small and
medium-sized business enterprises (the MBE Market). Our business strategy is to acquire companies that will allow us to serve the MBE Market on an integrated, turnkey basis from system design, procurement and installation through all
aspects of providing network service and designing and hosting network applications.

Beacon was a development stage enterprise with no operating history until the completion of the share exchange transaction in which the shareholders of Beacon become the majority owners of Suncrest (Share Exchange
Transaction) completed on December 20, 2007. Concurrent with the Share Exchange Transaction, we also completed the acquisition of four complementary information technology and telecommunications businesses (the Phase I
Acquisitions) described below.

Acquisition Growth Strategy

Phase I Acquisitions have been integrated into a single organization with a cohesive internal infrastructure to scale the business. Consistent with our operating plan, upon our successful integration of these operations
and the development of organic growth described below, we expect to pursue our phase II acquisition strategy, financed by additional debt or equity financings, by exploring acquisition targets to build around our three state operating hub to grow
Beacon into a national and international information technology and telecommunications provider.

Infrastructure Management Services

Our Infrastructure Management Services are becoming an emerging revenue generator for our business. Infrastructure management services is the management of a customers physical layer or Layer 1 in the Open Systems
Interconnection (OSI), and are defined by the combination and integration of our infrastructure design, installation, telecommunications, and information technology management services. By combining the integrated disciplines into one
service, we are able to maintain, manage and document the complete low voltage infrastructure of our customers, a value added service that we believe reduces their cost of these services by up to 30% or more.

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One of the offerings under this program is our Innovative, Intelligent, Installation, Moves, Adds, and Changes, or I3MAC Services, which is an internally developed system that supports our network infrastructure
management service offering including: Physical layer assessment; Network design and engineering; Bid specification; Materials, labor and logistics; Documentation, implementation and ongoing management of the physical network including all moves,
adds, and changes. Today companies are asked to achieve more with fewer resources than ever before.

We have signed a contract to provide our I3MAC Services to one of the worlds premier pharmaceutical and consumer health products companies, headquartered in New Jersey, and operating over 250 businesses. Under the
terms of the contract, we provide, as requested, all moves, adds and changes for low voltage infrastructure, including cabling, at the manufacturers companies across North America, Canada and Puerto Rico.

As we ramp up our operations to provide services to this client, we hope to establish a national presence to leverage with other national customers who may be able to take advantage of the savings we expect to provide
with this value added service. In addition, we are exploring strategic partnerships with other OSI Layer 1 service providers to expand our operations internationally.

Results of OperationsFor the three and nine months ended June 30, 2009 and 2008

Revenue for the three months ended June 30, 2009 and 2008, was approximately $3,039,000 and $2,365,000 respectively, consisting of approximately $2,100,600 and $1,314,000 of business telephone system
installations and time and materials services for system maintenance, $29,000 and $9,000 of maintenance contracts related to the installations and $909,000 and $1,042,000 of engineering and design and customer specific application
design services. Revenue for the nine months ended June 30, 2009 and 2008, was approximately $7,118,000 and $4,073,000 respectively, consisting of approximately $4,378,000 and $1,964,000 of business telephone system installations and
time and materials services for system maintenance, $95,000 and $35,000 of maintenance contracts related to the installations and $2,644,000 and $2,075,000 of engineering and design and customer specific application design.

Cost of goods sold for the three months ended June 30, 2009 and 2008 amounted to approximately $2,118,000, and $1,445,000, respectively and consisted of approximately $1,117,000 and $846,000 of equipment
and materials used in business telephone systems installations and parts used in services, $517,000 and $363,000 of direct labor, $99,000 and $1,700 of direct project related costs, and $385,000 and $227,000 of subcontractor
fees incurred in providing all of our services. For the nine months ended June 30, 2009 and 2008, Cost of goods amounted to approximately $4,826,000, and $2,319,000, respectively and consisted of approximately $2,548,000 and
$1,147,000 of equipment and materials used in business telephone systems installations and parts used in services, $1,432,000 and $808,000 of direct labor, $279,000 and $123,000 of direct project related costs, and $568,000
and $241,000 of subcontractor fees incurred in providing all of our services

For the three months ended June 30, 2009 we experienced an increase in sales of $674,000. This growth was across all service lines however, our gross profit margin contracted by of 9% for the three months ended June
30, 2009 versus 2008 principally due to increases in material costs of $360,000 and the use of subcontractor resulting in additional costs of $158,000. For the nine months ended June 30, 2009 sales increased $3,045,000 with margin
contraction of 11% resulting from increases in material costs of $1,400,000, direct labor of $624,000 (from utilization of our in-market professional service personnel) and subcontractor costs of $327,000 primarily used during the I3MAC
growth period.

33

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We believe that the conditions compressing our gross profit margins during the three months and nine months ended June 30, 2009 and 2008 were a result of the rapid sales ramp up and expansion. Going forward we expect
gross profit margins to stabilize as service mix becomes fully developed and entrenched.

Salaries and benefits of approximately $1,186,000 and $1,117,000 for the three months ended June 30, 2009 and 2008 respectively, consisted of salaries and wages of approximately $705,000 and $789,000,
commissions of $135,000 and $7,000, benefits of $82,000 and $102,000, payroll taxes of $97,000 and $91,000, and the company match of employee contributions to the 401k plan of $0 and $33,000. Non-cash share-based
compensation of $167,000 and $95,000 related to restricted stock and stock options that vested during the period is included in salaries and wages. For the nine months ended June 30, 2009 and 2008 respectively, salaries and benefits of
approximately $3,109,000 and $2,623,000, consisted of salaries and wages of approximately $2,081,000 and $1,939,000, commissions of $248,000 and $43,000, benefits of $295,000 and $267,000, payroll taxes of
$280,000 and $242,000 and the company match of employee contributions to the 401k plan of $37,000 and $97,000. Non-cash share-based compensation of $320,000 and $95,000, related primarily to restricted stock that vested
during the nine months ended June30, 2009 and 2008, is included in salaries and wages.

Selling, general and administrative expense for the three months ended June 30, 2009 and 2008
of approximately $895,000 and $532,000 include approximately $441,000 and $104,000 of accounting,
investor relations and professional fees, charge for bad debt expense of $35,000 and $6,000,
$45,000 and $45,000 of rent expense, $78,000 and $73,000 of telecommunications and data related
expenses, $78,000 and $88,000 of travel related expenses, and approximately $57,000 and $67,000 of
expenses related to business insurance, $48,000 and $12,000 of miscellaneous outside services and
$113,000 and $137,000 of other administrative services.  Selling, general and administrative expense
for the nine months ended June, 2009 and 2008 of approximately $2,117,000 and $1,590,000 include
approximately $992,000 and $342,000 of accounting, investor relations and professional fees, charge
for bad debt expense of $106,000 and $6,000, $135,000 and $113,000 of rent expense, $180,000 and
$104,000 of telecommunications and data related expenses, $167,000 and $153,000 of travel related
expenses, and approximately $130,000 and $104,000 of expenses related to business insurance, $127,000
and $116,000 of miscellaneous outside services and $280,000 and $655,000 of other administrative services.

Interest expense of approximately $222,000 and $120,000 for the three months ended June 30, 2009 and 2008, includes interest related to our Bridge Notes in addition to the notes payable issued in connection with
our Phase I Acquisitions. Non-cash interest expense related to the accretion of the Bridge Notes to face value, warrants issued in exchange for certain financing arrangements, and the vesting of contingent bridge warrants was approximately
$49,000 and $61,000 for the three months ended June 30, 2009 and 2008 and $65,000 and $0 related to warrants earned in connection with Put Right. For the nine months ended June 30, 2009 and 2008 Interest expense of approximately
$662,000 and $322,000, includes interest related to our Bridge Notes in addition to the notes payable issued in connection with our Phase I Acquisitions. Non-cash interest expense related to the accretion of the Bridge Notes to face value,
warrants issued in exchange for certain financing arrangements, and the vesting of contingent bridge warrants was approximately $327,000 and $171,000 and $209,000 and $0 related to warrants earned in connection with Put Right

Contractual dividends on our Series A, A-1, and B Preferred Stock amounted to approximately $160,000 and 93,000 for the three months ended June 30, 2009 and 2008. Contractual dividends on our Series A, A-1, and B
Preferred Stock amounted to approximately $411,000 and $100,000 for the nine months ended June 30, 2009 and 2008. These amounts are included in accrued expenses as of June 30, 2009 and 2008. Deemed dividends related to the beneficial
conversion feature embedded in our Series A, A-1, and B Preferred Stock of approximately $0 and $60,000 was recognized during the three months ended June 30, 2009 and 2008. Deemed dividends related to the beneficial conversion feature
embedded in our Series A, A-1, and B Preferred Stock of approximately $187,000 and $3,956,000 was recognized during the nine months ended June 30, 2009 and 2008.

34

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Liquidity and Capital Resources

For the nine months ended June 30, 2009 and 2008, net cash used in operating activities of approximately $3,399,000 and $1,844,000 consisted primarily of a net loss of approximately ($4,050,000) and
($3,160,000) and was impacted by an increase in accounts receivables of approximately $1,033,000 and $759,000 and an increase decrease in other current assets of $4,000 and ($110,000) and customer deposits of $56,000 and
$193,000 for 2009 and 2008 respectively. These amounts were offset by increases in cash due to an increase in account payable and accrued expenses of $745,000 and $1,160,000. Finally, cash used in operations was impacted by non-cash
depreciation and amortization of $455,000 and $386,000, non-cash interest of $429,000 and $171,000, share based payments of approximately $456,000 and $447,000 and other non-cash activities of $178,000 and
$70,000.

For the nine months ended June 30, 2009 and 2008, cash used in investing activities of approximately $119,000 and $2,256,000 consisted of purchases of fixed assets of $119,000 and $69,000 and acquisition
of a business of $0 and $2,187,000.

For the nine months ended June 30, 2009 and 2008, cash provided by financing activities of approximately $3,938,000 and $4,165,000 was derived primarily from approximately $3,773,000 and $0 of net
proceeds from the sale of common stock (gross proceeds of approximately $4,770,000 and $0 less placement costs of approximately $997,000 and $0) raised in our common stock offerings, proceeds of $300,000 and $3,876,000 from
conversion of preferred shares to common, net proceeds of $150,000 and $200,000 of lines of credit and $0 and $422,000 from proceeds of issuance of bridge notes, repayments of debt of approximately ($334,000) and
$(675,000) and payments of capital lease obligations of ($12,000) and ($8,000), additional proceeds from issuance of convertible notes of $500,000 and $0 with payment of referral finance costs of $(75,000) and $0 for the
nine months ended June 30, 2009 and 2008.

We incurred a net loss of approximately ($1,534,000) and ($1,029,000) for the three months ended June30, 2009 and 2008 respectively. For the nine months ended June 30, 2009 and 2008 respectively, we incurred a
net loss of approximately ($4,050,000) and ($3,160,000). At June 30, 2009, our accumulated deficit amounted to approximately ($13,819,000). We had cash of $548,000 and a working capital deficit of approximately $767,000 at June
30, 2009.

On October 29, November 17 and November 19, 2008, Beacon and Midian Properties, LLC, entered into short term credit facilities in the amounts of $100,000, $120,000 and $70,000, respectively, the principal of
which was due and payable to the holder within seven (7) days of issuance along with a 0.5% origination fee. Should the holder declare the notes in default, the notes shall bear interest at the rate of 18% per annum from the date of default until
paid in full. The notes were not declared in default at any time and the principal has been paid back from time to time from November 20, 2008 through January 28, 2009 when the amounts were paid back in full. On March 27, 2009, Beacon and Midian,
entered into a short term credit facility in the amount of $53,000, the principal of which was due and payable to the holder within seven (7) days of issuance along with a 1% origination fee. Should the holder declare the notes in default, the
notes shall bear interest at the rate of 18% per annum from the date of default until paid in full. On November 12, 2008, Beacon engaged a registered broker-dealer in a private placement of Common Stock and Warrants to raise $3.0 million of
equity financing. At May 27, 2009 we closed the private placement at $3.4 million in gross proceeds.

On June 5, 2009, Beacon engaged a registered broker-dealer in a private placement of Common Stock and Warrants to raise $600,000 of equity financing with an option to raise an additional $400,000 if the offering is oversubscribed. As of
August 11, 2009 we have received approximately $1.0 million in gross proceeds. On July 9, 2009 we opted to increase the offering to $2.5 million.

35

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On January 7, 2009, we entered into a note payable with a principal amount of $200,000 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 $100,000 note issued prior to December 31, 2008. 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.

On January 9, 2009, we entered into an equity financing arrangement with one of our directors that provided up to $2.2 million of additional funding, the terms of which provide for compensation of a one-time grant
of warrants to purchase 100,000 shares of common stock at $1.00 per share and ongoing grants of warrants to purchase 33,333 shares of common stock at $1.00 per share each month that the financing arrangement is in effect. The warrants have a
five year term. The commitment will be reduced on a dollar for dollar basis as we raise additional equity capital in private offerings, described above, and terminating upon completion of equity financing of $2.2 million, upon mutual agreement
or on January 1, 2010. On May 13, 2009, the director agreed to increase the equity financing arrangement to $1.8 million available in exchange for a continuation of the ongoing grants of warrants to purchase 33,333 shares of common stock at
$1.00 per share each month which is all available as of the day of filing of this Quarterly Report on Form 10-Q. 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 $500,000 in the aggregate of which the broker/dealer received a cash commission of $50,000 and a non-accountable expense reimbursement of $25,000. The net proceeds were used to
pay off certain short term debts with the balance used as working capital. The Notes have a maturity date of July 21, 2009 and bear interest at a fixed annual rate of 12.5% due monthly. The Notes can be extended by Beacon to January 21, 2010 and,
upon extension, will bear interest at a fixed annual rate of 15% from the original maturity date to the extended maturity date due monthly along with principal payments of 16.67% of the principal due monthly from the original maturity date through
the extended maturity date until paid in full. The Notes can be prepaid at any time on or after March 21, 2009 in whole or in part upon 30 days prior written notice to the holders without penalty. The holder may convert the Notes into shares of
Beacon Common Stock, par value $0.001, at the rate of $0.75 per share in minimum increments of $5,000. The holder received a five-year warrant to purchase one share of Beacon Common Stock at a purchase price of $1.00 per share per
$10 of Note balance. The Notes contain certain provisions in the event of default that could result in acceleration of payment of the entire balance including accrued and unpaid interest. Acceleration of the Note in the event of default would
also result in the interest rate increasing by 0.4166% per event. On August 7, 2009, we entered into a non-interest bearing Bridge Note arrangement with one of our directors in the amount of $500,000 with a payment date of September 6, 2009 and
a commitment fee of $25,000 paid on August 10, 2009. The Bridge Note also contained 25,000 warrants immediately exercisable into common shares at $1.00.

As widely reported, the financial markets have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in securities prices, severely diminished liquidity and credit
availability, rating downgrades of certain investments and declining valuations of others. Among other risks we face, the current tightening of credit in financial markets may adversely affect our ability to obtain financing in the future,
including, if necessary, to fund our organic growth strategy or a strategic acquisition, and/or ability to refinance our debt as it comes due.

36

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We believe that our currently available cash, the proceeds of our equity financing activities, the equity financing arrangement, further debt financing and refinancing, and funds we expect to generate from operations will enable us to effectively operate our business and pay our debt obligations as they become due within
the next twelve months through July 1, 2010. We require additional capital in order to execute our current business plan. If we are
 unable to raise additional capital, 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 four operating lease commitments for real estate used for office space and production facilities.

Contractual Obligations as of June 30, 2009

The following is a summary of our contractual obligations as of June 30, 2009:

Payment Due by PeriodContractual Obligations
      
      Total
      
      Year1
      
      Years2-3
      
      Years4-5
      
      ThereafterLong-term debt obligations
      
      
      2,664,279
      
      $
      1,741,829
      
      $
      536,227
      
      $
      386,223Interest obligations (1)
      
      
      203,017
      
      
      69,265
      
      
      114,896
      
      
      18,856Operating lease obligations (2)
      
      
      101,670
      
      
      52,602
      
      
      49,068$
      2,968,966
      
      $
      1,863,696
      
      $
      700,191
      
      $
      405,079
      
      $
      


|(1) | Interest obligations assume Prime Rate of 3.25% at June 30, 2009. 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 Statement of Financial Accounting Standards No. 13 Accounting for Leases, as may be modified or supplemented. These amounts are not recorded as liabilities 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 is 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 twelve months ended June 30, 2010 in cash, the total obligation would be $545,000 based on the number of shares of Series A, A-1 and B Preferred Stock outstanding as of June 30, 2009.

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 $750,000 for the twelve months ended June 30, 2010 and can be curtailed based on actual results of operations.

37

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Working Capital

As of June 30, 2009, our current liabilities exceed current assets by approximately $767,000. Certain vendors have agreed to defer payment or agreed to payment plans. Our working capital deficit has increased by
approximately $27,000 and $556,000 during the three and nine months ended June 30, 2009. We can give no assurance that we will continue to be successful in our efforts to negotiate favorable terms with our vendors.

Client Base

Through the Phase I Acquisitions, Beacon acquired a client base that consisted of approximately 4,000 customers, which were predominantly MBEs with 25-2,500 end users each, as well as approximately 50 larger customers.
We expect that most of our revenue will be derived from our I3MAC Services offering.

Competitors

Beacon has numerous competitors in each one of its four service areas, many of which are substantially better capitalized, have more employees, have a longer operating history and are better known in the industry.
However, management is not aware of any direct competitor in the middle-market service space that can provide all of these services without significant outsourcing or reselling, although IBM Global and others do present these services by relying
upon outside consultants. Beacon believes that its integration of these services, particularly of its systems and software design and engineering capabilities, provides a distinct competitive advantage.

Technology & equipment procurement competitors include: AT&T, Qwest, Level 3, Broadwing, and Covad. Application development/support competitors include: Trigent, Inventa Technologies, and AAlpha. Competitors
specific to the interconnect services include: BellSouth, Vonage, and Packet8. Competitors with respect to data/systems integration services include: Cisco, Datacomm Solutions, Dell, and Sun Microsystems.

Employees

Beacon currently employs approximately 80 people in the Columbus, OH, Louisville, KY, and Cincinnati, OH markets. None of Beacons employees is subject to a collective bargaining agreement.

Facilities

Beacon currently maintains its offices at 1961 Bishop Lane, Louisville, KY 40218 and our telephone number is (502) 657-3500.

Beacon leases office space in Louisville, Kentucky, Cincinnati, Ohio, and Columbus, Ohio for amounts that are not deemed to be material.

Certain Relationships and Related Party Transactions

The Company has obtained insurance through an agency owned by one of its founding stockholders. Insurance expense paid through the agency for the three and nine months ended June 30, 2009 was approximately $22,000
and $87,000, respectively, and is partly deferred and partly included in selling, general and administrative expense in the accompanying condensed consolidated statement of operations.

38

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On May 15, 2008, subsequently amended on August 19, 2008, we entered into an equity financing arrangement with one of our directors that provided up to $3,000,000 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 equity financing arrangement expired on December 31, 2008. Accordingly, we recognized $82,166 of interest expense for the three and nine months ended June 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:

DateEarned
      
      QuantityEarned
      
      ExpectedLife(days)
      
      StrikePrice
      
      Fair Valueof CommonStock
      
      VolatilityRate
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperWarrant
      
      Charge toInterestExpense10/15/2008
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      1.20
      
      66.34
      %
      
      0
      %
      
      2.90
      %
      
      $
      0.74
      
      $
      24,66611/15/2008
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      0.85
      
      66.34
      %
      
      0
      %
      
      2.33
      %
      
      $
      0.45
      
      $
      15,00012/15/2008
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      1.52
      
      66.34
      %
      
      0
      %
      
      1.50
      %
      
      $
      0.99
      
      $
      33,00012/31/2008
      
      16,667
      
      1,825
      
      $
      1.00
      
      $
      1.01
      
      66.34
      %
      
      0
      %
      
      1.55
      %
      
      $
      0.57
      
      $
      9,500


On January 9, 2009, we entered into an equity financing arrangement with one of our directors that provided up to $2.2 million of additional funding, the terms of which provide for compensation of a one-time grant of warrants to purchase 100,000 shares of common stock at $1.00 per share and ongoing grants of warrants to purchase 33,333 shares of common stock at $1.00 per share
each month that the financing arrangement is in effect. The warrants have a five year term. The commitment will be reduced on a dollar
for dollar basis as we raise additional equity capital in private offerings, described above, and terminating upon completion of equity
financing of $2.2 million, upon mutual agreement or on January 1, 2010. As of August 11, 2009, approximately $330,000 was available under
 this financing arrangement. We recognized $64,969 and $209,469 of interest expense for the three and nine months ended June 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:

DateEarned
      
      QuantityEarned
      
      ExpectedLife(days)
      
      StrikePrice
      Fair Valueof CommonStock
      
      VolatilityRate
      
      DividendYield
      
      Risk-FreeInterestRate
      
      ValueperWarrant
      
      Charge toInterestExpense1/9/2009
      
      100,000
      
      1,825
      
      $
      1.00
      
      $
      0.80
      
      66.34
      %
      
      0
      %
      
      1.51
      %
      
      $
      0.41
      
      $
      41,0002/9/2009
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      0.80
      
      66.34
      %
      
      0
      %
      
      1.99
      %
      
      $
      0.41
      
      $
      13,6673/9/2009
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      0.54
      
      66.34
      %
      
      0
      %
      
      1.90
      %
      
      $
      0.23
      
      $
      7,6674/9/2009
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      0.75
      
      66.34
      %
      
      0
      %
      
      1.90
      %
      
      $
      0.37
      
      $
      12,3335/9/2009
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      1.19
      
      66.34
      %
      
      0
      %
      
      2.09
      %
      
      $
      0.72
      
      $
      23,9706/9/2009
      
      33,333
      
      1,825
      
      $
      1.00
      
      $
      1.35
      
      66.34
      %
      
      0
      %
      
      2.73
      %
      
      $
      0.86
      
      $
      28,666


On August 7, 2009, we entered into a non-interest bearing Bridge Note arrangement with one of our directors in the amount of $500,000 with a payment date of September 6, 2009 and a commitment fee of $25,000 paid on August 10, 2009. The Bridge Note also contained 25,000 warrants immediately exercisable into common shares at $1.00.

ITEM 4(T). CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules
and forms of the SEC. This information is accumulated and communicated to our executive officers to allow timely decisions regarding
required disclosure. As of March 31, 2009, our Chief Executive Officer, who acts in the capacity of principal executive officer and our
Chief Accounting Officer who acts in the capacity of principal financial officer, have evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and
the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2009, based on
their evaluation of these controls and procedures
required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

39

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DISCLOSURE CONTROLS AND INTERNAL CONTROLS

Disclosure controls are designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as
appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that our transactions are properly authorized, recorded and reported and
our assets are safeguarded against unauthorized or improper use, to permit the preparation of our financial statements in conformity with generally accepted accounting principles, including all applicable SEC regulations.

As of September 30, 2008, we had identified certain matters that constituted material weaknesses in our internal controls over financial reporting. Although we have strengthened and unified our internal controls, we
continue to improve our controls and eliminate material weaknesses including inadequate internal accounting information systems and limited qualified accounting staff. Our systems and personnel were insufficient to support the complexity of our
financial reporting requirements. Since September 30, 2008, we have taken certain steps to correct these material weaknesses that include undertaking a review of our systems and engaging a consultant to assist in the upgrade of our accounting
systems and implementation of additional controls. We have hired an additional accounting resource to assist in completion of our internal control matrix and further strengthen our controls. Although we believe that these steps will result in
significant improvements to our internal controls and expect to correct our material weaknesses, additional time is still required to fully document our systems, implement control procedures and test their operating effectiveness.

Specifically, we have engaged a firm to assist us with migrating from our current unified accounting system to Microsoft Dynamics GP including the modules that assist with Sarbanes-Oxley compliance. Additionally, we
have implemented a control matrix and software to identify our critical internal accounting controls and measure compliance on a month to month basis to ensure our controls are effective. In addition, we have implemented further controls to aid and
improve our inventory systems to ensure they are operating effectively and added controls over revenue recognition to ensure appropriate compliance with current accounting standards. Finally, we have hired an additional accounting resource, bringing
the number of Certified Public Accountants on our staff to three, to assist in the day to day accounting functions. We believe that our internal controls risks are partially mitigated by the fact that our Chief Executive Officer and Chief Accounting
Officer review and approve substantially all of our major transactions and we have, when needed, hired outside experts to assist us with implementing complex accounting principles. We believe that our weaknesses in internal control over financial
reporting and our disclosure controls relate primarily to the fact that we are an emerging business with limited personnel. Our Chief Accounting Officer was our only employee with SEC reporting experience as of the date of this Quarterly Report on
Form 10-Q.

Changes in Internal Control Over Financial Reporting

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

40

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PART II: OTHER INFORMATION

|        |                  
|------- | -----------------
|ITEM 1. | LEGAL PROCEEDINGS
|        |                  
|        | None.            

|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------
|        |                                                     
|        | None.                                               

|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

On August 7, 2009, we entered into a non-interest bearing Bridge Note arrangement with one of our directors in the amount of $500,000 with a payment date of September 6, 2009 and a commitment fee of $25,000 paid
on August 10, 2009. The Bridge Note also contained 25,000 warrants immediately exercisable into common shares at $1.00.

As of August 10, 2009 Kenneth Kerr, formerly the Chief Operating Officer, resigned his position from Beacon Enterprise Solutions Group, Inc. effectively immediately. No executive officer of Beacon Enterprise Solutions Group, Inc. (Beacon) is aware of
any disagreement between Mr. Kerr and Beacon on any matter relating to the Companys
operations, policies or practices.

41

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ITEM 6. EXHIBITSPart I Exhibits

|4.1  | Form
of warrant to purchase common stock granted to the investors in connection with the June
2009 offering of Common Stock.                           
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                        
|10.1 | Selling
Agency Agreement dated June 12, 2009 by and between the Company and the selling agent
named therein.                                           
|     |                                                                                                                                                        
|10.2 | Employment
Agreement dated May 12, 2009 by and between the Company and Bruce Widener.                                                                  
|     |                                                                                                                                                        
|10.3 | Employment
Agreement dated May 22, 2009 by and between the Company and Richard C. Mills.                                                               
|     |                                                                                                                                                        
|10.4 | Employment
Agreement dated May 22, 2009 by and between the Company and Robert Mohr.                                                                    
|     |                                                                                                                                                        
|10.5 | Letter
Agreement dated August 10, 2009 by and between the Company and John Rhodes.                                                                     
|     |                                                                                                                                                        
|10.6 | Promissory
Note dated August 10, 2009 made and issued by the Company to John Rhodes Family Limited
Partnership.                                        
|     |                                                                                                                                                        
|31.1 | Certification of Principal Executive Officer, pursuant to Rules 13a-14(a) of the Sarbanes-Oxley Act of 2002.                                           
|    
|31.2 | Certification of Principal Financial Officer, pursuant to Rules 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 Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* - This certification shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

42

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SIGNATURES

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

|                      |                                         |                                   
|--------------------- | --------------------------------------- | ----------------------------------
|                      | Beacon Enterprise Solutions Group, Inc.
|                     
|Date: August 12, 2009 | By:                                     | /s/ Bruce Widener                 
|                      |                                         |                                   
|                      |                                         | Bruce Widener                     
|                      |                                         | Chief Executive Officer and       
|                      |                                         | Chairman of the Board of Directors
|                      |                                         |                                   
|                      |                                         | and                               
|                     
|Date:August 12, 2009  | By:                                     | /s/ Robert Mohr                   
|                      |                                         |                                   
|                      |                                         | Robert Mohr                       
|                      |                                         | Principal Financial Officer       

43

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