Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY (DEFICIENCY)

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STOCKHOLDERS' EQUITY (DEFICIENCY)
 12 Months Ended
Sep. 30, 2011
Stockholders Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
NOTE 13 —
STOCKHOLDERS’ EQUITY (DEFICIENCY)
 
Authorized Capital
 
Beacon is currently authorized to issue up to 70,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of convertible preferred stock, par value $0.01 per share, of which the following series have been designated: 4,500 shares of Series A, 1,000 shares of Series A-1, 4,000 shares of Series B, 400 shares of Series C-1 and 2,000 shares of Series C-2.
 
Preferred Stock
 
On March 25, 2011 Beacon offered in a private placement 350 units (the "Series C-1 Units"), to two existing shareholders, at a purchase price of $2 per Series C-1 Unit.  Each Series C-1 Unit is comprised of (i) one (1) share of $2 Stated Value Series C-1 Convertible Preferred Stock (with each share having 130% nonparticipating liquidation preference, bearing dividends at a rate of 6% per annum payable quarterly in cash or additional Preferred Stock at the holder’s option and convertible at the holder’s discretion into 2,000 shares of the Company’s Common Stock, at a conversion price of $0.75, and (ii) a five (5) year warrant to purchase 1,000 shares of its Common Stock (each, an "Investor Warrant") at a purchase price of $0.75 per share (collectively the "Series C-1 Offering").  As of June 30, 2011, we completed the sale of 350 Series C-1 Units for an aggregate purchase price of $525 and issued 350,000 warrants having a fair value, as determined using the Black Scholes pricing model, of $112.
 
On May 4, 2011 Beacon offered in a private placement 100 units (the "Series C-2 Units"), at a purchase price of $2 per Series C-2 Unit.  A Series C-2 Unit comprised of (i) one (1) share of $2 Stated Value Series C-2 Convertible Preferred Stock (with each share having 125% nonparticipating liquidation preference, bearing dividends at a rate of 6% per annum payable quarterly in cash or additional Preferred Stock at the company’s option and convertible at the holder’s discretion into 2,000 shares of the Company’s Common Stock, at a conversion price of $0.75, and (ii) a five (5) year warrant to purchase 1,000 shares of its Common Stock (each, an "Investor Warrant") at a purchase price of $0.75 per share (collectively the "Series C-2 Offering").  As of June 30, 2011, we completed the sale of 100 Series C-2 Units for an aggregate purchase price of $150 and issued 100,000 warrants having a fair value, as determined using the Black Scholes pricing model, of $32.
 
For services performed in connection with Series C private placements, Beacon paid a placement agent fee of $68 and issued 90,000 placement agent warrants.  Using the Black Scholes pricing model, we determined the fair value of the warrants and recorded an expense of $29.
 
Each share of preferred stock has voting rights equal to the equivalent number of common shares into which it is convertible. The holders of the Series A and Series A-1 are entitled to receive contractual cumulative dividends in preference to any dividend on the common stock at the rate of 10% per annum on the initial investment amount commencing on the date of issue.  The holders of the Series B, C-1 and C-2 are entitled to receive contractual cumulative dividends in preference to any dividend on the common stock (but subject to the rights of the previously issued series of preferred stock) at the rate of 6% per annum on the initial investment amount commencing on the date of issue.  Such dividends are payable on January 1, April 1, July 1 and October 1 of each year.  Dividends accrued but unpaid as of September 30, 2011, are $47, $66, $116, $16 and $2 for Series A, A-1, B, C-1 and C-2, respectively
 
 The Series A, A-1, B, C-2 Preferred Stock also contains a right of redemption in the event of liquidation or a change in control. The redemption feature provides for payment of a liquidation fee of 125% of the face value plus any accrued unpaid dividends in the event of bankruptcy, change of control, or any actions to take the Company private.  The Series C-1 has similar right but with a liquidation fee of 130%.  The amount of the redemption preference is $96, $471, $1,020, $703 and $198 for the Series A, A-1, B, C-1 and C-2, respectively, as of September 30, 2011.
 
  The Company applies the classification and measurement principles enumerated in ASC 815 with respect to accounting for its issuances of the preferred stock. The Company is required, under Nevada law, to obtain the approval of its Board of Directors in order to effectuate a merger, consolidation or similar event resulting in a more than 50% change in control or a sale of all or substantially all of its assets.  We evaluate convertible preferred stock at each reporting date for appropriate balance sheet classification. 
 
 Preferred Stock Conversions to Common Stock
 
For the year ended September 30, 2010, 1,993 and shares of Series A and 462 shares of Series A-1 were converted into 3,286,372 of common stock.
 
The Series A, A-1, C-1 and C-2 are convertible into common stock at any time, at the option of the holder at a conversion price of $.75 per share.  Series B has a conversion price of $.80. 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.
 
As described in Note 3, we evaluated the conversion options embedded in the preferred stock securities to determine (in accordance ASC 815) whether they should be bifurcated from their host instruments and accounted for as separate derivative financial instruments. We determined the risks and rewards of the common shares underlying the conversion feature are clearly and closely related to those of the host instrument. Accordingly the conversion features are being accounted for as embedded conversion options.
 
As described in Note 3, we apply the classification and measurement principles enumerated in ASC 815 with respect to accounting for our issuances of the preferred stock. We are required, under Nevada law, to obtain the approval of our board of directors in order to effectuate a merger, consolidation or similar event resulting in a more than 50% change in control or a sale of all or substantially all of our assets. The board of directors is then required to submit proposals to enter into these types of transactions to our stockholders for their approval by majority vote. The preferred stockholders do not currently (i) control or have representation on our Board of Directors and/or (ii) have sufficient voting rights to control redemption of these shares by either of these events. In addition the effectuation of any transaction or series of transactions resulting in a more than 50% change in control can be made only by us in our sole discretion. Based on these provisions, we classified the preferred shares as permanent equity in the accompanying Consolidated Balance Sheet because the liquidation events are deemed to be within our sole control.
 
We evaluate the convertible preferred stock at each reporting date for appropriate balance sheet classification.
 
At our option, we can redeem the Series B Preferred Stock, and any dividends issued there under, for a 1% origination fee and 1% interest per month on the outstanding face value of the Series B preferred stock. As of September 30, 2010, we have not redeemed any Series B Preferred Stock.
 
Preferred Stock Dividends
 
We follow the guidelines of ASC 505 Dividends and Stock Splits when accounting for pay-in-kind dividends that are settled in convertible securities with beneficial conversion features. Therefore, we recorded deemed dividend related to the conversion feature based on the difference between the effective conversion price of the conversion option and the fair value of the common stock on the date of election which is considered the commitment date. For the year ended September 30, 2011, the conversion value was lower that the fair value on each date of election, as such no deemed dividend was recorded.  The following table contains information related to the contractual dividends issued pursuant to our preferred stock:
 
                                          
Fair Value of
    
Dividend
  
       
Date of
  
Contractual
    
Conversion
    
Common
    
Closing
    
Fair Value
    
Contractual
    
Related to
  
Preferred
  
Date of
  
Election
  
Preferred
    
Price Per
    
Shares
    
Price on
    
of Underlying
    
Preferred
    
Beneficial
  
Stock
  
Contractual
  
(Commitment
  
Stock
    
Common
    
Underlying
    
Date of
    
Common
    
Stock
    
Conversion
  
Series
  
Dividend
  
Date)
  
Dividend
    
Share
    
Dividend
    
Election
    
Stock
    
Dividend
    
Feature
  
                                                   
A
  
10/1/2009
  
9/9/2009
   $ 19     $ 0.75       25     $ 1.00     $ 66     $ 19     $ 17  
A
  
1/1/2010
  
2/4/2010
   $ 50     $ 0.75       67     $ 1.07     $ 71     $ 50     $ 32  
A
  
4/1/2010
  
2/4/2010
   $ 7     $ 0.75       9     $ 1.38     $ 15     $ 7     $ 7  
A
  
7/1/2010
  
6/3/2010
   $ 1     $ 0.75       1     $ 1.03     $ 1     $ 1     $ -  
A-1
  
10/1/2009
  
9/9/2009
   $ 19     $ 0.75       25     $ 1.00     $ 25     $ 19     $ 6  
A-1
  
1/1/2010
  
2/4/2010
   $ 19     $ 0.75       25     $ 1.07     $ 27     $ 19     $ 9  
A-1
  
4/1/2010
  
2/4/2010
   $ 10     $ 0.75       13     $ 1.38     $ 19     $ 10     $ 9  
A-1
  
7/1/2010
  
6/3/2010
   $ 8     $ 0.75       11     $ 1.03     $ 10     $ 8     $ 3  
B
  
10/1/2009
  
9/9/2009
   $ 11     $ 0.80       14     $ 1.00     $ 13     $ 11     $ 3  
B
  
1/1/2010
  
2/4/2010
   $ 11     $ 0.80       14     $ 1.07     $ 14     $ 11     $ 3  
B
  
4/1/2010
  
2/4/2010
   $ 10     $ 0.80       13     $ 1.38     $ 18     $ 10     $ 7  
B
  
7/1/2010
  
6/3/2010
   $ 10     $ 0.80       13     $ 1.03     $ 13     $ 10     $ 3  
                                                                 
   
Total For year end September 30, 2010
   $ 175             $ 230             $ 292             $ 99  
 
 
Restricted Stock Grant
 
Prior to adoption of the 2008 Incentive Plan, on December 5, 2007, we issued 782,250 shares of restricted common stock with an aggregate fair value of $667 to our then president in exchange for $156. We account for share-based compensation under ASC 718 “Compensation — Stock Compensation,” which requires us to expense the fair value of grants made under the share based compensation programs over the vesting period of each individual agreement. We recognize non-cash share-based compensation expense ratably over the requisite service period which generally equals the vesting period of awards, adjusted for expected forfeitures. Immediately upon the sale, 150,000 shares vested with the remaining shares vesting in quantities of 210,750 shares on each of December 20, 2008, 2009 and 2010. As of May 2010 upon the president’s termination of employment, the remaining non-vested shares immediately vested and the expense recognized. We recognized $0 and $221 of share-based compensation expense during the years ended September 30, 2011 and 2010, respectively, in connection with this grant.
 
 Sales of Common Stock and Warrants
 
During the year ended September 30, 2010, we sold 3,795,295 Common Units to accredited investors for net proceeds of $2,398 (gross proceeds of $2,982, less offering costs of $584). We issued to certain agents who represented us in sales of the units, warrants to purchase 448,500 shares of our common stock.
 
Cashless Warrant Conversions
 
For the year ended September 30, 2010 holders of 1,566,065 Common Stock Warrants elected to exercise the cashless conversion options thereby redeeming 441,153 shares, including 423,336 shares issued upon the exercise of 1,481,965 warrants as described below.
 
Derivative Financial Instruments
 
In December 2008, the FASB issued ASC 815-40 “Contracts in Entity’s own Equity”. This issue addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock. This issue is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Under this guidance, instruments which do not have fixed settlement provisions are deemed to be derivative instruments.
 
As such, we were required to (i) reclassify certain common stock purchase warrants we issued in financing transaction completed prior to October 1, 2009 from stockholders equity to liabilities at fair value as of October 1, 2009, (ii) record all new issuances of derivatives that do not have fixed settlement provisions as liabilities and (iii) mark to market all such derivatives to fair value through March 30, 2010, which immediately precedes the date on which the removal of anti-dilution provisions in our derivative financial instruments became effective.
 
Effective October 1, 2009, the Company reclassified the fair value of all common stock purchase warrants issued prior to October 1, 2009 from equity to liabilities at their aggregate fair value of $4,628. We recorded a corresponding charge to the accumulated deficit to recognize the cumulative effects of having adopted this accounting policy. We calculated the adoption date fair values for these derivatives using the Black-Scholes option pricing model with the following weighted average assumptions:
 
   
October 1
  
   
2009
  
Expected Life
     3.72  
Risk-free interest rate
     2.20 %
Dividend Yield
     0 %
Volatility
     66.34 %
Warrants issued with private placements
     9,979,577  
Fair value of warrants
   $ 4,628  
 
We also performed a classification assessment of the common stock warrants issued to investors and agents in the common units completed during the year ended September 30, 2010 on their respective dates of issuance. We determined that such common stock purchase warrants, as originally issued, did not contain fixed settlement provisions because the strike price was subject to adjustment in the event we subsequently issued equity securities or equity linked securities with exercise prices lower than the exercise prices featured in these warrants. Accordingly, we allocated $1,094 of the offering proceeds to the fair value of the warrants on their respective dates of issuance and recorded them as liabilities in our Consolidated Balance Sheet through the date on which the removal of anti-dilution provisions in our derivative financial instruments became effective. We calculated the issuance date fair values of these derivatives using the Black-Scholes option pricing model with the following weighted average assumptions:
 
Expected Life
     5  
Risk-free interest rate
     2.69 %
Dividend Yield
     0 %
Volatility
     66.34 %
Weighted average unit fair value
   $ 0.47  
Warrants Issued
     2,312,250  
Fair Value
   $ 1,094  
 
On March 8, 2010, the Company announced an offer to the holders of its warrants that contain anti-dilution protection providing them with the option of (i) exercising their warrants for cash at discount of $0.10 off the contractual exercise price, (ii) exercising their warrants pursuant to a cashless exercise provision at the contractual exercise price (which results in a net share settlement), or (iii) consent to the elimination of the anti-dilution protection clause that caused the warrants not to be indexed to the Company’s own stock. As of March 31, 2010, a required majority of warrant holders consented to the removal of anti-dilution provisions which resulted in the elimination of such anti-dilution provisions.
 
On March 30, 2010, immediately prior to the completion of our offer to the warrant holders, we marked all remaining derivative financial instruments to fair value, including the warrants exercised for cash at a discount of $0.10 off the contractual exercise price. The aggregate fair value of all such warrants amounted to $10,095. We calculated the fair values of these derivatives using the Black-Scholes option pricing model (which management determined is not materially different from a binomial valuation model), with the following weighted average assumptions:
 
   
March 30,
  
   
2010
  
Expected Life
     3.88  
Risk-free interest rate
     2.55 %
Dividend Yield
     0 %
Volatility
     65.40 %
Warrants issued with private placements (including 3,375,375 with a discounted exercise price of $0.10 per share)
     12,291,827  
Fair value of warrants
   $ 10,095  
 
On March 31, 2010, we reclassified the warrant liability on our balance sheet to stockholders’ equity. The change in the fair value of the warrants reclassified to liabilities on October 1, 2009, and additional warrants issued between October 1, 2009 and March 30, 2010 amounted to approximately $4,373 and is reflected as the change in fair value of warrants in the accompanying Consolidated Statement of Operations for the year ended September 30, 2010.
 
As of September 30, 2010, pursuant to this offer, the Company issued 4,738,966 shares of common stock.  Those warrant holders who elected to exercise these instruments for cash at a $0.10 discount from the contractual exercise price. Net proceeds from these exercises amounted $3,664 (gross proceeds of $4,369 less costs of $705).  The Company also issued 423,336 net shares of common stock to warrant holders electing to exercise 1,481,965 warrants pursuant to the cashless exercise alternative.
 
Issuance of non-employee compensatory options
 
During the fiscal year ended September 30, 2010, in consideration for services, we have granted options to purchase 250,000 shares of Common Stock vesting ratably over a 36 month period.  We calculated the fair value of the options using the Black-Scholes option pricing model with the following assumptions: Stock price — $.54, Volatility — 66.34%, Risk —free interest rate — 2.09%, Expected life — 120 months and Dividend yield — 0.00%, resulting in a fair value determination of $188, to be recognized over a 36 month period.  No such options were granted for the year ended September 30, 2011. For the years ended September 30, 2011 and 2010 we recognized share based compensation of $63 and $34 related to these options.