Beacon Enterprise Solutions Provides Letter to Shareholders

LOUISVILLE, Ky., Sept. 21, 2012 /PRNewswire/ -- Beacon Enterprise Solutions Group, Inc. (OTC BB:  BEAC) (www.askbeacon.com), released the following letter to shareholders:

(Logo: http://photos.prnewswire.com/prnh/20101021/DA85933LOGO)

Dear Beacon Shareholder:

I am writing today to update you on recent developments since we filed our 10-Q for the quarter ending June 30th, 2012 and explain the events the led up to the 8-K filed last week.  As we stated in our most recent quarterly report, it would be essential to obtain additional financing to meet our obligations in the fiscal fourth quarter, and for the rest of the calendar year.  The recently announced transaction represents what we believe will provide for the best possible outcome for our stakeholders.  Before we discuss the most recent developments, we would like to back up a few quarters and walk you through the events that brought us to where we are today.  

The Company experienced break-even operating income for the forth fiscal quarter ending September 30th, 2011 and positive operating income on $6.0 million in sales for the first fiscal quarter ending December 31st, 2011.  The Company experienced an unforeseen and significant revenue shortfall for the second fiscal quarter ending March 31, 2012 of approximately 50% or $3.0 million versus the previous fiscal quarter due to its major customer indefinitely suspending two large global projects that accounted for approximately 50% of the Company's annual revenue. This revenue shortfall resulted in negative operating income and an inability to service contractors and creditors.  Accordingly, the Company began to reduce operating expenses and allocate resources to increase incremental new revenue, understanding that our expenses at this revenue level resulted in negative operating income.  Subsequently we determined that in addition to refinancing our senior debt, additional capital was required to stabilize the Company.  

The Company engaged advisors and bankers beginning in February 2012 to raise $3.0 million in new capital and secure an asset based lending facility of up to $5 million.  The Company had discussions with approximately 20 potential financing sources and engaged in due diligence with several banks.  The decline in net sales, which began in our second fiscal quarter, negatively impacted our ability to complete the refinancing as planned.  These efforts yielded an amount that was not sufficient to stabilize the Company.   Our senior secured notes began to mature in June 2012.  We were unable to meet our obligations and the Company began working with the advisors for the secured note holders.   During this time, the Company had also been working closely with its largest customer and its critical vendors.  This customer established a deadline to resolve all outstanding vendor payments.  Despite our best efforts, this deadline was missed.  Concurrently, the Company did not meet its July and August 2012 principal and interest payments on its senior secured notes.  

On August 29th, the company received an unsolicited offer to purchase the operating assets of the Company from MDT Labor d/b/a/ MDT Technical in exchange for approximately $2.2 million in cash to bring contractors of our major customers current; an earn-out payment not to exceed $3.5 million, and; certain other assumed liabilities associated with, among other things, liabilities related to employees transferring to MDT.  Given the status of the refinancing efforts and state of the contractor and other vendor payables, the only viable option for the Company to meet its financial obligations and remain in business and avoid seeking protection under the bankruptcy code at the time was to agree to the Asset Purchase Agreement between the Company and MDT Labor, LLC.  As a result of this transaction, the Company ceased business operations and is exploring options including mergers, acquisitions, and new business ventures.

The Company believes this transaction is in its, and its stakeholders' best interest.  Specifically, this Agreement, together with the other transactions contemplated to occur in connection with it:

• Provides for the uninterrupted service of its customers by substantially fulfilling outstanding vendor payment obligations;
• Provides an opportunity to pay down the notes held by the secured lenders;
• Enables the Company to avoid filing for bankruptcy protection and survive as a public entity;
• Allows the Company to pursue the acquisition of another operating business that could potentially result in some return for common shareholders and unsecured creditors;
• Allows most of the Company's employees to retain their positions with MDT as their new employer

Should any further significant developments occur, we will keep you informed.

Sincerely,
Bruce Widener
CEO

This press release may contain "forward-looking statements." Expressions of future goals and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  These forward-looking statements include, without limitation, the ability to receive future earn-out payments under the Asset Purchase Agreement and consummate a transaction to bring a new business into the Company.  Because the earn-out payments are dependent on the success of MDT with the acquired assets, a favorable outcome of either of these events is uncertain.  The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release.

SOURCE Beacon Enterprise Solutions Group, Inc.

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