10QSB/A 1 doc1.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB AMENDMENT NUMBER 1 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Crescent Communications, Inc. (Exact name of registrant as specified in its charter) Commission file number: 0-22711 Nevada 87-05065948 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 701 North Post Oak, Road, Suite 630, Houston, Texas 77024 (Address of Principal Executive Office) (Zip Code) (713) 682-7400 (Registrant's Telephone Number, Including Area Code) BERENS INDUSTRIES, INC. (Former Name) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] November 9, 2001, the registrant had 3,828,699 shares of Common Stock outstanding. Part I ITEM 1. FINANCIAL STATEMENTS CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) __________ UNAUDITED CONDENSED FINANCIAL STATEMENTS for the period from inception, July 23, 2001, to September 30, 2001 F-1 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) TABLE OF CONTENTS __________ PAGE ---- Unaudited Condensed Financial Statements: Unaudited Condensed Balance Sheet as of September 30, 2001 F-3 Unaudited Condensed Statement of Operations for the period from inception, July 23, 2001, to September 30, 2001 F-4 Unaudited Condensed Statement of Stockholders Equity for the period from inception, July 23, 2001, to September 30, 2001 F-5 Unaudited Condensed Statement of Cash Flows for the period from inception, July 23, 2001, to September 30, 2001 F-6 Notes to Unaudited Condensed Financial Statements F-7 F-2 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED BALANCE SHEET SEPTEMBER 30, 2001 __________ ASSETS ------ Current assets: Cash and cash equivalents $ 3,875 Accounts receivable, net of allowance for doubtful accounts of $2,000 148,467 Prepaid and other 41,292 ---------- Total current assets 193,634 Property and equipment, net of accumulated depreciation of $30,143 at September 30, 2001 431,827 Goodwill, net of accumulated amortization of $337 200,006 Other assets 46,558 ---------- Total assets $ 872,025 ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Note payable to bank $ 90,000 Note payable to a related party 32,500 Accounts payable 236,926 Accrued liabilities 328,453 Deferred revenue 85,867 ---------- Total current liabilities 773,746 Commitment and contingencies Stockholders' deficit: Common stock, $.001 par value, 50,000,000 shares authorized, 3,828,699 shares issued and outstanding at September 30, 2001 3,828 Series A Convertible Non-Redeemable Preferred stock, $.001 par value, 20,000,000 shares authorized; 600 issued and outstanding at September 30, 2001 1 Additional paid-in capital 596,171 Receivable from stockholder (104,976) Accumulated deficit (396,745) ---------- Total stockholders' equity 98,279 ---------- Total liabilities and stockholders' equity $ 872,025 ========== See accompanying notes. F-3 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION, JULY 23, 2001, TO SEPTEMBER 30, 2001 __________ Service revenue $ 287,111 Cost of services 153,790 ----------- Gross margin 133,321 Selling, general and administrative expenses 504,784 Depreciation and amortization 30,480 ----------- Loss from operations (401,943) Other income 5,198 ----------- Net loss $ (396,745) =========== Basic and diluted net loss per common share $ (0.10) =========== Weighted average shares outstanding 3,828,699 =========== See accompanying notes. F-4
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION, JULY 23, 2001, TO SEPTEMBER 30, 2001 __________ COMMON STOCK PREFERRED STOCK ADDITIONAL RECEIVABLE --------------------- ---------------- PAID-IN FROM ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER DEFICIT TOTAL --------- ---------- ------- ------- --------- ------------- ---------- ---------- Balance at inception, July 23, 2001 100,000 $ 1,000 - $ - $599,000 $ (384,910) $ - $ 215,090 Reverse acquisition effective July 23, 2001 (Note 2) 3,728,699 2,828 600 1 (2,829) - - - Collection of subscription receivable from stock- holder - - - - - 279,934 - 279,934 Net loss - - - - - - (396,745) (396,745) --------- ---------- ------- ------- --------- ------------- ---------- ---------- Balance at September 30, 2001 3,828,699 $ 3,828 600 $ 1 $ 596,171 $ (104,976) $(396,745) $ 98,279 ========= ========== ======= ======= ========= ============= ========== ==========
See accompanying notes. F-5 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION, JULY 23, 2001, TO SEPTEMBER 30, 2001 __________ Cash flows from operating activities: Net loss $(396,745) Adjustments to reconcile net loss to net cash used in operating activities 178,686 ---------- Net cash used in operating activities (218,059) ---------- Cash flows from investing activities: Purchase of computers and equipment (47,588) Cash received upon acquisition of Berens 4,553 ---------- Net cash used in investing activities (43,035) ---------- Cash flows from financing activities: Proceeds from note payable to bank 90,000 Collection of receivable from stockholder 279,934 Payment of asset acquisition debt (104,965) ---------- Net cash provided by financing activities 264,969 ---------- Net decrease in cash and cash equivalents 3,875 Cash and cash equivalents at beginning of period - ---------- Cash and cash equivalents at end of period $ 3,875 ========== See accompanying notes. F-6 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS __________ 1. BASIS OF PRESENTATION ----------------------- The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles and the rules of the U.S. Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report of Form 10-KSB for the year ended December 31, 2000. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2000, as reported in the Form 10-KSB, have been omitted. 2. REVERSE ACQUISITION -------------------- Effective July 23, 2001, Berens Industries, Inc. ("Berens") acquired Solis Communications, Inc. ("Solis") in a reverse acquisition transaction (the "Transaction") accounted for using the purchase method. Because Solis shareholders emerged from the Transaction with approximately 88% ownership of the combined entity, Berens Industries was the "acquired" company, but remains the surviving legal entity. Prior to the transaction, Berens was a public corporation with certain long-lived assets that had ceased all current operations. Accordingly, the transaction was treated as an issuance of stock by Solis for Berens' net assets and liabilities resulting in a purchase price of $423,220 paid through the assumption of liabilities as follows: Assets acquired ---------------- Cash $ 4,553 Property and equipment 218,324 Goodwill 190,230 Other intangibles 10,113 -------- $423,220 ======== Liabilities assumed ------------------- Note payable to a related party (Yolana Berens) 32,500 Accounts payable 154,606 Payroll liability 45,035 Payroll tax liability 86,114 Liability for asset acquisition 104,965 -------- $423,220 ======== Continued F-7 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, CONTINUED __________ 2. REVERSE ACQUISITION, CONTINUED -------------------------------- Under the terms of the stock exchange agreement (the "Agreement") that formed the basis of the Transaction, Berens issued 600 shares of new Series A convertible non-redeemable preferred stock for 100% of issued and outstanding shares of Solis. Solis, at the time of the Agreement, was a newly established, closely held corporation that was formed for the purpose of capitalizing on the telecommunications industry downturn. The Company believes that it will achieve its purpose by providing affordable co-location facilities to internet service providers. Subsequent to the Agreement, the Company's stockholders approved a change in the Company's name from Berens Industries, Inc. to Crescent Communications, Inc. 3. STOCKHOLDERS' EQUITY --------------------- REVERSE STOCK SPLIT --------------------- Effective September 24, 2001, the Company's board of directors declared a 5 for 1 reverse stock split. The reverse stock split has been reflected in the accompanying financial statements and all references to common stock outstanding, additional paid-in capital, weighted average shares outstanding and per share amounts prior to the record dates of the reverse stock split have been restated to reflect the stock split on a retroactive basis. SERIES A PREFERRED STOCK --------------------------- Effective July 19, 2001, the Company's board of directors authorized the issuance of 600 shares of Series A voting convertible non-redeemable preferred stock with a par value of $0.001 per share and a liquidation value of $1,000 per share. Each share of Series A convertible preferred stock may be converted, at the option of the shareholder, into 46,795 shares of common stock with fractional shares permitted. 4. COMPREHENSIVE INCOME --------------------- The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which requires a company to display an amount representing comprehensive income as part of the Company's basic financial statements. Comprehensive income includes such items as unrealized gains or losses on certain investment securities and certain foreign currency translation adjustments. The Company's financial statements include none of the additional elements that affect comprehensive income. Accordingly, comprehensive income and net income are identical. Continued F-8 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, CONTINUED __________ 5. NON-CASH INVESTING AND FINANCING ACTIVITIES ----------------------------------------------- At the inception of the Company, a founding stockholder contributed certain assets as follows: Computer equipment $ 196,060 Security deposit 19,030 ---------- $ 215,090 ========== F-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This management's Discussion and Analysis for the period since inception July 23, 2001 through September 30, 2001, should be read in conjunction with the unaudited condensed financial statements and notes thereto set forth in Item 1 of this report. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, words such as, "may," "will," "should," "estimates," "predicts," "potential," continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to the risks discussed in our other SEC filings. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. GENERAL We are a Nevada corporation that began operations on July 23, 2001, providing co-location hosting and connectivity systems to small to mid-size businesses in Texas. The Company was formed through a Stock Exchange Agreement ("Agreement") whereby the shareholders of Solis Communications, Inc ("Solis") exchanged all the issued and outstanding shares of Solis for 600 shares of newly issued Series A Convertible Non-Redeemable Preferred Stock of Berens Industries, Inc. ("Berens"). Solis, the ultimate acquirer of Berens in this reverse merger, agreed to contribute $600,000 cash and cash equivalents. Berens was a development stage enterprise involved in the development of an online auction site for exclusive paintings and other art works. At the date of the Agreement, Berens had ceased all activity due to their inability to generate sufficient revenue or obtain additional capital funding. This transaction is exempt from section 4.2 of the Securities Act. On September 17, Berens filed a name change to Crescent Communications, Inc. d.b.a. Crescent Broadband and approved a 5-for-1 reverse stock split to be effective on September 24, 2001. On a fully convertible post-split basis, the former shareholders of Solis beneficially own an aggregate of approximately 28,000,000 shares of common stock, or approximately 87.9% of the outstanding common stock. The Series A Preferred Stock does not receive dividends. Of the $600,000 committed under the Agreement, $105,000 was used to purchase certain assets of Crescent Services Corporation, a Houston, Texas based company that provided broadband and wireless services. The assets were purchased under the review and approval of the court appointed trustee as part of an involuntary petition under Chapter 7 of the U.S. Bankruptcy Code, filed against Crescent in the U.S. Bankruptcy Court in the Southern District of Texas in January 2001. Approximately $196,000 of connectivity assets were contributed by Solis as partial satisfaction of its $600,000 commitment and $194,000 was used to fund working capital requirements. An additional $105,000 remains due under the agreement which the Company intends to use for working capital. RESULTS OF OPERATIONS During the period since inception ending September 30, 2001, the Company has experienced significant month over month revenue growth. Total revenue from connectivity systems, web site hosting, engineering services and hardware sales was $287,111 for the period. Cost of sales, which includes approximately $40,000 non-recurring charges, were $153,790 which generated a 46% gross margin. Selling, general and administrative expenses were $504,784 for the initial period, which included approximately $58,000 non-recurring acquisition related expenses. The Company acquired approximately $47,000 of fixed assets during the period, in addition to the $105,00 purchased by Berens and $196,000 contributed by Solis, that were required to provision connectivity services for customers. No significant additional capital expenditures are currently planned. PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES At September 30, 2001 the Company had cash and cash equivalents of $3,875. Operations since inception have been funded by the capital committed as part of the Agreement, a $150,000 bank line of credit and internal operations. The Company has taken steps to reduce its monthly operating expenses, and based on current monthly revenue growth trends, expects to be cash flow break even from operations by the end of the second quarter of 2002. The Company is seeking additional capital to fund expected future operating costs, however; no commitments for any funding have been obtained at this time. We believe this funding may be obtained from public or private offerings of equity securities, debt or convertible debt securities or other sources. Stockholders should assume that any additional funding will likely be dilutive. If we are unable to raise additional funding, we may have to limit our operations to an extent that we cannot presently determine. The effect on our business may include the sale of certain assets, the reduction or curtailment of new customer acquisition, reduction in the scope of current operations or the cessation of business operations. Our ability to achieve profitability will depend upon our ability to raise additional operating capital, continued growth in demand for connectivity services and our ability to execute and deliver high quality, reliable connectivity services. We have experienced rapid sales growth since inception as many connectivity providers have exited the marketplace and we have moved quickly to serve their customer bases. We anticipate more connectivity provider churn and believe we will continue to successfully secure these unserved customer bases. PART B Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1 through 4 are omitted. Item 5. Other Information The Company appointed James E. Hausman, age 45, as its Chief Financial Officer on August 27, 2001. Mr. Hausman has worked as a financial consultant to a variety of telecommunications and technology companies since January 2000. Prior to this period Mr. Hausman was the Vice President of Finance and Administration of Houston Cellular Telephone Company from September 1988 until December 1999. Mr. Hausman has a B.S. in Accounting from the University of Kentucky (1978) and is a Texas C.P.A. Item 6. Exhibits and Reports on Form 8-K (a.) The following exhibits are to be filed as part of this Form 10-QSB: None (b.) Reports on Form 8-K. Berens Industries, Inc. Form 8-K filed July 23, 2001 reporting Item 1. & 2. Change in Control of Registrant and Acquisition or Disposition of Assets. Crescent Communications, Inc. Form 8-K filed September 17, 2001 reporting Item 5. Other Event SIGNATURES In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Crescent Communications, Inc. Date: November 14, 2001 /s/ Manfred Sternberg -- --------------------------------- Manfred Sternberg, Chief Executive Officer Date: November 14, 2001 /s/ James Hausman -- --------------------------------- James Hausman Chief Financial Officer