-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AFN56DzIzDhT0OSjeR1sOlv0AV+0NDiN03HpH3y+BPMK6tK9UygyI4AJad/U7EZj 3UFp4nSIMSTMlCYDsUFI0Q== 0001015402-02-003812.txt : 20021115 0001015402-02-003812.hdr.sgml : 20021115 20021115071239 ACCESSION NUMBER: 0001015402-02-003812 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRESCENT COMMUNICATIONS INC CENTRAL INDEX KEY: 0000768216 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 870565948 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22711 FILM NUMBER: 02828163 BUSINESS ADDRESS: STREET 1: 701 NORTH POST OAK ROAD STREET 2: SUITE 630 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7136827400 MAIL ADDRESS: STREET 1: 701 NORTH POST OAK ROAD STREET 2: SUITE 630 CITY: HOUSTON STATE: TX ZIP: 77024 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL AIR CORP DATE OF NAME CHANGE: 19970521 FORMER COMPANY: FORMER CONFORMED NAME: BERENS INDUSTRIES INC DATE OF NAME CHANGE: 19990823 10QSB 1 doc1.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 [ ] 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 76-0640970 (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 5, 2002 the registrant had 12,999,833 shares of Common Stock outstanding.
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) TABLE OF CONTENTS __________ PART I. FINANCIAL INFORMATION Item 1. Financial Statements . . . . . . . . . . . . . . . F-1 Condensed Balance Sheet. . . . . . . . . . . . . . F-2 as of September 30, 2002 and December 31, 2001 Condensed Statement of Operations. . . . . . . . . F-3 for the three months and nine months ended September 30, 2002 Condensed Statement of Stockholders' Equity. . . . F-4 for the nine months ended September 30, 2002 Condensed Statement of Cash Flows. . . . . . . . . F-5 for the nine months ended September 30, 2002 Notes to Condensed Financial Statements. . . . . . F-6 Item 2. Management's Discussion and Analysis . . . . . . . I-1 Item 3. Evaluation of Disclosure Controls and Procedures . I-3 PART II. OTHER INFORMATION Item 2. Changes in Securities . . . . . . . . . . . . . . II-1 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . II-2 Signatures. . . . . . . . . . . . . . . . . . . . II-2 Certifications. . . . . . . . . . . . . . . . . . II-3
2 ITEM 1. FINANCIAL STATEMENTS CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) __________ UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 F-1
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED BALANCE SHEET __________ SEPTEMBER 30, DECEMBER 31, ASSETS 2002 2001 - ------ --------------- -------------- Current assets: Cash and cash equivalents $ 256,705 $ 10,773 Accounts receivable, net of allowance for doubtful accounts of $4,171 and $10,982 at September 30, 2002 and December 31, 2001, respectively 282,315 176,223 Prepaid and other 281,843 21,453 --------------- -------------- Total current assets 820,863 208,449 Property and equipment, net of accumulated depreciation of $143,292 and $57,200 at September 30, 2002 and December 31, 2001, respectively 552,221 529,134 Goodwill 200,346 200,346 Other assets 56,361 46,958 --------------- -------------- Total assets $ 1,629,791 $ 984,887 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current portion of long-term debt $ 24,310 $ 36,350 Current portion of notes payable to related party 70,690 248,685 Accounts payable 476,726 566,676 Accrued liabilities 266,696 340,712 Deferred revenue 116,832 88,985 --------------- -------------- Total current liabilities 955,254 1,281,408 Long-term debt - 34,166 Notes payable to related parties 234,000 100,000 Commitments and contingencies Stockholders' equity: Common stock, $.001 par value, 50,000,000 shares authorized, 12,485,181 and 4,278,699 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively 12,485 4,278 Series A Convertible Non-Redeemable Preferred stock, $.001 par value, 20,000,000 shares authorized; 600 issued and outstanding at September 30, 2002 and December 31, 2001, respectively 1 1 Additional paid-in capital 3,374,050 1,172,784 Receivable from stockholders (136,976) Deferred compensation (39,862) (257,407) Accumulated deficit (2,906,137) (1,213,367) --------------- -------------- Total stockholders' equity 440,537 (430,687) --------------- -------------- Total liabilities and stockholders' equity $ 1,629,791 $ 984,887 =============== ==============
See accompanying notes. F-2
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 __________ THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2002 2002 --------------- --------------- Service revenue $ 466,210 $ 1,328,723 Cost of services 283,569 908,214 --------------- --------------- Gross margin 182,641 420,509 Selling, general and administrative expenses 797,193 1,955,299 --------------- --------------- Loss from operations (614,552) (1,534,790) Interest expense 6,967 157,980 --------------- --------------- Net loss $ (621,519) $ (1,692,770) =============== =============== Basic and diluted net loss per common share $ (0.12) $ (0.34) =============== =============== Weighted average shares outstanding 5,030,479 5,030,479 =============== ===============
See accompanying notes. F-3
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 __________ COMMON STOCK PREFERRED STOCK ADDITIONAL RECEIVABLE ------------------- ------------------- PAID-IN FROM DEFERRED ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER COMPENSATION DEFICIT ---------- ------- -------- --------- ----------- ------------- -------------- ------------- Balance at December 31, 2001 4,278,699 $ 4,278 600 $ 1 $ 1,172,784 $ (136,976) $ (257,407) $ (1,213,367) Collection of subscription receivable from stock- holder - - - - 13,024 136,976 - - Issuance of common stock for compensation 467,500 468 - - 268,117 - - - Value of conversion feature associated with conver- tible debt - - - - 134,000 - - - Compensatory stock options issued to employees and others (1,200,288 options) - - - - 166,839 - 217,545 - Issuance of common stock for cash 7,738,982 7,739 - - 1,619,286 - - Net loss - - - - - - - (1,692,770) ---------- ------- -------- --------- ----------- ------------- -------------- ------------- Balance September 30, 2002 12,485,181 $12,485 600 $ 1 $ 3,374,050 $ - $ (39,862) $ (2,906,137) ========== ======= ======== ========= =========== ============= ============== ============= TOTAL ------------ Balance at December 31, 2001 $ (430,687) Collection of subscription receivable from stock- holder 150,000 Issuance of common stock for compensation 268,585 Value of conversion feature associated with conver- tible debt 134,000 Compensatory stock options issued to employees and others (1,200,288 options) 384,384 Issuance of common stock for cash 1,627,025 Net loss (1,692,770) ------------ Balance September 30, 2002 $ 440,537 ============
See accompanying notes. F-4 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) UNAUDITED CONDENSED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 __________ Cash flows from operating activities: Net loss $ (1,692,770) Adjustments to reconcile net loss to net cash used in operating activities: (361,057) ---------------- Net cash used in operating activities (1,331,713) ---------------- Cash flows from investing activities: Capital expenditures (109,179) ---------------- Net cash used in investing activities (109,179) ---------------- Cash flows from financing activities: Proceeds from notes payable to related parties 134,000 Payments on notes payable to related parties (177,995) Payments on notes payable (46,206) Collection of receivable from stockholder 150,000 Issuance of common stock for cash 1,627,025 ---------------- Net cash provided by financing activities 1,686,824 ---------------- Net increase in cash and cash equivalents 245,932 Cash and cash equivalents at beginning of period 10,773 ---------------- Cash and cash equivalents at end of period $ 256,705 ================ See accompanying notes. F-5 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, 2001. 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, 2001, 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 ========== 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. Continued F-6 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, CONTINUED __________ 2. REVERSE ACQUISITION, CONTINUED -------------------------------- 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 --------------------- During the nine months ended September 30, 2002, the Company engaged in various transactions affecting stockholders' equity, as follows: - The Company entered into convertible debt agreement with certain stockholders/officers of the Company and recognized interest expense of $134,000 related to the conversion feature. - The Company collected $150,000 from certain stockholders for a $136,976 subscription receivable and as a capital contribution of $13,024. - The Company issued common stock to consultants for services totaling $268,585. - Due to cash constraints on the Company, $166,839 of compensatory stock options were issued by the Company to retain and compensate certain key employees. - The Company sold certain common shares to accredited private investors for cash under a Private Placement Memorandum pursuant to regulation D, rule 506 small business offering. A total of 500,000 shares were sold during April and June to two investors at prices ranging from $.10 to $.25 per share. No discounts or commissions were paid and the aggregate amount raised was $110,000. - In June the Company entered into an agreement with Pacific Continental Securities UK to sell common stock under Regulation S to various foreign investors. Among other things, the agreement provided for the company to issue up to 3,000,000 shares of Regulation S stock at 35% of the average bid price for the preceding 5 day period prior to exercise. The term was originally set to expire August 31, 2002 and required a floor price of $.40. The agreement has been amended several times and as of September 30, 2002 the Company has issued 7,238,982 shares for $1,517,025 in connection with this arrangement. On October 24, 2002, the Company entered into a second agreement with similar terms allowing for up to 10 million shares to be issued through January 31, 2003. The first 3 million have a floor price of $.40 and the remainder have a floor price of $.70. - The Company issued common stock to two consultants for legal and financial services. As of September 30, 467,500 shares have been issued under these agreements. Of this amount, 400,000 shares were issued to a consultant under a one year agreement to provide guidance to the Company, develop a business plan and assist in evaluating merger and acquisition possibilities. The 400,000 shares were valued at $239,000 and included in prepaid and other assets at September 30, 2002 and are being amortized to expense over the term of the contract. Continued F-7 CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, CONTINUED __________ 3. STOCKHOLDERS' EQUITY, CONTINUED --------------------------------- - The Company issued options to acquire certain common shares to employees in lieu of cash compensation under section 4.2 of the Securities Act of 1933. The options are exercisable after a vesting period at the employee's election, at an option price of $.10 per share. 4. COMPREHENSIVE INCOME --------------------- The Company has adopted Statement of Financial Accounting Standards (ASFAS@) 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. 5. INCOME TAX ----------- The difference between the Federal statutory income tax rate of 34% and the Company's effective rate is primarily attributable to increases in the valuation allowance offset against deferred tax assets associated with the Company's net operating losses. 6. NOTES PAYABLE TO RELATED PARTIES ------------------------------------ Certain notes payable to related parties are convertible into common shares of the Company's stock at $.05 per share, at the election of the payee, any time prior to repayment of the note. At September 30, 2002 the notes are convertible into 6,003,700 common shares. In order to meet cash requirements, one of the Company's officers entered into an agreement to factor certain receivables of the Company. The arrangement, which began in May allows for receivables to be sold at 90% of their book value. At September 30, 2002 no amounts were outstanding under this agreement. F-8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This management's Discussion and Analysis as of September 30, 2002 and for the nine months ended September 30, 2002, 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 owned an aggregate of approximately 28,000,000 shares of common stockAs a result, and based upon stock transactions occuring throughout 2002, the former shareholders control approximately 67% 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 $165,000 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 $136,000 remained due under the agreement which was paid by the shareholders of Solis in January 2002 and used for working capital. The Company has incurred a significant loss from operations since inception, and is in a negative working capital position at September 30, 2002. The Company remains dependent on outside sources of funding for continuation of its operations. Based on these factors, our auditors issued a qualified opinion at December 31, 2001 that reflects the significant doubt about the company's ability to continue as a going concern. I-1 RESULTS OF OPERATIONS During the nine months ended September 30, 2002, the Company's revenue from connectivity systems, web site hosting, engineering services and hardware sales was $1,328,723. The Company began its operations on July 23, 2001, therefore a comparison to the prior year or previous nine month period is not completely appropriate. Revenue growth has, however, been achieved with improvements noted primarily in the connectivity system and hardware segments of the business. Connectivity revenues were $898,929 during the first nine months of 2002. On a quarter over quarter basis, revenues from connectivity during the three month period ended September 30 were $316,619, representing an improvement of $10,642 versus the three month period ended June 30. This increase represents consecutive quarterly growth from connectivity for the Company during the year. Hardware sales were $167,537 for the nine months ended September 30, 2002 with $76,599 realized in the most recent quarter. Cost of sales for the nine month period ended September 30, 2002 were $908,214, with a gross margin of $420,509. On a quarter over quarter basis, cost of sales during the third quarter of $283,569 are significantly improved when compared to the quarter ended June 30 of $315,992. Gross margins were 39.1% for the quarter as compared to year to date of 31.6%. These amounts compare favorably to the gross margin percentage of 9.9% realized during the period from the Company's inception through December 31, 2001. Selling, general and administrative expenses were $1,955,299 for the nine month period ended September 30, 2002. On a quarter over quarter basis these expenses aggregated $797,193 during the most recent quarter versus $618,687 for the three month period ended in June. Higher selling, general and administrative expenses are primarily attributable to the Company's incurring additional payroll, consulting and professional expenses in connection with its expansion from its core business of internet connectivity for small and medium size businesses into a medical vertical market under the Bluegate brand name. Bluegate seeks to capitalize on the adoption of the Health Insurance Portability and Accountability Act ("HIPAA") as mandated by the United States Congress for the healthcare industry. HIPAA is a standardization of communication, including billing, record storage, etc., of information and is to be effective April 14, 2003. Bluegate seeks to provide the medical industry with highly secure broadband private network service to maintain compliance with HIPAA requirements. Also included in selling, general and administrative expenses are costs associated with the Company's expensing of non-qualified stock options . The Company has issued non-qualified stock options to certain employees in lieu of cash compensation. These options have been valued based on the difference between the option price and the market price of the Company's stock on the date of the grant and that amount is included as a reduction of current earnings. Total expense associated with such compensation arrangements accumulated $292,798 through September 30, 2002. Capital expenses aggregated $109,179 through September 30, 2002 almost all of which occurred in the third quarter. These expenses are primarily associated with software in preparation for the expansion into the healthcare industry market. PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES At September 30, 2002 the Company had cash and cash equivalents of $256,705. Operations for the nine month period ended September 30, 2002 have been funded by the issuance of common stock for cash of $1,627,025, the final payment due from stockholders related to the purchase Agreement of $150,000, newly issued convertible notes payable to stockholders for $134,000, and nonqualified stock options issued to certain employees and contractors in lieu of cash compensation. The Company has continued to take steps to reduce its monthly operating expenses relating to its core business and has expanded its efforts in creating a market for the health care industry. Because of the uncertainty associated with this new market, break even cash flow is not expected until late 2003 at the earliest. The Company is seeking additional capital to fund expected operating costs and has engaged in negotiations to merge or sell part or all of the Company. No commitments for mergers or acquisitions have been obtained at this time and the Company continues to negotiate with certain parties to address the operating cash flow shortfalls. During the nine months ended September 30 the Company raised $1,627,025 from the sale of equity securities. We believe future fundings 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. I-2 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. ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Manfred Sternberg, our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures are appropriate and effective. He has evaluated these controls and procedures as of a date within 90 days of the filing date of this report of Form 10-QSB. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of his evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. I-3 PART II Item 2. Changes in Securities The Company sold certain common shares to accredited private investors for cash under a Private Placement Memorandum pursuant to regulation D, rule 506 small business offering. These transactions were exempt pursuant to Section 4(2) of the Securities Act of 1933. A total of 500,000 shares were sold during April and June to two investors at prices ranging from $.10 to $.25 per share. No discounts or commissions were paid and the aggregate amount raised was $110,000. In June the Company entered into and agreement with Pacific Continental Securities UK to sell common stock under Regulation S to various foreign investors. Among other things, the agreement provided for the company to issue up to 3,000,000 shares of Regulation S stock at 35% of the average bid price for the preceding 5 day period of the exercise with a floor price of $.40. The term was originally to expire August 31, 2002. The Agreement has been amended several times and as of September 30, 2002 the Company has issued 7,238,982 shares for $1,517,025 under this arrangement. On October 24, 2002 the Company entered into a second agreement with similar terms allowing for up to 10 million shares to be issued through January 31, 2003. The first 3 million shares have a floor price of $.40 and the remainder have a floor price of $.70. The transactions were as follows: Date Issued Title of Securities Shares ------------ --------------------- ------ June 28, 2002 Common Shares 620,743 July 17, 2002 Common Shares 1,173,686 July 31, 2002 Common Shares 2,223,989 August 16, 2002 Common Shares 1,291,219 September 3, 2002 Common Shares 1,389,357 September 17, 2002 Common Shares 539,988 The Company issued common stock to two consultants for legal and financial services. These transactions were exempt pursuant to Section 4(2) of the Securities Act of 1933. Through September 30, 2002, 467,500 shares aggregating $268,585 as shown below have been issued under this arrangement. Date Issued Title of Securities Shares ------------ --------------------- ------ January 9, 2002 Common Shares 47,500 June 25 2002 Common Shares 300,000 July 24, 2002 Common Shares 100,000 August 15, 2002 Common Shares 20,000 The Company issued options to acquire certain common shares to employees in lieu of cash compensation under section 4(2) of the Securities Act of 1933. The options are exercisable after a vesting period at the employees election, at an option price of $.10 per share: Date Issued Title of Securities Vesting Period Shares Granted ---------------- ------------------- -------------- -------------- July 1, 2002 Common Shares Adjustment -491,537 July 1, 2002 Common Shares One Month 270,000 July 1, 2002 Common Shares Seven Months 710,000 II-1 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - None 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, 2002 -------------------------------- /s/ Manfred Sternberg Manfred Sternberg, Chief Executive Officer and Chief Financial Officer II-2 Certification of Chief Executive Officer of Crescent Communications, Inc. - -------------------------------------------------------------------------------- pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 - -------------------------------------------------------------------------------- U.S.C. 63. - ---------- I, Manfred Sternberg, the Chief Executive Officer of Crescent Communications, Inc., hereby certify that Crescent Communications, Inc.'s periodic report on Form 10-QSB, for the period ending September 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that information contained in the periodic report on Form 10-QSB fairly presents, in all material respects, the financial condition and results of the operations of Crescent Communications, Inc. ------------------------------ Date: November 14, 2002 /s/ Manfred Sternberg Manfred Sternberg Chief Executive Officer Certification of Chief Financial Officer of Crescent Communications, Inc. - -------------------------------------------------------------------------------- pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 - -------------------------------------------------------------------------------- U.S.C. 63. - ---------- I, Manfred Sternberg, the Chief Financial Officer of Crescent Communications, Inc., hereby certify that Crescent Communications, Inc.'s periodic report on Form 10-QSB, for the period ending September 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that information contained in the periodic report on Form 10-QSB fairly presents, in all material respects, the financial condition and results of the operations of Crescent Communications, Inc. ------------------------------ Date: November 14, 2002 /s/ Manfred Sternberg Manfred Sternberg Chief Financial Officer II-3 CERTIFICATIONS - -------------- I, Manfred Sternberg, the Chief Executive Officer of Crescent Communications, Inc, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Crescent Communications, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 - ---------------------------- /s/ Manfred Sternberg Manfred Sternberg Chief Executive Officer II-4 CERTIFICATIONS - -------------- I, Manfred Sternberg, the Chief Financial Officer of Crescent Communications, Inc, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Crescent Communications, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 - ---------------------------- /s/ Manfred Sternberg Manfred Sternberg Chief Financial Officer II-5 -----END PRIVACY-ENHANCED MESSAGE-----