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 March 31, 2004 [ ] 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 filings requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each the issuer's classes of common equity, as of the latest practicable date: 40,099,030 common shares outstanding as of May 11, 2004. Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X] ================================================================================
CRESCENT COMMUNICATIONS, INC. (FORMERLY BERENS INDUSTRIES, INC.) TABLE OF CONTENTS __________ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Unaudited Condensed Consolidated Financial Statements . . . . . . . . . . . . . F-1 Condensed Consolidated Balance Sheet as of March 31, 2004 (Unaudited) and December 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Unaudited Condensed Consolidated Statement of Operations for three months ended March 31, 2004 and 2003. . . . . . . . . . . . . . . . . . . F-3 Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2004. . . . . . . . . . . . . . . . . . . F-4 Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . F-5 Notes to Unaudited Condensed Consolidated Financial Statements . . . . . . . F-6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. . . . . . . . . . . . . . . . . . . . . . I-1 ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . I-4 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 ITEM 5. OTHER EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. __________ UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 F-1
CRESCENT COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEET __________ MARCH 31, DECEMBER 31, 2004 2003 ASSETS (UNAUDITED) (NOTE) ------ ------------ -------------- Current assets: Cash and cash equivalents $ 8,990 $ 9,485 Accounts receivable, net of allowance for doubtful accounts of $134,425 and $80,000 at March 31, 2004 and December 31, 2003, respectively 133,059 155,425 Employee advances 2,100 2,100 ------------ -------------- Total current assets 144,149 167,010 Property and equipment, net of accumulated depreciation of $461,453 and $393,772 at March 31, 2004 and December 31, 2003, respectively 331,170 403,217 Goodwill 200,346 200,346 ------------ -------------- Total assets $ 675,665 $ 770,573 ============ ============== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current liabilities: Book overdraft $ 34,939 $ 63,705 Notes payable 163,863 124,658 Notes payable to related parties 500,670 514,670 Accounts payable 737,169 717,188 Accrued liabilities 367,379 297,693 Deferred revenue 208,709 193,038 ------------ -------------- Total current liabilities 2,012,729 1,910,952 ------------ -------------- Commitment and contingencies Stockholders' deficit: Series A Convertible Non-Redeemable Preferred stock, $.001 par value, 20,000,000 shares authorized, 115.726 shares issued and outstanding, $5,000 per share liquidation preference ($578,630 aggregate liquida- tion preference) - - Series B Convertible Non-Redeemable Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding - - Common stock, $.001 par value, 85,000,000 shares auth- orized, 38,972,619 shares issued and outstanding 38,973 34,540 Additional paid-in capital 5,775,621 5,540,467 Deferred compensation (12,008) (12,008) Accumulated deficit (7,139,650) (6,703,378) ------------ -------------- Total stockholders' deficit (1,337,064) (1,140,379) ------------ -------------- Total liabilities and stockholders' deficit $ 675,665 $ 770,573 ============ ============== Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
See accompanying notes. F-2
CRESCENT COMMUNICATIONS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS MARCH 31, 2004 AND 2003 __________ MARCH 31, MARCH 31, 2004 2003 ------------ ------------ Service revenue $ 621,518 $ 603,389 Cost of services 454,382 411,754 ------------ ------------ Gross margin 167,136 191,635 Selling, general and administrative expenses 592,569 748,315 ------------ ------------ Loss from operations (425,433) (556,680) Interest expense 10,839 10,972 ------------ ------------ Net loss $ (436,272) $ (567,652) ============ ============ Basic and diluted net loss per common share $ (0.01) $ (0.04) ============ ============ Weighted average shares outstanding 38,492,545 14,459,265 ============ ============
See accompanying notes. F-3
CRESCENT COMMUNICATIONS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2004 __________ SERIES A SERIES B ADDITIONAL -------- -------- COMMON STOCK PREFERRED STOCK PREFERRED STOCK PAID-IN DEFERRED ACCUMULATED ------------------- ------------------ ------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT ---------- ------- --------- ------- --------- ------- ----------- -------------- ------------- Balance at December 31, 2003 34,540,174 $34,540 116 $ - - $ - $ 5,540,467 $ (12,008) $ (6,703,378) Issuance of common stock for compensation 50,000 50 - - - - 11,950 - - Issuance of common stock for cash 4,382,445 4,383 - - - - 223,204 - - Net loss - - - - - - - - (436,272) ---------- ------- --------- ------- --------- ------- ----------- -------------- ------------- Balance at March 31, 2004 38,972,619 $38,973 116 $ - - $ - $ 5,775,621 $ (12,008) $ (7,139,650) ========== ======= ========= ======= ========= ======= =========== ============== ============= TOTAL ------------ Balance at December 31, 2003 $(1,140,379) Issuance of common stock for compensation 12,000 Issuance of common stock for cash 227,587 Net loss (436,272) ------------ Balance at March 31, 2004 $(1,337,064) ============
See accompanying notes. F-4
CRESCENT COMMUNICATIONS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 __________ MARCH 31, MARCH 31, 2004 2003 ----------- ----------- Cash flows from operating activities: Net loss $ (436,272) $ (567,652) Adjustments to reconcile net loss to net cash used in operating activities: 207,385 79,999 ----------- ----------- Net cash used in operating activities (228,887) (487,653) ----------- ----------- Cash flows from investing activities: Proceeds from disposition of property and equipment 4,366 - ----------- ----------- Net cash used in investing activities 4,366 - ----------- ----------- Cash flows from financing activities: Repayment of book overdraft (28,766) - Proceeds from notes payable 40,000 127,000 Repayment of notes payable (795) (24,000) Repayment of notes payable to related parties (14,000) - Issuance of common stock for cash 227,587 401,664 ----------- ----------- Net cash provided by financing activities 224,026 504,664 ----------- ----------- Net (decrease) increase in cash and cash equivalents (495) 17,011 Cash and cash equivalents at beginning of period 9,485 - ----------- ----------- Cash and cash equivalents at end of period $ 8,990 $ 17,011 =========== ===========
See accompanying notes. F-5 CRESCENT COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS __________ 1. BASIS OF PRESENTATION ----------------------- The unaudited consolidated condensed financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to such rules and regulations. These unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Crescent Communications, Inc. (the "Company") included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003. In the opinion of management, the unaudited consolidated condensed financial information included herein reflect all adjustments, consisting only of normal, recurring adjustments, which are necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for a full year or any other interim period. The preparation of 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 consolidated financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from estimates making it reasonably possible that a change in the estimates could occur in the near term. 2. GOING CONCERN CONSIDERATIONS ------------------------------ During the three months ended March 31, 2003, and the years ended December 31, 2003 and 2002 the Company has been unable to generate cash flows sufficient to support its operations and has been dependent on debt and equity raised from qualified individual investors. During the years ended December 31, 2003 and 2002, the Company experienced negative financial results as follows:
2003 2002 ------------ ------------ Net loss $(2,543,629) $(2,946,382) Negative cash flow from operations (1,423,363) (1,774,837) Negative working capital (1,743,942) (1,276,547) Stockholders' deficit (1,140,379) (442,332)
These negative factors have continued during the three months ended March 31, 2004 and raise substantial doubt about the Company's ability to continue as a going concern. The Company has supported current operations by: 1) raising additional operating cash through private placements of its common stock, 2) issuing debt convertible to common stock to certain key stockholders and 3) issuing stock and options as compensation to certain employees and vendors in lieu of cash payments. These steps have provided the Company with the cash flows to continue its business plan, but have not resulted in significant improvement in the Company's financial position. Management is considering alternatives to address its critical cash flow situation that include: - Raising capital through additional sale of its common and preferred stock and/or debt securities. F-6 CRESCENT COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS __________ 2. GOING CONCERN CONSIDERATIONS, CONTINUED ------------------------------------------ - Merging the Company with another business that compliments current activities. - Reducing cash operating expenses to levels that are in line with current revenues. Reductions can be achieved through the issuance of additional common shares of the Company's stock in lieu of cash payments to employees or vendors. These alternatives could result in substantial dilution of existing stockholders. There can be no assurances that the Company's current financial position can be improved, that it can raise additional working capital or that it can achieve positive cash flows from operations. The Company's long-term viability as a going concern is dependent upon the following: - The Company's ability to locate sources of debt or equity funding to meet current commitments and near term future requirements. - The ability of the Company to achieve profitability and ultimately generate sufficient cash flow from operations to sustain its continuing operations. 3. 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. 4. STOCKHOLDERS' EQUITY --------------------- During the three months ended March 31, 2004, the Company engaged in various transactions affecting stockholders' equity, as follows: - The Company sold common stock under Regulation S to various foreign investors under investment agreements entered into during 2002. The investment agreements generally provide for the sale of restricted common stock at 35% of the current trading price in the United States. During the three month period ended March 31, 2004 4,382,445 shares were issued for $227,587. - The Company issued common stock for legal services totaling $12,000. 5. SUBSEQUENT EVENT ---------------- On April 7, 2004 the Company entered into a letter of intent with MobilePro Corp. ("MobilePro") to sell substantially all of its broadband internet service related assets, including (but not limited to) all cash, receivables (including written off receivables), inventory, network and other equipment, property, customer lists, network relationships, billing arrangements, intangible assets and all other assets, required or useful for operating its internet service provider business but specifically excluding its Bluegate assets. The proposed sales price is $1,150,000 in the form of (a) $900,000 cash at Closing and (b) $250,000 in the form of a one-year, 6% secured promissory note. F-7 CRESCENT COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS __________ 2. SUBSEQUENT EVENT, CONTINUED ----------------------------- On April 13, 2004, MobilePro lent the Company $400,000 at a rate of twelve percent (12%) per annum with a maturity date of July 12, 2004. The loan is secured by (a) a security interest in the assets and properties of the Company and (b) all outstanding common stock held by the Company's CEO, Manfred Sternberg. As additional security, Manfred Sternberg, personally guaranteed repayment of the loan. MobilePro is in the process of conducting due diligence. F-7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This Management's Discussion and Analysis as of March 31, 2004 and for the three months ended March 31, 2004, should be read in conjunction with the unaudited condensed financial statements and notes thereto set forth in Item 1 of this report and in conjunction with our Annual Report on Form 10-KSB for the year ended December 31, 2003. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for a full year or any other interim period. 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. CRITICAL ACCOUNTING POLICIES AND ESTIMATES ------------------------------------------ The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. REVENUE RECOGNITION ------------------- Revenue from broadband telecommunications services are recognized based upon contractually determined monthly service charges to individual customers. Telecommunications services are billed in advance and, accordingly, revenues are deferred until the period in which the services are provided. At March 31, 2004, deferred service revenue was $208,709. I-1 STOCK-BASED COMPENSATION ------------------------- Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") established financial accounting and reporting standards for stock-based employee compensation plans. It defined a fair value based method of accounting for an employee stock option or similar equity instrument and encouraged all entities to adopt that method of accounting for all of their employee stock compensation plans and include the cost in the income statement as compensation expense. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". The Company accounts for compensation cost for stock option plans in accordance with APB Opinion No. 25. GENERAL Crescent Communications is 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, headquartered in Houston, Texas is a Value Added Network provider that develops and deploys specific technological internet related solutions for businesses. 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, 2001 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 stock. The Company has incurred a significant loss from operations since inception, and is in a negative working capital and stockholders' deficit position at March 31, 2004. 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, 2003 that reflects the significant doubt about the company's ability to continue as a going concern. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2003 During the three months ended March 31, 2004, the Company's revenue from connectivity systems, web site hosting, engineering services and hardware sales was $621,518 versus $603,389 for the three month period ended March 31, 2003. This increase is primarily attributable to higher connectivity revenue. Cost of sales for the three months ended March 31, 2004 were $454,382 versus $411,754 for the comparable 2003 period. The increase is due to higher interconnect fees associated with the increased revenue stream. Selling, general and administrative expenses during the quarter ended March 31, 2004, were lower by $155,746, or 21%, as compared to the quarter ended March 31, 2003, due to lower costs attributable to stock based compensation and cost reduction efforts by the Company as it moves into the implementation phase of its medical vertical market under the Bluegate (TM) brand name. No significant capital expenditures were made during the period. I-2 PLAN OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES Operations for the three month period ended March 31, 2004 have been funded by the issuance of common stock for cash of $227,587, and newly issued short term notes payable for $40,000. 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 2005, 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. We believe future 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. On April 7, 2004 the Company entered into a letter of intent with MobilePro Corp. ("MobilePro") to sell substantially all of its broadband internet service related assets, including (but not limited to) all cash, receivables (including written off receivables), inventory, network and other equipment, property, customer lists, network relationships, billing arrangements, intangible assets and all other assets, required or useful for operating its internet service provider business but specifically excluding its Bluegate assets. The proposed sales price is $1,150,000 in the form of (a) $900,000 cash at Closing and (b) $250,000 in the form of a one-year, 6% secured promissory note. On April 13, 2004, MobilePro lent the Company $400,000 at a rate of twelve percent (12%) per annum with a maturity date of July 12, 2004. The loan is secured by (a) a security interest in the assets and properties of the Company and (b) all outstanding common stock held by the Company's CEO, Manfred Sternberg. As additional security, Manfred Sternberg, personally guaranteed repayment of the loan. MobilePro is in the process of conducting due diligence. ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Manfred Sternberg, our Chief Executive Officer and Mike McDonald, our Chief Financial Officer, have concluded that our disclosure controls and procedures are appropriate and effective. They have 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 this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. I-4 PART II ITEM 2. CHANGES IN SECURITIES During the calendar quarter ending March 31, 2004 the Company completed a placement of 4,382,445 shares of common stock with investors located outside of the United States. The shares were offered pursuant to an exemption from registration afforded by Regulation S to the Securities Act of 1933. Shares sold pursuant to Regulation S are deemed restricted and may not be sold to any U.S. Person (as that term is defined in the Regulation) for a period of one (1) year from date of sale. Thereafter, the shares will be subject to the restrictions of Rule 144. The Company received a total of $227,587 for the shares. The proceeds were used for general business purposes. Among other things, the placement agreement provided for the Company to issue shares of Regulation S stock at prices substantially below the quoted market price of the shares The transactions during the quarter ended March 31, 2004 were as follows: Date Issued Title of Securities Shares ---------------------------------------------------------------- January 6, 2004 Common stock 43,750 January 9, 2004 Common stock 1,000,000 January 20, 2004 Common stock 1,000,000 January 27, 2004 Common stock 266,000 January 30, 2004 Common stock 60,000 February 2, 2004 Common stock 70,000 February 5, 2004 Common stock 90,000 February 17, 2004 Common stock 54,000 February 23, 2004 Common stock 121,690 February 27, 2004 Common stock 132,800 March 5, 2004 Common stock 711,200 March 10, 2004 Common stock 25,000 March 23, 2004 Common stock 14,000 March 26, 2004 Common stock 700,000 March 29, 2004 Common stock 10,500 March 31, 2004 Common stock 83,505 ----------- 4,382,445 =========== The Company issued common stock to an attorney for legal services. These transactions are exempt pursuant to Section 4(2) of the Securities Act of 1933. For the three months ended March 31, 2004, 50,000 shares aggregating $12,000 were issued. Date Issued Title of Securities Shares ------------ --------------------- ------ February 18, 2004 Common Shares 50,000 ITEM 5. OTHER EVENTS The Board has not adopted a formal policy with regard to the process to be used for identifying and evaluating nominees for director. At this time, the consideration of candidates for the Board of Directors is in the Board's discretion, which we believe is adequate based on the size of the Company and each current board member's qualifications. On April 7, 2004 the Company entered into a letter of intent with MobilePro Corp. ("MobilePro") to sell substantially all of its broadband internet service related assets, including (but not limited to) all cash, receivables (including written off receivables), inventory, network and other equipment, property, customer lists, network relationships, billing arrangements, intangible assets and all other assets, required or useful for operating its internet service provider business but specifically excluding its Bluegate assets. The proposed sales price is $1,150,000 in the form of (a) $900,000 cash at Closing and (b) $250,000 in the form of a one-year, 6% secured promissory note. On April 13, 2004, MobilePro lent the Company $400,000 at a rate of twelve percent (12%) per annum with a maturity date of July 12, 2004. The loan is secured by (a) a security interest in the assets and properties of the Company and (b) all outstanding common stock held by the Company's CEO, Manfred Sternberg. As additional security, Manfred Sternberg, personally guaranteed repayment of the loan. MobilePro is in the process of conducting due diligence. II-1 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (A) Exhibits Exhibit 31.1 - Certification of Chief Executive Officer of Crescent Communications, Inc required by Rule 13a - 14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 - Certification of Chief Financial Officer of Crescent Communications, Inc required by Rule 13a - 14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 -- 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. Exhibit 32.2 -- 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. (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: May 17, 2004 /s/ Manfred Sternberg ---------------------- Manfred Sternberg, Chief Executive Officer Crescent Communications, Inc. Date: May 17, 2004 /s/ Mike McDonald ------------------ Mike McDonald, Chief Financial Officer II-2