SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-QSB
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1999.
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No.0-23965
CENTENNIAL BANC SHARE CORP.
---------------------------
(Exact name of Registrant as specified in its charter)
Colorado 84-1374481
-------- ----------
(State or other (IRS Employer File Number)
jurisdiction of
incorporation)
6795 E. Tennessee Ave., 5th Floor 80224
--------------------------------- -----
(Address of principal executive offices) (zip code)
(303) 840-2000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) had filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
The number of shares outstanding of Registrant's common stock, par value
$.0000001 per share, as of June 30, 1999 were 3,397,983 common shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM I. Financial Statements
See attached financial statements
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: the Company's ability to successfully develop new products
for new markets; the impact of competition on the Company's revenues, changes in
law or regulatory requirements that adversely affect or preclude customers from
using the Company's products for certain applications; delays in the Company's
introduction of new products or services; and failure by the Company to keep
pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business.
Results of Operations
On April 30, 1999, the Company acquired 100% of Entrust Mortgage,
Inc.(Entrust). As a result, Entrust became a wholly-owned subsidiary of the
Company. The financials of Entrust are included in the consolidated financial
statements.
Entrust is a Colorado corporation and originates residential loans in 36
states and funds loans on company warehouse lines of credit and sells these
loans into various secondary markets. The activity of this subsidiary has become
the principal activity of the Company. The Company expects the Entrust
subsidiary to be the principal revenue generator of the Company for the near
future.
The Company does not have an extensive history of operations and continues
to be unprofitable. The current unprofitability came about principally as a
result of an attempted acquisition of certain assets and technology to be known
as Vision One Technologies, Inc. (Vision). The Vision acquisition, which closed
on June 11, 1999, was rescinded after the end of the reporting period. During
the period between the closing of the acquisition and the recission, the Company
significantly increased its infrastructure and overhead. The Company spent
approximately $508,000 until it discovered that a fraud had been perpetrated on
the Company. To date, at least one of the perpetrators has been indicted and is
in custody. The Company has begun legal proceedings to recovered the losses
suffered by the fraud. The Company has also identified assets of the
perpetrators of the fraud and is hopeful of being able to recover a substantial
portion of the losses.
<PAGE>
During the six months ended June 30,1999, the Company's revenue increased
to $1,179,866 from $396,793 in the previous year's six month period. This
increase came about principally as a result of the acquisition of Entrust.
The operating expenses for the Company were $1,403,663 for the six months
ended June 30, 1999, and $457,312 for the same period in 1998.
The major components of operating expenses are independent contractor fees,
office salaries and associated payroll costs, general and health insurance
costs, rent and telephone expenses.
Net profit from operations for the six months ended June 30, 1999 was
$(223,797), compared to $(60,519) for the period in the previous year. The per
share loss for the six months ended June 30, 1999 was $0.11 compared to a per
share loss of $0.05 for the period in the previous year. The reason for the
increase in the loss was principally as a result the increase of infrastructure
to support the Vision One acquisition and resulting fraud.
For the immediate future, the Company's primary activity will be to focus
on its residential loan business and to attempt to expand these operations. The
Company plans to work with its established contacts and to attempt to develop
new contacts to increase its business.
Entrust will operate the wholesale and retail mortgage operations. Entrust
is presently developing underwriting matrixes on proprietary underwriting
software to be used on the Internet by the Company's mortgage brokers and
consumers.
The Company will be marketing to all 36 states in which it is licensed.
Emphasis will be made to initiate loan business in all of the licensed states
through the Internet.
Liquidity and Capital Resources
As of the end of the reporting period, the Company had cash or cash
equivalents of $732,155. These cash and cash equivalents were almost completely
depleted as a result of the fraud connected to the Vision acquisition. The
Company plans to raise additional capital by leveraging Company assets and
utilizing internally generated profits to recover its cash position over the
short-term. Over the long term, the Company believes that it can recover a
substantial portion of the fraud losses. This situation, combined with a
profitable operation, should permit the Company to recover from its present
position. There was no significant change in working capital during this fiscal
year. During the reporting period, the Company engaged in a private placement
which raised approximately $520,000 with the sale of common stock and
approximately $500,000 with the sale of a Convertible Promissory Note. These
funds were utilized in Company operations, including the Vision acquisition.
Other than as disclosed herein, there are no plans, proposals,
arrangements, or understandings with respect to the sale or issuance of
additional securities by the Company.
<PAGE>
Net cash provide by operating activities of the Company was $1,826,562 for
the six months ended June 30, 1999, compared to $62,708 for the six months ended
June 30, 1998.
Cash flows used for investing activities provided $367,291 for the six
months ended June 30, 1999, compared to $35,625 for the six months ended June
30, 1998.
Cash flows from financing activities accounted for $2,914,410 for the six
months ended June 30, 1999, compared to $109,931 for the six months ended June
30, 1998.
Cash and cash equivalents increased to $732,155 for the six months ended
June 30, 1999, compared to $11,598 for the six months ended June 30, 1998.
Subsequent to the end of the period, the cash and cash equivalents were almost
completely depleted.
Management feels that the Company currently has inadequate working capital
to pursue most of its business opportunities other than to internally expand the
operations of its existing offices or to effect an acquisition with third
parties.
The Company does not intend to pay dividends in the foreseeable future.
Year 2000 Compliance
Background
In the past, many computers, software programs, and other information
technology ("IT systems"), as well as other equipment relying on microprocessors
or similar circuitry ("non-IT systems"), were written or designed using two
digits, rather than four, to define the applicable year. As a result,
date-sensitive systems (both IT systems and non-IT systems) may recognize a date
identified with "00" as the Year 1900, rather than the year 2000. This is
generally described as the Year 2000 issue. If this situation occurs, the
potential exists for system failures or miscalculations, which could impact
business operations.
The Securities and Exchange Commission ("SEC") has asked public companies
to disclose four general types of information related to Year 2000 preparedness:
the Company's state of readiness, costs, risks, and contingency plans. See SEC
Release No. 33-7558 (July 29, 1998). Accordingly, the Company has included the
following discussion in this report, in addition to the Year 2000 disclosures
previously filed with the SEC.
State of Readiness
The Company believes that it has identified all significant IT systems and
non-IT systems that require modification in connection with Year 2000 issues.
Internal and external resources have been used and are continuing to be used, to
make the required modifications and test Year 2000 readiness. The required
modifications are under way. The Company plans on completing the modifications
to and testing of all significant systems by September 30, 1999.
<PAGE>
In addition, the Company has been communicating with customers, suppliers,
banks, vendors and others with whom it does significant business (collectively)
its "business partners") to determine their Year 2000 readiness and the extent
to which the Company is vulnerable to any other organization's Year 2000 issues.
Based on these communications and related responses, the Company is monitoring
the Year 2000 preparations and state of readiness of its business partners.
Although the Company is not aware of any significant Year 2000 problems with its
business partners, there can be no guarantee that the systems of other
organizations on which the Company's system rely will be converted in a timely
manner, or that a failure to convert by another organization, or a conversion
that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.
Costs
The total cost to the Company of Year 2000 activities has not been and is
not anticipated to be material to its financial position or results of
operations in any given year. The total costs to the company of addressing Year
2000 issues are estimated to be less than $10,000. These total costs, as well as
the date on which the Company plans to complete the Year 2000 modification and
testing processes, are based on management's best estimates. However, there can
be no guarantee that these estimates will be achieved, and actual results could
differ from those estimates.
Risks
The Company utilizes IT systems and non-IT systems in various aspects of
its business. Year 2000 problems in some of the Company's systems could possibly
disrupt operations, but the Company does not expect that any such disruption
would have a material adverse impact on the Company's operating results. The
Company is also exposed to the risk that one or more of its customers, suppliers
or vendors could experience Year 2000 problems that could impact the ability of
such customers to transact business or such suppliers or vendors to provide
goods and services. Although this risk is lessened by the availability of
alternative suppliers, the disruption of certain services, such as utilities,
could, depending upon the extent of the disruption, potentially have a material
adverse impact on the Company's operations.
Contingency Plans
The Company is in the process of developing contingency plans for the
Company's IT systems and non-IT systems requiring Year 2000 modification. In
addition, the Company is developing contingency plans to deal with the
possibility that some suppliers or vendors might fail to provide goods and
services on a timely basis as a result of Year 2000 problems. These contingency
plans will include the identification, acquisition and/or preparation of backup
systems, suppliers and vendors.
<PAGE>
PART II- OTHER INFORMATION
ITEM 1. Legal Proceedings
No legal proceedings of a material nature to which the Company is a party
were pending during the reporting period, and the Company knows of no legal
proceedings of a material nature pending or threatened or judgments entered
against any director or officer of the Company in his capacity as such.
Subsequent to the end of the reporting period, the Company filed a lawsuit
in the Colorado District Court for the City and County of Denver against Stephen
B. Torres, J. Scott Oler, Berkley Rasband, and Vision One Technologies, Inc.
seeking damages and injunctive relief in connection with the Company's
acquisition of the assets of Vision One Technologies, Inc. The Company has
alleged deceit based upon fraud, fraud in connection with the purchase of
securities, misappropriation of trade secrets, among other claims. The Company
is seeking actual and punitive damages, as well as injunctive relief against the
defendants. The case in the preliminary stages and no answer has been filed by
the defendants.
ITEM 2. Changes in Securities and Use of Proceeds.
On April 30, 1999, the Company acquired 100% of Entrust Mortgage,
Inc.(Entrust) in exchange for 800,000 common shares.
On May 5, 1999, the Company issued a Convertible Promissory Note for
$500,000, with an interest rate of 10% per annum. The Note is due May 5, 2000,
and may be converted at any time, at the option of the holder, into 250,000
shares of common stock.
The Company sold common shares in a private placement during the reporting
period. The Company raised $519,999 through the sale of 173,333 shares at a
price of $3.00 per share.
The foregoing transactions were exempt under Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 3. Defaults upon Senior Securities. None.
ITEM 4. Submission of Matters to a Vote of Security Holders. None
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit No. 27.1- Financial Data Schedule
No reports on Form 8-K were filed as of the most recent fiscal quarter.
<PAGE>
CENTENNIAL BANC SHARE CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Balance Sheet
For the Six Month Period Ended June 30, 1999
(Unaudited)
Six Months Six Months
Ended Ended
Jun. 30, 99 Jun. 30, 98
----------- -----------
ASSETS:
- - -------
Current Assets:
<S> <C> <C>
Cash $ 732,155 $ 11,598
Accounts Receivable 136,334 1,828
Prepaid Expenses 491,881 24,567
Loans - EMB 155,624 --
Loans - Held for Sale 2,542,441 --
----------- -----------
Total Current Assets 4,058,435 37,993
Property & Equipment:
Net of accumulated depreciation of $18,495 915,976 10,576
for 1999 and $200 for 1998
Other Assets:
Client Contracts 1,200,000 --
Corporate Set-up 68,602 --
State Approvals 400,000 --
Technology Rights 200,000 --
Deposit 13,063 65,685
----------- -----------
1,881,665 65,685
Less Amortization (18,109) --
----------- -----------
Total Other Assets 1,863,556 131,370
TOTAL ASSETS $ 6,837,967 $ 114,254
=========== ===========
LIABILITIES AND EQUITY
- - ----------------------
Current Liabilities:
Accounts payable $ 55,697 $ 524
Accrued Expenses 752 3,730
Impound 1,865 --
Loan Payable - First Payable 20,754 --
Loan Payable - Centennial Banc 468,821 --
Loan Payable - Shareholders 20,000 --
Debenture Payable 500,000 --
Warehouse Line Payable 2,517,100 --
Notes Payable -- 34,382
----------- -----------
Total Current Liabilities 3,584,989 38,636
Stockholder's Equity:
Preferred stock, $.0000001 Par Value
1,000,000 Shares Authorized. None Issued -- --
Common stock, $.0000001 Par Value
50,000,000 Shares Authorized, 3,397,983 were
issued and outstanding as of June 30, 1999, 1 1
1,149,300 were issued and outstanding as of June 30, 1998
Additional Paid-In Cash 3,547,420 136,136
Retained Earnings (Deficit) (294,443) (60,519)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,252,978 75,618
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY: $ 6,837,967 $ 114,254
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Statement of Operations
For the Six Months Ended June 30, 1999
(Unaudited)
Six Months Six Months
Ended Ended
Jun. 30, 99 Jun. 30, 98
----------- -----------
REVENUE:
Brokerage Fees $ 1,165,866 $ 393,608
Miscellaneous Income 14,000 3,185
----------- -----------
Total Revenue $ 1,179,866 $ 396,793
=========== ===========
OPERATING EXPENSES:
Salary & Wages 417,460 29,553
Payroll Taxes 44,109 2,883
Employee Benefits 16,168 --
Bonus -- 2,738
Advertising 11,986 4,677
Amortization 18,109 --
Telemarketing 7,612 --
Contract Labor 12,770 2,671
Office Expenses -- 164
Professional Fees 386,441 7,087
Maintenance & Repairs 1,241 325
Insurance 7,803 537
Legal & Audit Fees 4,647 3,987
Office Supplies 25,436 598
Equipment Lease 7,209 515
Equipment Repairs 12,959 --
Internet Expense 2,384 1,242
Rent 52,391 11,967
Telephone 36,098 4,172
Dues & Subscriptions -- 26
Training 590 --
Travel 12,351 4,664
Meals & Entertainment 2,144 --
Postage 14,706 475
Printing 24,378 1,335
Warehouse Fees 11,374 --
Appraisal Fees 13,525 5,345
Credit Reports 11,284 1,206
Loan Originator Fees 132,659 --
Stonecreek Loan Expenses 10,644 345,605
Processing Fees 5,084 1,911
Mortgage 2000 - Expenses 5,082 19,223
Charitable Contributions -- 53
Bank Charges 891 1,215
Personal Property Taxes 1,042 --
Interest Expense 69,516 900
Licenses 1,062 89
Miscellaneous Expense 4,013 1,008
Depreciation Expense 18,495 1,141
----------- -----------
Total Operating Expenses 1,403,663 457,312
----------- -----------
NET DEFICIT $ (223,797) $ (60,519)
=========== ===========
NET LOSS PER COMMON STOCK $ (0.11) $ (0.05)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 2,062,522 1,148,875
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL BANC SHARE CORPORATION
STOCKHOLDER'S EQUITY
June 30, 1999
(Unaudited)
COMMON STOCKS Additional Retained Total
-------------------------- Paid- In Earnings Stockholder's
Shares Amount Capital (Deficit) Equity
------ ------ ------- --------- ------
<S> <C> <C> <C> <C> <C>
Issuance of Stock for Cash & Services 1,147,500 1 108,510 -- 108,511
Net Deficit 12/31/97 (3,080) (3,080)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 1,147,500 1 108,510 (3,080) 105,431
Feb, 1998 Issuance of Stock for Cash 4,300 -- 10,750 -- 10,750
May, 1998 Cancelled Stock (2,500) -- (6,250) -- (6,250)
July, 1998 Issuance of Stock for Cash 16,665 -- 24,998 24,998
Net Deficit 12/31/98 -- (67,566) (67,566)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 1,165,965 1 138,008 (70,646) 67,363
April, 1999 Issuance for Acquisition 800,000 -- 2,889,412 -- 2,889,412
May, 1999 Forward Split of Shares 1,158,685 -- -- -- --
June, 1999 Issuance for Services 100,000 -- -- -- --
June, 1999 Issuance for Cash 173,333 -- 520,000 -- 520,000
Net Deficit 6/30/99 -- -- -- (223,797) (223,797)
----------- ----------- ----------- ----------- -----------
Balance June 30, 1999 3,397,983 $ 1 $ 3,547,420 $ (294,443) $ 3,252,978
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Statement of Cash Flow
For the Six Months Ended June 30, 1999
(Unaudited)
Six Months Six Months
Ended Ended
Jun.30,99 Jun.30,98
----------- -----------
Cash Flows from Operating Activities:
Net Income (Loss) $ (233,924) $ (3,080)
Depreciation 18,945 200
Changes in Assets & Liabilities:
Notes Receivable 2,698,065 (4,700)
Deposits 52,622 (25,000)
Debenture Payable 500,000 --
Accounts Payable 55,173 524
Notes Payable (2,971,539) (34,382)
Intangibles (1,868,602) --
Accrued Expenses (77,302) 3,730
----------- -----------
Net Cash Provided by Operating Activities (1,826,562) (62,708)
Cash Flows Used for Investing Activities:
Capital Expenditures (367,291) (35,625)
----------- -----------
Net Cash Used for Investing Activities (367,291) (35,625)
Cash Flows from Financing Activities:
Issuance of Common Stocks 2,914,410 109,931
----------- -----------
Net Cash Provided by Financing 2,914,410 109,931
Net Increase in Cash & Cash Equivalents 720,557 11,598
Cash & Cash Equivalents at Beginning of Period 11,598 --
----------- -----------
Cash & Cash Equivalents at End of Period $ 732,155 $ 11,598
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest 69,516 900
Income Taxes -- --
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies:
- - ---------------------------------------------------------------------
Organization
- - ------------
The Company was formed on November 8, 1996, and incorporated under the laws of
the State of Colorado. The Company spent several months of preparation and
research before beginning formal operations on March 10, 1997. No financial
transactions occurred in 1996.
The Company is a Colorado Corporation organized for the purpose of developing
and maintaining the business associated with mortgage banking. The Company name
has been approved by the State of Colorado division of banking. The Company is
an approved broker, which has a correspondent relationship with several large
wholesale banks. On April 30, 1999 the Company purchased 100% of Entrust
Mortgage, Inc. for Eight Hundred Thousand shares of restricted 144 common stock.
Entrust Mortgage, Inc. became a wholly owned subsidiary of Centennial Banc Share
Corp. and is included in these consolidated financial statements utilizing the
purchase method of accounting.
Entrust Mortgage , Inc. was incorporated under the laws of the State of Colorado
on March 4, 1999. Entrust is acquiring the mortgage operation of Investment
Consultants, Inc., d.b.a. EMB Mortgage. The Company originated residential loans
in over thirty states and assigns them to investors for approval and subsequent
funding.
The Company originates residential real estate loans and assigns them to various
lenders. The Company receives fees from borrowers and yield spread premiums on
loans sold to lenders. Management believes that the Company is not economically
dependent on any one lender because the Company does assign loans to numerous
lenders and has ability to select lenders for assignment.
The Company has entered into various loan purchase and sale agreements. The
Company acts as a loan correspondent for lenders for certain loans closed and
funded by the company and sold to the lenders. The transfers of the mortgage
loans that are subject to these agreements are subject to the warranties,
representations and provisions in the agreement. Certain lenders have the right
to require the Company to repurchase a mortgage loan for any of the following
reasons: (a) if a representation and warranty given by the Company as to a
particular mortgage loan is breached, (b) if there has been a breach of any
other terms and conditions of the agreement, and (c) if final post-closing
documentation is improper or incomplete after a reasonable period of time, the
determination of which is at the bank's discretion. At the lender's option, the
Company shall be required either promptly to cure such a breach in all material
respects or to repurchase the mortgage loan at a price equal to the following:
The principle balance of the mortgage loan plus interest at the mortgage loan
rate from the date to which the interest has last been paid to the date of
repurchase.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies (Cont):
- - ----------------------------------------------------------------------------
Basis of Presentation:
- - ----------------------
The Company is primarily engaged in mortgage brokering. The authorized capital
stock of the corporation is 50,000,000 shares of common stock at $.0000001 and
1,000,000 shares of preferred stock at $.0000001 par value. No preferred stock
has been issued.
Cash and Cash Equivalents:
- - --------------------------
The Company considers all highly-liquid debt instruments, purchased with an
original maturity of ninety (90) days, to be cash equivalents.
Concentration of Credit Risk
- - ----------------------------
Financial instruments, which potentially subject the Company to concentration of
credit risk, consist primarily of mortgage notes receivable. The Company grants
credit to mortgage borrowers nationwide. Concentrations of credit with respect
to trade receivables are limited due to the large number of customers comprising
the Company's customer base and the fact that the commissions and fees paid to
the Company are remitted to the Company within a short period after the closing.
As of June 30, 1999, the Company has no significant concentrations of credit
risk with regard to these financial instruments.
Pervasiveness of Estimates
- - --------------------------
The preparation of a financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement. Actual results could differ from those estimates.
Geographic Area of Operations and Interest Rates
- - ------------------------------------------------
The Company originates residential loans in over thirty states and most
geographic areas of the United States. The potential for severe financial impact
which can result from negative effects of economic conditions within the market
of geographic areas are limited due to the Company's diverse geographic
originations. The interest rates at which borrowers can refinance or obtain new
financing for real estate acquired has a direct effect on the demand for the
Company's services. Changes in interest rates could result in potential severe
impacts on future operations of the Company.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies (Cont):
- - ----------------------------------------------------------------------------
Property and Equipment
- - ----------------------
Property and equipment is stated at cost. The cost of ordinary maintenance and
repairs is charged to operations while renewals and replacements are
capitalized. Depreciation is computed on the straight-line method over the
following estimated useful lives:
Furniture and fixtures 7 years
Equipment 5 years
Intangible Assets
- - -----------------
Intangible assets consist of the following at April 30, 1999:
Estimated Useful Life
---------------------
Organization Costs $ 40,321 5 years
Client Contracts 1,200,000 20 years
Technology Rights 200,000 10 years
State Approvals 400,000 40 years
Revenue Recognition:
- - --------------------
Revenue is recognized when earned and expenses are recognized when they occur.
Note 2 - Federal Income Taxes:
- - ------------------------------
The Company adopted statement of financial Accounting Standards No. 109,
"Accounting For Income Taxes." FAS 109 requires the recognition of deferred tax
liabilities and assets for the anticipated future tax effects of temporary
differences that arise as a result of differences in the carrying amounts and
tax bases of assets and liabilities. There was no material effect on the
financial statements as a result of adopting FAS 109. The Company has a net
operating loss carry-forward of approximately $84,000, which expires in the year
2014.
Note 3 - Money Market Funds
- - ---------------------------
The Company maintains a money market pledge account at Southern Pacific Bank.
This account secures outstanding loans on the EMB Warehouse Line with IMPAC
Warehouse Funding. The amount owned by Entrust and which amount shows on the
statement is $90,490. By contractual agreement with EMB, if IMPAC Warehouse
Funding seizes any portion of the $90,490 in the money market pledge account,
EMB CORP indemnifies the Company. The indemnity is secured by a promise that EMB
Corp. will issue shares of fully registered, unrestricted stock of EMB Corp.
with a market value equivalent to any amount seized by IMPAC Warehouse Funding
from the money market pledge account. This stock is to be issued within three
days of the money being seized by IMPAC Warehouse Funding.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 4 - Marketable Security
- - ----------------------------
The Company owns 400,000 shares of EMB Corp. common stock; a NASDAQ bulletin
board company traded under EMBU. The shares were issued on December 23, 1997,
and were subject to Rule 144 of the Securities Act of 1933. The shares are
listed at their fair market value, which is the initial cost basis of the
security.
Note 5 - Related Party Transactions
- - -----------------------------------
Jerrold Burden, an officer and director of the corporation has loaned and
secured loans for the corporation. During the organizational meeting of the
corporation 1,107,500 shares were issued to officers and directors of the
company at par value for past services rendered.
Note 6 - Impact of Recently Issued Accounting Standards
- - -------------------------------------------------------
SFAS No. 131 requires disclosure of certain information regarding operating
segments, products, and services, geographic areas of operation and major
customers. SFAS No. 134 accounting for mortgage-backed securities retained after
the securitization of mortgage loans held for sale by a mortgage banking
enterprise. Adoption of these statements is expected to have no impact on the
Company's financial position, results of operation, or cash flows.
Note 7 - Commitments
- - --------------------
The Company leases its' offices under long-term leases that are accounted for as
operating leases. Future minimum rental payments on all non-cancelable operating
leases with initial or remaining lease terms in excess of one year are as
follows:
Year Ending Offices
----------- -------
March 12, 2000 $ 141,994
March 12, 2001 108,650
---------
$ 250,644
=========
Note 8 - Subsequent Event
- - -------------------------
The Company was victimized by a fraud which caused the Company to significantly
increase the Company's infrastructure and overhead for the period of time until
the fraud was uncovered. The Company has begun legal proceedings to recover the
losses suffered from the fraud. The principal perpetrator of the fraud has been
indicted and is in custody by authorities.
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CENTENNIAL BANC SHARE CORP.
Dated: 8/20/99 By: /s/ J. Dean Burden
- - -------------- ----------------------
J. Dean Burden
Chief Financial and Accounting Officer
Director
Dated: 8/20/99 By: /s/ J. Dean Burden
- - -------------- ----------------------
J. Dean Burden
Chief Financial and Accounting Officer
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 212,155
<SECURITIES> 0
<RECEIVABLES> 136,334
<ALLOWANCES> 2,698,065<F1>
<INVENTORY> 491,881<F2>
<CURRENT-ASSETS> 3,538,435
<PP&E> 397,867
<DEPRECIATION> 1,881,665<F3>
<TOTAL-ASSETS> 5,817,967
<CURRENT-LIABILITIES> 3,084,989
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 2,732,977
<TOTAL-LIABILITY-AND-EQUITY> 5,817,967
<SALES> 0
<TOTAL-REVENUES> 1,179,866
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,334,147
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,516
<INCOME-PRETAX> (223,797)
<INCOME-TAX> 0
<INCOME-CONTINUING> (223,797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223,797)
<EPS-BASIC> (.11)
<EPS-DILUTED> 0
<FN>
<F1> Loans Rec.
<F2> Prepaid Expenses
<F3> Other Assets
</FN>
</TABLE>
