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 September 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 September 30, 1999 were 3,717,900 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
The Company continues to be unprofitable. For the nine months ended
September 30, 1999, the Company had revenues of $2,010,578, compared to revenues
of $679,443 for the same period ended September 30, 1998. Total expenses for the
nine months ended September 30, 1999 were $2,716,758, compared to expenses of
$730,118 for the same period ended September 30, 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.
As a result, the Company had a net loss of $706,180 for the nine months
ended September 30, 1999, compared to $50,675 for the same period ended
September 30, 1998. The current unprofitability came as a result of the fraud
perpetrated upon the Company by Vision One Technologies (Vision). The Vision
acquisition, which closed on June 11, 1999, was rescinded during the reporting
period. During the period between the closing of the acquisition and the
recission, the Company significantly increased its infrastructure and overhead.
As a consequence of the Vision fraud, the Company spent $508,000 to Vision and
paid approximately $400,000 of additional expenses for the discontinued
operations.
<PAGE>
The Company has filed a civil suit against Vision, its principals, and
their attorney. The two principals of Vision have been criminally indicted for
the numerous charges associated with the fraud perpetrated upon the Company. The
Company has also identified assets of the perpetrators of the fraud and is
hopeful of being able to ultimately recover a substantial portion of the losses.
During the reporting period, the Company discontinued operations of the
program which was a result of the fraud perpetrated by Vision. Part of the
discontinued operations was the dismissal of a staff infrastructure which was
acquired by the Company to originate and process subprime mortgages utilizing
the technology infrastructure which was to be provided by Vision.
The Company's primary business function remains mortgage originations. The
Company generates wholesale mortgage originations as Entrust Mortgage and retail
originations as Mortgage 2000 and Easyqual.com. During the third quarter, the
Company entered into contracts with two major banking companies to market their
products to the mortgage brokerage community. These new product lines replace
the programs for which Entrust's predecessor company was successful in
marketing.
The Company's strategy is to deliver into the U.S. mortgage industry an
automated underwriting and loan application processing program. The present
mortgage industry conducts its business through many manual steps, in an
antiquated system prone to mistakes. The pre-approval process by itself requires
a 24 to 48 hour turn around on average. The Company's system will be set up to
permit the mortgage customer to process an application much quicker, typically
one to three minutes. Currently, the pre approval and stipulations for a
mortgage in the industry typically need one to two days to complete before
sending out. The more loan programs offered by the mortgage company, the more
complexity sets in, pushing those averages out.
In the competitive loan environment providing a diverse range of programs,
for every 10 applications that the underwriter pre-approves, a significant
number are pre-approved for the wrong program. On average five pre-approvals per
day have to be redone.
On average, out of every 10 loans submitted, one-half are pre-qualified and
generate a customer list of stipulations. Of the customers receiving a list of
stipulations, only one half return a full package. The time delays to get
pre-approval encourage the customer to shop around for other product. Document
completion by the customer (assisted by the broker) can take another 7 to 10
days on average. Of the customers responding to the stipulations completely,
one-half actually close their loans. On average, out of ten initial mortgage
loan applications submitted, fewer than one (.833) is funded in an industry
completion process of 18 days.
With the Company's planned system, the industry standard would change. Out
of ten initial loan applications, the Company projects three will close in a
major positive shift in cost and time. In the Company's system, the loan
application is a "smart application." One long, tedious form no longer fits
every customer. As the computer asks the broker (or customer) a question, the
response determines the next question. Each new question fits the applicant's
prior responses in a design to limit questions to what is directly relevant.
Broker data input time is thereby reduced.
<PAGE>
By integrating the smart application into an automated underwriting
program, the Company's search engine would be able to examine a thousand loan
programs, if necessary, to find an exact match for each customer profile without
mistakes. Pre-approval and document stipulations are complete in about 6o
seconds, not two days.
With the Company's planned system, management evaluation of a sales
person's prospect is eliminated. Back office data entry is also eliminated.
Applications that would sit for two days in a back office file disappear as
well. There is only one human interface in the underwriting process involving a
review of the authenticity of tax returns and the other stipulated documents.
With the Company's planned system, the cost of back office personnel would go
down, providing margins for employing a higher quality personnel using systems
that ensure an efficient document review process. Consequently, everything is
speeded up without error.
The Company's planned system turns an inexperienced loan officer into a
seemingly experienced loan officer, able to provide the customer with definite
answers instantaneously without the customary mistakes. With every requirement
of the loan process scripted, the customer gets accurate information from the
broker who no longer has to constantly call the home office for answers. With
the Company's planned system, a loan officer's time is released to sell rather
than study dozens of loan programs offered by the firm. The system also removes
the insecurity that currently prevails when an inexperience sales person
attempts to describe complex loan options. In addition, the current limits on
the number of loans a top producer or any producer can manage is dramatically
expanded. The confidence that the lender has for the integrity of the
underwriting/loan process is enhanced as well.
Automated underwriting can be found currently in limited pockets of the
industry. For the "prime market"--offering standard, government generated
mortgages to the creditworthy customer--automated underwriting is now available
on a limited basis. The "prime market," however, represents one-fourth of the
total mortgage business. For the "sub-prime" market involving more complexity,
including credit issues and the need for individual loan tailoring, the manual
mortgage system prevails everywhere in the industry.
The sub-prime market representing three-fourths of the total U.S. mortgage
origination business provides three to four times the profit margins of the
prime market. That is the market in which the Company seeks to create a new
standard and by its standard and to establish a new industry leadership.
The Company's market roll-out of this new system is expected to target both
the wholesale and retail mortgage industry. Bringing the Company's automated
system into the small to medium brokerage office currently operating in every
rural and urban region of the United States should be the basis of substantial
business. Small mortgage brokers dominate this industry.
<PAGE>
The Company's plan for the U.S. wholesale mortgage industry uses
relationships with brokerage office which do require to giving up autonomy,
name, ownership or loan programs to participate in the Company's mortgage
origination program.
Upon the funding of its program, which is expected in the fourth quarter,
the Company intends to begin operating this system to the mortgage industry
through industry publications and other media outlets, a web site, an industry
newsletter and a team of account executives.
Liquidity and Capital Resources
As of the end of the reporting period, the Company had cash or cash
equivalents of $21,567.
Net cash provide by operating activities of the Company was $2,949,641 for
the nine months ended September 30, 1999, compared to $37,503 for the nine
months ended September 30, 1998.
Cash flows used for investing activities provided $706,218 for the nine
months ended September 30, 1999, compared to $5,288 for the nine months ended
September 30, 1998.
Cash flows from financing activities accounted for $3,597,712 for the nine
months ended September 30, 1999, compared to $19,256 for the nine months ended
September 30, 1998.
The Company's cash and cash equivalents are not sufficient to meet its
business plan objectives, particularly the funding of its mortgage origination
program. The Company plans to raise additional capital through a private
placement, by leveraging Company assets and utilizing internally generated
profits to recover its cash position over the short-term. These funds will be
necessary for the funding of the Company's mortgage origination program. 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 raised no funds.
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.
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.
<PAGE>
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 November 30, 1999.
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.
<PAGE>
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.
PART II- OTHER INFORMATION
ITEM 1. Legal Proceedings
During 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.
Otherwise, 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.
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 period
ending June 30, 1999. The Company raised $519,999 through the sale of 173,333
shares at a price of $3.00 per share.
<PAGE>
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.
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: 11/12/99 By: /s/ J. Dean Burden
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J. Dean Burden
Chief Financial and Accounting Officer
Director
Dated: 11/12/99 By: /s/ J. Dean Burden
- --------------- ----------------------
J. Dean Burden
Chief Financial and Accounting Officer
Director
<PAGE>
CENTENNIAL BANC SHARE CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Balance Sheet
For the Nine Month Period Ended September 30, 1999
(Unaudited)
Nine Months Year
Ended Ended
Sep. 30, 99 Dec. 31, 98
----------- -----------
ASSETS:
- -------
<S> <C> <C>
Current Assets:
Cash $ 21,567 $ 79,714
Accounts Receivable 183,648 --
Prepaid Expenses 430,351 1,102
Note Receivable - EMB 160,183 --
Note Receivable 186,554 --
Loans - Held for Sale 3,077,311 --
----------- -----------
Total Current Assets 4,059,614 80,816
Property & Equipment:
Net of accumulated depreciation of $34,244 915,976 9,133
for 1999 & $2,283 depreciation for 1998
Other Assets:
Client Contracts 1,200,000 --
Corporate Set-up 63,257 --
Leasehold Improvements 12,424 --
State Approvals 400,000 --
Technology Rights 200,000 --
Deposit 14,756 1,828
----------- -----------
1,890,437 1,828
Less Amortization (45,800) --
----------- -----------
Total Other Assets 1,844,637 3,656
TOTAL ASSETS $ 6,820,227 $ 91,777
=========== ===========
LIABILITIES AND EQUITY
- ----------------------
Current Liabilities:
Accounts payable $ 153,638 $ 342
Accrued Expenses 56,752 1,572
Impound 4,911 --
Note Payable - First Payable 18,323 --
Loan Payable - Shareholders (Note 5) 20,000 --
Debenture Payable 500,000 --
Warehouse Line Payable 3,077,290 --
Notes Payable 10,418 22,500
----------- -----------
Total Current Liabilities 3,841,332 24,414
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, 3,717,900 were
issued and outstanding as of September 30, 1999, 1 1
1,165,965 were issued and outstanding as of December 31, 1998
Additional Paid-In Cash 3,755,720 138,008
Retained Earnings (Deficit) (776,826) (70,646)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,978,895 67,363
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY: $ 6,820,227 $ 91,777
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
(Unaudited)
Nine Months Year
Centennial Entrust Ended Ended
Sep. 30, 99 Sep. 30, 99 Sep. 30, 99 Dec. 31, 98
----------- ----------- ----------- -----------
REVENUE:
<S> <C> <C> <C> <C>
Brokerage Fees $ 348,787 $ 503,556 $ 852,343 $ 899,554
Commission 92,330 -- 92,330 --
Loan Income 190,460 732,749 923,209 --
Interest Income -- 142,290 142,290 --
Miscellaneous Income 406 -- 406 6,370
----------- ----------- ----------- -----------
Total Revenue 631,983 1,378,595 2,010,578 905,924
OPERATING EXPENSES:
Advertising 4,398 13,903 18,301 9,354
Amortization -- 45,800 45,800 --
Appraisal Fees 15,300 3,375 18,675 10,689
Bank Charges 46 1,096 1,142 2,430
Bonus -- -- -- 5,475
Charitable Contributions -- -- -- 105
Commissions -- 563,885 563,885 --
Contract Labor 5,525 16,576 22,101 5,341
Credit Reports 3,462 13,745 17,207 3,522
Depreciation Expense 8,561 25,683 34,244 2,083
Dues & Subscriptions 136 -- 136 52
Employee Benefits 4,514 23,311 27,825 --
Equipment Lease 16,660 42,133 58,793 1,031
Equipment Repairs 100 -- 100 2,100
Insurance 2,904 7,190 10,094 1,074
Interest Expense 1,315 121,296 122,611 1,799
Internet Expense 3,051 -- 3,051 2,485
Legal & Audit Fees 4,868 1,722 6,590 7,973
Licenses -- 2,002 2,002 178
Loan Originator Fees 192,931 -- 192,931 57,857
Maintenance & Repairs 500 1,499 1,999 650
Miscellaneous Expense 8,702 887 9,589 2,017
Mortgage 2000 - Expenses 4,000 -- 4,000 38,446
Office Expenses -- -- -- 327
Office Supplies 14,325 34,333 48,658 1,195
Payroll Taxes 33,247 54,600 87,847 5,767
Personal Property Taxes 388 781 1,169 --
Postage & Delivery 8,085 22,872 30,957 950
Printing -- 58,274 58,274 2,670
Processing Fees 7,539 2,498 10,037 3,823
Professional Fees 102,965 -- 102,965 14,174
Rent 42,648 58,372 101,020 21,933
Salary & Wages 287,981 497,039 785,020 59,107
Stonecreek Loan Expenses 185,584 -- 185,584 691,210
Telemarketing 10,612 -- 10,612 --
Telephone 23,638 54,954 78,592 8,345
Training 3,039 985 4,024 --
Travel 18,577 10,148 28,725 9,328
Warehouse Fees -- 22,198 22,198 --
----------- ----------- ----------- -----------
Total Operating Expenses 1,015,601 1,701,157 2,716,758 973,490
----------- ----------- ----------- -----------
NET DEFICIT $ (383,618) $ (322,562) $ (706,180) $ (67,566)
=========== =========== =========== ===========
NET LOSS PER COMMON STOCK $ (0.23) $ (0.06)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 3,027,420 1,131,496
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL BANC SHARE CORPORATION
STOCKHOLDER'S EQUITY
September 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 1,170,302 -- -- -- --
June, 1999 Issuance for Services 100,000 -- -- -- --
June, 1999 Issuance for Cash 173,333 -- 520,000 -- 520,000
Sept, 1999 Issuance for Services 100,000 -- -- -- --
Sept, 1999 Issuance for Cash 208,300 -- 208,300 208,300
Net Deficit 9/30/99 -- -- -- (706,180) (706,180)
----------- ----------- ----------- ----------- -----------
Balance September 30, 1999 3,717,900 $ 1 $ 3,755,720 $ (776,826) $ 2,978,895
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
CENTENNIAL BANC SHARE CORPORATION
Consolidated Statement of Cash Flow
For the Nine Months Ended September 30, 1999
(Unaudited)
Nine Months Year
Ended Ended
Sep.30,99 Dec.31,98
----------- -----------
Cash Flows from Operating Activities:
Net Income (Loss) $ (706,180) $ (66,823)
Depreciation 34,244 2,083
Changes in Assets & Liabilities:
Notes Receivable 597,362 4,700
Deposits 12,928 23,172
Accounts Payable (153,296) 1,102
Notes Payable (838,538) (182)
Intangibles (1,840,981) (11,882)
Accrued Expenses (55,180) (2,174)
----------- -----------
Net Cash Provided by Operating Activities (2,949,641) (50,004)
Cash Flows Used for Investing Activities:
Capital Expenditures (706,218) (7,050)
----------- -----------
Net Cash Used for Investing Activities (706,218) (7,050)
Cash Flows from Financing Activities:
Issuance of Common Stocks 3,597,712 25,675
----------- -----------
Net Cash Provided by Financing 3,597,712 25,675
Net Increase in Cash & Cash Equivalents (58,147) (31,379)
Cash & Cash Equivalents at Beginning of Period 79,714 111,093
----------- -----------
Cash & Cash Equivalents at End of Period $ 21,567 $ 79,714
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest 122,611 1,479
Income Taxes -- --
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
September 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. The Company originates 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
September 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 September 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
origination's. 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
September 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 September 30, 1999:
Estimated Useful Life
---------------------
Client Contracts 1,200,000 20 years
Corporate Set-up 63,257 7 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 $775,000, which expires in the
year 2015.
Note 3 - 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.
<PAGE>
CENTENNIAL BANC SHARE CORP.
Notes to Financial Statements
September 30, 1999
(Unaudited)
Note 4 - 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 5 - 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 6 - 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 7 - 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.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 21,567
<SECURITIES> 0
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