United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Amendment No. 3
[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
Commission File Number 000-23851
CENTENARY INTERNATIONAL CORP
(formerly, R&R Resources, Inc.)
(Exact name of registrant as specified in its charter)
Nevada 86-0874841
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
692 Madison Avenue, Third Floor, New York, NY 10021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 644-2113
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 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 [ ]
Applicable Only to Corporate Issuers
As of July 30, 1999, there were outstanding 19,113,500 shares of the
registrant's $.001 par value Common Stock.
<PAGE>
Table of Contents
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and December 31, 1998 (audited)
Consolidated Statements of Operations for the three
months and six months ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows for the three
months and the six months ended June 30, 1999 and 1998 (unaudited)
Selected Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II
OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information required hereunder is included in the Company's
Consolidated Financial Statements and the Notes thereto as set forth beginning
on page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion, Analysis of Financial Condition and
Results of Operations are qualified by reference to, and should be read in
conjunction with the Company's Consolidated Financial Statements (unaudited )
and the Notes thereto as forth set beginning on page F-1, and in the audited
consolidated Financial Statements, Management Discussion, Analysis of Financial
Condition and Results of Operations contained in the Company's 10-KSB for the
year ended December 31, 1998.
INFORMATION REGARDING AND FACTORS AFFECTING FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this Report
on Form 10-Q; to make applicable and take advantage of the safe harbor provision
of the Private Securities Litigation Reform Act of 1995, for any forward-looking
statements made by, or on behalf of the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements that are other than statements of historical facts. Certain
statements contained in this Report on Form 10-Q are forward-looking statements,
and the matters discussed in these forward-looking statements are subject to
risks and uncertainties, which could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements.
The Company's forward-looking statements are expressed in good faith, and
are believed by the Company to have a reasonable basis, based on management
examination of historical operating trends, data contained in the Company's
records and other data available from third parties. But no assurance can be
made that any matter discussed in a forward-looking statement will ultimately be
achieved, or if achieved, will have the same impact on the Company as discussed
in the forward-looking statement.
In addition to those factors already mentioned, other factors which could
effect forward looking statements are the ability of the Company to obtain
financing on favorable terms, the success of the Company's olive oil, animal
feed, cattle feeding and meat processing operations, demand and supply factors,
competitive factors, weather conditions, crop yield and failures, crop
oversupply, geopolitical changes, import restrictions in countries of customers,
the effect of inflation and government regulations. The Company has no
obligation to update or revise any forward-looking statement to reflect future
events.
3
<PAGE>
RESULTS OF OPERATIONS
General. The following sets forth, for the periods presented, the percentage of
net sales represented by certain items in the Company's Consolidated Statements
of Operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1999 1998
<S> <C> <C>
Net Sales . . . . . . . . . . . 100.0% 100.0%
Cost of goods sold. . . . . . . 77.0 81.1
------ ------
Gross profit. . . . . . . . . . 23.0 18.9
Selling expenses. . . . . . . . 19.1 11.5
Administrative expenses . . . . 2.6 1.9
------ ------
Operating income. . . . . . . . 1.3 5.5
Other Income (Expense), Net . . 2.8 (.6)
Interest expense. . . . . . . . 1.8 1.2
------ ------
Income before income taxes and
minority interests. . . . . . . 2.3 3.7
Income taxes. . . . . . . . . . 1.2 1.0
Minority interest in subsidiary 0.0 ---
------ ------
Net income. . . . . . . . . . . 1.1 2.7
------ ------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
<S> <C> <C>
Net Sales . . . . . . . . . . . 100.0% 100.0%
Cost of goods sold. . . . . . . 78.0 81.0
------ ------
Gross profit. . . . . . . . . . 22.0 19.0
Selling expenses. . . . . . . . 17.3 13.2
Administrative expenses . . . . 3.0 2.6
------ ------
Operating income. . . . . . . . 1.7 3.2
Other Income (Expense), Net . . 1.6 (.4)
Interest expense. . . . . . . . 1.8 1.2
------ ------
Income before income taxes and
minority interests. . . . . . . 1.5 1.6
Income taxes. . . . . . . . . . 0.8 0.7
Minority interest in subsidiary 0.0 0.0
------ ------
Net income. . . . . . . . . . . .7 .9
------ ------
</TABLE>
4
<PAGE>
The following table sets forth-sales revenues by region for the six months ended
June 30, 1999 and 1998:
5
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
(STATED IN US DOLLARS)
<S> <C> <C>
Geographical Information
- -------------------------------
Middle East . . . . . . . . . . $ 17,464,735 $ 9,758,331
South American Pacific. . . . . $ 16,394,726 $38,551,861
Mercosur. . . . . . . . . . . . $ 641,883 $ 1,826,758
Caribbean . . . . . . . . . . . $ 9,069,069 $13,273,928
Africa. . . . . . . . . . . . . $ 90,600 $ 1,861,261
Russia & ex - Soviet Countries. $ 275,118 $10,587,176
Mediterranean . . . . . . . . . $ 26,000 $ -
China and Far East. . . . . . . $ - $ 68,250
Europe. . . . . . . . . . . . . $ - $ 6,487
------------ -----------
$ 43,962,131 $75,934,052
</TABLE>
The Three Months Ended June 30, 1999
Compared to the Three Months Ended June 30, 1998:
Revenues: - Net revenues decreased 55.3 % from $56 million in the three
months ended June 30, 1998 to $ 25 million in the three months ended June 30,
1999. During the three months ended June 30, 1999, the Company shipped 173,484
metric tons of food commodities compared to 285,481 metric tons in the three
months ended June 30, 1998. The 55.3% decrease in sales was attributable
primarily to the lack of working capital, which limited the Company to trading
on letters of credit rather than on cash against documents or clean credit.
Cost of sales: - The cost of sales decreased from $45 million in the three
months ended June 30, 1998 to $19 million in the three months ended June 30,
1999 due to the decrease in sales. The cost of sales as a percentage of
revenues remained relatively stable in 1999 in comparison to 1998. The cost of
sales was 77% for the three months ended June 30, 1999 and 81% for the three
months ended June 30, 1998.
Selling expenses: - Selling expenses decreased from $6.4 million in the
three months ended June 30, 1998 to $4.8 million in the three months ended June
30, 1999. As a percentage of revenues, selling expenses increased from 12% in
the three months ended June 30, 1998 to 19% in the three months ended June 30,
1999. Selling expenses include freight charges, importation fees, bank charges
and sales commissions. Selling expenses in the three months ended June 30, 1999
increased primarily because of an increase of the sales with importation fees
included. Freight rates increased in the second quarter, compared to the first
quarter, but this impact was reduced by the acquisition of Platafreight.
Freight charges declined due to a global decrease in freight charges.
Administrative expenses: - Administrative expenses decreased $403,745 in
the three months ended June 30, 1999 compared to the three months ended June 30,
1998. As a per cent of sales, administrative expenses increased from 2% in the
three months ended June 30, 1998 to 2.5% in three months ended June 30, 1999
primarily because of a decrease in the amortization of the trademark which was
sold during 1998 and other nonrecurring expenses.
6
<PAGE>
Interest expense: - Interest expense decreased $ 225,301 in the three
months ended June 30, 1999 compared to the three months ended June 30, 1998.
The decrease in interest expense was attributable to the $31 million decrease in
the net revenues and therefore the decrease of additional interest incurred in
discounts on extensions of letters of credit to banks in connection with sales
to customers.
Other Income. Other income in 1999 was attributable primarily to the sale
of the breeding livestock and services performed by Platafreight.
Income taxes: - Income taxes decreased in the three months ended June 30,
1999 compared to the same period in 1998 due primarily to a decrease in 1999
income.
The Six Months Ended June 30, 1999
Compared to the Six Months Ended June 30, 1998:
Revenues: - Net revenues decreased 42% from $75 million in the six months
ended June 30, 1998 to $44 million in the six months ended June 30, 1999.
During the six months ended June 30, 1999, the Company shipped 298,870 metric
tons of food commodities compared to 356,197 metric tons in the six months ended
June 30, 1998. The 42% decrease in sales was attributable primarily to the
impact of lower commodity prices, and lack of working capital.
Cost of sales: - The cost of sales decreased from $61 million in the six
months ended June 30, 1998 to $ 34 million in the six months ended June 30, 1999
due to the decrease in sales. The cost of sales as a percentage of revenues
remained relatively stable in 1999 in comparison to 1998. The cost of sales was
78% for the six months ended June 30, 1999 and 81% for the six months ended June
30, 1998.
Selling expenses: - Selling expenses decreased from $10 million in the six
months ended June 30, 1998 to $7.5 million in the six months ended June 30,
1999. As a percent of revenues, selling expenses increased from 13% in the six
months ended June 30, 1998 to 17% in the six months ended June 30, 1999. Selling
expenses include freight charges, importation fees, bank charges and sales
commissions. Selling expenses in the six months ended June 30, 1999 decreased
primarily because of a decrease of sales of cargos. Freight charges declined
due to a global decrease.
Administrative expenses: - Administrative expenses decreased $631,000 in
the six months ended June 30, 1999 compared to the six months ended June 30,
1998. As a percentage of sales, administrative expenses increased from 2.6% in
the six months ended June 30, 1998 to 3.0 % in six months ended June 30, 1999.
7
<PAGE>
Interest expense: - Interest expense decreased $ 133,119 in the six months
ended June 30, 1999 compared to the six months ended June 30, 1998. The
decrease in interest expense was attributable to the decrease in the net
revenues, and therefore, the decrease of additional interest incurred in
discounts on extensions of letters of credit to banks in connection with sales.
Other Income. Other income in 1999 was attributable primarily to the sale
of the breeding livestock and services performed by Platafreight.
Income taxes:- Income taxes decreased in the six months ended June 30, 1999
compared to the same period in 1998 due primarily decrease in 1999 income.
Liquidity and Capital Resources
Operating activities consumed $ 835,000 in the six months ended June 30,
1999 in comparison to $5.6 million in the six months ended June 30, 1998. The
decrease in cash used in the six months ended June 30, 1999 was primarily
attributable to an increase in the current portion of a related party receivable
of $2 million, an increase in other receivable of $3.1 million and a decrease in
accounts payable of $7.4 million offset by a $3.7 million increase in receivable
accounts.
Investing activities utilized $3.3 million in the six months ended June 30,
1999 and provided $368,000 in the six months ended June 30, 1998. During the
six months ended June 30, 1999, the Company used $2 million for a note
receivable from a related party. The Company expended $1 million for the
purchase of Platafreight SA, a sea freight company.
Financing activities provided $3.8 million in the six months ended June 30,
1999 and utilized $4.2 million in the six months ended June 30, 1998. In the
six months ended June 30, 1999, cash was provided by an additional $3.8 million
on short-term debt and $705,000 on long-term debt. During the six months ended
June 30, 1999, the Company used $740,000 for repayment of long-term debt.
During the six months ended June 30, 1998, the Company repaid $3.7 million of
short term debt. In the six months ended June 30, 1999, the capital was
increased by $150,000 through a 150,000 shares issuance.
During the six months ended June 30, 1999 the Company re-negotiated its
bank loan of $3,294,000 for the pre-financing of exports. The first eight
monthly payments of $ 68,182 formerly due beginning February 1999, are now due
in three monthly installments of $181,818 each, beginning September 1999.
The Company contemplates raising capital through a private or public
placement of equity or debt. If such an offering is successful, the Company
anticipates that the primary uses of this capital would be to expand the food
commodities trading business first, and then to develop the olive grove and
olive oil production facility. The Company's growth, expansion, and liquidity
and capital resources will be significantly affected by its ability to raise
additional capital. During the six months ended June 30, 1999, the Company
raised $ 150,000 through private placement of its securities.
The Company does not currently have material commitments for capital
expenditures and does not anticipate entering into any such commitments during
the next twelve months unless it is able to raise additional capital.
8
<PAGE>
Until the Company achieves its goal of increasing its capital, and
improving its profitability, international trading activities will be limited
to the high return niches only. With the same aim we will enhance the original
food products and export activities that, in spite of being highly profitable,
require less working capital than international trading.
On July 9, 1999 Centenary International Corp. acquired Panamanian Shell
Corporation which holds a purchase option for two 27,000MT DWT bulk carrier
vessels, presently under construction, at a price of $13.0 million each. The
first one will be ready for launching on February, 2000; and the second one
will be completed by June 2001. This option can be exercised by depositing 5%
of the total value of the vessels on December 15, 1999. The historic value
for vessels of this kind in the international market, is between $15.0 and
$22.0 million each.
Inflation:
The Company operates in certain countries that have experienced high rates
of inflation and hyper-inflation in the past. However, the Company's
transactions are denominated in U.S. Dollars. Therefore, local inflation has
not had a material impact on the Company's results of operations during the
periods presented herein. Further, the Company does not expect inflation to
have a material impact on the Company in the future. However, the future impact
of inflation on the Company is unknown.
Impact of Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruption of business activities.
Based on ongoing assessments, the Company believes that no significant
modifications of existing computer software will be required. The Company
believes that its computer systems will function properly with respect to dates
in the year 2000 and thereafter. The Company also believes that costs related
to the Year 2000 issue have not and will not be significant and will not exceed
$10,000.
9
<PAGE>
The Company has assessed its relationships with significant suppliers and
major customers to determine the extent to which the Company is vulnerable to
any third party's failure to remedy their own Year 2000 issues. Based on these
assessments, management believes that significant exposure does not exist with
respect to third parties. Management is developing a contingency plan to
address potential Year 2000 problems that could arise. This plan includes
identification of alternatives to mitigate the possibility of interruptions in
business operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk exposure related to changes in
interest rates on its debt facilities. These instruments carry interest at a
preagreed upon percentage point spread from the Libor interest rate. These debt
facilities are in U.S. dollars. At June 30, 1999, the Company had $ 7.7 million
outstanding under these facilities. Based on this balance, an immediate change
of one percent in the interest rate would cause a change in interest expense of
approximately $ 77,000 on an annual basis.
The Company is subject to market risk related to fluctuations in the value
of the U.S. dollar compared to certain foreign currencies. The Company has
subsidiaries, which operate worldwide. However, the functional currency used by
these operating units is the U.S. dollar. Substantial portions of these
operating units' invoicing, customer receivable, and many operating cost factors
are denominated in dollars.
A hypothetical 10% fluctuation of the U.S. dollar relative to the foreign
currencies of the markets in which the Company operates would not materially
adversely affect the Company's expected 1999 earnings or cash flows regardless
of the direction of the change in relation to the U.S. dollar. The Company's
sensitivity analysis of the effects of changes in foreign currency exchange
rates does not factor in a potential change in sales levels.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On June 28, 1999, the Company sold and issued 150,000 shares of common
stock to the Nicholas L. Schenk Trust at a cash purchase of $1.00 per share
for total proceeds of $150,000. This transaction was effectuated by the
Company in reliance upon exemptions from registration under the Securities Act
of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each
certificate issued for unregistered securities contained a legend stating
that the securities have not been registered under the Act and setting
forth the restrictions on the transferability and the sale of the securities.
No underwriter participated in, nor did the Company pay any commissions or fees
to any underwriter in connection with any of these transactions. None of the
transactions involved a public offering. The Company believes that this
purchaser had knowledge and experience in financial and business matters which
allowed it to evaluate the merits and risk of the purchase of these securities
of the Company. The Company believes that this purchaser was knowledgeable
about the Company's operations and financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule for the quarter ended June 30, 1999.
(b) Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-Q
Amendment No. 3 to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTENARY INTERNATIONAL CORP.
September 3, 1999 By: /s/ Hector A. Patron Costas
------------------------------
Hector A. Patron Costas
Director, Chairman, Secretary,
and Chief Financial Officer
12
<PAGE>
<TABLE>
<CAPTION>
CENTENARY INTERNATIONAL CORP.
-----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Stated in US Dollars)
(UNAUDITED)
June 30, December 31,
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
- --------------
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,901 $ 37,336
Accounts receivable, net of allowance for doubtful
accounts of 448,024 and 291,868 in 1999 and 1998
respectively . . . . . . . . . . . . . . . . . . . . 12,464,362 8,731,673
Other receivables (note 4) . . . . . . . . . . . . . . 8,703,310 5,580,157
Deferred tax asset (note 10). . . . . . . . . . . . . . 142,224 102,153
Notes receivable - related party (note 5). . . . . . . 2,000,000 -
---------------- ----------------
Total current assets . . . . . . . . . . . . . . . 23,380,797 14,451,319
Notes receivable - related party (note 5). . . . . . . 2,000,000 -
Property, plant and equipment. . . . . . . . . . . . . 10,850,479 10,687,036
Goodwill (note 3). . . . . . . . . . . . . . . . . . . 1,027,632 -
---------------- ----------------
13,878,111 10,687,036
---------------- ----------------
Total assets . . . . . . . . . . . . . . . . . . . $ 37,258,908 $ 25,138,355
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
Accounts payable . . . . . . . . . . . . . . . . . . . $ 9,467,840 $ 2,025,242
Short term debt (note 6) . . . . . . . . . . . . . . . 4,599,838 826,876
Long term debt - current portion (note 6). . . . . . . 2,357,681 1,723,201
Accrued payroll and related expenses . . . . . . . . . 110,995 129,895
Taxes payable. . . . . . . . . . . . . . . . . . . . . 752,358 432,201
Customers advances . . . . . . . . . . . . . . . . . . 439,621 360,050
Other liabilities. . . . . . . . . . . . . . . . . . . 295,833 143,906
---------------- ----------------
Total current liabilities. . . . . . . . . . . . . 18,024,166 5,641,371
---------------- ----------------
Accounts payable long term . . . . . . . . . . . . . . 36,633 77,306
Long term debt (note 6). . . . . . . . . . . . . . . . 11,566,048 12,235,708
Taxes payable. . . . . . . . . . . . . . . . . . . . . - 26,216
Minority interest. . . . . . . . . . . . . . . . . . . 77,622 71,578
---------------- ----------------
Total non-current liabilities. . . . . . . . . . . 11,680,303 12,410,808
---------------- ----------------
Total liabilities. . . . . . . . . . . . . . . . . 29,704,469 18,052,179
---------------- ----------------
SHAREHOLDERS' EQUITY
- --------------------
Common stock, $.001 par value, 50,000,000
shares authorized; 19,113,500 and
3,910,000 shares issued and outstanding in 1999
and 1998 respectively (Note 7) . . . . . . . . . . . 19,113 18,963
Paid in capital. . . . . . . . . . . . . . . . . . . . 8,130,887 7,981,037
Retained earnings (deficit). . . . . . . . . . . . . . (419,561) (737,824)
Receivable from sale of stock. . . . . . . . . . . . . (176,000) (176,000)
---------------- ----------------
Total shareholders' equity . . . . . . . . . . . . 7,554,439 7,086,176
---------------- ----------------
Total liabilities and shareholders' equity . . . . $ 37,258,908 $ 25,138,355
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
CENTENARY INTERNATIONAL CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE PERIODS OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
----------------------------------------------------------
(Stated in US Dollars)
(UNAUDITED)
1999 1998
--------------- ---------------
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . $ 43,962,131 $ 75,934,052
Cost of goods sold . . . . . . . . . . . . 34,281,063 61,450,471
--------------- ---------------
Gross profit . . . . . . . . . . . . . 9,681,068 14,483,581
Selling expenses . . . . . . . . . . . . . 7,583,859 10,073,620
Administrative expenses. . . . . . . . . . 1,337,573 1,968,722
--------------- ---------------
Operating income . . . . . . . . . . . 759,636 2,441,239
Other income and loss, net . . . . . . . . 691,535 326,439
Interest expenses. . . . . . . . . . . . . 794,484 927,603
--------------- ---------------
Income before income taxes and
minority interest. . . . . . . . . . . 656,687 1,187,197
Income taxes (note 10). . . . . . . . . . . 332,380 493,857
Minority interest in subsidiary. . . . . . 6,044 -
--------------- ---------------
Net income . . . . . . . . . . . . . . $ 318,263 $ 693,340
=============== ===============
Earnings per share, basic and diluted. $ .017 $ .037
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
CENTENARY INTERNATIONAL CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE PERIODS OF THREE MONTHS ENDED JUNE 30, 1999 AND 1998
------------------------------------------------------------
(Stated in US Dollars)
(UNAUDITED)
1999 1998
--------------- ---------------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . $ 25,170,519 $ 56,308,435
Cost of goods sold. . . . . . . . . . . . 19,386,830 45,668,146
--------------- ---------------
Gross profit. . . . . . . . . . . . . 5,783,689 10,640,289
Selling expenses. . . . . . . . . . . . . 4,810,697 6,483,635
Administrative expenses . . . . . . . . . 650,315 1,054,060
--------------- ---------------
Operating income. . . . . . . . . . . 322,677 3,102,594
Other income and loss, net. . . . . . . . 701,504 326,881
Interest expense. . . . . . . . . . . . . 436,321 661,622
--------------- ---------------
Income before income taxes and
Minority interest . . . . . . . . . . 587,860 2,114,091
Income taxes. . . . . . . . . . . . . . . 301,120 576,350
Minority interest in subsidiary . . . . . 5,890 -
--------------- ---------------
Net income. . . . . . . . . . . . . . $ 280,850 $ 1,537,741
=============== ===============
Earnings per share, basic and diluted $ .015 $ .081
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CENTENARY INTERNATIONAL CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(Stated in US Dollars)
(UNAUDITED)
1999 1998
---------------- ------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
- -----------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . $ 318,263 $ 693,340
---------------- ------------------
Adjustments to reconcile net income to net cash:
Amortization of intangibles assets. . . . . . . . . . - 199,258
Depreciation of fixed assets. . . . . . . . . . . . . 123,757 90,100
Depreciation of goodwill. . . . . . . . . . . . . . . 21,865 -
Changes in assets and liabilities:
Accounts receivables. . . . . . . . . . . . . . . . . (3,732,689) (7,424,162)
Other receivables . . . . . . . . . . . . . . . . . . (3,123,153) 5,992,834
Notes receivables . . . . . . . . . . . . . . . . . . (2,000,000) -
Inventories . . . . . . . . . . . . . . . . . . . . . - 422,159
Deferred taxes. . . . . . . . . . . . . . . . . . . . (40,071) 62,197
Accounts payable. . . . . . . . . . . . . . . . . . . 7,401,925 (5,570,444)
Accrued payroll and related expenses. . . . . . . . . (18,900) 260,154
Taxes payable . . . . . . . . . . . . . . . . . . . . 293,941 326,649
Advances of customers . . . . . . . . . . . . . . . . 79,571 (142,590)
Other liabilities . . . . . . . . . . . . . . . . . . 151,927 155,878
Minority interest . . . . . . . . . . . . . . . . . . 6,044 -
---------------- ------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . (835,783) (5,627,967)
---------------- ------------------
INVESTING ACTIVITIES
- --------------------
Notes receivable - related party. . . . . . . . . . . (2,000,000) -
Purchase of Platafreight. . . . . . . . . . . . . . . (1,049,497) -
Purchase of fixed assets. . . . . . . . . . . . . . . (359,223) (1,584,374)
Proceeds of sale of fixed assets. . . . . . . . . . . 72,023 117,000
Purchase of intangible assets . . . . . . . . . . . . - (1,171)
Proceeds of sale of property held for sale. . . . . . - 1,100,000
---------------- ------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,336,697) (368,545)
---------------- ------------------
FINANCING ACTIVITIES
- --------------------
Net borrowings (repayments) of short term debt. . . . 3,772,962 (3,613,304)
Net borrowing (repayments) under long term debt . . . - 6,597,575
Borrowings-long term debt . . . . . . . . . . . . . . 705,031 292,587
Repayments - long term debt . . . . . . . . . . . . . (740,211) (563,614)
Issuance of common stock. . . . . . . . . . . . . . . 150,000 5,500,000
Advanced capital contribution . . . . . . . . . . . . - (4,000,000)
---------------- ------------------
Net cash provided (used in) financing activities. . . 3,887,782 4,213,244
---------------- ------------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . 33,565 (1,089,928)
- -----------------------------------------------------
CASH AT THE BEGINNING OF THE PERIOD . . . . . . . . . 37,336 1,168,099
- ----------------------------------------------------- ---------------- ------------------
CASH AT THE END OF THE PERIOD . . . . . . . . . . . . $ 70,901 $ 78,171
- ----------------------------------------------------- ================ ==================
Supplemental cash flow information:
Cash paid for incomes taxes . . . . . . . . . . . . . $ 42,963 $ 172,481
Cash paid for interest. . . . . . . . . . . . . . . . 422,490 938,836
---------------- ------------------
$ 465,453 $ 1,111,317
================ ==================
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CENTENARY INTERNATIONAL CORP.
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE PERIOD OF THREE MONTHS ENDED JUNE 30, 1999 AND 1998
------------------------------------------------------------
(Stated in US Dollars)
(UNAUDITED)
1999 1998
---------------- ------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
- -----------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . $ 280,850 $ 1,537,741
---------------- ------------------
Adjustments to reconcile net income to net cash:
Amortization of intangibles assets. . . . . . . . . . - 93,725
Depreciation of fixed assets. . . . . . . . . . . . . 63,160 46,505
Depreciation of goodwill. . . . . . . . . . . . . . . 13,119 -
Changes in assets and liabilities:
Accounts receivables. . . . . . . . . . . . . . . . . (6,539,365) (8,190,293)
Other receivables . . . . . . . . . . . . . . . . . . (2,548,950) 4,331,537
Notes receivables . . . . . . . . . . . . . . . . . . - -
Inventories . . . . . . . . . . . . . . . . . . . . . - 398,619
Deferred taxes. . . . . . . . . . . . . . . . . . . . (35,001) 94,643
Accounts payable. . . . . . . . . . . . . . . . . . . 7,759,834 (6,126,747)
Accrued payroll and related expenses. . . . . . . . . 27,628 310,606
Taxes payable . . . . . . . . . . . . . . . . . . . . 154,562 31,065
Advances of customers . . . . . . . . . . . . . . . . 58,955 (165,007)
Other liabilities . . . . . . . . . . . . . . . . . . 89,427 93,378
Minority interest . . . . . . . . . . . . . . . . . . 5,890 -
---------------- ------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . (950,741) (9,081,969)
---------------- ------------------
INVESTING ACTIVITIES
- --------------------
Notes receivable - related party. . . . . . . . . . . - -
Purchase of Platafreight. . . . . . . . . . . . . . . - -
Purchase of fixed assets. . . . . . . . . . . . . . . (269,089) (509,710)
Proceeds of sale of fixed assets. . . . . . . . . . . 2,148 (983,901)
Purchase of intangible assets . . . . . . . . . . . . - -
Proceeds of sale of property held for sale. . . . . . - 1,100,000
---------------- ------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . (266,941) (393,611)
---------------- ------------------
FINANCING ACTIVITIES
- --------------------
Net borrowings (repayments) of short term debt. . . . 611,769 (126,349)
Net borrowing (repayments) under long term debt . . . - 6,597,575
Borrowings-long term debt . . . . . . . . . . . . . . 427,605 (506,210)
Repayments - long term debt . . . . . . . . . . . . . (279,589) (430,232)
Issuance of common stock. . . . . . . . . . . . . . . 150,000 5,100,000
Advanced capital contribution . . . . . . . . . . . . - (4,000,000)
---------------- ------------------
Net cash provided (used in) financing activities. . . 909,785 6,634,784
---------------- ------------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . (27,047) (1,303,055)
- -----------------------------------------------------
CASH AT THE BEGINNING OF THE PERIOD . . . . . . . . . 97,948 1,381,226
- ----------------------------------------------------- ---------------- ------------------
CASH AT THE END OF THE PERIOD . . . . . . . . . . . . $ 70,901 $ 78,171
- -----------------------------------------------------
Supplemental cash flow information:
Cash paid for incomes taxes . . . . . . . . . . . . . $ 40,456 $ 129,363
Cash paid for interest. . . . . . . . . . . . . . . . 179,664 551,666
---------------- ------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 220,120 $ 681,029
================ ==================
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
1. Basis of presentation
-----------------------
The accompanying unaudited consolidated financial statements of CENTENARY
INTERNATIONAL CORP. and its majority owned subsidiary have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The unaudited consolidated financial statements have been prepared
on the same basis as the audited condensed financial statements and, in the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months and six months, ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. For further information refer to the financial statements and
footnotes included in the company's annual report on Form 10-KSB for the year
ended December 31, 1998.
The consolidated financial statements include the accounts of CENTENARY
INTERNATIONAL CORP. and its majority owned subsidiary, CENTENARY ARGENTINA S.A.
and, PLATAFREIGHT S.A. since February 1, 1999.
2. Earnings per share
--------------------
Basic earnings per share is computed by dividing net income by the 18,963,500
shares outstanding.
Diluted earnings per share is equivalent to basic earnings per share because
there are no potentially dilutive equivalents.
3. Acquisition of Platafreight S.A. and Pisondix S.A.
-------------------------------------------------------
On February 1, 1999 the Company purchased Platafreight S.A., a private company
in Uruguay in the sea freight business. The purchase price was $ 1,268,000 for
all the issued and outstanding Platafreight stock. The cost in excess of the
fair value of the net assets (goodwill) is $1,049,497, at the time of purchase.
The transaction is accounted for as a purchase and the net assets and earnings
of Platafreight S.A. are consolidated with Centenary since February 1, 1999.
Goodwill resulting from the transaction will be amortized over 20 years.
On July 9, 1999 Centenary International Corp. acquired a Panamanian shell
corporation Pisondix, which holds a purchase option for two 27,000 MT DWT
bulk carrier vessels, presently under construction, at a price of $13.8 million
each. The first one will be ready for launching on February, 2000; and the
second one will be completed by June, 2001. This option can be exercised by
depositing 5% of the total value of the vessels on December 15, 1999. The
historic value for vessels of this kind in the international market, is between
$15.0 and $22.0 million each.
F-6
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
4. Other receivables
------------------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Related party (note 8). . . . . . . $ 5,178,929 $ 1,790,859
Receivables from sale of trademark. 1,530,000 1,530,000
Refundable tax credits. . . . . . . 1,384,573 1,251,148
Other receivables . . . . . . . . . 214,243 279,375
Receivable, Sale of Marigold Plant. 212,284 271,000
Advances to directors . . . . . . . 183,281 142,233
Receivable, Platafreight S.A. . . . - 291,986
Notes receivable. . . . . . . . . . - 23,556
------------- -------------
. . . . . . . . . . . . . . . . . . $ 8,703,310 $ 5,580,157
============= =============
</TABLE>
5. Note receivable- related party
---------------------------------
The Company has a receivable in the amount of $ 4 million from a company under
common control.
The note receivable bears interest at 12% and is payable in 2 annual
installments of $ 2,000,000 due June 30, 2000 and 2001. The note is
collateralized by 2,000,000 shares of stock in the Company.
6. Debt
----
<TABLE>
<CAPTION>
June 30, December 31,
Short term debt: 1999 1998
------------ ------------
<S> <C> <C>
Bank loans. . . $ 3,466,945 $ 511,199
Bank notes. . . 685,686 -
Bank overdraft. 447,207 315,677
------------ ------------
$ 4,599,838 $ 826,876
============ ============
</TABLE>
The Company has a bank loan of $ 960,257 for the financing of exports which is
due August, 1999. The interest rate is LIBOR (London Interbank Offered Rate)
(5.67% at June 30, 1999) plus 3%.
F-7
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
The Company has a bank loan of $ 2,506,688 for prefinancing of exports. The loan
is collateralized by the ranch. Repayment of this loan is due in 3 monthly
payments of $ 807,640 beginning September 1999. The interest rate was LIBOR
(London Interbank Offered Rate) (5.67% at June 30, 1999) plus 2%.
The Company has bank notes of $ 685,686 for prefinancing of exports. One of the
notes requires repayments of $ 522,500 - The discount fee totaling $ 22,500- and
is due in 2 monthly payments of $ 261,250, beginning June 99. The total amount
is being renegotiated with the Bank. The other notes require repayments of $
163,186 and are due in 3 payments of $ 116,162, $ 19,431 and $ 27,593, during
September 1999, including an interest rate of 12%.
<TABLE>
<CAPTION>
June 30, December 31,
Long term debt: 1999 1999
--------------- ----------------
<S> <C> <C>
Bank loans. . . . . . . . . . . . . $ 7,708,238 $ 7,513,014
Vendor loans. . . . . . . . . . . . 5,844,231 5,909,432
Office purchase loan. . . . . . . . 371,260 536,463
Less current maturities, included
in long term debt-current portion (2,357,681) (1,723,201)
--------------- ----------------
$ 11,566,048 $ 12,235,708
=============== ================
</TABLE>
The Company has bank loans of $ 5,309,864 for the prefinancing of exports. The
loans are collateralized by the ranch. One loan requires repayment of $
3,294,000 and is due in 44 monthly payments of $ 68,182 beginning February 22,
1999 plus interest at 14% per annum. The amount of the first 8 monthly payments
was renegotiated with the bank. These payments are due in 3 monthly installments
of $ 181,818, plus interest at 14% per annum, beginning September 1999. The
other loan requires repayment of $ 2,015,864 and is due at the Company's option
at six month intervals until August, 2002 and the interest rate is LIBOR (London
Interbank Offered Rate) (5.67% at June 30, 1999) plus 2%.
The Company also has a bank loan of $ 2,398,374 for financing the development of
the olive grove. The loan is collateralized by the ranch. The interest rate is
LIBOR (London Interbank Offered Rate) (5.67% at June 30, 1999) plus 4.5%.
Repayment of this loan is due in 5 annual payments of $ 600,000 beginning
August, 2000.
The Company has a vendor loan of $ 5,844,231 for commodities purchases. The loan
is collateralized by the ranch. The interest rate is 12%. Repayment of this loan
is due in 1 payment of $ 105,000, which was paid, and 4 semi-annual payments of
$ 500,000 beginning March, 1999, of which $ 400,969 was paid and 6 semi-annual
payments of $ 850,000 beginning February, 2001. The remaining $ 99,031 of the
March payment has been renegotiated and is due in September 30, 1999.
The Company has an office purchase loan of $ 371,260 for the purchase of the
administrative office. The loan is collateralized by the office. The interest
rate is 10%. Repayment of this loan is due in 4 annual payments of $ 87,375 plus
interest beginning January, 2000.
F-8
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
Maturities of long-term debt for the next five years at June 30, 1999, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2000 . . . $ 2,357,681
2001 . . . 2,238,115
2002 . . . 2,703,238
2003 . . . 4,214,667
2004 . . . 2,049,702
Thereafter 360,326
--------------
. . . . . $ 13,923,729
==============
</TABLE>
7. Common Stock. During the current period, the Company raised $150,000
through a private placement of common stock at $1.00 per share. This
transaction was approved by the Directors on June 22, 1999. These shares
were issued on June 28, 1999.
8. Related party transactions
----------------------------
Other receivables include amounts due from affiliated companies of $ 5,178,929
and $ 2,117,178 in 1999 and 1998 respectively.
The Company purchased $ 2,123,139 and $ 19,545,139 of products and $ 1,790,570
and $ 4,971,995 of services from affiliated companies, during 1999 and 1998. In
addition, the Company provides certain administrative services and pays certain
expenses for an affiliated company. The affiliated company reimbursed the
Company for these costs totaling $ 3,151,907 during 1999 and $ 210,540 during
1998.
9. Restricted retained earnings
------------------------------
According to the Argentine laws, 5% of the net earnings of CENTENARY S.A.,
calculated in accordance with generally accepted accounting principles in
Argentina, for the year should be appropriated to increase the legal reserve up
to 20% of common stock. At December 31, 1998, the legal reserve amounted to $
47,681.
In previous years the shareholders designated $ 95,057 of retained earnings as a
general reserve.
Retained earnings related to the legal and general reserves are not available
for dividends.
F-9
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
10. Income taxes
-------------
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
-------------- ------------
<S> <C> <C>
Current
Federal . . . . . . . . . . $ 372,450 $ 431,660
State and local . . . . . . - -
-------------- ------------
Total income taxes current
Deferred tax benefit. . . . 372,450 431,660
Income taxes (benefit). . . (40,070) 62,197
-------------- ------------
. . . . . . . . . . . . . $ 332,380 $ 493,857
============== ============
</TABLE>
The income tax provision reconciled to the tax computed at the statutory Federal
rate is:
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
-------- -----------
<S> <C> <C>
Tax at statutory rate. . . . . . . . . . . . . . . . . . 35% 33 %
Non deductible allowance for doubtful accounts . . . . . 1.3% 2.7%
Non deductible board remuneration. . . . . . . . . . . . 2.5% .4%
Profit of Platafreight and Centenary International Corp. 14.9% -
Amortization of intangible assets. . . . . . . . . . . . - 5.5%
Other deductions . . . . . . . . . . . . . . . . . . . . (3.1%) -
-------- -----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.6% 41.6 %
======== ===========
</TABLE>
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
June 30, December, 31,
1999 1998
----------- --------------
<S> <C> <C>
Deferred tax assets due to:
Allowance for doubtful accounts. $ 137,154 $ 102,153
Provision for severance payments 5,070 -
----------- --------------
. . . . . . . . . . . . . . . . 142,224 $ 102,153
=========== ==============
</TABLE>
F-10
<PAGE>
CENTENARY INTERNATIONAL CORP.
-----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(stated in US Dollars)
(UNAUDITED)
11. Geographical information
-------------------------
The Company's operations involve, basically, a single industry segment, trading
commodities and agriproducts internationally. In the future when the olive grove
has been developed there will be an additional segment. The geographic areas in
which the Company operates are Pacific, Europe, Mercosur, Russia and ex B
Soviet, China and Far East, Africa, Middle East and Caribbean. Net sales by
geographical area were as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Middle East. . . . . . . . . . . 17,464,735 9,758,331
South American Pacific . . . . . 16,394,726 38,551,861
Caribbean. . . . . . . . . . . . 9,069,069 13,273,928
Mercosur . . . . . . . . . . . . 641,883 1,826,758
Russia and ex - Soviet Countries 275,118 10,587,176
Africa . . . . . . . . . . . . . 90,600 1,861,261
Mediterranean. . . . . . . . . . 26,000 -
China and Far East . . . . . . . - 68,250
Europe . . . . . . . . . . . . . - 6,487
-------------- ---------------
43,962,131 75,934,052
============== ===============
</TABLE>
The Company has no identificable assets in other countries than Argentina.
F-11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE 6 MONTHS THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 70901
<SECURITIES> 0
<RECEIVABLES> 12912386
<ALLOWANCES> 448024
<INVENTORY> 0
<CURRENT-ASSETS> 23380797
<PP&E> 11305114
<DEPRECIATION> 454635
<TOTAL-ASSETS> 37258908
<CURRENT-LIABILITIES> 18024166
<BONDS> 11566049
<COMMON> 8150000
0
0
<OTHER-SE> (595561)
<TOTAL-LIABILITY-AND-EQUITY> 37258908
<SALES> 43962131
<TOTAL-REVENUES> 43962131
<CGS> 34281063
<TOTAL-COSTS> 34281063
<OTHER-EXPENSES> 691535
<LOSS-PROVISION> 156156
<INTEREST-EXPENSE> 794484
<INCOME-PRETAX> 656687
<INCOME-TAX> 332380
<INCOME-CONTINUING> 318263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318263
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
