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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q/A
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
__________ SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 26, 1998
__________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_________ TO __________.
COMMISSION FILE NUMBER 1-12912
CENTENNIAL TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2978400
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7 LOPEZ ROAD, WILMINGTON, MASSACHUSETTS 01887
(Address of Principal Executive Offices) (Zip Code)
(978) 988-8848
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has 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 [ ]
As of January 29, 1999, there were 20,546,683 shares of Common Stock,
$.01 par value per share (the "Common Stock"), of the Registrant
outstanding.
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CENTENNIAL TECHNOLOGIES, INC.
TABLE OF CONTENTS
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PAGE NUMBER
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PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements 3
Consolidated Balance Sheets at December 26, 1998 and March 31, 3
1998
Consolidated Statements of Operations for three and nine 4
months ended December 26, 1998 and December 27, 1997
Consolidated Statements of Cash Flows for nine months 5
ended December 26, 1998 and December 27, 1997
Notes to Consolidated Financial Statements 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
On February 8, 1999, the Registrant filed its Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1998 (the "Original Form 10-Q").
The Registrant hereby amends Part I, Item 1 of the Original Form 10-Q to
include in its earnings per share calculations those shares of its Common
Stock that were approved for issuance in settlement of its class action
litigation as of July 20, 1998, the date upon which the Registrant's
settlement of the class action litigation became effective. See Note 8 of the
Notes to the Unaudited Consolidated Financial Statements.
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The Registrant hereby amends Part I, Item 1 of its Quarterly Report on Form
10-Q for the period ended December 26, 1998 to read in its entirety as
follows:
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
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<CAPTION>
DECEMBER 26, MARCH 31,
1998 1998
---- ----
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents............................................. $ 8,686 $ 5,358
Trade accounts receivable............................................. 4,059 3,677
Less allowances.................................................. (856) (868)
---------- ---------
3,203 2,809
Recoverable income taxes.............................................. 337 337
Inventories........................................................... 2,204 2,309
Other current assets.................................................. 172 684
---------- ---------
Total current assets....................................................... 14,602 11,497
Equipment and leasehold improvements....................................... 3,630 3,973
Less accumulated depreciation and amortization........................ (1,298) (1,242)
----------- ----------
2,332 2,731
Other assets............................................................... 388 417
Investment in former affiliate............................................. 1,700 2,433
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Total assets............................................................... $ 19,022 $ 17,078
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Obligations under capital leases...................................... $ 54 $ 70
Accounts payable and accrued expenses................................. 8,199 8,070
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Total current liabilities.................................................. 8,253 8,140
Long-term obligations under capital leases................................. -- 36
Contingencies (Note 8)
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized, none issued............................................... -- --
Common Stock, $.01 par value; 50,000,000 shares authorized,
20,549,000 issued and outstanding at December 26, 1998 and
18,499,000 issued and outstanding at March 31, 1998................... 205 185
Additional paid-in capital............................................ 84,200 84,220
Foreign currency translation adjustment............................... (6) --
Accumulated deficit................................................... (73,630) (75,503)
----------- ----------
Total stockholders' equity................................................. 10,769 8,902
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Total liabilities and stockholders' equity................................. $ 19,022 $ 17,078
---------- ---------
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- ---------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 26, DECEMBER 27,
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales ................................................. $ 7,568 $ 7,567 $ 19,954 $ 21,041
Cost of goods sold ........................................ 4,978 5,362 13,809 17,866
-------- -------- -------- --------
Gross profit ......................................... 2,590 2,205 6,145 3,175
Operating expenses:
Engineering, research and development costs ............ 205 249 574 683
Selling, general and administrative expenses ........... 1,808 1,725 4,706 6,185
-------- -------- -------- --------
Operating income/(loss) ............................. 577 231 865 (3,693)
Provision for loss on inventory subject to customer dispute -- -- -- 1,841
Proceeds from resolution of customer dispute .............. -- -- (1,600) --
Loss on investment activities ............................. -- 5,156 733 14,065
Other expenses, net ....................................... 83 -- 83 855
Net interest (income)/expense ............................ (79) (51) (224) 96
-------- -------- -------- --------
Income/(loss) before equity in earnings of affiliate ... 573 (4,874) 1,873 (20,550)
Equity in earnings of former affiliate .................... -- -- -- 423
-------- -------- -------- --------
Net income/(loss) ................................... $ 573 $ (4,874) $ 1,873 $(20,127)
-------- -------- -------- --------
-------- -------- -------- --------
Net income/(loss) per share - basic ....................... $ .02 $ (.26) $ .08 $ (1.09)
Net income/(loss) per share - diluted ..................... $ .02 $ (.26) $ .08 $ (1.09)
Weighted average shares outstanding - basic ............... 25,334 18,513 22,524 18,446
Weighted average shares outstanding - diluted ............. 25,391 18,513 22,654 18,446
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
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NINE MONTHS ENDED
-------------------------------
DECEMBER 26, DECEMBER 27,
1998 1997
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Cash flows from operating activities:
Net income/(loss).............................................................. $ 1,873 $ (20,127)
Adjustments to reconcile net income/(loss) to net cash from operating
activities:
Depreciation and amortization.................................................. 782 665
Loss on disposal of capital equipment.......................................... 85 --
Equity in earnings of former affiliate......................................... -- (423)
Provision for loss on accounts receivable...................................... 130 310
Provision for loss on investments.............................................. 733 12,161
Change in operating assets and liabilities:
Accounts receivable.......................................................... (524) 1,317
Inventories.................................................................. 105 4,935
Notes receivable from former affiliate....................................... -- 4,129
Recoverable income taxes..................................................... -- 7,019
Other assets................................................................. 541 (5)
Accounts payable and accrued expenses........................................ 129 (3,236)
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Net cash provided by operating activities.................................... 3,854 6,745
Cash flows from investing activities:
Capital expenditures........................................................... (500) (848)
Disposal of capital equipment.................................................. 32 607
Advances from affiliate (net).................................................. -- 1,017
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Net cash provided by/(used in) investing activities.......................... (468) 776
Cash flows from financing activities:
Net borrowings under line of credit............................................ -- (7,941)
Borrowings from term loans..................................................... -- 938
Payments on term loans......................................................... -- (167)
Payments on capital leases..................................................... (52) (549)
Proceeds from exercise of stock options........................................ -- 209
Foreign currency translation adjustment........................................ (6) 77
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Net cash used in financing activities........................................ (58) (7,433)
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Net increase in cash and cash equivalents........................................ 3,328 88
Cash and cash equivalents at beginning of period................................. 5,358 57
-------- ---------
Cash and cash equivalents at end of period....................................... $ 8,686 $ 145
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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CENTENNIAL TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND CHANGE IN FISCAL YEAR
BASIS OF PRESENTATION
The consolidated financial statements of Centennial Technologies, Inc. (the
"Company") include the accounts of the Company and all wholly owned
subsidiaries. Investments in companies in which ownership interests range from
20 to 50 percent and the Company exercises significant influence over operating
and financial policies are accounted for using the equity method. Other
investments are accounted for using the cost method. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to prior reported financial statements to
conform to the fiscal 1999 presentation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all financial information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial statements
include all adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of the results of operations for the interim periods
reported and of the financial condition of the Company as of the date of the
interim balance sheet. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with the Company's
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the fiscal period ended March 31, 1998.
CHANGE IN FISCAL YEAR
On March 24, 1997, the Company's Board of Directors voted to change the
fiscal year end from June 30 to March 31. All references to fiscal 1999 and
fiscal 1998 in the accompanying financial statements relate to the twelve months
ended March 31, 1999 and 1998, respectively. All references to fiscal 1997 in
the accompanying financial statements relate to the nine months ended March 31,
1997. References to fiscal 1996, 1995 and 1994 relate to the respective years
ended June 30.
The Company's fiscal year begins on April 1. Each fiscal quarter ends on the
Saturday of the thirteenth week following the beginning of the quarter, except
for the fourth quarter, which ends on March 31.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
has no requirements for compensating balances.
2. CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of trade receivables. If any
of the Company's major customers fail to pay the Company on a timely basis, it
could have a material adverse effect on the Company's business, financial
condition and results of operations.
For the three and nine months ended December 26, 1998, two customers
accounted for approximately 28% and 27% of the Company's sales, respectively. At
December 26, 1998, these customers accounted for approximately $1.2 million, or
39% of the Company's net accounts receivable balance.
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For the three and nine months ended December 27, 1997, two customers
accounted for approximately 39% and 32% of the Company's sales, respectively. At
December 27, 1997, these customers accounted for approximately $1.7 million, or
42% of the Company's net accounts receivable balance.
Approximately 14% and 16% of the Company's sales for the three months ended
December 26, 1998 and December 27, 1997, respectively, and approximately 12% of
the Company's sales for each of the nine months ended December 26, 1998 and
December 27, 1997, respectively, were outside the United States, primarily in
several Western European countries. No one area comprised more than 10% of the
Company's sales.
3. INVENTORIES
Inventories consisted of (in thousands):
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DECEMBER 26, MARCH 31,
1998 1998
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Raw material, primarily electronic components....... $ 1,307 $ 1,239
Work in process..................................... 421 620
Finished goods...................................... 476 450
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$ 2,204 $ 2,309
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The Company maintains levels of inventories that it believes are necessary
based upon assumptions concerning its growth, mix of sales and availability of
raw materials. Changes in those underlying assumptions could affect management's
estimates of inventory valuation.
In fiscal 1998, the Company reserved fully $1.8 million of costs related to
inventory specifically purchased and manufactured pursuant to a customer
purchase order (the "Custom Inventory"). The customer later attempted to cancel
the purchase order. The Company disputed the customer's claim that the purchase
order cancellation was effective, and sought legal remedies related thereto.
During fiscal 1999, the Company agreed to settle its claims against the
customer, in return for a $1.6 million cash payment and the right to retain and
sell the Custom Inventory at issue. The Company sold portions of the Custom
Inventory during the three months and the nine months ended December 26, 1998
for approximately $0.5 million and $1.0 million, respectively, which has been
included in net sales. At December 26, 1998, the costs related to the Custom
Inventory still on hand remained fully reserved.
4. INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC.
During fiscal 1997, the Company completed three separate business
acquisitions of contract manufacturing activities. On July 10, 1996, the Company
acquired a majority equity position in Design Circuits, Inc. ("DCI") for
approximately $3.2 million in cash, 250,000 shares of the Company's Common Stock
and assumption of certain liabilities.
In October 1996, the Company and the minority shareholders in DCI exchanged
their DCI shares for shares of capital stock in a newly formed entity, Century
Electronics Manufacturing, Inc. ("Century").
Pursuant to a joint venture agreement executed in May 1996, the Company
invested $1.3 million during fiscal 1997 as its initial capital contribution
into its 51% owned contract manufacturing joint venture in Thailand. The
Company's joint venture partner's initial capital contribution was $3.7 million.
On November 5, 1996, Century purchased Triax Technology Group Limited
("Triax"), a provider of contract manufacturing services located in the United
Kingdom for approximately $4.2 million in cash and approximately 2.2 million
shares of common stock of Century. The Company also contributed 25,000 shares of
Centennial Common Stock as a finder's fee. At the conclusion of the Triax
transaction, Triax and DCI were wholly-owned subsidiaries of Century, and
Centennial owned approximately 67% of Century.
On March 14, 1997, Century entered into an agreement in principal with the
Company, whereby Century agreed to redeem a portion of its shares in exchange
for $1.3 million in cash and a $6.0 million subordinated debenture, reducing the
Company's equity ownership position to 45%. The debentures bore interest at a
rate of 6% and were to mature in ten years. Under certain conditions, the
debentures would have been convertible into the capital stock of an entity with
which Century might merge. In addition, the Company
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agreed to contribute to Century its interest in the Thailand joint venture.
Century also agreed to repay an 8.5% note payable to Centennial in the amount of
$4.1 million and to take the necessary steps to remove all outstanding
guarantees of third-party indebtedness.
On July 1, 1997, the aforementioned transaction was completed. In order to
remove certain guarantees of equipment subleased to DCI, Centennial executed
lease buyouts amounting to $2.4 million and sold the underlying equipment to
Century for cash and a $1.9 million 9% promissory note due December 1998.
On February 4, 1998, the Company entered into a transaction with Century
whereby Century redeemed the Company's remaining holdings of Century common
stock, repurchased its $1.9 million 9% promissory note due December 1998,
recovered a warrant for the purchase of 250,000 shares of Century common stock,
and satisfied its $6 million 6% Convertible Subordinated Debenture due June
2007, in exchange for $9.7 million in cash and $4.0 million of Century Series B
Convertible Preferred Stock and the forgiveness of interest due on the note and
debenture. The Series B Convertible Preferred Stock is equivalent upon
conversion to approximately 7%, non-diluted, of Century's outstanding shares, is
non-voting, has no dividend, and has a liquidation preference of $4 million
senior to the common shareholders and subordinate to the holders of Century
Series A Convertible Preferred Stock. The Company recorded a loss on investment
activities of $5.1 million during fiscal 1998 to reflect the difference between
the fair value of the consideration received from Century and the carrying value
of the Company's investment in Century.
During the second quarter of fiscal 1999, the Company reduced the carrying
value of its investment in Century by $733,000 to $1.7 million, reflecting
management's assessment of the deterioration in value of contract manufacturing
businesses in general and a permanent decline in the value of its investment.
During the third quarter of fiscal 1999, Century agreed to redeem the Company's
remaining interest in Century for $1.7 million. The Company expects to complete
this transaction in February 1999.
5. OTHER INVESTMENTS
During fiscal 1996, the Company began a strategy of making investments,
financed through a combination of cash and common stock, in technology companies
for the expressed purpose of market development for its PC card business as well
as investment gain. Management has decided to focus its financial resources on
its core business, and to suspend new investment activities. The Company fully
reserved the carrying value of its investments in these development stage
companies during fiscal 1997 and 1998.
On December 13, 1996, the Company completed merger agreements with
Intelligent Truck Project, Inc., Fleet.Net, Inc. and Smart Traveler Plazas, Inc.
(collectively, "ITP/Fleet.Net") agreeing to exchange 792,960 shares of Common
Stock of the Company for all of the outstanding common stock of the acquired
businesses. Subsequent to the Company's February announcement of financial
irregularities, the principal shareholder of ITP/Fleet.Net filed suit, alleging,
among other things, breach of representations and warranties as to the financial
statements of Centennial. On March 4, 1997, the Company and the principal
shareholder of ITP/Fleet.Net entered into a memorandum of understanding pursuant
to which the companies would unwind the merger agreements. The parties were
unable to reach mutually satisfactory terms to complete the unwinding and on May
15, 1997 agreed to complete the merger and exchange mutual releases of certain
claims. Based on the material uncertainties surrounding the value of
consideration on the original merger date, which uncertainties were not resolved
until the execution of a settlement and mutual release agreement, the Company
recorded the merger and corresponding issuance of Common Stock as of May 15,
1997. Advances to ITP/Fleet.Net made during fiscal 1996 and fiscal 1997, certain
of which were previously characterized as advance payments for technology
license arrangements, were included in loss on investment activities in the
periods the advances were made. The merger was recorded using purchase
accounting, and the excess (approximately $3.2 million) of the purchase price
over the fair value of assets acquired was written off as of the agreement date
(May 15, 1997) because of the uncertainties related to the future operations of
ITP/Fleet.Net.
6. DEBT
On August 14, 1997, the Company entered into a credit agreement, effective
through August 13, 2000 unless terminated sooner, with Congress Financial Corp.
("Congress Financial"), a commercial credit institution, for a revolving credit
facility and term loan facility of up to $4.1 million and $0.9 million,
respectively, and a $2.0 million capital equipment acquisition facility, based
on certain limitations and covenants. On August 15, 1997, the Company paid in
full its line of credit and lease financing obligations with the bank that was
previously providing the Company with its credit facilities.
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On November 24, 1998, the Company terminated its credit agreement with
Congress Financial and entered into a new credit agreement with Fleet National
Bank ("Fleet") for a revolving credit facility, equipment term loan facility and
foreign exchange facility of $3.5 million, $1.5 million and $2.0 million,
respectively. Allowable borrowings are based on accounts receivable and the cost
of equipment, are secured by substantially all of the Company's assets, and are
based on certain limitations and covenants.
At December 26, 1998 and March 31, 1998, the Company had no outstanding
borrowings under either of these credit agreements.
7. EARNINGS (LOSS) PER SHARE
The Company computes basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards ("SFAS") 128, "Earnings Per
Share," which the Company adopted as of March 31, 1998. Basic earnings per share
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. The computation of
diluted earnings per share is similar to the computation of basic earnings per
share except that the denominator is generally increased to include the number
of additional common shares that would have been outstanding if the dilutive
potential common shares had been issued. Common equivalent shares result from
the assumed exercise of outstanding stock options and warrants, the proceeds of
which are then assumed to have been used to repurchase outstanding common stock
using the treasury stock method. The following table reconciles the numerator
and denominator of the basic and diluted earnings per share computations shown
on the Consolidated Statements of Operations. All shares issuable in
connection with the settlement of the Consolidated Litigation described in
Note 8 are included in the weighted average shares outstanding calculation as
of July 20, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 26, DECEMBER 27,
1998 1997 1998 1997
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BASIC EARNINGS PER SHARE
Numerator
Net income/(loss) $ 573 $ (4,874) $ 1,873 $(20,127)
Denominator
Weighted average common
shares outstanding 25,334 18,513 22,524 18,446
-------- -------- -------- --------
Basic earnings (loss) per share $ 0.02 $ (0.26) $ 0.08 $ (1.09)
-------- -------- -------- --------
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DILUTED EARNINGS PER SHARE
Numerator
Net income/(loss) $ 573 $ (4,874) $ 1,873 $(20,127)
Denominator
Weighted average common
shares outstanding 25,334 18,513 22,524 18,446
Effective of dilutive securities:
Employee stock options 57 -- 130 --
-------- -------- -------- --------
Denominator for diluted
earnings per share 25,391 18,513 22,654 18,446
-------- -------- -------- --------
Diluted earnings (loss) per share $ 0.02 $ (0.26) $ 0.08 $ (1.09)
-------- --------- -------- ---------
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</TABLE>
Options to purchase 2,885,000 shares of Common Stock on December 27, 1997
were excluded from the three and nine months ended calculations of diluted net
income/(loss) per share as the effect of their inclusion would have been
anti-dilutive. Earnings per share data have been restated for all periods
presented to reflect the adoption of SFAS 128.
8. CONTINGENCIES
CLASS ACTION LITIGATION. Since the Company's announcement on February 11,
1997 that it was undertaking an inquiry into the accuracy of its prior reported
financial results, and that preliminary information had raised questions as to
whether reported results contained material misstatements, approximately 35
purported class action lawsuits have been filed in or transferred to the United
States District Court for the District of Massachusetts. These complaints assert
claims against the Company under Section 10(b) of the Securities Exchange Act of
1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder, and related state
law claims of fraud,
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deceit and negligent misrepresentation. The complaints also assert claims
against some or all of the Company's Board of Directors, and some complaints
assert claims against certain of the Company's nondirector officers, under
Section 20(a) of the 1934 Act, as well as the same state law claims asserted
against the Company. The Company's independent accountants, Coopers & Lybrand
L.L.P. ("Coopers & Lybrand"), the Company's lead underwriter for its March 1996
subsequent public offering, Needham & Company, Inc., and a financial advisory
subscription company, Cabot Heritage Corporation, have also been named in some
of the suits. These class action lawsuits were purportedly brought by and on
behalf of purchasers of the Company's Common Stock between the Company's initial
public offering on April 12, 1994 and February 10, 1997 (the "Centennial
Securities Litigation").
On February 20, 1997, the Company received a subpoena from the United
States Department of Justice ("DOJ") to produce documents in connection with a
grand jury investigation regarding various irregularities in the Company's
previous press releases and financial statements. The DOJ also requested certain
information regarding some of the Company's former officers, certain stock
transactions by the Company's former Chief Executive Officer, and correspondence
with the Company's auditors. The DOJ has subsequently subpoenaed additional
Company records and files. The Company has not been notified by the DOJ that it
is a target or subject of this investigation.
On and after February 26, 1997, four complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased the Company's Common Stock on
February 25, 1997. The complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleges violations of Sections
10(b) and 20(a) of the 1934 Act (the "February 25 Securities Litigation").
In mid-February 1997, the Company was notified that the Boston District
Office of the Securities and Exchange Commission ("SEC") was conducting an
investigation of the Company. The SEC has requested that the Company provide the
SEC with certain documents concerning the Company's public reports and financial
statements. The SEC indicated that its inquiry should not be construed as an
indication by the SEC or its staff that any violations have occurred, or as a
reflection upon the merits of the securities involved or upon any person who
effected transactions in such securities. The Company is cooperating with the
SEC in connection with this investigation, the outcome of which cannot yet be
determined.
On and after March 26, 1997, several complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased stock of WebSecure, Inc.
("WebSecure") between December 5, 1996 and February 27, 1997 (the "WebSecure
Complaints"). The WebSecure Complaints assert claims against WebSecure, certain
officers, directors and underwriters of WebSecure, and the Company. Claims
against the Company include alleged violations of Sections 11 and 15 of the
Securities Act of 1933 (the "1933 Act") (the "WebSecure Securities Litigation").
In addition, several shareholder derivative lawsuits have been filed by
purported holders of the Company's Common Stock seeking recovery for certain
alleged breach of fiduciary duties, alleged gross negligence, alleged breach of
contract and alleged insider trading by members of the Company's Board of
Directors between August 21, 1996 and February 10, 1997 (the "Derivative
Litigation").
On January 13, 1998, a plaintiff purporting to represent classes of
shareholders who purchased the Company's Common Stock on February 27, 1997 filed
a complaint in the United States District Court for the District of
Massachusetts. The complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and Mr. Ramaekers' employer, Jay Alix
& Co., and alleges violations of Sections 10(b) and 20(a) of the 1934 Act (the
"February 27 Securities Litigation").
On February 9, 1998, a consolidated amended complaint combining the
Centennial Securities Litigation, the February 25 Securities Litigation, the
February 27 Securities Litigation and the Derivative Litigation was filed in the
United States District Court for the District of Massachusetts (the
"Consolidated Litigation"). Also on February 9, 1998, the Company and lead
counsel representing the plaintiffs in the Consolidated Litigation filed a
Stipulation of Settlement (the "Settlement Agreement"), whereby the Company and
certain of its officers and directors would be released from liability arising
from the allegations included in the Consolidated Litigation. In return, the
Company agreed to pay the plaintiffs in the Consolidated Litigation $1.475
million in cash and to issue to these plaintiffs 37% of the Company's Common
Stock. The Company also agreed to adopt certain corporate governance policies
and procedures.
The plaintiffs in the Consolidated Litigation have not yet reached an
agreement with the Company's former Interim Chief Executive Officer, Lawrence J.
Ramaekers, regarding their alleged claims against him. The plaintiffs have
agreed to release the
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Company from any direct liability related to those alleged claims. In the
agreement under which Mr. Ramaekers provided services to the Company, the
Company agreed to provide Mr. Ramaekers with the same indemnification as is
applicable to other officers of the Company pursuant to the Company's By-Laws.
The Company has agreed to indemnify, hold harmless, and defend Mr. Ramaekers
from and against certain claims arising out of his engagement with the Company.
The Court granted final approval of the Settlement Agreement of the
Consolidated Litigation on April 29, 1998, which became effective on July 20,
1998. All shares issuable in connection with the Consolidated Litigation are
included in weighted average shares outstanding from July 20, 1998 forward.
As of March 31, 1997, the Company recorded a provision for the settlement of
the Consolidated Litigation of $20.0 million, representing the cash portion of
the Settlement Agreement, together with an amount equal to 37% of the estimated
market capitalization of the Company. The Company satisfied its obligations
regarding the cash portion ($1,475,000) of the Settlement Agreement by remitting
that amount into a settlement fund during fiscal 1998. The Company distributed
2,050,321 shares of the common stock component of the Settlement Agreement
during the second quarter of fiscal 1999, and expects to satisfy its remaining
obligation to distribute 4,784,083 shares of Common Stock by the end of fiscal
1999.
A significant number of class members opted not to participate in the
Settlement Agreement. No assurance can be given that claims by class members who
declined to participate in the Settlement Agreement will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
On November 13, 1998, the Company reached an agreement to settle the
WebSecure Securities Litigation. The settlement agreement contemplates that the
Company and certain of its officers and directors would be released from any and
all liability arising from the allegations included in the WebSecure Securities
Litigation in return for the issuance to the WebSecure Securities Litigation
class of 345,000 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The settlement
agreement must be submitted to the Court for review and approval and,
thereafter, presented to class members for consideration. If a sufficiently
large number of class members opt not to participate in the settlement
agreement, the agreement may by withdrawn. No assurance can be given that the
Court will approve the settlement agreement, or that, if such approval is
obtained, that a material number of class members will not decline to
participate in the settlement.
9. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income." Statement
130 establishes rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income (loss) or stockholders' equity. During the third quarter
and first nine months of fiscal 1999, total comprehensive income was not
materially different than net income.
10. SEGMENT DISCLOSURES
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (Statement 131), which is effective for
years beginning after December 15, 1997. Statement 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. Statement 131 is effective
for financial statements for fiscal years beginning after December 15, 1997, and
therefore the company will adopt the new requirements retroactively in fiscal
1999. Management has not completed its review of Statement 131, but does not
anticipate that the adoption of this statement will have a significant effect on
the Company's reported segments.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The exhibits listed on the Exhibit Index filed as a part of
this Amendment #1 to Quarterly Report on Form 10-Q are incorporated herein
by reference.
(b) Reports on Form 8-K. During the quarter ended December 26, 1998, the Company
filed no reports on Form 8-K.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment #1 to Quarterly Report to be
signed on its behalf by the undersigned thereunto duly authorized.
CENTENNIAL TECHNOLOGIES, INC.
Dated: June 4, 1999 BY: /s/ L. MICHAEL HONE
------------------- --------------------------
L. Michael Hone
President and Chief Executive Officer
Dated: June 4, 1999 BY: /s/ DONALD R. PECK
------------------- --------------------------
Donald R. Peck
Secretary, Treasurer and General Counsel
-------------------------------
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM
NO. DESCRIPTION
- ---
<S> <C>
3.1 -- Amended and Restated Bylaws of Centennial Technologies, Inc. (1)
10.1 -- Key Employee Agreement between Centennial Technologies, Inc. and Jacques Assour,
as of April 1, 1998(2)
10.2 -- Employment Agreement between Centennial Technologies, Inc. and John C. Nugent,
as of January 12, 1998(2)
10.3 -- $3,500,000 Revolving Note, dated November 20, 1998, made by Centennial Technologies, Inc.
and payable to the order of Fleet National Bank(2)
10.4 -- $1,500,000 Term Note, dated November 20, 1998, made by Centennial Technologies, Inc. and
payable to the order of Fleet National Bank(2)
10.5 -- Letter Agreement, dated November 20, 1998, by and between Centennial Technologies, Inc. and
Fleet National Bank(2)
27 -- Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the Registration Statement on Form 8-A filed
with the Securities and Exchange Commission on November 19, 1998.
(2) Previously filed.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-26-1998
<EXCHANGE-RATE> 1
<CASH> 8,686
<SECURITIES> 0
<RECEIVABLES> 4,059
<ALLOWANCES> 856
<INVENTORY> 2,204
<CURRENT-ASSETS> 14,602
<PP&E> 3,630
<DEPRECIATION> 1,298
<TOTAL-ASSETS> 19,022
<CURRENT-LIABILITIES> 8,253
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 10,564
<TOTAL-LIABILITY-AND-EQUITY> 19,022
<SALES> 19,954
<TOTAL-REVENUES> 19,954
<CGS> 13,809
<TOTAL-COSTS> 13,809
<OTHER-EXPENSES> 6,096
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,873
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,873
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,873
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
