<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACTS OF 1934
DATE OF REPORT (date of earliest event reported)
DECEMBER 29, 1999
COMMISSION FILE NUMBER 1-12912
------------------------
CENTENNIAL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-2978400
(State Or Other Jurisdiction (IRS 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)
--------------------
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 12, 2000, the Registrant, Centennial Technologies, Inc.,
("Centennial") filed a Current Report on Form 8-K (the "Centennial Initial
Report") describing the acquisition of the assets of the Flash Memory Card
Business of Intel Corporation ("Flash Card Business"). This Current Report on
Form 8-K/A amends the Centennial Initial Report by including with this Form
8-K/A the financial statements and pro forma financial information required by
Item 7 of Form 8-K.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
See Exhibit 20.1 for the audited financial statements of the
Flash Memory Card Business of Intel Corporation
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined consolidated financial
statements reflect the business combinations between Centennial and the Flash
Card Business of Intel Corporation. This acquisition was accounted for under the
purchase method of accounting in accordance with APB Opinion No. 16. Under the
purchase method of accounting, the purchase price is allocated to the assets
acquired and liabilities assumed based on their estimated fair values. The
estimated fair values contained herein are preliminary in nature and may not be
indicative of the final purchase price allocation. Such preliminary estimates of
the fair values of the assets and liabilities of the Flash Card Business have
been combined with the recorded values of the assets and liabilities of
Centennial in the unaudited pro forma combined consolidated financial
statements. The unaudited pro forma combined balance sheets and unaudited pro
forma combined statements of operations are provided for illustrative purposes
only and should be read in conjunction with the accompanying notes thereto. The
unaudited pro forma combined consolidated financial statements are based on, and
should be read in conjunction with, the historical financial statements and the
notes thereto of Centennial included in the Annual Report on Form 10-K for the
fiscal year ended March 31, 1999 along with any other filings with the
Securities and Exchange Commission since March 31, 1999, and the historical
financial statements and the notes thereto of the Flash Card Business included
as an exhibit hereto.
The unaudited pro forma combined balance sheets have been prepared to
reflect the acquisition as if it occurred December 25, 1999. The unaudited pro
forma combined statements of operations for the year ended March 31, 1999 give
effect to the acquisition as if it occurred on April 1, 1998. The unaudited pro
forma combined statement of operations for the nine months ended December 25,
1999 give effect to the acquisition as if it occurred on April 1, 1999. The
unaudited pro forma combined consolidated financial statements do not purport to
represent what Centennial's financial position or results of operations would
actually have been if the acquisition had in fact occurred on such dates or to
project Centennial's financial position or results of operations as of any
future date or for any future period. The unaudited pro forma data is not
indicative of the operating results or financial position that would have been
achieved had the acquisition been consummated at the dates indicated, nor is it
indicative of future operating results and financial condition. The flash memory
component used in the Flash Card Business is reflected in the historical
financial statements of the Flash Card Business at Intel Corporation's actual
manufacturing cost. Centennial believes it purchases this component from Intel
Corporation at a price which is higher than this actual manufacturing cost.
Therefore, future cost of goods sold are expected to be higher on a per unit
basis. Centennial has received notice from the Flash Card Business's primary
customer of its intent to discontinue purchasing from Centennial.
The unaudited pro forma adjustments have been applied to the financial
information derived from the financial statements of Centennial and the Flash
Card Business to account for the acquisition; accordingly, assets acquired and
liabilities assumed are reflected at their estimated fair values.
2
<PAGE>
UNAUDITED PRO FORMA COMBINED
BALANCE SHEETS
DECEMBER 25, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
CENTENNIAL FLASH CARD PRO FORMA PRO FORMA
TECHNOLOGIES BUSINESS ADJUSTMENTS NOTES COMBINED
------------ -------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 5,193 $ (2,000) (a) $ 3,193
Short-term investments................................... 2,254 2,254
Trade accounts receivable, net........................... 4,385 4,385
Recoverable income taxes................................. 106 106
Inventories.............................................. 4,808 $ 4,005 4,176 (e) 12,989
Other current assets..................................... 269 269
-------- -------- -------- --------
Total current assets.......................................... 17,015 4,005 2,176 23,196
Equipment and leasehold improvements.......................... 4,755 399 5,154
Less: accumulated depreciation and amortization.......... (1,981) (201) (2,182)
-------- -------- --------
2,774 198 2,972
Other assets.................................................. 245 245
Investments in third parties.................................. 1,948 1,948
-------- -------- -------- --------
Total assets.................................................. $ 21,982 $ 4,203 $ 2,176 $ 28,361
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Secured promissory note.................................. $ 4,000 (a) $ 4,000
Accounts payable and accrued expenses.................... $ 7,381 100 (a) 7,481
Current portion of obligations under capital leases...... 228 228
-------- -------- --------
Total current liabilities..................................... 7,609 4,100 11,709
Negative goodwill............................................. 198 (a) 198
Long-term obligations under capital leases.................... 860 860
Net assets of the Flash Card Business acquired................ $ 4,203 (4,203) (a)
Commitments and contingencies.................................
Stockholders' equity:
Preferred Stock........................................... 1 (a) 1
Common Stock.............................................. 32 32
Additional paid-in capital.................................... 83,800 2,080 85,880
Accumulated deficit........................................... (70,292) (70,292)
Accumulated other comprehensive loss.......................... (27) (27)
-------- -------- --------
Total stockholders' equity.................................... 13,513 2,081 15,594
-------- -------- -------- --------
Total liabilities and stockholders' equity.................... $ 21,982 $ 4,203 $ 2,176 $ 28,361
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
consolidated financial statements.
3
<PAGE>
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 25, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
CENTENNIAL FLASH CARD PRO FORMA PRO FORMA
TECHNOLOGIES BUSINESS ADJUSTMENTS NOTES COMBINED
------------ -------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 22,881 $ 23,055 $ 45,936
Cost of goods sold .................................... 14,902 23,777 38,679
--------- --------- ---------
Gross profit (loss)............................ 7,979 (722) 7,257
Operating expenses:
Research and development.......................... 1,069 296 1,365
Selling, general and administrative expenses...... 5,326 281 $ (50) (d) 5,557
--------- --------- -------- ---------
Operating income (loss)...................... 1,584 (1,299) 50 335
Revision of an estimate of a litigation settlement..... 940 940
Loss on disposal of equipment.......................... (345) (345)
Net interest income (expense).......................... 230 (270) (c) (40)
Other Income........................................... 39 39
--------- --------- -------- ---------
Income (loss) before taxes................... 2,448 (1,299) (220) 929
Income taxes........................................... 43 43
--------- --------- -------- ---------
Net income (loss)...................................... $ 2,405 $(1,299) $ (220) $ 886
========= ========= ======== =========
Net income per share - basic........................... $ .76 $ .28
Net income per share - diluted......................... $ .75 $ .23
Weighted average shares outstanding - basic............ 3,177 3,177
Weighted average shares outstanding -diluted........... 3,229 3,829
</TABLE>
See accompanying notes to unaudited pro forma combined
consolidated financial statements
4
<PAGE>
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
CENTENNIAL FLASH CARD
TECHNOLOGIES BUSINESS
YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 26, PRO FORMA PRO FORMA
1999 1998 ADJUSTMENTS NOTES COMBINED
------------ ------------ ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 27,633 $ 29,369 $ 57,002
Cost of goods sold....................... 18,968 28,879 47,847
--------- --------- ---------
Gross profit........................ 8,665 490 9,155
Operating expenses:
Research and development costs......... 750 413 1,163
Selling, general and administrative.... 6,132 590 $ (66) (d) 6,656
--------- --------- ------- ---------
Operating income (loss) ............ 1,783 (513) 66 1,336
Loss on investment activities.......... 733 733
Proceeds from resolution of customer
dispute............................. (1,600) (1,600)
Other expenses, net.................... 132 132
Net interest (income) expense.......... (344) 360 (c) 16
--------- --------- ------- ---------
Income (loss) before income taxes........ 2,862 (513) (294) 2,055
Provision for income taxes............... 56 56
--------- --------- ------- ---------
Net income (loss)................. $ 2,806 $ (513) $ (294) $ 1,999
========= ========= ======== =========
Net income per share - basic............. $ .12 $ .09
Net income per share - diluted........... $ .12 $ .08
Weighted average shares
outstanding - basic.................... 23,255 23,255
Weighted average shares
outstanding - diluted.................. 23,508 24,108
</TABLE>
See accompanying notes to unaudited pro forma combined
consolidated financial statements
5
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
1. ACQUISITION
On December 29, 1999, Centennial acquired the flash memory card
business of Intel Corporation for a total purchase price of approximately $8.2
million. Centennial's acquisition includes the PCMCIA card families (Series 2,
Value series 100 and 200) and the miniature card families (Series 100 and 200),
inventory valued at approximately $8.2 million and fixed asset valued at
approximately $.2 million. This acquisition will be accounted for as a purchase
combination in the fourth quarter of fiscal 2000. In exchange, Centennial made a
cash payment of $2 million, issued a secured promissory note for $4 million and
issued 60,000 shares of preferred stock valued at approximately $2.1 million
which represents approximately 16 percent of the outstanding shares of
Centennial, on an as-converted basis. The note payable bears interest at the
rate of 9% and the note and interest are due and payable in one year. The
Preferred Stock converts at a ratio of 10 for 1 and has registration rights and
a liquidation preference of $4.8 million. The Flash Card Business was
concentrated with a few customers. While there is a contingent payment of up to
$4.5 million due in one year based on units shipped related to the primary
customer of the acquired business, Centennial has received notice by this
primary customer of its intent to discontinue purchasing from Centennial
following the acquisition. Accordingly, if this primary customer discontinues
purchasing from Centennial, no contingent payment will be due.
2. PERIODS COMBINED
The unaudited pro forma combined balance sheets have been prepared as
if to the acquisition occurred on December 25, 1999. The unaudited pro forma
combined statements of operations for the year ended March 31, 1999 reflect the
combined results of operations of Centennial for the year ended March 31, 1999
and the Flash Card Business for the year ended December 26, 1998 as if the
acquisition occurred on April 1, 1998. The unaudited pro forma combined
statements of operations for the nine months ended December 25, 1999 reflect the
combined results of operations of Centennial and the Flash Card Business as if
the acquisition occurred on April 1, 1999.
3. BASIS OF PRESENTATION
The unaudited pro forma combined consolidated financial statements
reflect Centennial's acquisition of the Flash Card Business in exchange for a
cash payment of $2 million, a secured promissory note for $4 million and 60,000
shares of Centennial preferred stock valued at approximately $2.1 million.
This acquisition was accounted for under the purchase method of
accounting in accordance with APB Opinion No.16. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. Estimates of the fair
values of the assets and liabilities of the Flash Card Business have been
combined with the recorded values of the assets and liabilities of Centennial in
the unaudited pro forma combined consolidated financial statements. The
estimated fair values contained herein are preliminary in nature and may not be
indicative of the final purchase price allocation.
The unaudited pro forma combined balance sheets have been prepared to
reflect the acquisition as if it occurred December 25, 1999. The unaudited pro
forma combined statements of operations for the year ended March 31, 1999 give
effect to the acquisition as if it occurred on April 1, 1998. The unaudited pro
forma combined statement of operations for the nine months ended December 25,
1999 give effect to the acquisition as if it occurred on April 1, 1999. The
unaudited pro forma combined consolidated financial statements do not purport to
represent what Centennial's financial position or results of operations would
actually have been if the acquisition had in fact occurred on such dates or to
project Centennial's financial position or results of operations as of any
future date or for any future period. The unaudited pro forma data is not
indicative of the operating results or financial position that would have been
achieved had the acquisition been consummated at the dates indicated, nor is it
indicative of future operating results and financial condition. The flash memory
component used in the Flash Card Business is reflected in the historical
financial statements of the Flash Card Business at Intel Corporation's actual
manufacturing cost. Centennial believes it purchases this component from Intel
Corporation at a price which is higher than this actual manufacturing cost.
Therefore, future cost of goods sold are expected to be higher on a per unit
basis. Centennial has received notice from the Flash Card Business's primary
customer of its intent to discontinue purchasing from Centennial.
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
4. MERGER TRANSACTION COSTS
Centennial incurred direct transaction costs of approximately $100,000
associated with the acquisition, primarily for legal and accounting fees. These
costs were included in the total purchase price. There can be no assurance that
Centennial will not incur additional charges in subsequent quarters to reflect
costs associated with the acquisition or that Centennial will be successful in
their efforts to integrate the operations of the Flash Card Business.
5. NET INCOME PER SHARE
Pro forma basic and diluted net income per share amounts for the nine
month period ended December 25, 1999 and the year ended March 31, 1999, are
based upon the historical weighted-average number of Centennial common stock
outstanding adjusted to reflect the issuance, as of April 1, 1999 and 1998,
respectively, of approximately 600,000 shares of Centennial common stock, on an
as converted basis, associated with the 60,000 shares of Centennial preferred
stock issued in connection with the acquisition.
6. CONFORMING AND RECLASSIFICATION ADJUSTMENTS
There were no adjustments required to conform the accounting policies
of Centennial and the Flash Card Business.
7. PRO FORMA ADJUSTMENTS
Adjustments included in the unaudited pro forma combined balance sheets
and unaudited pro forma combined statements of operations are
summarized as follows:
(a) To reflect the cash payment of $2 million, the issuance of 60,000
shares of Centennial Preferred Stock valued at approximately $2.1
million and the issuance of a secured promissory note for $4
million in connection with the acquisition, for an aggregate
purchase price of approximately $8.2 million, including
approximately $100,000 of transaction costs and $198,000 of net
assets acquired in excess of purchase price.
(b) To eliminate the historical net assets acquired of $4,203,000.
(c) To accrue interest expense on the secured promissory note at an
interest rate of 9% as if the acquisition occurred on April 1,
1998.
(d) To amortize negative goodwill over a three year period.
(e) To increase inventory to the estimated fair value less selling
costs.
7
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
Exhibit 2.1 Asset Purchase Agreement dated December 29, 1999
between Centennial Technologies, Inc. and Intel
Corporation. *
Exhibit 2.2 Rights Agreement dated December 29, 1999 Between
Centennial Technologies, Inc and Intel
Corporation. *
Exhibit 2.3 Subordinated Secured Promissory Noted dated
December 29, 1999. *
Exhibit 2.4 Security Agreement dated December 29, 1999 between
Centennial Technologies, Inc. and Flash Card
Business. *
Exhibit 20.1 Flash Card Business audited financial statements for
the years ended December 31, 1999, 1998 and 1997.
Exhibit 23.1 Consent of Ernst & Young LLP, Independent Auditors.
Exhibit 99.1 Press Release of Centennial Technologies, Inc.
dated December 30, 1999. *
* Previously filed
8
<PAGE>
SIGNATURES
Pursuant to the requirements 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 TECHNOLOGIES, INC.
Dated: March 13, 2000 By: /s/ L. MICHAEL HONE
-----------------------------
L. Michael Hone
President and Chief Executive
Officer
Dated: March 13, 2000 By: /s/ RICHARD J. PULSIFER
-----------------------------
Richard J. Pulsifer
Chief Financial Officer
9
<PAGE>
EXHIBIT 20.1
FINANCIAL STATEMENTS
FLASH MEMORY CARD BUSINESS OF
INTEL CORPORATION
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998,
AND DECEMBER 27, 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FINANCIAL STATEMENTS
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998,
AND DECEMBER 27, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.................................................1
Financial Statements
Statements of Assets Acquired..................................................2
Statements of Net Revenues and Direct Expenses.................................3
Notes to Financial Statements..................................................4
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Intel Corporation
We have audited the accompanying statements of assets acquired of the Flash
Memory Card Business (Flash Card Business) of Intel Corporation as of December
25, 1999 and December 26, 1998, and the related statements of net revenues and
direct expenses for the three years in the period ended December 25, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1, the accompany financial statements were prepared solely
to present the assets of the Flash Card Business acquired by Centennial
Technologies pursuant to the purchase agreement, dated December 29, 1999, and
the related net revenues and direct expenses of the Flash Card Business, and are
not intended to be a complete presentation of the assets and liabilities or the
results of operations of the Flash Card Business of Intel Corporation.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets acquired of the Flash Card Business of Intel
Corporation as of December 25, 1999 and December 26, 1998, and the related
statements of net revenues and direct expenses for the three years in the period
ended December 25, 1999 in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
San Jose, California
March 10, 2000
1
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
STATEMENTS OF ASSETS ACQUIRED
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 26,
1999 1998
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Inventories $ 4,005 $ 9,127
Property, plant, and equipment:
Machinery and equipment 399 399
Less accumulated depreciation (201) (76)
---------------------------------------------
Net property, plant, and equipment 198 323
---------------------------------------------
Assets acquired $ 4,203 $ 9,450
=============================================
</TABLE>
See accompanying notes.
2
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
STATEMENTS OF NET REVENUE AND DIRECT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
-------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues $30,740 $29,369 $34,079
Direct expenses:
Cost of sales 31,703 28,879 33,178
Operating expenses:
Research and development 394 413 771
Selling, marketing, and administrative 375 590 1,006
-------------------------------------------------------------------
Total operating expenses 769 1,003 1,777
-------------------------------------------------------------------
Total expenses 32,472 29,882 34,955
-------------------------------------------------------------------
Net revenues less direct expenses $ (1,732) $ (513) $ (876)
===================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 25, 1999
1. BASIS OF PRESENTION
RELATIONSHIP WITH INTEL CORPORATION
The Flash Memory Card Business (Flash Card Business) has operated as a product
line within the Flash Products Division of Intel Corporation (Intel). The Flash
Card Business produces and sells flash memory cards, including the PCMCIA card
families and the Miniature card families. The accompanying financial statements
were prepared to present the assets of the Flash Card Business acquired by
Centennial Technologies Inc. (Centennial), pursuant to the purchase agreement,
dated December 29, 1999, and the related net revenues and direct expenses of the
Flash Card Business, and are not intended to be a complete presentation of the
results of operations of the Flash Card Business. The related net revenues and
direct expenses include net revenues and an allocation of expenses for the Flash
Card Business products sold by Intel.
The Flash Card Business had no separate legal status as it was an integral part
of Intel's overall operations. As a result, separate financial statements have
not been maintained for the operations acquired by Centennial.
The accompanying financial statements have been prepared from the historical
accounting records of Intel and do not purport to reflect the assets and the net
revenues and direct expenses that would have resulted if the Flash Card Business
had operated as an unaffiliated independent company. Since only certain assets
are being acquired, statements of cash flows are not applicable.
4
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICES
INVENTORY
Inventories include all finished goods and flash memory components related to
the Flash Card Business at Intel's facilities, any purchased finished goods in
transit between Intel's subcontractor and Intel, any purchased finished goods at
the subcontractor, and any flash memory components related to the Flash Card
Business, owned by Intel and cosigned to the subcontractor at the
subcontractor's facilities or in transit from Intel to the subcontractor. Cost
is computed on a currently adjusted standard basis (which approximates actual
cost on a current average or first-in, first-out basis). Inventories are valued
using Intel's standard valuation methods, including reserves for lower of cost
or market, and inventory in excess of predetermined levels of demand. The
predetermined levels of demand were based on external demand for the flash
memory cards as well as the individual flash components.
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Work-in-process $1,610 $5,307
Finished goods 2,395 3,820
---------------------------------------------
$4,005 $9,127
=============================================
</TABLE>
RISKS AND UNCERTAINTIES
The preparation of the financial statements requires management to make
estimates and assumptions which affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
In February 2000, Cisco, the largest customer in fiscal 1999, affirmed that
it would no longer purchase any flash memory cards from Intel or Centennial.
Intel believes that there is adequate demand from other customers to cover
the inventory levels as of December 25, 1999. However, if orders from other
customers do not meet Intel's expectations, the Flash Card Business may be
required to write off excess inventory.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is computed for
financial reporting purposes principally by the use of the straight-line method
over the estimated useful lives of the assets. The assets acquired have useful
lives of four years. Direct operating expenses include depreciation expense of
$125,000, $71,000, and $5,000 for the years ended December 25, 1999, December
26, 1998, and December 27, 1997, respectively, related to the assets acquired.
5
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
REVENUES
The percentage of revenues from unaffiliated customers by geographic region were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C>
United States 77% 70% 75%
Europe 20% 26% 15%
Other 3% 4% 10%
</TABLE>
Net revenues per the accompanying financial statements represent sales by Intel
for the products acquired by Centennial. Adjustments have been made to reflect
estimated sales returns in accordance with Statement of Financial Accounting
Standards No. 48, "Revenue Recognition When Right of Return Exists." Intel
believes that these estimates are reasonable.
DIRECT EXPENSES
The caption "Direct expenses" on the accompanying financial statements
represents that portion of the total direct expenses of Intel incurred by the
Flash Card Business and/or allocated to the Flash Card Business by Intel. Intel
does not maintain separate accounts to capture manufacturing, cost of sales,
research and development, marketing, general, and administrative expenses for
the Flash Card Business. Intel allocates corporate services, facilities,
information services, advertising, other selling, general, and administrative
services, etc., based on estimated usage. There is no allocation of interest
income, interest expense, or income taxes. Cost of sales is computed based on
the full absorption of manufacturing costs and is not necessarily indicative of
the costs that would have been incurred by an independent third-party purchaser.
Intel believes that these percentage allocations are reasonable. These direct
expenses are not necessarily indicative of the expenses that would have been
incurred had the Flash Card Business operated as a standalone business.
6
<PAGE>
FLASH MEMORY CARD BUSINESS OF INTEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
SIGNIFICANT CUSTOMERS
The customers, which account for more than 10% of revenues in each period, are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C>
Cisco 52% 41% 38%
Arrow 15% 15% 11%
Northern Telecom - - 13%
</TABLE>
3. SUBSEQUENT EVENTS
On December 29, 1999, the assets reflected in the accompanying Statements of
Assets Acquired were acquired by Centennial. The purchase price consists of
60,000 shares of preferred stock of Centennial, cash of $2,000,000, a promissory
note of $4,000,000, and contingent consideration of up to $4,500,000, based on
anticipated customer's purchase of flash memory cards.
Cisco affirmed that it would no longer purchase any flash memory cards from
Intel or Centennial.
7
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 333-75335, No. 333-75331, No. 333-75329, No. 033-89154, and
No. 333-83591) pertaining to the 1999 Employee Stock Purchase Plan, 1994
Formula Stock Option Plan, 1994 Stock Option Plan, 1994 Stock Option Plan and
1994 Formula Stock Option Plan, and the 1999 Qualified Employee Stock
Purchase Plan, respectively, of Centennial Technologies, Inc. of our report
dated March 10, 2000, with respect to the statements of assets acquired of
the Flash Memory Card Business of Intel Corporation as of December 25, 1999
and December 26, 1998, and the related statements of net revenues and direct
expenses for the three years in the period ended December 25, 1999 included
in the Current Report on Form 8-K/A of Centennial Technologies, Inc. dated
March 13, 2000.
ERNST & YOUNG LLP
San Jose, California
March 10, 2000
