1
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1997

COMMISSION FILE NUMBER 1-12912

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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)

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INDICATE BY CHECK MARK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [ ] NO [X]

As of October 31, 1997, there were 18,471,362 shares of Common Stock, $.01
par value per share (the "Common Stock"), of the registrant outstanding.

CENTENNIAL TECHNOLOGIES, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE NUMBER

Item 1. Financial Statements 3

Consolidated Balance Sheets at September 27, 1997 and March
31, 1997 3

Consolidated Statements of Operations for three and six
months ended September 27, 1997 and September 30, 1996 4

Consolidated Statements of Cash Flows for six months ended
September 27, 1997 and September 30, 1996 5

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 17
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19

PART I

ITEM 1. FINANCIAL STATEMENTS

CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

SEPTEMBER 27, MARCH 31,
1997 1997
------------- --------
ASSETS

Current assets:
Cash and cash equivalents ....................................... $ 59 $ 57
Trade accounts receivable ....................................... 4,399 6,263
Less allowances ............................................ (820) (692)
-------- --------
3,579 5,571
Accounts receivable from affiliates ............................. -- 676
Recoverable income taxes ........................................ 337 7,356
Inventories ..................................................... 2,400 7,794
Notes receivable from affiliate ................................. -- 4,129
Other current assets ............................................ 601 1,630
-------- --------
Total current assets ............................................ 6,976 27,213
Equipment and leasehold improvements ............................ 4,213 4,023
Less accumulated depreciation and amortization ............. (1,200) (936)
-------- --------
3,013 3,087
Investments .......................................................... -- 5,089
Notes receivable from affiliate ...................................... 7,891 --
Other assets ......................................................... 740 566
Investment in affiliate .............................................. 8,916 15,243
-------- --------
Total assets ......................................................... $ 27,536 $ 51,198
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit notes .......................................... $ 1,626 $ 10,090
Obligations under capital leases ................................ 68 671
Obligations under term loans .................................... 235 --
Accounts payable and accrued expenses ........................... 9,486 11,883
-------- --------
Total current liabilities ............................................ 11,415 22,644
Obligations under capital leases ..................................... 71 --
Obligations under term loans ......................................... 684 --
Contingencies (Note 10)
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
Authorized, none issued ....................................... -- --
Common Stock, $.01 par value; 50,000,000 shares authorized,
18,655,000 issued and outstanding at September 27, 1997;
17,745,000 issued and outstanding at March 31, 1997 ........... 186 177
Additional paid-in capital ........................................... 84,219 82,240
Accumulated deficit .................................................. (68,883) (53,630)
Foreign currency translation of equity investment .................... (156) (233)
-------- --------
Total stockholders' equity ........................................... 15,366 28,554
-------- --------
Total liabilities and stockholders' equity ........................... $ 27,536 $ 51,198
======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED

SEPTEMBER 27, SEPTEMBER 30, SEPTEMBER 27, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(RESTATED) (RESTATED)

Sales ........................................ $ 6,901 $ 10,154 $ 13,474 $ 21,798
Costs and expenses:
Cost of goods sold ......................... 5,603 8,806 11,745 17,566
Engineering costs .......................... 335 344 691 652
Selling, general and administrative
expenses ................................ 3,073 1,400 4,962 2,498
Provision for loss on inventory subject to
customer dispute ......................... 1,841 -- 1,841 --
Loss on investment activities .............. 5,424 2,459 8,909 5,052
Special investigation costs ................ -- -- 597 --
Lease cancellation charge .................. 258 -- 258 --
Net interest (income)/expense .............. 69 (82) 147 (239)
-------- -------- -------- --------
Total costs and expenses ................. 16,603 12,927 29,151 25,529
-------- -------- -------- --------
Loss before equity in earnings of affiliate .. (9,702) (2,773) (15,676) (3,731)
Equity in earnings (loss) of affiliate ....... (77) 46 423 46
-------- -------- -------- --------
Net loss ................................. $ (9,779) $ (2,727) $(15,253) $ (3,685)
======== ======== ======== ========
Net loss per share ........................... $ (.52) $ (.16) $ (.83) $ (.22)
Weighted average shares outstanding .......... 18,648 16,939 18,412 16,759

The accompanying notes are an integral part of the consolidated financial
statements.

CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

(UNAUDITED)

SIX MONTHS ENDED
----------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 30, 1996
------------------ ------------------
(RESTATED)

Cash flows from operating activities:
Net loss .......................................... $ (15,253) $(3,685)
Adjustments to reconcile net loss to net cash from
(used in) operating activities:
Depreciation and amortization ..................... 514 633
Equity in earnings of affiliate.................... (423) (46)
Provision for loss on accounts receivable ......... 128 135
Provision for loss on investments ................. 7,019 1,790
Other non-cash items .............................. -- 148
Change in operating assets and liabilities:
Accounts receivable ............................. 1,864 (1,842)
Accounts receivable from affiliate .............. -- (3,900)
Inventories ..................................... 5,394 (2,571)
Notes receivable ................................ -- (83)
Notes receivable from affiliate.................. 4,129 --
Recoverable income taxes ........................ 7,019 (3,579)
Other assets .................................... 1,131 (1,387)
Accounts payable and accrued expenses ........... (2,397) 2,580
-------- --------
Net cash provided by (used in) operating
activities .................................... 9,125 (11,807)
Cash flows from investing activities:
Capital expenditures .............................. (667) (520)
Disposal of capital equipment ..................... 477 --
Purchase of available-for-sale securities ......... -- (36,164)
Proceeds from sale of available-for-sale securities -- 35,164
Purchase of investments ........................... -- (1,610)
Acquisition of businesses, net of cash acquired ... -- (3,969)
Investment in affiliates .......................... (1,141) --
-------- --------
Net cash used in investing activities ........... (1,331) (7,099)
Cash flows from financing activities:
Net borrowings under line of credit ............... (8,464) 5,925
Borrowings from term loans ........................ 938 --
Payments on term loans ............................ (19) --
Borrowings from capital leases .................... -- --
Payments on capital leases ........................ (532) (170)
Proceeds from exercise of stock options ........... 208 249
Proceeds from exercise of warrants ................ -- 360
Net proceeds from public offerings of
Common Stock ..................................... -- 1,221
Proceeds from certain related party transactions . -- 1,797
Foreign currency translation of
equity investment................................. 77 --
-------- --------
Net cash provided by (used in) financing activities (7,792) 9,382
-------- --------
Net increase (decrease) in cash and cash equivalents 2 (9,524)
Cash and cash equivalents at beginning of period .... 57 12,281
-------- --------
Cash and cash equivalents at end of period .......... $ 59 $ 2,757
======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

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. The Company's investment in Century Electronics Manufacturing,
Inc. ("Century") of which it had a 45% equity ownership position at September
27, 1997 and a 67% equity ownership position at March 31, 1997, has been
accounted for using the equity method for all periods presented because the
Company had a plan of disposition of a portion of the investment in place prior
March 31, 1997 and the transaction closed on June 30, 1997. Investments are
accounted for using the cost method. All significant intercompany balances and
transactions have been eliminated. Certain reclassifications have been made to
prior years' consolidated financial statements to conform to the fiscal 1998
presentation.

The accompanying financial statements have been prepared on the basis of a
going concern, which contemplates the realization of assets and settlement of
liabilities in the normal course. The Company is a defendant in certain
litigation, as more fully described in Note 10 hereof. No assurance can be given
that the settlement of litigation will result in an outcome which would not
significantly impair the ability of the Company to continue as a going concern.

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
unaudited consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the fiscal period ended March 31, 1997.

Changes in Fiscal Year and Quarterly Reporting Dates

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 1998 in the
accompanying financial statements relate to the year ending March 31, 1998.
References to fiscal 1997 relate to the nine months ended March 31, 1997.
References to fiscal 1996, 1995 and 1994 relate to the respective years ended
June 30.

During the second quarter of fiscal 1998, the Company changed its quarterly
reporting dates to comport with its new four week/four week/five week monthly
cycle for each quarter. As a result, each quarter will now end on the closest
Saturday to the calendar end of each quarter. The Company's fiscal year-end will
continue to be March 31.

2. RESTATEMENT OF FINANCIAL STATEMENTS

On February 11, 1997 the Company announced that it had commenced a special
investigation into certain apparent financial and management irregularities and
that its previously published financial statements and related financial
disclosures could no longer be relied upon. On June 12, 1997, the Company
announced the completion of the financial review associated with the special
investigation, including condensed restated financial information, as well as
the financial results for the periods ended March 31, 1997. The Company had
previously changed its fiscal year end to March 31, in order to accelerate the
receipt of certain tax refunds and in order to complete audited financial
statements for the entire periods under review as quickly as possible. The
accompanying

financial statements for the three and six months ended September 30, 1996 give
effect to adjustments arising from the financial review.

The following table sets forth the effects of these adjustments on the
Company's financial position at September 30, 1996 and results of operations for
the three and six months ended September 30, 1996, excluding the results of
Century (in thousands except per share data):

THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------ ------------------

Sales:
As previously reported .. $ 14,547 $ 26,974
As adjusted ............. 10,154 21,798
Cost of goods sold:
As previously reported .. 8,840 16,589
As adjusted ............. 8,806 17,566
Net income (loss):
As previously reported .. 2,445 4,313
As adjusted ............. (2,727) (3,685)
Net income (loss) per share:
As previously reported .. .14 .25
As adjusted ............. (.16) (.22)

AS OF SEPTEMBER 30,
-------------------
1996
----

Total assets:
As previously reported..... $66,381
As adjusted................ 46,430
Total stockholders' equity:
As previously reported..... 53,232
As adjusted................ 34,564

The following table sets forth the summary of restatement adjustments (in
thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------ ------------------

Reversal of invalid sales transactions ............... $ (663) $ (954)
Reversal of sales for revenue recognition ............ (3,277) (3,277)
Reclassification of purchasing agency arrangement .... (425) (810)
Additional accounts receivable adjustments ........... (28) (135)
------- -------
Total adjustments to sales ........................... (4,393) (5,176)
Corrections to inventory pricing and physical counts . (1,893) (1,343)
Additional provisions for inventory obsolescence ..... (439) (777)
Restoration of inventory for revenue recognition ..... 1,697 1,697
Reversal of certain additions to capital equipment,
net of related depreciation, which were not bona fide 18 (1,423)
Provision for losses on investment activities ........ (1,600) (3,096)
Pre-acquisition advances to subsidiary ............... (859) (1,891)
Other adjustments, net ............................... 598 975
Reversal of provisions for income taxes .............. 1,699 3,036
------- -------

Total adjustments to net income (loss) ............... $(5,172) $(7,998)
======= =======

3. 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 six months ended September 27, 1997, three customers
accounted for approximately 40% and 43% of the Company's sales, respectively.
At September 27, 1997, these customers accounted for approximately $1.5 million,
or 43% of the Company's net accounts receivable balance.

8
For the three and six months ended September 30, 1996, two customers
accounted for approximately 61% and 53% of the Company's sales, respectively. At
September 30, 1996, these two customers accounted for approximately $5.3
million, or 55% of the Company's net accounts receivable balance.

Approximately 8% and 4% of the Company's sales for the three months
ended September 27, 1997 and September 30, 1996, respectively, and approximately
10% and 5% of the Company's sales for the six months ended September 27, 1997
and September 30, 1996, respectively, were outside the United States, primarily
in several Western European countries, Israel and Canada. No one area comprised
more than 10% of the Company's sales.

4. EARNINGS PER SHARE

Primary earnings per share data are based on outstanding Common Stock and
Common Stock assumed to be outstanding to reflect the dilutive effects of stock
options and warrants using the treasury stock method. Since all periods
presented in these financial statements reflect losses, such common stock
equivalents have been excluded, as they are anti-dilutive.

During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per
Share," which specifies a new computation for earnings per share. SFAS 128 is
effective for periods ending after December 15, 1997. Had SFAS 128 been adopted
as of April 1, 1996, there would have been no effect on the Company's reported
earnings per share for the quarters and nine month periods ended December 27,
1997 and December 31, 1996.

5. INVENTORIES

Inventories consisted of (in thousands):

SEPTEMBER 27, MARCH 31,
1997 1997
------ ------

Raw material, primarily electronic components.... $1,291 $3,995
Work in process................................. 691 1,387
Finished goods.................................. 418 2,412
------ ------
$2,400 $7,794
====== ======

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.

The Company has reserved fully $1.8 million of costs related to inventory
specifically purchased and manufactured pursuant to a customer's purchase order.
The customer later attempted to cancel the purchase order. The Company disputes
the customer's claim that the purchase order cancellation was effective, and is
seeking legal remedies related thereto.

6. 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 bear interest at a
rate of 6% and mature in ten years. Under certain conditions, the debentures
will be convertible into the capital stock of an entity with which Century may
merge. In addition, the Company 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 June 30, 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 $0.5 million in cash and a $1.9 million 9% promissory note due
December 1998. See Note 11.

7. 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 its investment activities. The Company has
written down fully its portfolio of investments based on an individual
assessment of their future viability and the Company's intention to focus its
financial resources on its core business.

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
has 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, have been included in loss on investment activities in the
periods the advances were made. The merger has been recorded using purchase
accounting, and the excess (approximately $3.2 million) of the purchase price
over the fair value of assets acquired has been written off as of the agreement
date (May 15, 1997) because of the uncertainties related to the future
operations of ITP/Fleet.Net.

8. DEBT

Note Payable

The Company had a revolving line of credit agreement with a bank that
limited borrowings to a percentage of receivables and inventories and contained
certain covenants relating to the Company's net worth and indebtedness, among
others. This credit agreement was collateralized by substantially all the assets
of the Company. On February 14, 1997, the Company received a notice of default
and on March 18, 1997 entered into a forbearance agreement whereby the bank
agreed to continue to extend credit under certain conditions. The forbearance
agreement was subsequently extended to August 15, 1997.

On August 14, 1997, the Company entered into a new credit agreement with
Congress Financial Corporation ("Congress Financial") 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. Allowable borrowings are based on
available accounts receivable and the cost of equipment, and are secured by all
of the Company's assets.

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.

9. RELATED PARTY TRANSACTIONS

During fiscal 1997, 1996, 1995 and 1994, the Company rendered invoices for
non-existent products to certain businesses which appear to have been under the
control or influence of Centennial's former Chief Executive Officer. These sale
transactions have been reversed in connection with the restatement of the
Company's financial statements. See Note 2. In certain instances, these invoices
were paid with funds that appear to have originated from the former Chief
Executive Officer. The proceeds to the Company related to these transactions,
which proceeds amounted to $662,000 and $1,797,000 for the three and six months
periods ended September 30, 1996, respectively, have been reflected in the
accompanying financial statements as additional paid-in capital.

10. 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, 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 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.

11
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, if approved,
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 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 plaintiffs have also retained their claims against the Company's former
Chief Executive Officer, Emanuel Pinez, the Company's former Chief Financial
Officer, James M. Murphy, the Company's independent accountants, Coopers &
Lybrand, LLP, and others.

As of March 31, 1997, the Company has recorded a provision for the
potential 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
cash portion ($1,475,000) of the Settlement Agreement is included in accounts
payable and accrued expenses and the Common Stock portion ($18,525,000) is
included in additional paid-in capital.

Preliminary approval of the Settlement Agreement is still pending. If the
Court grants preliminary approval, the Settlement Agreement must be presented to
class members for consideration and to the Court for final approval. If a
sufficiently large number of class members opt not to participate in the
Settlement Agreement, it may be withdrawn. No assurance can be given that the
Court will grant preliminary or final approval of 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 Agreement.

On June 19, 1997, the Company announced that it had reached an agreement in
principle to settle the WebSecure Securities Litigation. The agreement in
principle 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. A binding commitment to these terms must await the
execution of a final settlement agreement. Furthermore, any 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 parties will be able to
reach such a final settlement agreement, that any such agreement, if reached,
will be approved by the Court, or that, if such approval is obtained, that a
material number of class members will not decline to participate in the
settlement.

On August 11, 1997, a lawsuit was filed by four former employees (the
"Employees") of Intelligent Truck Project, Inc. ("ITP") against the Company,
alleging, among other things, that the Employees relied on certain
representations and warranties as to the financial statements of the Company in
exchanging their ITP shares for the Company's shares. The Company has filed a
notice of removal of this action to the United States District Court for the
Southern District of Florida. The Company disputes several of the claims made in
this action, and plans to pursue its defenses

11
12

vigorously.

On October 20, 1997, the Company and one of the Employees entered into a
Severance, Settlement and Release Agreement whereby the Employee, among other
things, agreed to a dismissal with prejudice of his claims against the Company
and its officers and directors described above.

11. SUBSEQUENT EVENT

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, and
satisfied its $6 million 6% Convertible Subordinated Debenture due June 2007, in
exchange for $9.7 million in cash and $4 million of Century Series B Convertible
Preferred Stock. The Company recorded a loss on investment activities of $4.2
million in the third quarter of 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.

CENTENNIAL TECHNOLOGIES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT

Except for historical information contained herein, the discussions
contained in this document include forward-looking statements. Such statements
involve a number of risks and uncertainties, including, but not limited to,
those (i) discussed below, (ii) discussed under the heading "Risk Factors", and
(iii) identified from time to time in the Company's filings with the Securities
and Exchange Commission including those set forth in the Company's Annual Report
on Form 10-K for the fiscal period ended March 31, 1997 under the heading "Risk
Factors" These risks and uncertainties could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company assumes no obligation
to update these forward-looking statements to reflect events or circumstances
after the date hereof.

OVERVIEW

The Company designs, manufacturers and markets an extensive line of PC
cards used primarily by OEMs in industrial and commercial applications. The
Company's PC cards provide added functionality to devices containing
microprocessors by supplying increased storage capacity, communications
capabilities and programmed software for specialized applications.

The following discussion and analysis should be read in conjunction with
the unaudited Consolidated Financial Statements and Notes thereto.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 30, 1996

Sales. Sales decreased 32% to approximately $6.9 million in the 1997 period
compared to $10.2 million in the 1996 period, due in part to the impact of
adverse publicity surrounding the criminal indictment of the Company's former
Chief Executive Officer and the associated special investigation and
shareholder litigation matters. In addition, sales to a major customer
decreased from $2.3 million in the 1996 period to near zero in the 1997 period
due to the completion of the program under which the product was originally
shipped.

Another significant customer represented 29% of total sales in the 1997
period and 38% of total sales in the 1996 period. A third customer represented
8% of total sales in the 1997 period compared to 7% of total sales in the 1996
period. If these customers were to reduce significantly the amount of business
they conduct with the Company, it could have a material adverse effect on the
Company's business, financial condition and results of operations. No other
customer or group of related customers accounted for more than 10% of the
Company's sales.

Sales outside of the United States represented 8% of sales in the 1997
period compared to 4% of sales in the 1996 period.

Costs of Goods Sold. Cost of goods sold decreased 36% to $5.6 million for
the 1997 period compared to $8.8 million for the 1996 period. Gross margins were
18.8% for the 1997 period compared to 13.3% for the 1996 period. Costs of goods
sold include provisions for inventory obsolescence of $.4 million in the 1997
period and $.4 million in the 1996 period, representing 5.8% of sales in the
1997 period and 3.9% in the 1996 period. Improvements in gross margin result
primarily from improved procurement practices, particularly for memory chips, as
well as cost reductions resulting from a July 3, 1997 reduction-in-force of 24
production employees.

Engineering Costs. Engineering costs were $335,000 in the 1997 period
versus $344,000 in the 1996 period.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $3.1 million in the 1997 period compared to
$1.4 million in the comparable 1996 period. Increases are primarily attributable
to increased professional fees, provisions for uncollectible accounts
receivable, severance costs, and costs incurred in connection with new bank
financing.

In addition, during the 1997 period, the Company revised its method of
allocating overhead costs to cost of goods sold, which revision reduced the
allocation from selling, general and administrative expenses for this period by
approximately $420,000.

Depreciation expense decreased to $148,000 in the 1997 period compared to
$178,000 in the 1996 period, due to certain assets becoming fully depreciated.

Lease Cancellation Charge. This charge represents settlement costs paid to
the Company's previous secured lender, which lender also provided equipment
lease financing to the Company. Such lease financing was deemed to be in default
as a consequence of the company's revolving credit default. In order to release
all underlying collateral, the Company was required to buy out the lease
obligations, including the payment of residual values under the leases.

Net Interest Expense. Net interest expense was $69,000 in the 1997 period
compared to interest income of $82,000 in the 1996 period. The increase in
interest expense was primarily due to increased borrowings.

Loss on Investment Activities. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses associated with
certain investments. The following table describes the elements and the amounts
reflected in this category for the 1997 and 1996 periods (in thousands):

1997 1996
---- ----

Costs incurred in connection with
ITP/Fleet.Net (See Note 7) $ 608 $ 859
Loss on investment in ViA............................ 4,165 --
Loss on investment in Infos ......................... -- 1,500
Losses on other investments.......................... 651 100
------ ------
TOTAL................................................ $5,424 $2,459
====== ======

SIX MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 30, 1996

Sales. Sales decreased 38% to approximately $13.5 million in the 1997
period compared to $21.8 million in the 1996 period, due in part to the impact
of adverse publicity surrounding the criminal indictment of the Company's former
Chief Executive Officer and the associated special investigation and shareholder
litigation matters. In addition, sales to a major customer decreased from $5.0
million in the 1996 period to near zero in the 1997 period due to the completion
of the program under which the product was originally shipped.

Another significant customer represented 28% of total sales in the 1997
period and 31% of total sales in the 1996 period. A third and fourth customer
each represented 8% of total sales in the 1997 period compared to an
insignificant amount in the 1996 period. If these customers were to reduce
significantly the amount of business they conduct with the Company, it could
have a material adverse effect on the Company's business, financial condition
and results of operations. No other customer or group of related customers
accounted for more than 10% of the Company's sales.

Furthermore, sales for the first quarter of the 1997 period were negatively
impacted as several continuing customers accelerated their orders in the
previous quarter shortly after the adverse publicity broke. This had the effect
of improving the Company's performance in March 1997 and reducing April and May
shipments.

Sales outside of the United States represented 10% of sales in the 1997
period compared to 5% of sales in the 1996 period.

Costs of Goods Sold. Cost of goods sold decreased 33% to $11.7 million for
the 1997 period compared to $17.6 million for the 1996 period. Gross margins
were 12.8% for the 1997 period compared to 19.4% for the 1996 period. Costs of
goods sold include provisions for inventory obsolescence of $.8 million in the
1997 period and $.7 million in the 1996 period, representing 6% of sales in the
1997 period and 3% in the 1996 period. Cost of goods sold in the 1997 period was
also negatively impacted by inventory revaluation

14
adjustments of $.9 million or 6.7% of sales primarily due to declining
electronic component prices and changes in overhead absorption rates. No similar
adjustments were recorded in the 1996 period.

Engineering Costs. Engineering costs were $691,000 in the 1997 period
versus $652,000 in the 1996 period.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $5.0 million in the 1997 period compared to
$2.5 million in the comparable 1996 period due to increased sales staffing and
travel, increased professional fees, key employee retention bonuses incurred in
1997, severance costs, provision for uncollectible accounts receivable, costs
incurred in connection with new bank financings, expenses associated with the
May 1997 facility move, and increased insurance costs.

Depreciation expense decreased to $285,000 in the 1997 period compared to
$309,000 in the 1996 period, reflecting certain assets becoming fully
depreciated.

Lease Cancellation Charge. This charge represents settlement costs paid to
the Company's previous secured lender, which lender also provided equipment
lease financing to the Company. Such lease financing was deemed to be in default
as a consequence of the Company's revolving credit default. In order to release
all underlying collateral, the Company was required to buy out the lease
obligations, including the payment of residual values under the leases.

Net Interest Expense. Net interest expense was $147,000 in the 1997 period
compared to interest income of $239,000 in the 1996 period. The increase in
interest expense was primarily due to increased borrowings.

1997 1996
---- ----

Costs incurred in connection with
ITP/Fleet.Net (See Note 7) $3,819 $1,892
Loss on investment in ViA............................ 4,415 --
Loss on investment in Infos ......................... -- 1,500
Loss on investment in Advent Technology Management .. -- 1,000
Losses on other investments.......................... 675 660
------ ------
TOTAL................................................ $8,909 $5,052
====== ======

Equity Interest in Earnings (Loss) of Affiliate. The equity interest in
earnings of affiliate reflects the Company's net interest in earnings of
Century.

Special Investigation Costs. Due to incremental costs it was necessary to
increase the accrual for Special Investigation Costs by $597,000 in the first
quarter of fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operating activities
primarily from public and private offerings of equity securities and loans from
financial institutions and others.

Fiscal 1998 Liquidity Outlook

The Company has experienced significant losses from operations and has
taken measures to reduce those losses, including reducing various expenses and
implementing new cost controls. The Company believes that its present cash
balances after giving effect to the proceeds from the February 4, 1998 sale of
Century related assets, financing from Congress Financial, and anticipated
future cash flows will be sufficient to fund future operations.

Operating Activities

At September 27, 1997, working capital decreased to approximately negative
$4.4 million, compared to positive working capital of $4.6 million at March 31,
1997, due principally to operating losses. In the 1997 period the Company
experienced cash flow from operations of approximately $9.1 million, compared to
cash flow used in operations of $11.8 million for the comparable period last
year. Days of sales outstanding

in accounts receivable amounted to 36 days at September 27, 1997 compared to 46
days at March 31, 1997. The Company's inventories represent approximately 6
weeks of manufacturing output at September 27, 1997, compared to 12 weeks at
March 31, 1997. Management has implemented new procurement practices reflecting
increased emphasis on reducing inventory levels.

As a result of the adjustments made to the Company's financial statements
in connection with its financial review, previous provisions for income taxes
have been reversed and the associated payments of approximately $.3 million are
classified as recoverable income taxes at September 27, 1997. For the 1997
period $7.0 million of tax refunds were received and used to reduce borrowings.

The Company's access to trade credit from its vendors has been subject to
increased scrutiny by its vendors and more limited terms since its announcement
of financial irregularities in February 1997. While certain suppliers have
imposed "collection on delivery" terms, the Company's principal suppliers have
continued to extend credit.

Investing Transactions

Net capital expenditures amounted to $335,000 in the 1997 period and
$479,000 in the 1996 period.

The Company has commitments for future capital equipment expenditures in
fiscal year 1998 of $631,000.

Financing Transactions

In November 1996, the Company renewed and amended its revolving line of
credit with a bank, pursuant to which the Company could borrow up to specified
limits based on the Company's eligible receivables and inventory, including
eligible receivables and inventory of Design Circuits, Inc. ("DCI"). See " -
Investment in Century Electronics Manufacturing, Inc." Borrowings on the DCI
borrowing base were made by the Company and subject to a DCI guarantee. All
borrowings were collateralized by substantially all of the assets of the
Company. The agreement required the Company to comply with certain covenants
relating to the Company's net worth and indebtedness, among other things. On
February 14, 1997, the Company received a notice of default, and on March 18,
1997, entered into a forbearance agreement whereby the bank agreed to continue
to extend credit under certain conditions. The forbearance agreement was
subsequently extended to August 15, 1997.

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.

Investment in Century Electronics Manufacturing, Inc.

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.

Contingencies

The Company is a defendant in numerous lawsuits alleging violations of
securities and other laws in connection with the Company's prior reported
financial results and certain other related matters. See Note 10 of Notes to
Unaudited Consolidated Financial Statements. The Company has reached agreement
with plaintiffs' counsel regarding settlement of these lawsuits, and believes
that such lawsuits will be settled substantially in accordance with the
description contained in Note 10 of Notes to Unaudited Consolidated Financial
Statements. The Company believes that such settlements will not have a material
adverse impact on its liquidity. As of fiscal 1997, the Company has recorded a
provision for the potential settlement of the Consolidated Litigation of $20.0
million, representing the cash portion of the potential settlement, together
with an amount equal to 37% of the estimated market capitalization of the
Company. The cash portion ($1,475,000) of the potential settlement is included
in accounts payable and accrued expenses and the Common Stock portion
($18,525,000) is included in additional paid-in capital. However, there can be
no assurance that the Company will be successful in obtaining preliminary or
final approval of the settlements described in Note 10, that a material number
of class members will not decline to participate in the settlement, or that the
claims against Lawrence J. Ramaekers, the Company's interim Chief Executive
Officer, in connection with the February 25 Securities Litigation, as to which
the Company may have indemnification obligations will be settled, and such
events could have a material adverse affect on the Company's liquidity,
business, financial condition and results of operations.

On August 11, 1997, a lawsuit was filed by four former employees (the
"Employees") of Intelligent Truck Project, Inc. ("ITP") against, the Company
alleging, among other things, that the Employees relied on certain
representations and warranties as to the financial statements of the Company in
exchanging their ITP shares for the Company's shares. The Company has filed a
notice of removal of this action to the United States District Court for the
Southern District of Florida. The Company disputes several of the claims made in
this action, and plans to pursue its defenses vigorously.

RISK FACTORS

From time to time, information provided by the Company or statements made
by its employees may contain forward-looking information. The Company's actual
future results may differ materially from those projections or suggestions made
in such forward-looking information as a result of various potential risks and
uncertainties including, but not limited to, the factors discussed below.

Losses in Prior Periods; Liquidity and Financing Risks. The Company has
experienced significant losses from operations during fiscal 1994, fiscal 1995,
fiscal 1996 and fiscal 1997 and the first and second quarters of fiscal 1998.
The Company has taken measures since the firing of its former Chief Executive
Officer in February 1997 to reduce those losses, including appointing a
turnaround specialist, hiring new senior management, reducing various expenses
and implementing new cost controls. If cost savings are not achieved or revenues
are not increased, the operating plan for the Company could include further cost
reductions. The Company believes that its present cash balances, financing from
Congress Financial, [further monetization of its interest in Century] and
anticipated future cash flows will be sufficient to fund future operations.

Dependence on Major Customers; Concentration of Credit Risk. Bay Networks,
Inc. and Navionics, Inc. accounted for approximately 28% and 8%,
respectively, of the Company's sales for the six month period ended September
27, 1997. Bay Networks and a subsidiary of Philips Electronics, N.V. accounted
for 31% and 23%, respectively, of the Company's sales for the six months ended
September 30, 1996. The loss of, or a significant curtailment of purchases by
these customers, or any other significant customer of the Company, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Substantially all of the Company's sales to Philips have
been in connection with Philips' sales of screen phones to a single customer.
Except for certain orders presently in dispute, the Company has fulfilled all
purchase orders with Philips, and the Company believes that it will not receive
additional orders from Philips pursuant to the screen phone program. The
industries served by the Company are characterized by frequent mergers,
consolidations, acquisitions, corporate restructuring and changes in management,
and the Company has from time to time experienced reductions in purchase orders
from customers as a result of such events. There can be no assurance that such
events involving customers of the Company will not result in a significant
reduction in the level of sales by the Company to such customers or the
termination of the Company's relationship with such customers. In addition, the
percentage of the Company's sales to individual customers may fluctuate from
period to period. Customer orders can be canceled and volume levels can be
changed or delayed. The timely replacement of canceled, delayed, or reduced
orders with new customers cannot be assured. These risks are exacerbated because
a majority of the Company's sales are to customers in the electronics industry,
which is subject to rapid technological change and product obsolescence. The
electronics industry is also subject to economic cycles and has in the past
experienced, and is likely in the future to experience, fluctuations in demand.
The Company anticipates that a significant portion of its sales will continue
for the foreseeable future to be concentrated in a small number of customers in
the electronics industry.

Fluctuations in Quarterly Results. The Company's results of operations may
be subject to quarterly fluctuations due to a number of factors, including the
timing of receipt and delivery of significant orders for the Company's products,
competitive pricing pressures, increases in raw material costs, costs associated
with the expansion of operations, changes in customer and product mix,
production difficulties, quality of the Company's products, write-downs or
writeoffs of investments in other companies, exchange rate fluctuations and
market acceptance of new or enhanced versions of the Company's products, as well
as other factors, some of which are beyond the Company's control. Additionally,
as is the case with many high technology companies, a significant portion of the
Company's orders and shipments typically occurs in the last few weeks of a
quarter. As a result, revenues for a quarter are not predictable, and the
Company's revenues may shift from one quarter to the next, having a significant
effect on reported results.

The trading price of the Company's Common Stock may fluctuate widely in
response to, among other things, quarter-to-quarter operating results, industry
conditions, awards of orders to the Company or its competitors, new product or
product development announcements by the Company or its competitors and changes
in earnings estimates by analysts. There can be no assurance that the Company's
future performance will meet the expectations of analysts or investors. In
addition, the volatility of the stock markets may cause wide fluctuations in
trading prices of securities of high technology companies.

Dependence on Key Personnel. The Company's success depends to a significant
degree upon the efforts and abilities of members of its senior management and
other key personnel, including technical personnel. The loss of any of these
individuals could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's business also
depends upon its ability to continue to attract and retain senior managers and
skilled technical employees. Failure to attract and retain such senior personnel
could materially and adversely affect the Company's business, financial
condition and results of operations.

PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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").

On August 11, 1997, a lawsuit was filed by four former employees (the
"Employees") of Intelligent Truck Project, Inc. ("ITP") against the Company
alleging, among other things, that the Employees relied on certain
representations and warranties as to the financial statements of the Company in
exchanging their ITP shares for the Company's shares. The Company has filed a
notice of removal of this action to the United States District Court for the
Southern District of Florida. The Company disputes several of the claims made in
this action, and plans to pursue its defenses vigorously.

ITEM 2. CHANGES IN SECURITIES Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable.

ITEM 5. OTHER INFORMATION. Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

ITEM LOCATION
NO. DESCRIPTION SEE NOTE:
------- ------------------------------------------------------------------------------------- ---------

3.1 -- Certificate of Amendment to the Certificate of Incorporation........................ (2)
3.2 -- By-Laws............................................................................. (8)
3.3 -- Shareholder Voting Agreement between Centennial Technologies, Inc. and the
Shareholders who are a party thereto, dated November 27, 1996....................... (2)

4.1 -- Specimen Stock Certificate.......................................................... (1)
4.2 -- Form of Warrant Agreement between the Company and American Securities
Transfer, Incorporated (includes Specimen Warrant Certificate)...................... (8)
10.1 -- Revolving Credit and Security Agreement between the Company and The
First National Bank of Boston, dated September 14, 1994............................. (6)
10.2 -- $3,000,000 Revolving Credit Note, dated September 14, 1994, by NCT in favor of The
First National Bank of Boston for the benefit of the Company........................ (6)

10.3 -- Unlimited Guaranty, dated September 14, 1994, by NCT in favor of The First National
Bank of Boston for the benefit of the Company....................................... (6)
10.4 -- Affiliate Subordination Agreement, dated September 14, 1994, executed in favor of
The First National Bank of Boston by the Company, NCT and Emanuel Pinez............. (6)
10.5 -- Amendment No. 1 dated as of November 8, 1995 to the Revolving Credit and Security
Agreement between the Company and The First National Bank of Boston................. (3)
10.6 -- Forbearance Agreement and Amendment by and between The First National
Bank of Boston, BancBoston Leasing Inc., Centennial Technologies, Inc.,
NCT, Inc., Century Electronics Manufacturing, Inc. and Design Circuits,
Inc., dated as of March 18, 1997.................................................... (2)
10.7 -- Lease Agreement between the Company and 37 Manning Road Limited
Partnership, dated November 6, 1992 and amended on November 29, 1992............... (8)
10.8 -- Lease Agreement between the Company and 4 Point Interiors, dated June
28, 1993 ("California Lease")...................................................... (8)
10.9 -- Amendment to the California Lease, dated June 25, 1993............................. (8)
10.10 -- Form of the Company's Domestic Distributor Agreement between the
Company and its domestic distributors.............................................. (8)
10.11 -- Form of the Company's Agreement with its Manufacturer's Representatives............ (8)
10.12 -- Purchase Agreement between Triple I Corporation and Centennial
Technologies, Inc., dated March 31, 1996........................................... (2)
10.13 -- Investment and Stockholders Agreement by and between Centennial
Technologies, Inc. and ViA, Inc., dated November 27, 1996.......................... (2)
10.14 -- 1994 Stock Option Plan, as amended................................................. (4)
10.15 -- 1994 Formula Stock Option Plan, as amended......................................... (4)
10.16 -- Indemnification Agreement dated April 11, 1994 between Emanuel Pinez
and the Company.................................................................... (8)
10.17 -- Employment Agreement between the Company and John J. McDonald, dated
October 20, 1995................................................................... (3)
10.18 -- Key Employee Agreement between Centennial Technologies, Inc. and Donald
R. Peck, dated February 1, 1997.................................................... (2)
10.19 -- Agreement to Provide Interim Management and Consulting Services between
Centennial Technologies, Inc. and Jay Alix & Associates, dated February 17, 1997... (2)
10.20 -- Key Employee Agreement between Centennial Technologies, Inc. and John J.
McDonald dated April 1, 1997....................................................... (1)
10.21 -- Key Employee Agreement between Centennial Technologies, Inc. and David E.
Merry, Jr. dated April 1, 1997..................................................... (1)
10.22 -- First Amendment to Forbearance Agreement by and between The First National Bank
of Boston, BancBoston Leasing Inc., Centennial Technologies, Inc., NCT, Inc.,
Century Electronics Manufacturing, Inc. and Design Circuits, Inc., dated as of April
18, 1997........................................................................... (1)
10.23 -- Second Amendment to Forbearance Agreement and Amendment by and between The
First National Bank of Boston, BancBoston Leasing Inc., Centennial Technologies,
Inc., NCT, Inc., Century Electronics Manufacturing, Inc. and Design Circuits, Inc.,
dated as of June 4, 1997........................................................... (1)
10.24 -- Third Amendment to Forbearance Agreement and Amendment by and between The
First National Bank of Boston, BancBoston Leasing Inc., Centennial Technologies,
Inc., NCT, Inc., Century Electronics Manufacturing, Inc. and Design Circuits, Inc.,
dated as of June 26, 1997.......................................................... (1)
10.25 -- Consulting Agreement by and between Centennial Technologies, Inc. and William
M. Kinch dated as of March 1, 1997................................................. (1)

10.26 -- Agreement for Consulting Services between The Boston Agent and Centennial
Technologies, Inc., dated January 20, 1997......................................... (1)
10.27 -- Lease Agreement by and between Centennial Technologies, Inc. and Michael A.
Howland, as Trustee of the Hownat Trust, dated April 17, 1997...................... (1)
10.28 -- Settlement Agreement by and among Centennial Technologies, Inc., H. Hamby
Hutcheson and Mary Lou Hutcheson, dated as of May 15, 1997......................... (1)
10.29 -- Fourth Amendment to Forbearance Agreement and Amendment by and between The
First National Bank of Boston, BancBoston Leasing Inc., Centennial Technologies,
Inc., NCT, Inc., Century Electronics Manufacturing, Inc. and Design Circuits, Inc., Filed
dated as of June 26, 1997.......................................................... Herewith
10.30 -- Loan and Security Agreement by and between Congress Financial Corporation (New
England) as Lender and Centennial Technologies, Inc. as Borrower, dated Filed
August 14, 1997................................................................... Herewith
10.31 -- Employment Agreement between Centennial Technologies, Inc. and L. Michael Filed
Hone, effective August 19, 1997................................................... Herewith
10.32 -- Key Employee Agreement between Centennial Technologies, Inc. and Richard N. Filed
Stathes dated September 15, 1997.................................................. Herewith
10.33 -- Key Employee Agreement between Centennial Technologies, Inc. and Jacques Filed
Assour dated September 15, 1997................................................... Herewith
27 -- Financial Data Schedule........................................................... Filed
Herewith

(1) Incorporated by reference to the similarly numbered exhibit to the
Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission (the "Commission") on August 14, 1997.

(2) Incorporated by reference to the similarly numbered exhibit to the
Company's Annual Report on Form 10-K/A filed with the Commission on
November , 1997.

(3) Incorporated by reference to the similarly numbered exhibit to the
Company's Form S-3 Registration Statement (No. 33-1008) declared effective by
the Commission on March 19, 1996.

(4) Incorporated by reference to the similarly numbered exhibit to the
Company's Annual Report on Form 10-KSB filed with the Commission on October 13,
1995.

(5) Incorporated by reference to the similarly numbered exhibit to the
Company's Post-Effective Amendment No. 2 to its Form SB-2 Registration Statement
(No. 33-74862-NY) filed with the Commission on February 1, 1995.

(6) Incorporated by reference to the similarly numbered exhibit to the
Company's Post-Effective Amendment No. 1 to its Form SB-2 Registration Statement
(No. 33-74862-NY) originally filed with the Commission on December 22, 1994.

(7) Incorporated by reference to the similarly numbered exhibit to the
Company's Annual Report on Form 10-KSB filed with the Commission on September
25, 1994.

(8) Incorporated by reference to the similarly numbered exhibit to the
Company's Form SB-2 Registration Statement (No. 33-74862-NY) declared effective
by the Commission on April 12, 1994.

(b) Reports on Form 8-K. None.

SIGNATURES

IN ACCORDANCE WITH SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, THE REGISTRANT CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

CENTENNIAL TECHNOLOGIES, INC.

Dated: FEBRUARY 10, 1998 By: /s/ L. MICHAEL HONE
------------------- -------------------------------------
L. Michael Hone
President and Chief Executive Officer

Dated: FEBRUARY 10, 1998 By: /s/ EUGENE M. BULLIS
------------------- -------------------------------------
Eugene M. Bullis
Interim Chief Financial Officer