- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K
------------------

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 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 (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)

------------------------------

Securities registered pursuant to Section 12(b) of the Act:

None
(Title and Class)

Securities registered pursuant to Section 12(g) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ---------------------------------------------- ----------------------------------------------

Common Stock, $0.01 par value Not Applicable
Preferred Stock Purchase Rights Not Applicable

------------------------

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 /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

The aggregate market value of the voting stock held by non-affiliates of the
registrant on May 27, 1999 was $16,186,433. The fair market value of the common
stock, $0.01 par value per share (the "Common Stock"), of the registrant on May
27, 1999 was $.79 per share, based on information reported by certain
internet-based bulletin board services purporting to monitor trading activities.
The registrant is unable to verify the accuracy or completeness of such
information. As of May 27, 1999, there were 20,552,449 shares of Common Stock of
the registrant outstanding.

Certain items in Part III of this Form 10-K incorporate by reference certain
portions of the registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission in connection with the registrant's 1999
Annual Meeting of Stockholders.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

CAUTIONARY STATEMENTS

Except for historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding possible price competition
and erosion, expansion into new markets, future sales mix, future supply of raw
materials, gross margins, raw material inventory procurement practices, the
Company's customer base, future developments involving certain investments,
assessments regarding systems required to address Year 2000 issues, and future
availability of financing. Such statements involve a number of risks and
uncertainties, including, but not limited to, those (i) discussed under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations," (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. 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.

ITEM 1. BUSINESS

For purposes of this Annual Report on Form 10-K, all references to "fiscal
1999" and "fiscal 1998" relate to the fiscal year consisting of the twelve-month
period of Centennial Technologies, Inc. and its subsidiaries ("Centennial" or
the "Company") ending March 31, 1999 and March 31, 1998, respectively. All
references to "fiscal 1997" relate to the fiscal year consisting of the
Company's nine-month period ended March 31, 1997. All references to "fiscal
1996" and "fiscal 1995" relate to the Company's twelve month fiscal year ended
June 30, 1996 and June 30, 1995, respectively.

GENERAL

The Company was incorporated in 1994 in Delaware as the successor by merger
to C. Centennial, Inc., a Massachusetts corporation. The Company's principal
executive offices are located at 7 Lopez Road, Wilmington, Massachusetts, and
its telephone number is (978) 988-8848.

The Company designs, manufactures and markets an extensive line of PC
card-based solutions to original equipment manufacturers ("OEMs"). The Company
focuses on OEM applications and sells into a broad range of markets, including:
Communications (routers, wireless telephones, and local area networks);
Transportation (navigation, vehicle diagnostics); Mobile Computing (hand-held
data collection terminals, notebook computers, personal digital assistants); and
Medical (blood gas analysis systems, defibrillators, hand-held glucometers). The
Company has sold its products and services to over 250 OEMs, including Nortel
Networks, a division of Northern Telecom Limited ("Nortel Networks"), Lucent
Technologies, Inc. ("Lucent Technologies"), Solectron Corporation ("Solectron"),
and Intermec Technologies Corporation, a division of Unova, Inc. ("Intermec").

The Company was incorporated and began operation in 1987 to develop and
commercialize font cartridges for laser printers. In 1992, the Company began
designing, manufacturing and marketing cards which conformed to the
specifications agreed upon by the Personal Computer Memory Card International
Association ("PCMCIA") and became known as "PC cards," and gradually
de-emphasized and ceased the marketing and sales of font cartridges in order to
focus on the rapidly growing PC card market.

INDUSTRY OVERVIEW

In recent years, digital computing and processing have expanded beyond the
boundaries of desktop computer systems to include a broader array of electronic
systems, such as mobile communication systems, network switches, medical
devices, navigation systems, cellular telephones, portable computers, digital

cameras and portable data collection terminals. PC cards, with characteristics
such as high shock and vibration tolerance, low power consumption, small size
and higher access speed, better meet the requirements of these emerging
applications than do traditional hard drive and floppy disk storage solutions.
The Company believes that demand for PC cards will increase from increased
adoption of PCMCIA standards by electronic equipment manufacturers, the
inclusion of PC card slots on next generation electronic devices and the
development of PC cards offering new applications. In addition, the Company
believes that widening acceptance of Microsoft Corporation's hand-held and
mobile computer operating system, Windows CE, may stimulate demand for certain
hand-held computers and personal digital assistants ("PDAs") that use PC cards
for storage and other applications.

PRODUCTS

The Company's PC cards may contain memory chips (such as flash, static
random access memory ("SRAM") or one time programmable ("OTP") memory) for
storage capacity, input/output chips for transmitting and receiving data, and
memory chips with programmed software and other devices for specific
applications. Application-specific PC cards are generally designed by the
Company in cooperation with an OEM for a specific industry or commercial
application. The following are some of the applications in which the Company's
PC cards are used:

PC CARD PRODUCTS

TARGET INDUSTRY APPLICATIONS
- --------------------------------------- ------------------------------------------------------------------------

COMMUNICATIONS......................... PC cards are used for storage in certain wireless telephones and other
personal communication devices such as screen phones. PC cards are also
used in other communication devices, such as PBX switches and network
routers. The Company also markets network interface cards, which are
used to connect computing devices to local and wide area networks.

TRANSPORTATION......................... The Company markets PC cards for navigation systems, such as Global
Positioning Satellite ("GPS") equipment used in rental cars, fleet
vehicles, emergency and rescue vehicles, airplanes, ships and military
vehicles. GPS systems interpret signals from a dedicated network of
satellites that circle the earth, providing data on the position,
direction, altitude and speed of an object. The Company also develops PC
cards used to interact with on-board information systems embedded in
air, marine and land based vehicles.

MOBILE COMPUTING AND OFFICE
AUTOMATION........................... PC cards with memory chips are used for storage capacity in portable
consumer electronics devices, such as notebooks, handheld computers and
PDAs, and in office automation products, such as laser printers,
facsimile machines and desktop computers. PC cards are also used for
data acquisition and data conversion. The Company's ATA card offerings
may be used to display images recorded by a digital camera on a personal
computer. Other data acquisition and conversion cards are used by field
personnel to gather information, which can then be transmitted and
downloaded to computing devices in remote offices.

TARGET INDUSTRY APPLICATIONS
- --------------------------------------- ------------------------------------------------------------------------

MEDICAL................................ The Company sells PC cards for use in medical monitoring and diagnostic
equipment. Applications include blood gas analysis systems,
defibrillators and hand-held glucometers. PC cards are used for
recording patient data and storing system program information.

CONSUMER OEM........................... The Company sells PC cards to original equipment manufacturers who
design and sell various consumer products, such as sewing machines and
digital cameras. In these particular applications, PC cards are used to
store embroidery patterns and digital images, respectively.

The Company provides other non-PC card products based on flash memory
technology. Flash memory requires no power to retain data and is electronically
programmable and re-programmable, characteristics that are not present together
in other memory chips. Based on these advantages and recent decreases in the
cost of flash memory, the Company believes the use of flash memory will become
more prevalent in industrial and commercial equipment. Management believes that
its flash SIMMs (defined below) and miniature cards complement the Company's PC
card product offerings and provide the Company's OEM customers with alternative
solutions to address data storage and processing needs.

SMALL FORM FACTOR FLASH CARDS are removable flash memory devices that fit
into small electronic devices, such as compact digital cameras, through slots
that are smaller than those designed for PC cards. Small form factor flash cards
increase memory capacity and functionality and are similar to PC cards in that
they are made with existing flash memory technology in a modified mechanical
package with modified electrical connections. The Company offers four types of
standardized small form factor flash cards, in addition to custom form factors
tailored to particular OEM requirements:

- The CompactFlash-TM- (a trademark of SanDisk Corporation) is based on the
standard endorsed by the CompactFlash Association, an industry
organization established to promote uniform standards for compact flash
cards, of which the Company is a member. The CompactFlash uses a design
that relies on an on-board microcontroller and NAND flash technology.

- The Compact Linear Flash, or CLF-TM- card (a trademark of the Company), is
based upon a design promoted by the Company. The CLF-TM- card is based on
linear flash devices, NOR flash technology, and requires no on-board
micro-controller. The CLF-TM- card uses a similar housing to the
CompactFlash-TM-.

- The MiniatureCard-TM- (a trademark of Intel Corporation ("Intel")) is
based upon a design promoted by Intel. The MiniatureCard is based on
linear flash devices, NOR flash technology, uses a linear design, as
opposed to the design of the CompactFlash, and requires no on-board
microcontroller. The MiniatureCard-TM- uses a different housing design
than the CLF-TM- card or CompactFlash-TM-.

- The Half Card is based upon a proprietary design developed by the Company
utilizing linear flash technology and requires no on-board microcontroller
or PCMCIA interface logic devices.

FLASH SINGLE IN-LINE MEMORY MODULES ("SIMMS") are a type of compact circuit
board assembly consisting of flash memory devices and related circuitry.
Electronic systems increasingly employ SIMMs as building blocks in system
design. SIMMs allow OEMs to configure a system with a variety of different
levels of memory, thus enabling OEMs to address cost-effectively multiple price
points or applications with a single base system that is easily upgradable.

BUSINESS STRATEGY

The Company's goal is to become a leading worldwide provider of PC
card-based solutions to OEMs in the communications, transportation, mobile
computing, medical and consumer OEM industries. Key elements of the Company's
business strategy include the following:

OFFER COMPREHENSIVE PC CARD-BASED SOLUTIONS. The Company offers an
extensive PC card product line as well as related value-added services, such as
(i) in-house design expertise, (ii) flexible manufacturing, including the
ability to make short production runs with minimum down time, (iii) private
labeling, (iv) programming and testing capabilities, (v) rapid order turnaround,
and (vi) just-in-time delivery programs. By offering comprehensive solutions for
OEM PC card requirements, from design to shipment, the Company believes it has a
competitive advantage in the PC card market.

FOCUS ON OEM CUSTOMERS. The Company markets its products and services to
OEMs that sell products for applications within the Company's target industries.
The Company believes that it can achieve higher gross margins and customer
loyalty by serving the OEM market rather than consumer markets due to the OEM
market's requirements for value-added services, such as design expertise,
programming and prototype development. In addition, the Company believes that
serving OEMs gives it exposure to new technologies and emerging applications,
which helps the Company respond to technological advances and anticipate changes
in market conditions.

PROVIDE FLEXIBLE, HIGH QUALITY MANUFACTURING SOLUTIONS. The Company has
periodically upgraded and automated its manufacturing facilities to expand
production capacity. By manufacturing its PC cards in-house, the Company can
offer more flexible production schedules to accommodate OEMs that require the
delivery of a number of different products within a short time frame. The
Company's PC card manufacturing facility in Wilmington, Massachusetts is a
certified ISO 9001 manufacturer. ISO certification is based on numerous aspects
of the Company's business, including manufacturing, purchasing, human resources,
engineering and research.

SALES AND MARKETING

The Company targets industrial and commercial applications for PC cards
primarily in the communications, transportation, mobile computing, medical and
consumer OEM industries. The Company markets its products primarily through
direct sales people, independent manufacturer representatives and distributors.
The Company's customer service staff operates from the Company's main office in
Wilmington, Massachusetts. Field sales representatives operate from remote
offices and the Company's main office. During fiscal 1998, the Company opened a
foreign sales branch in Cheshire, England.

The Company generally markets its products and capabilities directly to
OEMs. The Company's sales staff and engineers work with OEM engineers to design
and engineer PC cards to OEM requirements, which often leads to the Company
providing custom-designed PC cards for specific applications. The Company
believes its interaction with OEM customers provides exposure to emerging
technologies and applications, facilitating a proactive approach to product
design. The Company's sales to its OEM customers are generally made pursuant to
purchase orders rather than long-term sales agreements. The Company has sold its
products and services to more than 250 OEMs, including Nortel Networks, Lucent
Technologies, Solectron and Intermec. The Company also pursues sales to the
military sector, and to corporate end-users.

respectively, of the Company's sales. During fiscal 1999, 1998 and 1997,
approximately 12%, 14% and 8% of the Company's sales, respectively, were outside
of the United States. See "Risk Factors--Dependence on Major Customers;
Concentration of Credit Risk" and "--Risks of International Operations and Euro
Currency."

ENGINEERING AND PRODUCT DEVELOPMENT

The Company directs its engineering and design efforts towards products for
which the Company believes there is a growing and profitable market. In
particular, the Company seeks to meet the requirements of its OEM customers for
products aimed at emerging applications in the communications, transportation,
mobile computing and medical industries by applying the latest available
technology and the PC card design and engineering know-how gained from the
Company's focus on these markets. The Company provides engineering and design
support to many of its OEM customers in order to help integrate the Company's
products into OEM equipment. OEMs often require PC cards for new applications
within the Company's target markets. The Company has developed a library of
several hundred designs through its work with OEMs. By working with these OEMs,
the Company is exposed to new market opportunities for the Company's PC
card-based solutions.

EMPLOYEES

As of March 31, 1999, the Company had 116 full-time employees, of whom 6
were executive officers, 14 were involved in sales and marketing, 16 were
involved with engineering and product development, 16 were involved with
administration, and 64 were involved in manufacturing.

None of the Company's employees are represented by a labor union, and the
Company is not aware of any activities seeking such organization. The Company
considers its relationships with its employees to be satisfactory.

ITEM 2. PROPERTIES

The Company maintains its principal executive offices and ISO 9001 certified
manufacturing operations in a 34,000 square foot leased facility in Wilmington,
Massachusetts. The Company currently pays rent in the amount of approximately
$18,000 per month, pursuant to a lease that expires on April 30, 2002. The lease
contains an option to renew for an additional five-year period. The lease
provides for annual rent increases of 4% and provides that the Company will pay
to its landlord as additional rent its pro rata share of certain operational and
maintenance costs at the facility during the term of the lease.

In March 1999, the Company's UK subsidiary renewed a lease on an office
located in Cheshire, England for a term of twelve months. The Company pays rent
in the amount of approximately $825 per month. The lease also provides for the
payment of any value added tax by the Company's subsidiary, as well as a
reasonable proportion of certain operational and maintenance costs of the sales
office during the term of the lease.

The Company conducts business with its domestic field sales representatives
using local in-home offices.

The Company believes that its facilities are adequate for its current needs
and that adequate facilities for expansion, if required, are available at
competitive rates.

ITEM 3. LEGAL PROCEEDINGS

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 former 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 and after February 26, 1997, four complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased the Company's Common Stock on
February 25, 1997. The complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleges violations of Sections
10(b) and 20(a) of the 1934 Act (the "February 25 Securities Litigation").

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, and the
February 27 Securities Litigation was filed in the United States District Court
for the District of Massachusetts (the "Consolidated Litigation"). Also on
February 9, 1998, the Company and lead counsel representing the plaintiffs in
the Consolidated Litigation filed a Stipulation of Settlement (the "Settlement
Agreement"), whereby the Company and certain of its officers and directors would
be released from liability arising from the allegations included in the
Consolidated Litigation. In return, the Company agreed to pay the plaintiffs in
the Consolidated Litigation $1.475 million in cash and to issue to these
plaintiffs 37% of the Company's Common Stock. The Company also agreed to adopt
certain corporate governance policies and procedures.

The Court granted final approval of the Settlement Agreement of the
Consolidated Litigation on April 29, 1998. The Settlement Agreement became
effective on July 20, 1998.

A significant number of class members opted not to participate in the
Settlement Agreement. No assurance can be given that claims by class members who
declined to participate in the Settlement Agreement will not have a material
adverse effect on the Company's business, financial condition and results of
operations.

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 also retained their claims against
the Company's former President and Chief Executive Officer, Emanuel Pinez; the
Company's former Chief Financial Officer, James M. Murphy; the Company's former
independent accountants, Coopers & Lybrand; and others.

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 Mr. Pinez, 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.

In mid-February 1997, the Company was notified that the Boston District
Office of the Securities and Exchange Commission ("SEC") was conducting an
investigation of the Company. The SEC has requested that the Company provide the
SEC with certain documents concerning the Company's public reports and financial
statements. The SEC indicated that its inquiry should not be construed as an
indication by the SEC or its staff that any violations have occurred, or as a
reflection upon the merits of the securities involved or upon any person who
effected transactions in such securities. The Company is cooperating with the
SEC in connection with this investigation, the outcome of which cannot yet be
determined.

On and after March 26, 1997, several complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased stock of WebSecure, Inc.
("WebSecure") between December 5, 1996 and February 27, 1997 (the "WebSecure
Complaints"). The WebSecure Complaints assert claims against WebSecure, certain
officers, directors and underwriters of WebSecure, and the Company. Claims
against the Company include alleged violations of Sections 11 and 15 of the
Securities Act of 1933 (the "1933 Act") (the "WebSecure Securities Litigation").

On November 13, 1998, the Company reached an agreement to settle the
WebSecure Securities Litigation. The settlement agreement contemplates that the
Company and certain of its officers and directors would be released from any and
all liability arising from the allegations included in the WebSecure Securities
Litigation in return for the issuance to the WebSecure Securities Litigation
class of 345,000 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The settlement
agreement must be submitted to the Court for review and approval and,
thereafter, presented to class members for consideration. If a sufficiently
large number of class members opt not to participate in the settlement
agreement, the agreement may be withdrawn. No assurance can be given that the
Court will approve the settlement agreement, or that, if such approval is
obtained, that a material number of class members will not decline to
participate in the settlement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal 1999, the Company did not submit any
matter to a vote of its security holders, through a solicitation of proxies or
otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is not currently traded on an organized stock
exchange. From March 1997 until May 1998, the Company's Common Stock was traded
on the "pink sheets," and since May 1998, has traded on the Over-the-Counter
Electronic Bulletin Board under the symbol "CENL." For the periods indicated,
the following table sets forth the range of high and low sale prices for the
Common Stock based on information reported by certain internet-based bulletin
board services purporting to monitor trading activities. The Company is unable
to verify the accuracy or completeness of the internet-based bulletin board
information. All sale prices have been rounded to the nearest one-sixteenth.

HIGH LOW
--------- ---

FISCAL 1998
April 1, 1997 through June 30, 1997............................................. 3 9/16 2 5/16
July 1, 1997 through September 27, 1997......................................... 5 1/8 1
September 28, 1997 through December 27, 1997.................................... 4 7/8 1 3/16
December 28, 1997 through March 31, 1998........................................ 3 3/4 1

FISCAL 1999
April 1, 1998 through June 27, 1998............................................. 2 5/8 1 5/16
June 28, 1998 through September 26, 1998........................................ 1 11/16 7/16
September 27, 1998 through December 26, 1998.................................... 1 3/8 3/8
December 27, 1998 through March 31, 1999........................................ 1 1/2 9/16

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with the Company's consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein. The selected consolidated
financial data as of March 31, 1997 and June 30, 1996 and 1995 and for the years
ended June 30, 1996 and 1995 have been derived from financial statements not
included herein.

During fiscal 1998 the Company completed a restatement of its financial
results previously reported for the first six months of fiscal 1997 and fiscal
years 1996, 1995 and 1994. The financial statements set forth below give effect
to the adjustments arising from the financial review.

On March 24, 1997 the Company's Board of Directors voted to change the
fiscal year end from June 30 to March 31. See Note 1 of the Consolidated
Financial Statements. All references to fiscal 1999 and 1998 in the accompanying
financial statements relate to the twelve months ended March 31, 1999 and 1998,
respectively. All references to fiscal 1997 relate to the nine months ended
March 31, 1997. References to fiscal 1996 and 1995 relate to the respective
years ended June 30.

CONSOLIDATED INCOME STATEMENT DATA (in thousands of dollars, except per share
data):

TWELVE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31, JUNE 30,
--------------------------------- ------------------------ ------------------------
1999 1998 1997 1997 1996 1996 1995
--------- --------- ----------- --------- ------------- ----------- -----------
(UNAUDITED) (RESTATED AND (RESTATED) (RESTATED)
UNAUDITED)

Net sales................................. $ 27,633 $ 28,263 $ 39,907 $ 28,263 $ 21,768 $ 33,412 $ 8,982

Cost of goods sold........................ 18,968 23,683 33,213 24,453 21,018 29,778 11,575
--------- --------- ----------- --------- ------------- ----------- -----------
Gross profit............................ 8,665 4,580 6,694 3,810 750 3,634 (2,593)
Operating expenses:
Engineering, research and development
costs................................. 750 838 1,369 1,061 1,126 1,434 753
Selling, general and administrative
expenses.............................. 6,132 9,957 8,416 7,318 2,705 3,803 2,442
--------- --------- ----------- --------- ------------- ----------- -----------
Operating income/(loss)............... 1,783 (6,215) (3,091) (4,569) (3,081) (1,603) (5,788)
Other (income)/expense:
Loss on investment activities........... 733 14,065 16,689 14,096 69 2,662 --
Special investigation costs............. -- 597 3,673 3,673 -- -- --
Provision for settlement of shareholder
litigation............................ -- -- 20,000 20,000 -- -- --
Provision for loss on inventory subject
to customer dispute................... -- 1,841 -- -- -- -- --
Proceeds from resolution of customer
dispute............................... (1,600) -- -- -- -- -- --
Other expense, net...................... 132 258 -- -- -- -- --
Net interest (income)/expense........... (344) 56 234 391 174 17 64
--------- --------- ----------- --------- ------------- ----------- -----------
Income/(loss) before income taxes and
equity in earnings of affiliate......... 2,862 (23,032) (43,687) (42,729) (3,324) (4,282) (5,852)
Equity in earnings of affiliate........... -- 423 959 959 -- -- --
--------- --------- ----------- --------- ------------- ----------- -----------
Income/(loss) before income taxes......... 2,862 (22,609) (42,728) (41,770) (3,324) (4,282) (5,852)
Provision for income taxes................ 56 -- -- -- -- -- --
--------- --------- ----------- --------- ------------- ----------- -----------
Net income/(loss)......................... $ 2,806 $ (22,609) $ (42,728) $ (41,770) $ (3,324) $ (4,282) $ (5,852)
--------- --------- ----------- --------- ------------- ----------- -----------
--------- --------- ----------- --------- ------------- ----------- -----------
Net income/(loss) per share--basic and
diluted................................. $ .12 $ (1.22) $ (2.49) $ (2.41) $ (.26) $ (.31) $ (.63)
Weighted average shares
outstanding--basic...................... 23,255 18,460 17,174 17,367 12,678 13,632 9,363
Weighted average shares
outstanding--diluted.................... 23,508 18,460 17,174 17,367 12,678 13,632 9,363

CONSOLIDATED BALANCE SHEET DATA (in thousands of dollars):

MARCH 31, JUNE 30,
------------------------------- ------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ----------- -----------
(RESTATED) (RESTATED)

Current assets................................ $ 14,553 $ 11,497 $ 27,213 $ 37,017 $ 8,237
Total assets.................................. 18,804 17,078 52,090 41,132 9,550
Current liabilities........................... 7,108 8,140 22,644 8,856 5,121
Working capital............................... 7,445 3,357 4,569 28,161 3,116
Stockholders' equity.......................... 11,696 8,902 29,446 31,909 4,267

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding price competition and
erosion, expansion into new markets, future sales mix, future supply of raw
materials, gross margins, raw materials inventory procurement practices, the
Company's customer base, future developments involving certain investments,
assessments regarding systems required to address Year 2000 issues, and future
availability of financing. 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. 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.

INTRODUCTION

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 give effect to the adjustments arising from
the financial review.

During fiscal 1997, the Company completed three separate business
acquisitions of contract manufacturing activities and formed an entity, Century
Electronics Manufacturing, Inc. ("Century") of which Centennial held a 67%
equity ownership position for the purpose of conducting this business. On March
14, 1997, the Company agreed to reduce its equity ownership position to 45% in a
transaction which was completed July 1, 1997. Accordingly, the accompanying
financial statements include the results of operations of Century from the dates
of acquisition on the equity method of accounting.

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 Company was incorporated and began operation in 1987 to develop and
commercialize font cartridges for laser printers. Beginning in 1992, when the
Company began designing, manufacturing and marketing PC cards, the Company
gradually de-emphasized and ceased the marketing and sales of font cartridges in
order to focus on the rapidly growing PC card market. As the Company effected
this shift in focus, the Company's sales increased from $7.8 million in fiscal
1994 to $39.9 million in the twelve month period ended March 31, 1997 to $27.6
million in fiscal 1999.

The Company incurred losses through fiscal 1998. See "Results of Operations"
for further discussion of the Company's losses.

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. In late fiscal 1997, management decided

to focus its financial resources on its core business, and to suspend its
investment activities. With the exception of Century, the Company has fully
reserved the carrying value of its investments.

The following table sets forth certain statements of operations data as a
percentage of sales for the periods presented:

TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- --------------------
1999 1998 1997 1997 1996
--------- ----------- --------- --------- ---------

Net sales..................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................................ 68.6 83.8 83.2 86.5 96.6
--------- ----- --------- --------- ---------
Gross profit................................................ 31.4 16.2 16.8 13.5 3.4
Operating expenses:
Engineering, research and development costs................. 2.7 3.0 3.5 3.7 5.2
Selling, general and administrative expenses................ 22.2 35.2 21.1 25.9 12.4
--------- ----- --------- --------- ---------
Operating income/(loss)..................................... 6.5 (22.0) (7.8) (16.1) (14.2)
Loss on investment activities............................... 2.7 49.8 41.8 49.9 0.3
Special investigation costs................................. -- 2.1 9.2 13.0 --
Provision for settlement of shareholder litigation.......... -- -- 50.1 70.8 --
Provision for loss on inventory subject to customer
dispute................................................... 6.5 -- -- --
Proceeds from resolution of customer dispute................ (5.8) -- -- -- --
Other expenses, net......................................... 0.4 0.9 -- -- --
Net interest (income)/expense............................... (1.2) 0.2 0.6 1.4 0.8
--------- ----- --------- --------- ---------
Income/(loss) before income taxes and equity in earnings of
affiliate................................................... 10.4 (81.5) (109.5) (151.2) (15.3)
Equity in earnings of affiliate............................... -- 1.5 2.4 3.4 --
--------- ----- --------- --------- ---------
Income/(loss) before income taxes............................. 10.4 (80.0) (107.1) (147.8) (15.3)
Provision for income taxes.................................... 0.2 -- -- -- --
--------- ----- --------- --------- ---------
Net income/(loss)............................................. 10.2% (80.0)% (107.1)% (147.8)% (15.3)%
--------- ----- --------- --------- ---------
--------- ----- --------- --------- ---------

YEAR 2000 DISCLOSURE

The Company is aware of problems associated with computer systems as the
year 2000 approaches. "Year 2000" problems are the result of common computer
programming techniques that result in systems that do not function properly when
manipulating dates later than December 31, 1999. The issue is complex and
wide-ranging. The problem may affect transaction processing computer
applications used by the Company for accounting, distribution, manufacturing,
planning and other applications. Problems may also affect embedded systems such
as building security systems, machine controllers and production test equipment.
Year 2000 problems with any or all of these systems may affect the effectiveness
or efficiency with which the Company can perform many significant functions,
including but not limited to:

- order processing

- product assembly

- invoicing

- material planning

- product test

- payroll and financial reporting

In addition, the problem may affect the computer systems of vendors and
customers, disrupting their operations and possibly impairing the Company's
sources of supply and demand.

The Company has established a Year 2000 readiness team to assess the impact
of the Year 2000 issue on the Company, and to coordinate testing and remediation
activities. In general, the Company's products

do not perform date related processing and are not materially affected by Year
2000 issues. Product testing has uncovered no Year 2000 problems, and
investigation into product design, specifically firmware and microcode, has
uncovered no design assumptions or application programming interfaces that would
cause Year 2000 problems. The Company has also sample tested 100% of its
manufacturing, testing and labeling equipment and uncovered no Year 2000
problems. The Company has not specifically tested software obtained from its
customers that is incorporated into its products for such customers, which may
in some cases involve date related processing, but the Company has sought
assurances from all of its customers that provide the Company with software for
incorporation into the Company's products that the software is Year 2000
compliant, as well as a disclaimer of liability and indemnification should any
Year 2000 issues arise with regard to the customer's software. The Company will
analyze the responses to these requests as they are received. There can be no
assurance that the Company will be successful in obtaining from these customers
such assurance or indemnification.

The Company has completed its Year 2000 compliance assessment and
remediation of the Company's management information system. The Company upgraded
its core management information systems to address the Year 2000 issues with
respect to internal budgeting, financial planning, material planning, sales
order processing, accounting, inventory control, shop floor accounting and
purchasing. All of the modules of this new system are currently operational. The
Company has tested the upgrade to verify its Year 2000 compliance. The cost of
this management information system was approximately $450,000, of which
approximately $394,000 is attributable to the purchase of new software, which
has been capitalized; the balance has been expensed as incurred. The Company has
used operating cash flows as the source of funds for Year 2000 compliance
issues.

The assessment and remediation of Year 2000 problems in tertiary business
information systems is on-going. The Company believes that over 95% of its
desktop PC hardware units are Year 2000 compliant. The majority of the software
used on these systems and network servers is composed of recent versions of
vendor supported, commercially available products that the Company believes are
Year 2000 compliant. Upgrading these applications as respective vendors release
Year 2000 compliant patches has not been a significant burden on the Company.
The Company has also replaced and tested one operating system that was not and
could not be modified to become year 2000 compliant. The cost for this new
system was not material.

The Company has completed its assessment and remediation of Year 2000
problems with computer systems used for facilities control. The Company has
recently purchased a Year 2000 compliant telephone system. The cost to purchase
and install the new telephone systems was approximately $108,000, which has been
capitalized. The Company has also tested its building security system and
determined that it is Year 2000 compliant.

During fiscal 1999, the Company initiated formal communications with its key
suppliers and customers regarding their Year 2000 readiness status. The Company
is in the process of analyzing the responses received from suppliers and
customers and is following up with those who have not yet provided a formal
response. The Company plans to complete this assessment phase early in fiscal
2000. While suppliers and customers may indicate that their products are or will
be Year 2000 compliant prior to the year 2000 and that they expect their
operations and services will continue uninterrupted, the Company can provide no
assurances that the Company's key suppliers and customers have, or will have
technology systems, non-information technology systems and products that are
Year 2000 compliant. Any Year 2000 compliance problem facing the Company's
customers or suppliers could have a material adverse effect on the Company's
business, financial condition and results of operations.

Any additional expenses related to the management of the Company's Year 2000
compliance program are not expected to be material to the Company's quarterly
operating results. The Company estimates that it has spent in aggregate
approximately $600,000 in addressing Year 2000 readiness issues. These
expenditures have been funded through operations.

The Company has not deferred or delayed any information technology projects
due to Year 2000 efforts.

The costs and time schedules for the Company's Year 2000 problem abatement
are based on management's best estimates for the implementation of its new
operating system and Year 2000 problems uncovered to date. These estimates were
derived from utilizing numerous assumptions, including that the most significant
Year 2000 risks have already been identified, that certain resources will
continue to be available, that third party plans will be fulfilled, and other
factors. However, there can be no assurance that these estimates will be
achieved or that the anticipated time schedule will be met. Actual results could
differ materially from those anticipated.

Because computer systems may involve different hardware, firmware and
software components from different manufacturers, it may be difficult to
determine which component in a computer system may cause a Year 2000 issue. As a
result, the Company may be subjected to Year 2000-related lawsuits independent
of whether its products and services are Year 2000 ready. Any Year 2000 related
lawsuits, if adversely determined, could have a material adverse effect on the
Company's business, financial condition, and results of operations.

The Company is in the process of preparing contingency plans for critical
areas to address Year 2000 failures if remedial efforts are not fully
successful. The Company expects to complete its initial contingency plans during
early fiscal 2000, which plans may thereafter be revised from time to time as
deemed appropriate. Should previously undetected Year 2000 problems be found in
systems that support the Company's on-going operations or other systems, these
systems will be upgraded, replaced, turned off, or operated in place with manual
procedures to compensate for their deficiencies. While the Company believes that
these alternative plans would be adequate to meet the Company's need without
materially impacting its operations, there can be no assurance that such
alternatives would be successful or that the Company's results of operations
would not be materially adversely affected by the delays and inefficiencies
inherent in conducting operations in this manner.

There may be additional Year 2000 problems that are as yet unknown to the
Company and for which remediation plans have not yet been made. Any such Year
2000 compliance problem of the Company, its suppliers or its customers could
materially adversely affect the Company's business, results of operations,
financial condition, and prospects. If, for example, third party suppliers were
unable to deliver necessary components, the Company may be unable to manufacture
products in a timely manner. Similarly, if shipping and freight forwarders were
unable to ship product, the Company would be unable to deliver product to its
customers. There can be no assurance that the Company's insurance will cover
losses from business interruptions arising from year 2000 problems of the
Company or its suppliers or customers.

The foregoing discussion of the Company's Year 2000 readiness includes
forward-looking statements, including estimates of the timeframes and costs for
addressing the known Year 2000 issues confronting the Company, and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved, and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the ability of the Company to identify and correct all relevant computer
code and the success of third parties with whom the Company does business in
addressing their Year 2000 issues.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
(FASB 133), which establishes new standards for recording derivatives in interim
and annual financial statements. This statement requires recording all
derivative instruments as assets or liabilities, measured at fair value. FASB
133 is effective for fiscal years beginning after June 15, 1999. Management does
not anticipate that the adoption of the new statement will have a significant
impact on the consolidated results of operations or financial position of the
Company.

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained elsewhere in this
Annual Report on Form 10-K.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998

SALES. Sales decreased 2% to approximately $27.6 million in the 1999 period
compared to $28.3 million in the 1998 period. The average selling price for the
Company's products fell approximately 7% during fiscal 1999, which was partially
offset by an increase in the volume of PC cards sold of approximately 5%.
Decreasing component costs between periods and competitive pricing pressures
contributed to the decrease in the average selling price of the Company's
products. The Company expects that its sales will continue to be affected in
future periods by, among other things, changes in the cost of component memory
devices and continued competitive pricing pressures.

Sales outside of the United States represented 12% of sales in the 1999
period compared to 14% of sales for the 1998 period. At the end of fiscal 1998,
the Company opened a new sales office in Cheshire, England. The Company expects
that sales outside the United States will continue to represent a percentage of
the Company's sales consistent with that of fiscal 1999 for the foreseeable
future.

Sales to one of the Company's customers represented 14% of total sales in
the 1999 period compared to 29% of total sales in the 1998 period. During fiscal
1999, this customer engaged a contract manufacturer to complete the final
assembly of a majority of its products for which the Company has historically
supplied PC cards. The Company's sales to this contract manufacturer represented
almost 10% of total sales during the 1999 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 during fiscal 1999.

COST OF GOODS SOLD. Cost of goods sold decreased 20% to $19.0 million for
the 1999 period compared to $23.7 million for the 1998 period. Gross margins
were 31.4% for the 1999 period compared to 16.2% for the 1998 period. During
fiscal 1999, the Company sold portions of some customized inventory for
approximately $1.2 million, the cost of which had been previously fully reserved
due to a dispute with the customer for whom the customized cards were originally
produced and who had attempted to cancel the order. Gross margin for fiscal
1999, excluding this sale of fully reserved inventory, was 28.1%. Costs of goods
sold include provisions for inventory obsolescence of $0 in the 1999 period and
$886,000 in the 1998 period, representing 3.1% of sales in the 1998 period,
which reflects the strategy of prior management to build inventory in
anticipation of customer orders, a portion of which did not materialize. During
fiscal 1998, the Company instituted policies that have resulted in a significant
decrease in the amount of inventory purchased in advance of receipt of customer
orders, which has resulted in a decrease in inventory obsolescence exposure in
fiscal 1999. The Company's gross margins were also negatively impacted during
fiscal 1998 by declining memory chip prices, which reduced PC card selling
prices in certain situations where the Company had already purchased memory
chips at higher prices. Beginning in fiscal 1998, the Company instituted new
procurement practices reflecting increased emphasis on reducing inventory
levels, and established on-site stores of raw materials consigned by several of
the Company's major vendors, which has resulted in decreased inventory carrying
cost exposure through fiscal 1999.

ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs decreased by 11% to approximately $750,000 in the 1999 period
compared to $838,000 for the 1998 period. The Company expects that engineering,
research and development costs will continue to trend slightly higher in fiscal
2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses decreased by 39% to $6.1 million in the 1999 period
compared to $10.0 million in the 1998 period. This decrease

primarily resulted from the non-recurrence in fiscal 1999 of the following
expenses incurred in fiscal 1998: legal and consulting expenses relating to the
negotiation and finalization of the settlement of the class action litigation
against the Company, the settlement of several other legal claims against the
Company, the filing of revised tax returns, and the conclusion of the Company's
arrangements for interim senior management consulting services. Bad debt
expenses were also higher in fiscal 1998 than in fiscal 1999 as the Company
provided specific reserves for several of the Company's former customers. The
Company also paid non-recurring retention bonuses during fiscal 1998 to several
key employees following the announcement of the special investigation into the
Company's prior reported financial results. The Company also incurred
non-recurring costs in fiscal 1998 in hiring a new senior management team, and
paid severance benefits to certain of the Company's former officers and
employees. The Company also incurred non-recurring costs during fiscal 1998 in
closing its Canadian and UK offices and establishing a new sales office in
Cheshire, England. The Company incurred increased sales expenses related to its
new UK sales office during fiscal 1999. Employee benefits and commissions
expenses increased in fiscal 1999 as the Company implemented a profit-sharing
plan and a new commissions program.

LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses recorded associated
with certain investments. During fiscal 1999, the Company reduced the carrying
value of its investment in Century by $733,000 to $1.7 million, reflecting
management's assessment of the deterioration in value of contract manufacturing
businesses in general and a permanent decline in the value of its investment.

PROCEEDS FROM RESOLUTION OF CUSTOMER DISPUTE. During fiscal 1998, the
Company filed suit against a customer regarding inventory specifically purchased
and manufactured pursuant to a purchase order from the customer (the "Custom
Inventory"). The customer attempted to cancel a portion of the purchase order.
The Company disputed the customer's claim that the purchase order cancellation
was effective. During fiscal 1998, the Company fully reserved the cost of the
Custom Inventory of approximately $1.8 million due to the legal costs and
inherent uncertainties involved in litigation.

During fiscal 1999, the Company and the customer agreed to settle the
litigation. As a result of this settlement, the Company received $1.6 million in
cash and the customer agreed that the Company would retain all rights with
regard to the Custom Inventory. During fiscal 1999, the Company recognized the
cash payment of $1.6 million as income. Also during fiscal 1999, after the
settlement agreement was reached, the Company sold portions of the Custom
Inventory for approximately $1.2 million, which the Company has included in net
sales.

OTHER EXPENSES, NET. During fiscal 1999, the Company incurred a loss on the
disposal of certain equipment that had a net book value of approximately
$132,000, which equipment was replaced. During fiscal 1998, the Company
increased its accrual for Special Investigation Costs by $597,000 due to
incremental costs. During fiscal 1998, 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. That bank required the Company
to pay lease cancellation charges of approximately $258,000 in order to release
its lien on the equipment being financed pursuant to those leases.

NET INTEREST INCOME/EXPENSE. Net interest income was $344,000 for fiscal
1999 and net interest expense was $56,000 in fiscal 1998, reflecting cash
available for investment in fiscal 1999 and outstanding borrowings during fiscal
1998.

PRIOR ACQUISITIONS. The Company's analysis of the future viability of
several development stage businesses in which the Company invested during fiscal
1997 and 1996, combined with the Company's decision to continue to focus its
financial resources on its core business, led the Company to reserve fully the
carrying value of its investments in these development stage companies. As of
March 31, 1998, the only remaining investment with a carrying value greater than
zero was the Company's remaining investment in the Series B Preferred Stock of
its former affiliate, Century Electronics Manufacturing, Inc., valued at

approximately $2.4 million. During fiscal 1999, the Company reduced the carrying
value of its investment in Century by $733,000 to $1.7 million, reflecting
management's assessment of the deterioration in value of contract manufacturing
businesses in general and a permanent decline in the value of its investment.

TWELVE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997

SALES. Sales decreased 29% to approximately $28.3 million in the 1998
period compared to $39.9 million in the 1997 period. The average selling price
for the Company's products fell approximately 40% during fiscal 1998, which was
partially offset by an increase in the volume of PC cards sold of approximately
15%.

Sales outside of the United States represented 14% of sales in the 1998
period compared to 8% of sales for the 1997 period. At the end of fiscal 1998,
the Company opened a new sales office in Cheshire, England. The Company expects
that sales outside the United States will continue to represent a percentage of
the Company's sales consistent with that of fiscal 1998.

Sales to one of the Company's customers represented 29% of total sales in
both the 1998 and 1997 periods. If this customer 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.

COST OF GOODS SOLD. Cost of goods sold decreased 29% to $23.7 million for
the 1998 period compared to $33.2 million for the 1997 period. Gross margins
were 16.2% for the 1998 period compared to 16.8% for the 1997 period. Costs of
goods sold include provisions for inventory obsolescence of $886,000 in the 1998
period and $1,263,000 in the 1997 period, representing 3.1% of sales in the 1998
period and 3.2% in the 1997 period, reflecting a strategy of prior management to
build inventory in anticipation of customer orders, a portion of which did not
materialize. In February 1997, the Company instituted policies that have
resulted in significantly decreasing the amount of inventory purchased in
advance of receipt of customer orders. The Company's gross margins have also
been impacted by declining memory chip prices, which reduced PC card selling
prices in certain situations where the Company had already purchased memory
chips at higher prices. During fiscal 1998, the Company instituted new
procurement practices reflecting increased emphasis on reducing inventory
levels, and has established on-site stores of raw materials consigned by several
of the Company's major vendors.

ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs were $0.8 million in the 1998 period compared to $1.4 million
for the 1997 period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased to $10.0 million in the 1998 period compared
to $8.4 million in the 1997 period. The Company incurred increased legal
expenses during fiscal 1998 as it negotiated and finalized the settlement of the
class action litigation against the Company, and settled several other legal
claims against the Company. The Company also paid retention bonuses during
fiscal 1998 to several key employees following the announcement of the special
investigation into the Company's prior reported financial results. The Company
also incurred costs in hiring a new senior management team, and paid severance
benefits to certain of the Company's former officers and employees. The Company
also incurred costs in closing its Canadian and UK offices and establishing a
new sales office in Cheshire, England.

LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses on disposition of a
series of investments made during the 1997 period and prior. The following table
describes the elements and the amounts reflected in this category (in
thousands):

1998 1997
--------- ---------

Provision for loss on Century Electronics Manufacturing, Inc................................ $ 5,142 $ --
Costs incurred in connection with ITP/Fleet.Net............................................. 3,869 4,761
Provision for loss on investment in Infos International..................................... -- 6,024
Provision for loss on investment in Industrial Imaging...................................... -- 2,283
Provision for loss on investment in WebSecure............................................... (125) 1,765
Less gain on sale of investment in WebSecure................................................ -- (1,200)
Provision for loss on investment in Advent Technology Management, Inc....................... -- 1,000
Provision for loss on investment in P.G. Technologies, Inc.................................. -- 497
Amortization of goodwill and equity in losses of ViA........................................ -- 585
Provision for loss on investment in ViA..................................................... 4,415 --
Other losses................................................................................ 764 974
--------- ---------
$ 14,065 $ 16,689
--------- ---------
--------- ---------

CENTURY ELECTRONICS MANUFACTURING, INC.

During the twelve months ended March 31, 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 the twelve months ended March 31, 1997 as its
initial capital into its 51% owned contract manufacturing joint venture in
Thailand. The Company's joint venture partner's initial capital contribution was
$3.7 million.

On November 5, 1996, Century purchased Triax Technology Group Limited
("Triax"), a provider of contract manufacturing services located in the United
Kingdom for approximately $4.2 million in cash, and approximately 2.2 million
shares of common stock of Century. The Company also contributed 25,000 shares of
Centennial Common Stock as a finder's fee. At the conclusion of the Triax
transaction, Triax and DCI were wholly-owned subsidiaries of Century, and
Centennial owned approximately 67% of Century.

On March 14, 1997, Century entered into an agreement in principal with the
Company, whereby Century agreed to redeem a portion of its shares in exchange
for $1.3 million in cash and a $6.0 million subordinated debenture, reducing the
Company's equity ownership position to 45%. The debentures bore interest at a
rate of 6% and were to mature in ten years. Under certain conditions, the
debentures would be convertible into the capital stock of an entity with which
Century might 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 July 1, 1997, the transaction agreed upon on March 14, 1997 was
completed. In order to remove certain guarantees of equipment subleased to DCI,
Centennial executed lease buyouts amounting to approximately $2.4 million and
sold the underlying equipment to Century for cash and a $1.9 million 9%
promissory note due December 1998.

On February 4, 1998, the Company entered into a transaction with Century
whereby Century redeemed the Company's remaining holdings of Century common
stock, repurchased its $1.9 million 9% promissory note due December 1998, and
satisfied its $6.0 million 6% Convertible Subordinated Debenture due June 2007,
in exchange for $9.7 million in cash and $4.0 million of Century Series B
Convertible Preferred Stock. The Company recorded a loss on investment
activities of $5.1 million during fiscal 1998 to reflect the difference between
the fair value of the consideration received from Century and the carrying value
of the Company's investment.

ITP/FLEET.NET

On December 13, 1996, the Company entered into merger agreements with
Intelligent Truck Project, Inc., Fleet.Net, Inc. and Smart Traveler Plazas, Inc.
(collectively, "ITP/Fleet.Net") agreeing to exchange an aggregate of 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 1997 announcement
of financial irregularities, the principal shareholder of ITP/Fleet.Net filed
suit, alleging, among other things, breach of representations and warranties
regarding the Company's prior reported financial statements. 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 agreement. 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 the Settlement and Mutual
Release, 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 of the purchase price over
the fair value of assets acquired (approximately $3.0 million) was written off
as of May 15, 1997, the settlement agreement date, because of the uncertainties
related to the future operations of ITP/Fleet.Net.

VIA, INC.

In December 1996, the Company acquired a 12% interest in ViA, Inc., a
development stage privately held technology company that designs, develops, and
markets miniature communication and computing products. Due to the significance
of the Company's investment to ViA's total capitalization and on the basis of
the complementary nature of the companies' products and related development
plans, the Company accounted for this investment using the equity method, and
amortized the purchase price in excess of its interest in the investee's
underlying net assets, which excess amounted to $5.0 million, over 60 months.
The Company has recorded this amortization, as well as its share of the
investee's losses since the date of the investment through March 31, 1997, for
an aggregate amount of $585,000, as loss on investment activities. During fiscal
1998, the Company reserved the remaining carrying value of its investment, and
recorded a loss on investment activities during fiscal 1998 related thereto of
approximately $4.4 million.

The Company's analysis of the future viability of several development stage
businesses in which the Company invested during fiscal 1997 and 1996, combined
with the Company's decision to continue to focus its financial resources on its
core business, led the Company to reserve fully the carrying value of its
investments in these development stage companies. As of March 31, 1998, the only
remaining investment with a carrying value greater than zero was the Company's
remaining investment in the Series B Preferred Stock of its former affiliate,
Century Electronics Manufacturing, Inc., valued at approximately $2.4 million.

WEBSECURE, INC.

During fiscal 1996, the Company purchased for $569,000 a minority interest
in WebSecure, Inc. ("WebSecure"), a corporation that provided Internet services.
The former president and a shareholder of WebSecure was a Director of the
Company from February 1994 through November 1995. In connection with WebSecure's
initial public offering, the Company realized a gain of $1.2 million from the
sale of a portion of its investment. The remaining investment, having a cost of
$560,000, was fully reserved as of March 31, 1997 on the basis that its value
appeared to have been permanently impaired. During fiscal 1998, the Company sold
this remaining investment for $125,000. In addition, the Company has accrued an
amount equal to the gain pending final resolution of certain litigation
described in Note 14 of Notes to Consolidated Financial Statements.

SPECIAL INVESTIGATION COSTS. The following table describes the elements and
the amounts reflected in this category for the 1998 and 1997 periods (in
thousands):

1998 1997
--------- ---------

Fees for services provided by the Company's Independent Accountants.......... $ -- $ 933
Fees for services provided by the Company's Special Litigation Legal
Counsel.................................................................... -- 942
Fees for services provided by the Company's Interim Chief Executive Officer
and Interim Chief Financial Officer........................................ 520 1,195
Fees for services provided by Counsel to the Special Committee of the Board
of Directors............................................................... -- 541
Other........................................................................ 77 62
--------- ---------
$ 597 $ 3,673
--------- ---------
--------- ---------

These expenses reflect fees in connection with the completion of the special
investigation, certain refinancing activities, and costs of legal defense
associated with shareholder litigation.

PROVISION FOR SETTLEMENT OF SHAREHOLDER LITIGATION. As of March 31, 1997,
the Company has recorded a provision for the settlement of the Consolidated
Securities Litigation of $20.0 million, representing the cash portion of the
settlement, together with an amount equal to 37% of the estimated market
capitalization of the Company. The Company satisfied its obligation to remit the
cash portion ($1,475,000) into a settlement fund during fiscal 1998. The Common
Stock portion ($18,525,000) is included in additional paid-in capital as of
March 31, 1998 and 1997.

PROVISION FOR LOSS ON INVENTORY SUBJECT TO CUSTOMER DISPUTE. During fiscal
1998, the Company filed suit against Philips Home Services, Inc., a subsidiary
of Philips Electronics, N.V. ("Philips"), seeking to recover damages regarding
inventory specifically purchased and manufactured pursuant to a purchase order
from Philips (the "Custom Inventory"). Philips later attempted to cancel a
portion of the purchase order. The Company claimed that the purchase order
cancellation was not effective. Due to the legal costs and inherent
uncertainties involved in litigation, the Company reserved the cost of the
Philips Inventory of approximately $1.8 million during fiscal 1998.

OTHER EXPENSES, NET. During fiscal 1998, 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. That bank required the Company
to pay lease cancellation charges of approximately $258,000 in order to release
its lien on the equipment being financed pursuant to those leases.

NET INTEREST EXPENSE. Net interest expense decreased to $56,000 in the 1998
period from $234,000 in the 1997 period, reflecting a decreased level of
borrowing under the Company's revolving credit agreements.

EQUITY INTEREST IN EARNINGS OF AFFILIATE. The equity interest in earnings
of affiliate reflects the Company's net interest in earnings of Century.

NINE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996

SALES. Sales increased 30% to approximately $28.3 million in the 1997
period compared to $21.8 million in the 1996 period, primarily as a result of
increased volume of sales of PC cards. Such increase resulted primarily from
expansion of the PC card market, increased sales and marketing efforts by the
Company and the broadening of the Company's product line.

Sales outside of the United States represented 8% of sales in the 1997
period compared to 12% of sales in the 1996 period.

Sales to one of the Company's customers represented 22% of total sales in
the 1997 period and 12% of sales in the 1996 period. Another significant
customer represented 32% of total sales in the 1997 period and 16% of total
sales in the 1996 period. No other customer or group of related customers
accounted for more than 10% of the Company's sales.

COSTS OF GOODS SOLD. Cost of goods sold increased 16% to $24.5 million for
the 1997 period compared to $21.0 million for the 1996 period. Gross margins
were 13.5% for the 1997 period compared to 3.5% for the 1996 period. Costs of
goods sold include provisions for inventory obsolescence of $925,000 in the 1997
period and $1,351,000 in the 1996 period, representing 3.3% of sales in the 1997
period and 6.2% in the 1996 period, reflecting a strategy of prior management to
build inventory in anticipation of customer orders, a portion of which did not
materialize. The decline in obsolescence as a percentage of sales reflects, in
part, a change in the practice in February 1997, which change significantly
decreased the amount of inventory purchased in advance of receipt of customer
orders. The Company's gross margins were also impacted by declining memory chip
prices, which reduced PC card selling prices in certain situations where the
Company had already purchased memory chips at higher prices.

During the 1997 and 1996 periods, the Company recorded sales of $5.3 million
and $3.7 million, respectively, which were subsequently deemed to be invalid and
reversed in the process of restating the Company's financial statements. These
transactions had the effect of overstating the Company's gross margins and
contributed to inappropriate pricing decisions and selling practices.

ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs were $1.1 million in both periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased to $7.3 million in the 1997 period compared to
$2.7 million in the 1996 period. Sales compensation and related travel costs for
domestic operations increased from $872,000 to $1,604,000, reflecting increased
investment in sales personnel. Legal, accounting and other professional fees
were approximately $1.8 million in the 1997 period compared to $90,000 in the
1996 period, reflecting increased costs associated with Company's investment
activities as well as costs associated with a public offering for convertible
debentures which was cancelled in December 1996.

Depreciation expense increased to $702,000 in the 1997 period compared to
$336,000 in the 1996 period, reflecting increased capital equipment expenditures
to increase production capacity and improve productivity.

The Company's Canadian and UK sales subsidiaries incurred $590,000 of
selling, general and administrative expenses in the 1997 period compared to
$464,000 in the 1996 period. These operations were both shut down in April 1997
and support for all international sales activities was consolidated at the
Company's headquarters.

During the 1997 period, the Company revised its method of allocating
overhead costs to cost of goods sold, which revision reduced the allocation for
this period by approximately $360,000.

LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses on disposition of a
series of investments made during the 1997 and 1996 periods. The following table
describes the elements and the amounts reflected in this category for fiscal
1997 (in thousands):

Costs incurred in connection with ITP/Fleet.Net.................... $ 3,729
Provision for loss on investment in Infos International............ 6,024
Provision for loss on investment in Industrial Imaging............. 2,283
Provision for loss on investment in WebSecure...................... 1,765
Less gain on sale of investment in WebSecure....................... (1,200)
Amortization of goodwill and equity in losses of ViA............... 585
Other losses....................................................... 910
---------
$ 14,096
---------
---------

See discussion of 1998 results concerning loss on investment activities
related to ITP/Fleet.Net and ViA.

INFOS INTERNATIONAL, INC.

During fiscal 1997, the Company acquired a 38% interest in Infos
International, Inc. ("Infos"), a supplier of intelligent hand-held data
collection equipment for route and shop floor accounting. The purchase price
amounted to approximately $3.0 million in cash and 230,000 shares of Centennial
Common Stock having a market value of $3.9 million at date of acquisition. On
February 6, 1998, the Company, Infos and the shareholders of Infos entered into
a transaction whereby the Company agreed to return its shares of Infos capital
stock in exchange for an agreement to sell Infos inventory and equipment arising
from the contract manufacturing relationship between Infos and Century, which
relationship was terminated. The parties also agreed to exchange mutual releases
of any claims arising from the original acquisition agreement. The full amount
of the investment cost ($7.0 million) has been written off. The recorded loss of
$6.0 million reflects the use by Infos of $1.0 million of the original cash
proceeds to repay an obligation of that amount due to Centennial from an Infos
subsidiary, Information Capture Corporation ("ICC"). This obligation originally
arose in fiscal 1995, prior to Infos acquiring ICC, in connection with a sales
transaction that was determined in the Company's financial review not to be bona
fide. The effect of the adjustment is to reflect $1.0 million of the investment
cost as a reduction of sales and net income in fiscal 1995 and the remainder as
loss on investment activities in fiscal 1997.

INDUSTRIAL IMAGING, INC.

For $730,000 in cash and the conversion of $200,000 of notes, the Company
purchased a minority interest in Industrial Imaging, Inc., which designs,
manufactures and markets automated optical vision and individual imaging systems
for inspection and identification of defects in printed circuit boards. In
addition, effective April 1, 1996 and expiring June 30, 1997, the Company agreed
to provide procurement services and purchase material using the Company's credit
arrangements for a service fee of $200,000. The Company completed purchases
aggregating $1.4 million on behalf of the investee and initially reflected by
the Company as sales with the equivalent amount of cost of goods sold. Such
sales have been reversed in connection with the Company's financial review.
During fiscal 1997, the Company determined that the investee was unable to repay
the Company for the material purchased, and also determined that the value of
the equity investment was permanently impaired. The Company agreed to convert
its account receivable into common stock of the investee and recorded a
valuation reserve equal to the carrying value of the

investment. The Company sold its remaining investment in Industrial Imaging,
Inc. during fiscal 1998 for $550,000.

WEBSECURE, INC.

During fiscal 1996, the Company purchased for $569,000 a minority interest
in WebSecure, a corporation that provided Internet services. The former
president and a shareholder of WebSecure was a Director of the Company from
February 1994 through November 1995. In connection with WebSecure's initial
public offering, the Company realized a gain of $1.2 million from the sale of a
portion of its investment. The remaining investment, having a cost of $560,000,
was fully reserved as of March 31, 1997 on the basis that its value appeared to
have been permanently impaired. In addition, the Company has accrued an amount
equal to the gain pending final resolution of certain litigation described in
Note 14 of Notes to Consolidated Financial Statements.

OTHER INVESTMENTS

During fiscal 1997 and 1996, the Company made investments aggregating
$860,000 in development stage businesses that had not reached commercial
viability as of March 31, 1997. Such investments have been fully reserved as of
March 31, 1997 (net of certain offsets included in accounts payable and accrued
expenses).

SPECIAL INVESTIGATION COSTS. The following table describes the elements and
the amounts reflected in this category for fiscal 1997 (in thousands):

Fees for services provided by the Company's Independent
Accountants....................................................... $ 933
Fees for services provided by the Company's Special Litigation Legal
Counsel........................................................... 942
Fees for services provided by the Company's Interim Chief Executive
Officer and Interim Chief Financial Officer....................... 1,195
Fees for services provided by Counsel to the Special Committee of
the Board of Directors............................................ 541
Other............................................................... 62
---------
$ 3,673
---------
---------

As of March 31, 1997, $1.6 million of these fees had been paid and $2.0
million are included in accounts payable and accrued expenses. Such accruals
include estimates of fees in connection with the completion of the special
investigation, certain refinancing activities, and costs of legal defense
associated with shareholder litigation.

PROVISION FOR SETTLEMENT OF SHAREHOLDER LITIGATION. As of March 31, 1997,
the Company has recorded a provision for the settlement of the Consolidated
Securities Litigation of $20.0 million, representing the cash portion of the
settlement, together with an amount equal to 37% of the estimated market
capitalization of the Company. The cash portion ($1,475,000) of the settlement
is included in accounts payable and accrued expenses and the Common Stock
portion ($18,525,000) is included in additional paid-in capital as of March 31,
1997.

NET INTEREST EXPENSE. Net interest expense increased from $174,000 in
fiscal 1996 to $391,000 in fiscal 1997, reflecting increased borrowings under
the Company's revolving credit agreement.

EQUITY INTEREST IN EARNINGS OF AFFILIATE. The equity interest in earnings
of affiliate reflects the Company's net interest in earnings of Century.

LIQUIDITY AND CAPITAL RESOURCES

Since the Company's inception, it has financed its operating activities
primarily from loans from financial institutions, public and private offerings
of equity securities, and positive cash flows from operations.

The Company experienced significant losses from operations from fiscal 1994
through fiscal 1998. The Company has taken measures since the firing of its
former Chief Executive Officer in February 1997 to reduce those losses,
including the following: 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. If cost savings are not achieved, or revenues are not
increased, it would significantly impair the ability of the Company to continue
as a going concern. The Company believes that its cash balances, bank financing,
and anticipated future cash flows will be sufficient to fund operations for the
foreseeable future. The Company can make no assurances that measures taken to
date or to be taken in the future will be sufficient to stem losses or that
future financing will be available to the Company or, if available, on terms
that will be satisfactory to the Company. Management believes the existing cash
and cash equivalents, short-term investments and available financing
arrangements will be sufficient to meet the Company's currently anticipated
working capital and capital expenditure requirements for the foreseeable future.

OPERATING ACTIVITIES

At March 31, 1999, working capital increased to approximately $7.4 million,
compared to working capital of $3.4 million at March 31, 1998, due principally
to the Company's achieving positive operating income. In fiscal 1999, the
Company generated cash flow from operations of approximately $2.8 million,
compared to cash flow from operations of $8.0 million for fiscal 1998. Days of
sales outstanding in accounts receivable amounted to 49 days at March 31, 1999
compared to 60 days at March 31, 1998. The Company's inventories represent
approximately 8 weeks of manufacturing output at March 31, 1999, compared to 6
weeks at March 31, 1998. Management has implemented new procurement practices
reflecting increased emphasis on reducing inventory levels, and has established
on-site stores of raw materials consigned by several of the Company's major
vendors. During the latter part of fiscal 1999, the Company purchased in bulk
several items of raw materials with extended lead times based upon purchase
orders received by the Company. The Company expects to use these raw materials
in the early part of fiscal 2000.

INVESTING TRANSACTIONS

Capital expenditures amounted to $0.7 million in fiscal 1999, $1.7 million
in fiscal 1998, and $2.3 million for the twelve month period ended March 31,
1997; such expenditures having been financed, in part, through leasing
arrangements. As of March 31, 1999, the Company had remaining obligations of
$36,000 on these equipment financing leases.

The Company has commitments for future capital equipment expenditures of
approximately $430,000 at March 31, 1999, which the Company expects to incur
during fiscal 2000. The Company expects to finance approximately $360,000 of
these capital expenditures through lease financing arrangements.

Depending on the demand for the Company's products, the Company may decide
to make additional investments, which could be substantial, in capital equipment
to support its business in the future.

FINANCING TRANSACTIONS

On August 14, 1997, the Company entered into a credit agreement, effective
through August 13, 2000 unless terminated sooner, with Congress Financial Corp.
("Congress Financial"), a commercial credit institution, for a revolving credit
facility and term loan facility of up to $4.1 million and $0.9 million,

respectively, and a $2.0 million capital equipment acquisition facility, based
on certain limitations and covenants. On August 15, 1997, the Company paid in
full its line of credit and lease financing obligations with the bank that was
previously providing the Company with its credit facilities. At March 31, 1998,
the Company had no outstanding borrowings under the Congress Financial credit
agreement. On November 24, 1998, the Company terminated its credit agreement
with Congress Financial and entered into a new credit agreement with Fleet
National Bank ("Fleet") for a revolving credit facility, equipment term loan
facility and foreign exchange facility of $3.5 million, $1.5 million and $2.0
million, respectively. Allowable borrowings are based on accounts receivable and
the cost of equipment, are secured by substantially all of the Company's assets,
and are based on certain limitations and covenants. At March 31, 1999, the
Company had no outstanding borrowings under the Fleet credit agreement.

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 "Item 3--Legal
Proceedings." The Company has been granted final approval of its proposed
settlement of these suits, and believes that such lawsuits will be settled
substantially in accordance with the description contained in "Item 3--Legal
Proceedings." The Company believes that such settlements will not have a
material adverse impact on its liquidity. As of March 31, 1997, the Company
recorded a provision for the settlement of the Consolidated Securities
Litigation of $20.0 million, representing the cash portion of the settlement,
together with an amount equal to 37% of the estimated market capitalization of
the Company. The Company satisfied its obligations regarding the cash portion
($1,475,000) of the Settlement Agreement by remitting that amount into a
settlement fund during fiscal 1998. The Common Stock portion ($18,525,000) is
included in additional paid-in capital.

There can be no assurance that claims by shareholders who opted not to
participate in the class action settlement will not be material, or that the
claims against Lawrence J. Ramaekers, the Company's former interim Chief
Executive Officer, in connection with the February 25 Securities Litigation and
the February 27 Securities Litigation, as to which the Company may have
indemnification obligations will be settled, and such inability to settle
pending litigation could have a material adverse affect on the Company's
liquidity, business, financial condition and results of operations.

IMPACT OF INFLATION

The Company believes that the impact of inflation on its operations is not
significant.

SEASONALITY

The Company generally does not experience seasonality with respect to the
sale of its products; however, the Company has experienced reduced sales to
certain customers in European countries during the months of July and August.

DIVIDENDS

The Company has never paid cash dividends. The Company currently intends to
retain all future earnings, if any, for use in its business and does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
Company's credit agreement with its bank prohibits the payment of cash dividends
without the bank's consent.

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 from fiscal 1994 through fiscal
1998. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Liquidity."

DEPENDENCE ON MAJOR CUSTOMERS; CONCENTRATION OF CREDIT RISK.

During fiscal 1999, Nortel Networks accounted for approximately 14% of the
Company's sales. During fiscal 1999, Nortel Networks engaged Solectron, a
contract manufacturer, to complete the final assembly of a majority of its
products for which the Company has historically supplied PC cards. In addition
to sales to Nortel Networks, sales to Solectron represented almost 10% of the
Company's sales during fiscal 1999. During fiscal 1998, Nortel Networks
accounted for approximately 29% of the Company's sales. 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. 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 experienced, and
is likely 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.

DECLINING AVERAGE SALES PRICES.

The Company has experienced, and expects to continue to experience,
declining average sales prices for its products. The data storage markets in
which the Company competes are characterized by intense competition. Therefore,
the Company expects to incur increasing pricing pressures from its customers in
future periods, which will likely result in a further decline in average sales
prices for the Company's products. The Company believes that it must continue to
achieve manufacturing costs reductions, develop new products that incorporate
customized features and increase its volume of PC card sales in order to offset
the effect of these declining average sales prices. If the Company were not able
to achieve such cost reductions, develop new customized products or increase its
unit sales volumes, each of these factors could have a material adverse effect
on the Company's business, financial condition and results of operations.

FLUCTUATIONS IN QUARTERLY RESULTS.

The Company's results of operations may be subject to quarterly fluctuations
due to a number of factors, including the following:

- timing of receipt and delivery of significant orders for the Company's
products

- costs associated with the expansion of operations

- production difficulties

- write-downs or write-offs of investments in other companies

- competitive pricing pressures

- increases in raw material costs

- changes in customer and product mix

- quality of the Company's products

- exchange rate fluctuations

- market acceptance of new or enhanced versions of the Company's products

Other factors, some of which are beyond the Company's control, may also
cause fluctuations in the Company's results of operations. 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.

FLUCTUATIONS IN TRADING PRICE.

The trading price of the Company's Common Stock may fluctuate widely in
response to, among other things, the following:

- quarter-to-quarter operating results

- awards of orders to the Company or its competitors

- changes in earnings estimates by analysts

- industry conditions

- new product or product development
announcements by the Company or its competitors

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.

NEED TO RESPOND TO RAPID TECHNOLOGICAL CHANGE.

The markets for the Company's products are characterized by rapid
technological change, evolving industry standards and rapid product
obsolescence. Rapid technological development substantially shortens product
life cycles, and the Company's growth and future success will depend upon its
ability, on a timely basis, to develop and introduce new products, to enhance
existing products and to adapt products for various industrial applications and
equipment platforms, as well as upon customer acceptance of these products,
enhancements and adaptations. The Company, having more limited resources than
many of its competitors, focuses its development efforts at any given time to a
relatively narrow scope of development projects. There can be no assurance that
the Company will select the correct projects for development or that the
Company's development efforts will be successful. In addition, no assurance can
be given that the Company will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of new products,
that new products and product enhancements will meet the requirements of the
marketplace and achieve market acceptance, or that the Company's current or
future products will conform to applicable industry standards. Any inability of
the Company to introduce on a timely basis new products or enhancements that
contribute to profitable sales would have a material adverse effect on the
Company's business, financial condition and results of operations.

HISTORICAL SINGLE PRODUCT CONCENTRATION.

PC cards and related services constitute 100% of the Company's sales for
fiscal 1999 and 1998. The market for PC cards is still developing and there can
be no assurance that computing and electronic equipment that utilize PC cards
will not be modified to render the Company's PC cards obsolete or otherwise have
the effect of reducing demand for the Company's PC cards. In addition, the
Company faces intense competition from competitors that have greater financial,
marketing and technological resources than the Company, which competition may
reduce demand for the Company's PC cards. Decreased demand for the Company's PC
cards as a result of technological change, competition or other factors would
have a material adverse effect on the Company's business, financial condition
and results of operations.

COMPETITION.

Each of the markets in which the Company competes is intensely competitive.
The Company competes with manufacturers of PC cards and related products,
including SanDisk Corporation and Smart Modular Technologies, Inc., as well as
with electronic component manufacturers who also manufacture PC cards, including
Advanced Micro Devices, Inc., Hitachi Semiconductor, Inc., Intel Corporation and
Mitsubishi Electric Corporation. Certain of these competitors supply the Company
with raw materials, including electronic components, which are occasionally
subject to industry wide allocation. These competitors may have the ability to
manufacture products at lower costs than the Company as a result of their higher
levels of integration. In addition, many of the Company's competitors or
potential competitors have greater name recognition, a larger installed base of
customers, more extensive engineering, manufacturing, marketing, distribution
and support capabilities and greater financial, technological and personnel
resources than the Company. The Company expects competition to increase in the
future from existing competitors and from other companies that may enter the
Company's existing or future markets with similar or alternative products that
may be less costly or provide additional features. The Company believes that its
ability to compete successfully depends on a number of factors, including the
following:

- product quality and performance

- provision of competitive design capabilities

- adequate manufacturing capacity

- timing of new product introductions by the Company, its customers and its
competitors

- price

- order turnaround

- timely response to advances in technology

- production efficiency

- number and nature of the Company's competitors in a given market

- general market and economic conditions

In addition, market conditions are expected to lead to intensified price
competition for the Company's products and services, resulting in lower prices
and gross margins, which could materially and adversely affect the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will compete successfully in the future.

RAW MATERIAL SHORTAGES AND DEPENDENCE ON SINGLE SOURCE SUPPLIERS.

The Company has from time to time experienced shortages in the supply of
computer memory chips and other electronic components used to manufacture PC
cards. The Company expects that such supply shortages may continue, particularly
with respect to computer memory chips and other electronic components used in
products targeted at high-growth market segments. Occasionally, certain memory
chips important to the Company's products are on industry-wide allocation by
suppliers. Any such shortages could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company purchases certain key components from single source vendors for
which alternative sources are not currently available. The Company does not
maintain long-term supply agreements with any of its vendors. The inability to
develop alternative sources for these single source components or to obtain
sufficient quantities of components could result in delays or reductions in
product shipments, or higher prices for these components, or both, any of which
could materially and adversely affect the Company's business, financial
condition and results of operations. No assurance can be given that one or more
of the Company's vendors will not reduce supplies to the Company.

ANTI-TAKEOVER PROVISIONS.

The Company has taken a number of actions that could have the effect of
discouraging a takeover attempt. For example, the Company has adopted a
Shareholder Rights Plan that would cause substantial dilution to a stockholder
who attempts to acquire the Company on terms not approved by the Company's Board
of Directors. In addition, the Company's Certificate of Incorporation grants the
Board of Directors the authority to fix the rights, preferences and privileges
of and issue up to 1,000,000 shares of Preferred Stock without stockholder
action. The Board of Directors has reserved 50,000 shares of Preferred Stock for
issuance pursuant to the Company's Shareholder Rights Plan. Although the Company
has no present intention of issuing shares of Preferred Stock, such an issuance
could have the effect of making it more difficult and less attractive for a
third party to acquire a majority of our outstanding voting stock. Preferred
Stock may also have other rights, including economic rights senior to the Common
Stock that could have a material adverse effect on the market value of the
Common Stock. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. This section
provides that a corporation shall not engage in any business combination with
any interested shareholder during the three-year period following the time that
such stockholder becomes an interested shareholder. This provision could have
the effect of delaying or preventing a change in control of the Company.

YEAR 2000 COMPLIANCE.

- order processing

- product assembly

- invoicing

- material planning

- product test

- payroll and financial reporting

In addition, the problem may affect the computer systems of vendors and
customers, disrupting their operations and possibly impairing the Company's
sources of supply and demand. See--"Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of the Company's
Year 2000 Status.

RISKS OF INTERNATIONAL OPERATIONS AND EURO CURRENCY.

During fiscal 1999 and 1998, the Company derived approximately 12% and 14%,
respectively, of its sales from outside the United States. The Company's
international operations subject the Company to the risks of doing business
abroad, including currency fluctuations, export duties, import controls and
trade barriers, restrictions on the transfer of funds, greater difficulty in
accounts receivable collection, burdens of complying with a wide variety of
foreign laws and, in certain parts of the world, political instability.

The participating member countries of the European Union adopted the Euro as
the common legal currency on January 1, 1999. On that same date, they
established the fixed conversion rates between their existing sovereign
currencies and the Euro. The Company has begun to assess the potential impact on
the Company that may result from the Euro conversion. At this early stage of its
assessment, the Company cannot yet predict the impact of the Euro conversion, or
the cost of any necessary system modifications. If the Company is unable to
complete any necessary system modifications in a timely fashion, its ability to
bill and collect on products shipped to its European customers may be adversely
affected.

PROTECTION OF PROPRIETARY INFORMATION.

The Company's products require technical know-how to engineer and
manufacture. To the extent proprietary technology is involved, the Company
relies on trade secrets that it seeks to protect, in part, through
confidentiality agreements with certain employees, consultants and other
parties. There can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known to, or independently
developed by, existing or potential competitors of the Company. The Company
historically has not sought to protect its proprietary information through
patents or registered trademarks, although it instituted a patent program in
fiscal 1999. There can be no assurance that the Company's products will not
infringe on patents held by others. The Company may be involved from time to
time in litigation to determine the enforceability, scope and validity of its
rights. Litigation could result in substantial cost to the Company and could
divert the attention and time of the Company's management and technical
personnel from the operations of the Company.

The Company currently licenses certain proprietary and patented technology
from third parties. There can be no assurance that the Company will be able to
continue to license such technology, that such licenses will be or remain
exclusive or that any patented technology licensed by the Company will provide
meaningful protection from competitors. In the event that a competitor's
products were to infringe on patents licensed by the Company, it would be costly
for the Company to enforce its rights in an infringement action and such an
action would divert funds and management resources from the Company's
operations.

RISKS OF ACQUISITIONS AND INVESTMENTS IN OTHER COMPANIES.

The Company has terminated its earlier program of acquiring interests in
companies and related technologies, and has written-off or provided valuation
reserves for many such investments. However, the Company may determine that it
is in the best interests to acquire or invest in other companies in the future.
There can be no assurance that the companies in which the Company has invested
(or may invest) will develop successful products or technologies beneficial to
the Company or that such investments will be economically justified.

ENVIRONMENTAL COMPLIANCE.

The Company is subject to a variety of environmental regulations relating to
the use, storage and disposal of hazardous chemicals used during its
manufacturing processes. Any failure by the Company to comply with present and
future regulations could subject the Company to significant liabilities. In
addition, such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or to incur
other significant expenses in order to comply with environmental regulations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is incorporated herein by reference from
the discussion under the heading Fair Value of Financial Instruments in the
Notes to the Financial Statements included in this Annual Report on Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Centennial Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Centennial
Technologies, Inc. as of March 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended. Our
audit also included the financial statement schedule listed in the Index at Item
14(a)(2). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Centennial Technologies Inc. at March 31, 1999, and the consolidated results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts
May 6, 1999

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Centennial Technologies, Inc.:

In our opinion, the consolidated financial statements listed in the
accompanying index on page 59 present fairly, in all material respects, the
financial position of Centennial Technologies, Inc. and Subsidiaries at March
31, 1998, and the results of their operations and their cash flows for the
twelve months ended March 31, 1998, and the nine months ended March 31, 1997 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule listed in the index on page 59
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinions expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
May 15, 1998

CENTENNIAL TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

MARCH 31, MARCH 31,
1999 1998
----------- -----------

ASSETS

Current assets:
Cash and cash equivalents................................................................ $ 4,922 $ 5,358
Short-term investments................................................................... 2,500 --

Trade accounts receivable................................................................ 4,521 3,677
Less allowances...................................................................... (795) (868)
----------- -----------
3,726 2,809

Recoverable income taxes................................................................. 125 337
Inventories.............................................................................. 3,049 2,309
Other current assets..................................................................... 231 684
----------- -----------
Total current assets....................................................................... 14,553 11,497

Equipment and leasehold improvements....................................................... 3,967 3,973
Less accumulated depreciation and amortization........................................... (1,508) (1,242)
----------- -----------
2,459 2,731

Other assets............................................................................... 92 417
Investment in former affiliate............................................................. 1,700 2,433
----------- -----------
Total assets............................................................................... $ 18,804 $ 17,078
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses.................................................... $ 7,072 $ 8,070
Obligations under capital leases......................................................... 36 70
----------- -----------
Total current liabilities.................................................................. 7,108 8,140

Long-term obligations under capital leases................................................. -- 36

Commitments and contingencies (Notes 9 and 16)

Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized, none issued................ -- --
Common Stock, $.01 par value; 50,000,000 shares authorized, 20,549,000 issued and
outstanding at March 31, 1999 and 18,499,000 issued and outstanding at March 31,
1998................................................................................... 205 185
Additional paid-in capital................................................................. 84,200 84,220
Accumulated deficit........................................................................ (72,697) (75,503)
Accumulated other comprehensive income..................................................... (12) --
----------- -----------
Total stockholders' equity................................................................. 11,696 8,902
----------- -----------
Total liabilities and stockholders' equity................................................. $ 18,804 $ 17,078
----------- -----------
----------- -----------

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)

TWELVE MONTHS ENDED NINE MONTHS
MARCH 31, ENDED
--------------------------------- MARCH 31,
1999 1998 1997 1997
--------- --------- ----------- -----------
(UNAUDITED)

Net sales.......................................... $ 27,633 $ 28,263 $ 39,907 $ 28,263

Cost of goods sold................................. 18,968 23,683 33,213 24,453
--------- --------- ----------- -----------
Gross profit..................................... 8,665 4,580 6,694 3,810

Operating expenses:
Engineering, research and development costs...... 750 838 1,369 1,061
Selling, general and administrative expenses..... 6,132 9,957 8,416 7,318
--------- --------- ----------- -----------
Operating income/(loss)........................ 1,783 (6,215) (3,091) (4,569)

Loss on investment activities.................... 733 14,065 16,689 14,096
Special investigation costs...................... -- 597 3,673 3,673
Provision for settlement of shareholder
litigation..................................... -- -- 20,000 20,000
Provision for loss on inventory subject to
customer dispute............................... -- 1,841 -- --
Proceeds from resolution of customer dispute..... (1,600) -- -- --
Other expenses, net.............................. 132 258 -- --
Net interest (income)/expense.................... (344) 56 234 391
--------- --------- ----------- -----------
Income/(loss) before income taxes and equity in
earnings of affiliate............................ 2,862 (23,032) (43,687) (42,729)
Equity in earnings of affiliate.................... -- 423 959 959
--------- --------- ----------- -----------
Income/(loss) before income taxes.................. 2,862 (22,609) (42,728) (41,770)
Provision for income taxes......................... 56 -- -- --
--------- --------- ----------- -----------
Net income/(loss)............................ $ 2,806 $ (22,609) $ (42,728) $ (41,770)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Net income/(loss) per share--basic and diluted..... $ .12 $ (1.22) $ (2.49) $ (2.41)
Weighted average shares outstanding--basic......... 23,255 18,460 17,174 17,367
Weighted average shares outstanding--diluted....... 23,508 18,460 17,174 17,367

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

CENTENNIAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED MARCH 31, 1997
AND THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1999

(AMOUNTS IN THOUSANDS)

ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
---------------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT INCOME EQUITY
--------- ----------- ----------- ------------ --------------- ------------

Balance at June 30, 1996...................... 16,631 $ 165 $ 42,712 $ (10,968) $ 31,909
Comprehensive income/(loss):
Net loss.................................... (41,770) (41,770)
Other comprehensive income--foreign currency
translation of equity in investment....... $ (233) (233)
------------
Total comprehensive income/(loss)............. (42,003)
------------
Proceeds from certain related party
transactions................................ 2,254 2,254
Exercise of options........................... 281 3 3,539 3,542
Exercise of warrants.......................... 172 2 516 518
Compensation from option grants............... 34 34
Issuance of Common Stock in connection with
acquisition of affiliates................... 275 3 4,822 4,825
Issuance of Common Stock in connection with
investments................................. 386 4 9,838 9,842
Estimated fair market value of shares to be
issued in connection with shareholder
litigation.................................. 18,525 18,525
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1997..................... 17,745 177 82,240 (52,738) (233) 29,446
--------- ----- ----------- ------------ ----- ------------
Comprehensive income/(loss):
Net loss...................................... (22,609) (22,609)
Other comprehensive income--foreign currency
translation adjustment...................... (156) 233 77
------------
Total comprehensive income/(loss)............. (22,532)
------------
Exercise of options........................... 117 1 206 207
Issuance of Common Stock in connection with
acquisition of affiliates................... 793 8 2,173 2,181
Retirement of shares repurchased.............. (156) (1) 1 0
Settlement of claims related to ViA
investment.................................. (400) (400)
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1998..................... 18,499 185 84,220 (75,503) -- 8,902
--------- ----- ----------- ------------ ----- ------------
Comprehensive income/(loss):
Net income.................................... 2,806 2,806
Other comprehensive income--foreign currency
translation adjustment...................... (12) (12)
------------
Total comprehensive income.................... 2,794
------------
Partial distribution of shares in settlement
of class action litigation.................. 2,050 20 (20) 0
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1999..................... 20,549 $ 205 $ 84,200 $ (72,697) $ (12) $ 11,696
--------- ----- ----------- ------------ ----- ------------
--------- ----- ----------- ------------ ----- ------------

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

CENTENNIAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

TWELVE MONTHS ENDED NINE MONTHS
MARCH 31, ENDED
--------------------------------- MARCH 31,
1999 1998 1997 1997
--------- --------- ----------- -------------
(UNAUDITED)

Cash flows from operating activities:
Net income/(loss)................................................ $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Adjustments to reconcile net income/(loss) to net cash used in
operating activities:
Provision for settlement of shareholder litigation............... -- -- 20,000 20,000
Depreciation and amortization.................................... 1,057 1,035 956 831
Equity in earnings of affiliate.................................. -- (423) (959) (959)
Provision for loss on accounts receivable........................ 170 177 516 400
Provision for losses on sale of equipment........................ -- (480) 318 318
Provision for loss on note receivable............................ -- -- 100 100
Provision for loss on investments................................ -- 7,019 9,317 8,027
Provision for loss on investment in affiliates................... 733 5,142 -- --
Provision for loss on inventory.................................. (2,114) -- -- --
Loss on disposal of capital equipment............................ 128 1,315 -- --
Other non-cash items............................................. 41 -- 102 34
Change in operating assets and liabilities:
Accounts receivable............................................ (1,087) 2,631 1,833 5,289
Accounts receivable from affiliate............................. -- 676 (676) (676)
Inventories.................................................... 1,374 5,485 (613) 454
Notes receivable............................................... -- -- 875 1,509
Notes receivable from affiliate................................ -- 4,129 (4,129) (4,129)
Recoverable income taxes....................................... 171 7,019 (6,746) (4,214)
Other assets................................................... 494 695 (1,172) (582)
Accounts payable and accrued expenses.......................... (1,054) (3,884) 7,668 6,572
Income taxes payable........................................... 56 27 -- --
--------- --------- ----------- -------------
Net cash provided by (used in) operating activities.......... 2,775 7,954 (15,338) (8,796)
Cash flows from investing activities:
Capital expenditures............................................. (669) (1,265) (2,257) (2,074)
Disposal of capital equipment.................................... 40 -- -- --
Purchase of held-to-maturity and available-for-sale securities... (2,500) -- (36,164) (27,250)
Proceeds from sale of available-for-sale securities.............. -- -- 36,163 32,182
Purchase of investments.......................................... -- -- (2,801) (1,291)
Purchase of investment in affiliates............................. -- -- (10,351) (10,351)
Proceeds from sale of investment in affiliates................... -- 8,983 -- --
--------- --------- ----------- -------------
Net cash provided by (used in) investing activities.......... (3,129) 7,718 (15,410) (8,784)
Cash flows from financing activities:
Net borrowings (repayments) under line of credit................. -- (10,090) 10,090 5,406
Borrowings from term loans....................................... -- 938 -- --
Repayments on term loans and leases.............................. (70) (938) -- --
Proceeds from equipment lease financing.......................... -- -- 250 250
Payments on equipment lease financing............................ -- (566) (370) (282)
Proceeds from exercise of stock options.......................... -- 208 3,544 3,542
Proceeds from exercise of warrants............................... -- -- 633 518
Net proceeds from public offerings of Common Stock............... -- -- 1,221 --
Proceeds from certain related party transactions................. -- -- 3,389 2,254
Foreign currency translation of equity investment................ -- 77 (233) (233)
--------- --------- ----------- -------------
Net cash provided by (used in) financing activities.......... (70) (10,371) 18,524 11,455
--------- --------- ----------- -------------
Effect of exchange rate changes on cash............................ (12) -- -- --
--------- --------- ----------- -------------
Net increase (decrease) in cash and cash equivalents............... (436) 5,301 (12,224) (6,125)
Cash and cash equivalents at beginning of period................... 5,358 57 12,281 6,182
--------- --------- ----------- -------------
Cash and cash equivalents at end of period......................... $ 4,922 $ 5,358 $ 57 $ 57
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................................... $ 4 $ 452 $ 604 $ 535
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Income taxes................................................... $ -- $ 18 $ 6,154 $ 4,151
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Non-cash transactions:
Issuance of Common Stock in connection with acquisition of
affiliates..................................................... $ -- $ -- $ 4,825 $ 4,825
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Issuance of Common Stock in connection with purchase of
investments.................................................... $ -- $ 2,181 $ 9,842 $ 9,842
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Settlement of claim related to ViA investment.................... $ -- $ 400 $ -- $ --
--------- --------- ----------- -------------
--------- --------- ----------- -------------

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

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND CHANGE IN FISCAL YEAR

BASIS OF PRESENTATION

The consolidated financial statements of Centennial Technologies, Inc. (the
"Company") include the accounts of the Company and all wholly owned
subsidiaries. Investments in companies in which ownership interests range from
20 to 50 percent and the Company exercises significant influence over operating
and financial policies are accounted for using the equity method. The Company's
investment in Century Electronics Manufacturing, Inc. ("Century"), of which it
had a 67% equity ownership position at March 31, 1997, has been accounted for
using the equity method for fiscal 1997 because the Company had a plan of
disposition of a portion of the investment in place prior to March 31, 1997 and
the transaction closed on July 1, 1997. During fiscal 1998, the Company further
reduced its equity ownership position in Century, and thereafter has accounted
for its remaining investment using the cost method. See Note 5. Other
investments are accounted for using the cost method. See Note 6. All significant
intercompany balances and transactions have been eliminated.

CHANGE IN FISCAL YEAR

On March 24, 1997, the Company's Board of Directors voted to change the
fiscal year end from June 30 to March 31. All references to fiscal 1999 and
fiscal 1998 in the accompanying financial statements relate to the twelve months
ended March 31, 1999 and 1998, respectively. All references to fiscal 1997
relate to the nine months ended March 31, 1997. References to fiscal 1996 relate
to the year ended June 30, 1996.

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

Revenue from product sales is recognized at time of shipment and when title
passes.

WARRANTY COSTS

The Company offers a limited warranty, ranging from one to two years, on
materials and workmanship for certain of its products. Costs relating to product
warranty are generally accrued at time of shipment. In addition, on sales to
certain wholesalers, the Company offers a stock rotation policy under which the
Company accepts returns on certain merchandise within two months of shipping for
merchandise or credit toward future orders, and accepts returns after two months
but within six months of shipping for merchandise credit minus a 15% restocking
charge. The Company has not experienced material costs associated with its
warranty and restocking policy.

RESEARCH AND DEVELOPMENT COSTS

Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents include highly liquid temporary cash investments having
maturities of three months or less at date of acquisition. Short-term
investments include commercial paper having a maturity longer than three months
but less than one year at date of acquisition.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and cash equivalents,
short-term investments and trade receivables. At March 31, 1999, over 98% of the
Company's cash, cash equivalents and short-term investments were held by one
financial institution. Additionally, short-term investments at March 31, 1999
included commercial paper from one issuer. Sales to the Company's recurring
customers are generally made on open account which sales to occasional customers
are typically made on a C.O.D. basis. The Company performs periodic credit
evaluations of its ongoing customers and generally does not require collateral.
Reserves are maintained for potential credit losses, and such losses have been
within management's expectations.

For fiscal 1999, one customer accounted for approximately 14% of the
Company's sales. At March 31, 1999, this customer accounted for approximately
$.06 million, or 2% of the Company's net accounts receivable balance.

For fiscal 1998, one customer accounted for approximately 29% of the
Company's sales. At March 31, 1998, this customer accounted for approximately
$1.1 million, or 40% of the Company's net accounts receivable balance.

For fiscal 1997, two customers accounted for approximately 54% of the
Company's sales. At March 31, 1997, these customers accounted for approximately
$3.0 million, or 54% of the Company's net accounts receivable balance.

Approximately 12%, 14% and 8% of the Company's sales in fiscal 1999, 1998
and 1997, 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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist principally of cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
other accrued expenses. The Company believes all of the carrying amounts
approximate fair value.

INVENTORIES

Inventories are stated on a first-in, first-out basis at the lower of cost
or market.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment is stated at cost. Major renewals and improvements are capitalized
while repair and maintenance charges are expensed when incurred. Depreciation is
provided over the estimated useful life of the respective assets, ranging from
three to seven years, on a straight-line basis. Leasehold improvements are
amortized over the lesser of the term of the lease or the estimated useful life
of the related assets. When assets are sold or retired, their cost and related
accumulated depreciation are removed from the accounts. Any gain or loss is
included in the determination of net income.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

The Company accounts for income taxes by the liability method as set forth
in Financial Accounting Standards Board (FASB) Statement No. 109, ACCOUNTING FOR
INCOME TAXES. Under the liability method, deferred taxes are determined based on
the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.

STOCK-BASED COMPENSATION

The Company accounts for stock-based awards to employees in accordance with
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES (APB 25) and has adopted the disclosure-only alternative to FASB
Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.

EARNINGS (LOSS) PER SHARE

The Company adopted FASB Statement No. 128, EARNINGS PER SHARE (FASB 128),
as of March 31, 1998. FASB 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effect of options, warrants and convertible securities. Diluted earnings per
share is similar to fully diluted earnings per share. All earnings per share
amounts for all periods have been presented to conform to FASB 128 requirements
and the accounting rules set forth in Staff Accounting Bulletin 98 issued by the
Securities and Exchange Commission on February 3, 1998.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following table sets forth the computation of earnings/(loss) per share
(in thousands, except per share data). All shares issuable in connection with
the settlement of the Consolidated Litigation described in Note 14 are included
in the weighted average shares outstanding calculation as of July 20, 1998.

TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1999 1998 1997 1997
----------------- ----------------- ----------------- ---------------
(UNAUDITED)

BASIC EARNINGS/(LOSS)
PER SHARE
Numerator
Net income/(loss)... $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Denominator
Common shares
outstanding....... 23,255 18,460 17,174 17,367
------ -------- -------- ---------------
Basic earnings/(loss)
per share........... $ .12 $ (1.22) $ (2.49) $ (2.41)
------ -------- -------- ---------------
------ -------- -------- ---------------

DILUTED
EARNINGS/(LOSS) PER
SHARE
Numerator
Net income/(loss)... $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Denominator
Common shares
outstanding....... 23,255 18,460 17,174 17,367
Stock options....... 253 -- -- --
------ -------- -------- ---------------
Shares used in
computing diluted
earnings/(loss)
per share......... 23,508 18,460 17,174 17,367
------ -------- -------- ---------------
Diluted
earnings/(loss) per
share............... $ .12 $ (1.22) $ (2.49) $ (2.41)
------ -------- -------- ---------------
------ -------- -------- ---------------

Options to purchase 863,300, 2,932,000 and 1,779,600 shares of Common Stock
on March 31, 1999, 1998 and 1997, respectively, were excluded from the
period-to-date calculations of diluted net loss per share as the effect of their
inclusion would have been anti-dilutive.

STOCK SPLIT

The Company effected a two-for-one stock split of its outstanding shares of
Common Stock in the form of a stock dividend in November 1996. All references in
the accompanying consolidated financial statements to number of shares, weighted
average number of shares outstanding and related prices, per share amounts, and
stock plan data reflect this split on a retroactive basis.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

COMPREHENSIVE INCOME

As of April 1, 1998, the Company adopted FASB Statement No. 130, REPORTING
COMPREHENSIVE INCOME (FASB 130). FASB 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's net income or
stockholders' equity. FASB 130 requires the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
FASB 130.

SEGMENTS OF BUSINESS ENTERPRISE

Effective April 1, 1998, the Company adopted the FASB Statement No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (FASB 131).
FASB 131 superseded FASB 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE. FASB 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. FASB 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The Company operates in a single industry segment, the
design and manufacture of high technology memory chip based products used in
industrial and commercial applications. As such, the adoption of FASB 131 did
not affect results of operations, financial position or the disclosure of
segment information.

RECLASSIFICATIONS

Certain amounts in the fiscal 1998 and 1997 consolidated financial
statements have been reclassified to conform to the current year presentation.

NEW ACCOUNTING PRONOUNCEMENTS

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES. The
Statement is effective for fiscal years beginning after December 15, 1998, and
requires that start-up costs capitalized prior to January 1, 1999 be written off
and any future start-up costs be expensed as incurred. Adoption of this
Statement will not have a significant effect on the Company's results of
operations or its financial position.

In June 1998, the FASB issued Statement No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is required to be adopted in years
beginning after June 15, 1999. Management does not anticipate that the adoption
of the new Statement will have a significant effect on earnings or the financial
position of the Company.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVENTORIES

Inventories consisted of (in thousands):

MARCH 31, MARCH 31,
1999 1998
----------- -----------

Raw materials, primarily electronic components......................... $ 1,709 $ 1,239
Work in process........................................................ 399 620
Finished goods......................................................... 941 450
----------- -----------
$ 3,049 $ 2,309
----------- -----------
----------- -----------

The Company maintains levels of inventories that it believes are necessary
based upon assumptions concerning its growth, mix of sales and availability of
raw materials. Changes in those underlying assumptions could affect management's
estimates of inventory valuation.

In fiscal 1998, the Company reserved fully $1.8 million of costs related to
inventory specifically purchased and manufactured pursuant to a customer
purchase order (the "Custom Inventory"). The customer later attempted to cancel
the purchase order. The Company disputed the customer's claim that the purchase
order cancellation was effective, and sought legal remedies related thereto.
During fiscal 1999, the Company agreed to settle its claims against the
customer, in return for a $1.6 million cash payment and the right to retain and
sell the Custom Inventory at issue. The Company reduced its reserve for the
Custom Inventory by approximately $1.7 million during fiscal 1999 as a portion
of the Custom Inventory was sold for approximately $1.2 million during fiscal
1999. These sales proceeds have been included in net sales. At March 31, 1999,
the costs related to the Custom Inventory still on hand remained fully reserved.

4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consisted of the following (in
thousands):

MARCH 31, MARCH 31,
1999 1998
----------- -----------

Equipment.............................................................. $ 3,702 $ 3,743
Equipment under capital leases......................................... 106 106
Leasehold improvements................................................. 159 124
----------- -----------
3,967 3,973
Accumulated depreciation and amortization.............................. (1,508) (1,242)
----------- -----------
$ 2,459 $ 2,731
----------- -----------
----------- -----------

During fiscal 1999, the Company placed in service certain testing equipment
originally purchased in fiscal 1997 and which was outfitted with software and
custom design services during fiscal 1999. The total cost of this testing
equipment was approximately $300,000.

During fiscal 1999, the Company wrote off equipment with an original cost of
$885,000 and accumulated depreciation of $757,000 in connection with the
upgrading of its manufcturing processes and the remodeling of its office space.
The Company also disposed of equipment with an original cost of $73,000 and
accumulated depreciation of $33,000 in connection with these activities. During
fiscal 1998, the Company paid in full its lease obligations to the bank that had
been providing the Company with its

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS (CONTINUED)

line of credit (See Note 7), and disposed of equipment having an original cost
and accumulated depreciation of approximately $691,000. During fiscal 1997, the
Company wrote off $80,000 of net book value of leasehold improvements in
connection with its move to new facilities.

Depreciation expense (including amortization of equipment under capital
lease) for fiscal 1999, 1998 and 1997 was approximately $1,057,000, $1,035,000
and $831,000, respectively. Depreciation expense for the twelve months ended
March 31, 1997 was approximately $956,000.

5. 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 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 July 1, 1997, the aforementioned transaction was completed. In order to
remove certain guarantees of equipment subleased to DCI, Centennial executed
lease buyouts amounting to approximately $2.4 million and sold the underlying
equipment to Century for cash and a $1.9 million 9% promissory note due December
1998.

On February 4, 1998, the Company entered into a transaction with Century
whereby Century redeemed the Company's remaining holdings of Century common
stock, repurchased its $1.9 million 9% promissory note due December 1998,
recovered a warrant for the purchase of 250,000 shares of Century common stock,
and satisfied its $6 million 6% Convertible Subordinated Debenture due June
2007, in exchange for $9.7 million in cash and $4.0 million of Century Series B
Convertible Preferred Stock and the forgiveness of interest due on the note and
debenture. The Series B Convertible Preferred Stock is equivalent upon
conversion to approximately 7%, non-diluted, of Century's outstanding shares, is

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC. (CONTINUED)

non-voting, has no dividend, and has a liquidation preference of $4 million
senior to the common shareholders and subordinate to the holders of Century
Series A Convertible Preferred Stock. The Company recorded a loss on investment
activities of $5.1 million during fiscal 1998 to reflect the difference between
the fair value of the consideration received from Century and the carrying value
of the Company's investment in Century.

During fiscal 1999, the Company reduced the carrying value of its investment
in Century by $733,000 to $1.7 million, reflecting management's assessment of
the deterioration in value of contract manufacturing businesses in general and a
permanent decline in the value of its investment.

The Company had sales to Century of $120,000 during fiscal 1997, but no
sales to this entity thereafter.

6. OTHER INVESTMENTS

VIA, INC.

In December 1996, the Company issued 156,000 unregistered shares of its
Common Stock in exchange for a 12% interest in ViA, Inc., a development stage
privately held technology company that designs, develops, and markets miniature
communication and computing products. Due to the significance of the Company's
investment to ViA's total capitalization and on the basis of the complementary
nature of the companies' products and related development plans, the Company
accounted for this investment during fiscal 1997 using the equity method, and
amortized the purchase price in excess of its interest in the investee's
underlying net assets, which excess amounted to $5.0 million, over 60 months.
The Company recorded this amortization, as well as its share of the investee's
losses from the date of the investment through March 31, 1997, for an aggregate
amount of $585,000, as loss on investment activities. During fiscal 1998, the
Company reserved the remaining carrying value of its investment, and recorded a
loss on investment activities during fiscal 1998 related thereto of
approximately $4.4 million.

INTELLIGENT TRUCK PROJECT, INC., FLEET.NET, INC. AND SMART TRAVELER PLAZAS,
INC.

On December 13, 1996, the Company entered into merger agreements with
Intelligent Truck Project, Inc., Fleet.Net, Inc. and Smart Traveler Plazas, Inc.
(collectively, "ITP/Fleet.Net") agreeing to exchange an aggregate of 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 1997 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

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. OTHER INVESTMENTS (CONTINUED)

advances were made. The merger has been recorded using purchase accounting, and
the excess (approximately $3.0 million) of the purchase price over the fair
value of assets acquired was written off as of the agreement date (May 15, 1997)
because of the uncertainties related to the future operations of ITP/ Fleet.Net.

INFOS INTERNATIONAL, INC.

During fiscal 1997, the Company acquired a 38% interest in Infos
International, Inc. ("Infos"), a supplier of intelligent hand held data
collection equipment for route and shop floor accounting. The purchase price
amounted to approximately $3.0 million in cash and 230,000 shares of Centennial
Common Stock having a fair market value of $3.9 million at date of acquisition.
On February 6, 1998, the Company, Infos and shareholders of Infos entered into a
transaction whereby the Company agreed to return its shares of Infos capital
stock in exchange for an agreement to sell Infos inventory and equipment arising
from the contract manufacturing relationship between Infos and Century, which
relationship was terminated. The parties also agreed to exchange mutual releases
of any claims arising from the original acquisition agreement. Accordingly, the
full amount of the investment cost ($7.0 million) has been written off. The
recorded loss of $6.0 million reflects the use by Infos of $1.0 million of the
original cash proceeds to repay an obligation of that amount due to Centennial
from an Infos subsidiary, Information Capture Corporation ("ICC"). This
obligation originally arose in fiscal 1995, prior to Infos acquiring ICC, in
connection with a sales transaction that was determined in the Company's special
investigation not to be bona fide. The effect of the adjustment is to reflect
$1.0 million of the investment cost as a reduction of sales and net income in
fiscal 1995 and the remainder as loss on investment activities in fiscal 1997.

INDUSTRIAL IMAGING, INC.

The Company purchased for $730,000 in cash and conversion of $200,000 of
notes a minority interest in Industrial Imaging, Inc. which designs,
manufactures and markets automated optical vision and individual imaging systems
for inspection and identification of defects in printed circuit boards. In
addition, effective April 1, 1996 and expiring June 30, 1997, the Company agreed
to provide procurement services and buy material using the Company's credit
arrangements for a service fee of $200,000. Purchases aggregating $1.4 million
were made on behalf of the investee and were initially reflected by the Company
as sales with an equivalent amount of cost of goods sold. Such sales have been
reversed in connection with the Company's financial review. During fiscal 1997,
the Company determined that the investee was unable to repay the Company for the
material purchased, and also determined that the value of the equity investment
was permanently impaired. The Company has agreed to convert its accounts
receivable into common stock of the investee and has recorded a valuation
reserve equal to the carrying value of the investment. During fiscal 1998, the
Company sold its investment in Industrial Imaging, Inc. for $550,000.

WEBSECURE, INC.

During fiscal 1996 the Company purchased for $569,000 a minority interest in
WebSecure, Inc. ("WebSecure"), a corporation that provided Internet services.
The former president and a shareholder of WebSecure was a Director of the
Company from February 1994 through November 1995. In connection with WebSecure's
initial public offering, the Company realized a gain of $1.2 million from the
sale of a portion of its investment; however, based upon the WebSecure
shareholder complaints and related litigation described in Note 14, the Company
provided a reserve in an amount equal to this gain. The

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. OTHER INVESTMENTS (CONTINUED)

remaining investment, having a cost of $560,000, was fully reserved as of March
31, 1997 on the basis that its value appeared to have been permanently impaired.
During fiscal 1998, the Company sold this remaining investment for $125,000.

OTHER INVESTMENTS

The Company's analysis of the future viability of several development stage
businesses in which the Company invested during fiscal 1998, 1997 and 1996,
combined with the Company's decision to continue to focus its financial
resources on its core business, led the Company to reserve fully the carrying
value of its investments in these development stage companies. As of March 31,
1999 and 1998, the only remaining investment with a carrying value greater than
zero was the Company's remaining investment in Series B Preferred Stock of its
former affiliate, Century Electronics Manufacturing, Inc., valued at
approximately $1.7 million as of March 31, 1999 and $2.4 million as of March 31,
1998.

During fiscal 1996, the Company purchased for $250,000 a minority interest
in a corporation which designs, manufactures and markets small form factor
computer hard drives. This technology, when and if implemented, could be used to
increase the speed and processing capabilities of PC cards. During fiscal 1998
and 1997, the Company increased its investment by $96,000 and $164,000,
respectively.

During fiscal 1997 and 1996, the Company made investments aggregating
$860,000 in development stage businesses that have not yet reached commercial
viability. Such investments have been fully reserved as of March 31, 1997.

7. DEBT

On August 14, 1997, the Company entered into a credit agreement, effective
through August 13, 2000 unless terminated sooner, 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. This arrangement contained
certain limitations and covenants, the most restrictive of which is a minimum
net worth requirement. Allowable borrowings were based on available accounts
receivable and the cost of equipment, and were collateralized 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. At March 31, 1998, the Company
had no outstanding borrowings under these credit facilities.

On November 24, 1998, the Company terminated its credit agreement with
Congress Financial and entered into a new credit agreement with Fleet National
Bank ("Fleet") for a revolving credit facility, equipment term loan facility and
foreign exchange facility of $3.5 million, $1.5 million and $2.0 million,
respectively. This arrangement contains certain limitations and covenants, the
most restrictive of which is a covenant regarding the maintenance of the
Company's liquidity, as defined. Allowable borrowings are based on accounts
receivable and the cost of equipment, are secured by substantially all of the
Company's assets. At March 31, 1999, the Company had no outstanding borrowings
under either of these credit agreements.

LEASES

The Company leased certain equipment under three year lease financing
agreements with the bank that was providing the Company with its line of credit
prior to August 14, 1997. These lease arrangements

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. DEBT (CONTINUED)

have been accounted for as financing transactions. The subject equipment is
recorded as an asset for financial statement purposes, and is being depreciated
accordingly. On August 15, 1997, the Company paid in full its lease obligations
to the bank that had been providing the Company with its line of credit.

The Company leases its facilities under operating leases with renewal
options, which expire at various dates through fiscal 2003. The lease on the
Company's headquarters and manufacturing facility contains an option to renew
for an additional five-year period, provides for annual rent increases of 4% and
provides that the Company will pay to its landlord as additional rent its pro
rata share of certain operational and maintenance costs at the facility during
the term of the lease.

At March 31, 1999, the minimum annual rental commitments under
non-cancelable operating lease obligations are as follows (in thousands):

Year ending March 31,
2000................................................................. $ 267
2001................................................................. 261
2002................................................................. 254
2003................................................................. 20
2004 and thereafter.................................................. --
---------
Total minimum lease payments......................................... $ 802
---------
---------

Rental expense under operating leases totaled approximately $250,000,
$427,000 and $312,000 in fiscal 1999, 1998 and 1997, respectively.

8. INCOME TAXES

The income/(loss) before income taxes consisted of the following (in
thousands):

YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
----------- ---------- ------------

U.S..................................................... $ 2,842 $ (22,609) $ (42,104)
Foreign................................................. 20 -- 334
----------- ---------- ------------
$ 2,862 $ (22,609) $ (41,770)
----------- ---------- ------------
----------- ---------- ------------

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)

The provision for income taxes consisted of the following (in thousands):

YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
------------- ----------- ---------------

Current:
Federal............................................... $ 40 $ -- $ --
State................................................. 9 -- --
Foreign............................................... 7 -- --
--- ----- -----
Total current....................................... $ 56 $ -- $ --
--- ----- -----
--- ----- -----
Provision for income taxes.............................. $ 56 $ -- $ --
--- ----- -----
--- ----- -----

The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to loss before income taxes as follows:

YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
----------- ----------- ---------------

Tax provision (benefit) at U.S. statutory rates......... 34.0% (34.0)% (34.0)%
State taxes net of federal benefit...................... 6.4 (3.4) (6.1)
Change in valuation allowance........................... (40.0) 37.5 39.8
Alternative minimum tax................................. 1.6 -- --
Other................................................... -- (0.1) 0.3
----- ----- -----
2.0% --% --%
----- ----- -----
----- ----- -----

The components of deferred income taxes are as follows (in thousands):

MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
---------- ---------- ----------

Allowance for doubtful accounts........................... $ 406 $ 230 $ 95
Notes receivable reserve.................................. 349 349 391
Inventory reserve and capitalization...................... 581 1,557 1,065
Investment reserve........................................ 5,648 5,355 5,235
Accrued expenses.......................................... 1,410 1,378 139
Equipment, net............................................ 371 211 276
Net operating losses...................................... 19,970 20,633 15,497
Capital loss carryforward................................. 1,473 1,473 --
---------- ---------- ----------
30,208 31,186 22,698
Less valuation allowance.................................. (30,208) (31,186) (22,698)
---------- ---------- ----------
Net deferred taxes........................................ $ -- $ -- $ --
---------- ---------- ----------
---------- ---------- ----------

Management of the Company has evaluated the positive and negative evidence
bearing upon the realizability of its deferred tax assets, which are comprised
principally of net operating losses and reserves.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)

Management has considered the Company's history of losses and concluded that
there is insufficient evidence that it is more likely than not that the Company
will generate future taxable income prior to the expiration of these net
operating losses in 2013. Accordingly, the deferred tax assets have been fully
reserved.

At March 31, 1999, the Company had federal net operating loss carryforwards
of approximately $50.9 million available to offset future taxable income
expiring in 2009 through 2013, and federal capital loss carryforwards of
approximately $4.3 million, which will expire in 2013. Approximately $2.1
million of the Company's net operating loss is attributable to the exercise of
stock options which, when utilized, will be credited as additional paid-in
capital. Additionally, the Company has a net operating loss of approximately
$1.3 million available to offset future taxable income in foreign jurisdictions.

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (in
thousands):

MARCH 31, MARCH 31,
1999 1998
----------- -----------

Trade accounts payable................................................. $ 1,720 $ 2,004
Accrual related to WebSecure litigation................................ 1,200 1,200
Accrued special investigation costs.................................... 1,197 1,554
Other accrued expenses................................................. 2,955 3,312
----------- -----------
Total accounts payable and accrued expenses.......................... $ 7,072 $ 8,070
----------- -----------
----------- -----------

Accrued special investigation costs represent professional and legal fees in
connection with the completion of the Company's special investigation, certain
refinancing activities, and legal fees associated with the shareholder
litigation. See Note 14.

10. STOCKHOLDERS' EQUITY

The Company is authorized to issue up to 950,000 shares of $0.01 par value
preferred stock without further stockholder approval with such additional
designations, powers, preferences, rights, qualifications, limitations and
restrictions as may be designated by the Company's Board of Directors from time
to time.

On March 16, 1999, the Board of Directors of the Company, declared a
dividend of one Right for each outstanding share of the Company's Common Stock
to stockholders of record at the close of business on March 31, 1999 (the
"Record Date"). Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series A Junior Participating Preferred
Stock, $.01 par value per share (the "Preferred Stock"), at a Purchase Price of
$6.00 in cash, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement dated as of March 16, 1999 (the "Rights
Agreement") between the Company and American Securities Transfer & Trust, Inc.,
as Rights Agent.

The Rights attach to all Common Stock certificates representing outstanding
shares. The Rights will separate from the Common Stock and a Distribution Date
will occur upon the earlier of (i) 10 business days (or such later date as may
be determined by the Board of Directors of the Company) following the later of
(a) a public announcement that a person or group of affiliated or associated
persons (an

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCKHOLDERS' EQUITY (CONTINUED)

"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock or (b) the
first date on which an executive officer of the Company has actual knowledge
that an Acquiring Person has become such (the "Stock Acquisition Date"), or (ii)
10 business days (or such later date as may be determined by the Board of
Directors of the Company) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of such outstanding shares of Common Stock. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be evidenced by
the Common Stock certificates and will be transferred with and only with such
Common Stock certificates.

The Rights are not exercisable until the Distribution Date and will expire
upon the close of business on March 16, 2009 (the "Final Expiration Date")
unless earlier redeemed or exchanged as described below.

In the event that any Person becomes an Acquiring Person, then, at such time
as the Rights are no longer redeemable by the Company as described below, each
holder of a Right (except as provided below and in Section 7(e) of the Rights
Agreement) shall thereafter have the right to receive, upon exercise, that
number of shares of Common Stock of the Company (or, in certain circumstances,
cash, property or other securities of the Company) which equals the exercise
price of the Right divided by 50% of the current market price (as defined in the
Rights Agreement) per share of Common Stock at the date of the occurrence of
such event. Following the occurrence of such event, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void. At any time
after a Person becomes an Acquiring Person, subject to certain conditions, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such Acquiring Person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-thousandth of a share
of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).

In the event that, at any time after any Person becomes an Acquiring Person,
(i) the Company is consolidated with, or merged with and into, another entity
and the Company is not the surviving entity of such consolidation or merger or
if the Company is the surviving entity, but shares of its outstanding Common
Stock are changed or exchanged for stock or securities (of any other person) or
cash or any other property, or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, that number of shares of common stock of the
acquiring company which equals the exercise price of the Right divided by 50% of
the current market price of such common stock at the date of the occurrence of
the event. The events summarized in this paragraph are referred to as "Section
13 Events." A Section 11(a)(ii) Event and Section 13 Events are collectively
referred to as "Triggering Events."

The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution. The number of Rights
associated with each share of Common Stock is also subject to adjustment in the
event of a stock split or reverse stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCKHOLDERS' EQUITY (CONTINUED)

Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors, a minimum preferential quarterly
dividend payment of $10 per share or, if greater, an aggregate dividend of 1,000
times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1,000 per share and will be entitled to an
aggregate payment of 1,000 times the payment made per share of Common Stock.
Each share of Preferred Stock will have 1,000 votes, voting together with the
Common Stock. In the event of any merger, consolidation or other transaction in
which Common Stock is changed or exchanged, each share of Preferred Stock will
be entitled to receive 1,000 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions. Because
of the nature of the Preferred Stock's dividend, liquidation and voting rights,
the value of one one-thousandth of a share of Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Common
Stock.

At any time prior to the earlier of (i) the tenth business day (or such
later date as may be determined by the Board of Directors of the Company) after
the Stock Acquisition Date, or (ii) the Final Expiration Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"), payable in cash or stock. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price. The Rights may also be redeemable following certain other
circumstances specified in the Rights Agreement.

Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.

Subject to certain exceptions, any of the provisions of the Rights Agreement
may be amended by the Board of Directors of the Company prior to such time as
the Rights are no longer redeemable.

11. STOCK OPTION PLANS

Under the Company's 1994 Stock Option Plan (the "Plan"), incentive and
non-qualified stock options may be granted to employees, officers, directors and
consultants of the Company. The Company initially reserved 900,000 shares of
Common Stock for issuance under the Plan. During fiscal 1996, the amount
reserved for issuance was increased to 1,500,000 shares, during fiscal 1997, the
amount reserved for issuance was increased to 3,000,000 shares, and during
fiscal 1999 the amount reserved for issuance was increased to 6,000,000 shares.
These options generally vest over a three-year period and expire after 10 years.

On December 6, 1994, the Company's stockholders adopted a formula stock
option plan (the "Formula Plan"), which is designed to provide certain
incentives to non-employee directors. Under the Formula Plan, options will be
granted pursuant to a formula that determines the timing, pricing and amount of
the option awards using objective criteria. The Company has reserved 300,000
shares of Common Stock for issuance under the Formula Plan. The exercise price
of the options granted to a

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. STOCK OPTION PLANS (CONTINUED)

non-employee director upon election as a director was 85% of the fair market
value of the shares of Common Stock on the date of the grant. During fiscal
1997, the Formula Plan was amended to provide that options are granted at fair
market value. These options vest and are exercisable on the date of grant and
expire after 5 years. All other options granted under the Formula Plan vest and
are exercisable one year from the date of the grant. During fiscal 1998, a
non-employee director was granted options to purchase 15,000 shares at $3.50 per
share. During fiscal 1999, non-employee directors were granted options to
purchase 51,000 shares at $.75 per share.

In addition, during fiscal 1998, the Company granted options to acquire
1,045,000 shares outside of the Company's stock option plans, exercisable at
prices ranging from $1.625 to $3.50 per share, of which 200,000 options were
granted to four non-employee directors and the balance to employees of the
Company; the vesting period for these options range from immediately upon grant
to three years, and the options expire in ten years.

FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires
that companies either recognize compensation expense for grants of stock, stock
options, and other equity instruments based on fair value, or provide pro forma
disclosure of net income and earnings per share in the notes to the financial
statements. The Company adopted the disclosure provisions of Statement No. 123
in fiscal 1997 and has applied APB 25 and related Interpretations in accounting
for its plans. Compensation costs of $0, $0 and $34,000 were recognized for
fiscal 1999, 1998 and 1997, respectively. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates as calculated in accordance with Statement No. 123, the
Company's net loss and net loss per share for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997 would have been
increased to the pro forma amounts indicated below:

1999 1998 1997
-------------------------------------- --------------------------- ---------------------------
NET INCOME/(LOSS) NET INCOME/(LOSS) NET LOSS NET LOSS NET LOSS NET LOSS
(IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE
----------------- ------------------- -------------- ----------- -------------- -----------

As Reported................... $ 2,806 $ .12 $ (22,609) $ (1.22) $ (41,770) $ (2.41)
Pro forma..................... $ (1,966) $ (.08) $ (29,869) $ (1.62) $ (47,699) $ (2.75)

The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: an expected life of 5 years for grants prior to April 1, 1998, and
3 years for fiscal 1999, expected volatility of 55% for grants prior to April 1,
1997, 100% for fiscal 1998 and 141% for fiscal 1999, no dividends and a
risk-free interest rate of 6.0%, 6.0% and 6.2% for the twelve months ended March
31, 1999 and 1998 and the nine months ended March 31, 1997, respectively.

The effects on fiscal 1999, 1998, and 1997 pro forma net income/(loss) and
net income/(loss) per share of expensing the estimated fair value of stock
options are not necessarily representative of the effects on reported net
income/(loss) for future years due to such things as the vesting period of the
stock options and the potential for issuance of additional stock options and
stock in future years.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. STOCK OPTION PLANS (CONTINUED)

A summary of the status of the Company's stock option plans as of March 31,
1999, 1998 and 1997 and changes during the years ending on those dates is
presented below:

MARCH 31, 1998 MARCH 31, 1997
MARCH 31, 1999 -------------------------- -------------------------
---------------------------- WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
AVERAGE EXERCISE EXERCISE
EXERCISE PRICE PRICE PRICE
NUMBER PER SHARE NUMBER PER SHARE NUMBER PER SHARE
----------- --------------- ----------- ------------- ---------- -------------

Options outstanding at beginning of
period............................ 2,932,000 1,779,600 986,200
Granted............................. 4,273,550 $ .80 2,581,000 $ 2.08 1,075,100 $ 21.78
Exercised........................... 0 $ -- (112,400) $ 1.75 (281,100) $ 12.60
Cancelled........................... (3,179,650) $ 1.82 (1,316,200) $ 16.42 (600) $ 2.77
----------- ----- ----------- ------ ---------- ------
Outstanding at period end........... 4,025,900 $ 1.64 2,932,000 $ 3.04 1,779,600 $ 14.26
Options exercisable at period end... 843,520 352,012 569,330
Weighted average fair value of
options granted during the year... $ .59 $ 1.61 $ 11.79

The following table summarizes information about stock options outstanding
at March 31, 1999:

OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED-AVERAGE OPTIONS EXERCISABLE
REMAINING ------------------------------
RANGE OF NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------------------- ----------- ---------------- ----------------- ----------- -----------------

$.33 - $.49...................... 5,000 9.5 years .43 0 --
$.50 - $.75...................... 3,137,600 8.6 years .65 45,000 .75
$.76 - $1.14..................... 126,500 9.3 years 1.12 125,500 1.12
$1.55 - $2.33.................... 217,500 8.2 years 2.30 145,000 2.30
$2.34 - $3.50.................... 235,300 7.6 years 3.40 235,300 3.40
$6.00 - $9.00.................... 233,000 0.9 years 7.49 221,720 7.42
$10.00 - $15.00.................. 15,000 2.3 years 12.89 15,000 12.89
$20.00 - $30.00.................. 56,000 7.5 years 21.48 56,000 21.48
----------- -------- ----- ----------- -----
$.33 - $30.00.................... 4,025,900 7.9 years 1.64 843,520 5.16

During fiscal 1998, the exercise price of options granted on October 1, 1996
to purchase approximately 488,000 shares of Common Stock were repriced from
$20.53 to $2.30, and the vesting period for exercise of such options was
extended.

During fiscal 1999, the exercise price of options to purchase approximately
2,846,700 shares of Common Stock were repriced to $.65 from a range between $.68
and $13.875 through cancellation and reissuance of new options. These options
cannot be exercised until the later of July 1, 1999 or the date said options
were initially scheduled to vest.

During fiscal 1999, the Company established a 1999 Employee Stock Purchase
Plan (the "ESPP") that provides for the grant of rights to eligible employees to
purchase up to 200,000 shares of the Company's

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. STOCK OPTION PLANS (CONTINUED)

Common Stock at 85% of the fair market value of the Common Stock at the end of
the established offering period. There were no shares issued under the ESPP in
fiscal 1999.

12. RELATED PARTY TRANSACTIONS

During fiscal 1998, the Company agreed to forgive the remaining balance of a
loan initially made to an executive officer during fiscal 1996. The remaining
loan balance was approximately $32,000.

13. SAVINGS PLAN

In fiscal 1994, the Company established a 401(k) Savings Plan under which
substantially all U.S. employees may voluntarily defer a portion of their
compensation and the Company may elect to match a portion of the employee
deferral. The Company made contributions of $29,000 to the plan related to
contributions by employees during fiscal 1999. For fiscal 1998 and 1997, the
Company made no contributions to this plan.

14. 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 former 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").

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. CONTINGENCIES (CONTINUED)

On February 9, 1998, a consolidated amended complaint combining the
Centennial Securities Litigation, the February 25 Securities Litigation, the
February 27 Securities Litigation and the Derivative Litigation was filed in the
United States District Court for the District of Massachusetts (the
"Consolidated Litigation"). Also on February 9, 1998, the Company and lead
counsel representing the plaintiffs in the Consolidated Litigation filed a
Stipulation of Settlement (the "Settlement Agreement"), whereby the Company and
certain of its officers and directors would be released from liability arising
from the allegations included in the Consolidated Litigation. In return, the
Company agreed to pay the plaintiffs in the Consolidated Litigation $1.475
million in cash and to issue to these plaintiffs 37% of the Company's Common
Stock. The Company also agreed to adopt certain corporate governance policies
and procedures.

The Court granted final approval of the Settlement Agreement of the
Consolidated Litigation on April 29, 1998 and the Settlement Agreement became
effective on July 20, 1998. All shares issuable in connection with the
Consolidated Litigation are included in the weighted average shares outstanding
calculation from July 20, 1998 forward.

CENTENNIAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. CONTINGENCIES (CONTINUED)

On November 13, 1998, the Company reached an agreement to settle the
WebSecure Securities Litigation. The settlement agreement contemplates that the
Company and certain of its officers and directors would be released from any and
all liability arising from the allegations included in the WebSecure Securities
Litigation in return for the issuance to the WebSecure Securities Litigation
class of 345,000 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The settlement
agreement must be submitted to the Court for review and approval and,
thereafter, presented to class members for consideration. If a sufficiently
large number of class members opt not to participate in the settlement
agreement, the agreement may by withdrawn. No assurance can be given that the
Court will approve the settlement agreement, or that, if such approval is
obtained, that a material number of class members will not decline to
participate in the settlement.

CENTENNIAL TECHNOLOGIES, INC.

VALUATION AND QUALIFYING ACCOUNTS

FOR THE TWELVE MONTHS ENDED MARCH 31, 1999 AND 1998,
AND THE NINE MONTHS ENDED MARCH 31, 1997

SCHEDULE II

BALANCE AT
BEGINNING CHARGED TO CHARGED TO
OF COSTS AND OTHER BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ---------------------------------------------- ----------- ----------- ------------- ----------- --------------

Accounts receivable allowance
Fiscal 1999................................. $ 868 $ 170 $ 243 $ 795
Fiscal 1998................................. 692 588 412 868
Nine months ended March 31, 1997............ 375 400 83 692
Notes receivable reserve
Fiscal 1999................................. $ 971 $ 0 $ 971
Fiscal 1998................................. 971 0 971
Nine months ended March 31, 1997............ 871 100 971
Investment reserve
Fiscal 1999................................. $ 13,095 $ 0 $ 13,095
Fiscal 1998................................. 8,669 4,426 13,095
Nine months ended March 31, 1997............ 646 8,023 8,669
Inventory reserve
Fiscal 1999................................. $ 3,485 $ 0 $ 2,114 $ 1,371
Fiscal 1998................................. 2,083 2,676 1,274 3,485
Nine months ended March 31, 1997............ 2,040 1,202 1,159 2,083

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

In June 1998, the Company requested proposals from several independent
accounting firms to provide auditing and tax services. On July 6, 1998, the
Company's former independent accountants, PricewaterhouseCoopers LLP ("PwC"),
advised the Company that they did not intend to submit a proposal. On July 7,
1998, the Company selected Ernst & Young and engaged them as independent
auditors. The selection of accountants was made by the Audit Committee of the
Board of Directors of the Company. None of the reports of PwC on the financial
statements of the Company for either of the past two fiscal years contained an
adverse opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles. The report on the financial
statements for the nine month period ended March 31, 1997 noted that significant
and recurring losses from operations, accumulated deficit and the absence of a
final shareholder settlement raised substantial doubt about the Company's
ability to continue as a going concern.

In connection with its audit for Fiscal 1998 and through July 6, 1998, there
were no disagreements with PwC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement if not resolved to the satisfaction of PwC would have caused them
to make reference thereto in their report on the financial statements for such
years, except as set forth in the following paragraphs.

On January 29, 1997, prior to the Company's announcement of its results for
the quarter ended December 31, 1996, PwC met with management and raised
questions regarding the treatment of certain accounting transactions which were
included in the Company's results. Management agreed to communicate with the
Audit Committee and then with PwC prior to announcing earnings. On January 30,
1997, the Company announced the quarter's earnings, which included the
questioned amounts without informing PwC. As a result of the announcement, PwC
requested a meeting with the Audit Committee to discuss the disagreements. PwC
informed the Audit Committee that they would need to perform extensive
procedures to obtain sufficient information to address the issues raised in the
disagreements, and that, if the Company was not willing to authorize such
procedures, PwC would be required to contact the Securities and Exchange
Commission and inform them of the potential misstatement of results. The Audit
Committee directed PwC to expand its procedures, which PwC began immediately.

On February 10, 1997, the Company's Board of Directors reviewed information
that raised significant questions as to whether previously reported financial
results contained material misstatements. A special committee consisting of
independent members of the Company's Board of Directors, with the assistance of
outside counsel and PwC, conducted an investigation regarding the financial
statements and business affairs of the Company. The results of the
investigation, which included significant restatements of financial statements
for the Fiscal 1994 through Fiscal 1996 and interim periods during Fiscal 1997,
are more fully described in the Company's Form 10-K/A filed in April 1998.

PART III

Items 10 to 13 are incorporated herein by reference to the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission.

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)(1) Financial Statement. The financial statements required to be filed by
Item 8 are as follows:

PAGE
----

Report of Independent Auditors............................................. 31

Consolidated Balance Sheets as of March 31, 1999 and 1998.................. 33

Consolidated Statements of Operations for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997.................. 34

Consolidated Statements of Stockholders' Equity for the twelve months ended
March 31, 1999 and 1998, and the nine months ended March 31, 1997........ 35

Consolidated Statements of Cash Flows for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997.................. 36

Notes to Consolidated Financial Statements................................. 37

(a)(2)Financial Statement Schedules. The financial statement schedule
required to be filed herewith is included in Item 8 of this report:
Schedule II--Valuation and Qualifying Accounts, page 46.

All other schedules have been omitted either because they are not required
or the information is included in the financial statements.

(a)(3)Exhibits.

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

3.1 -- Certificate of Incorporation (originally filed as Exhibit 3a)...................... (3)

3.2 -- Certificate of Amendment to the Certificate of Incorporation....................... (1)

3.3 -- Amended and Restated By-Laws....................................................... (2)

3.4 -- Shareholder Voting Agreement between Centennial Technologies, Inc. and the
Shareholders who are a party thereto, dated November 27, 1996...................... (1)

3.5 -- Certificate of Designations for Preferred Stock.................................... Filed Herewith

4.1 -- Specimen Stock Certificate......................................................... (2)

4.2 -- Rights Agreement, dated as of March 16, 1999....................................... Filed Herewith

10.1 -- Form of the Company's Domestic Distributor Agreement between the Company and its
domestic distributors (originally filed as Exhibit 10.10).......................... (3)

10.2 -- Form of the Company's Agreement with its Manufacturer's Representatives (originally
filed as Exhibit 10.11)............................................................ (3)

10.3 -- Investment and Stockholders Agreement by and between Centennial Technologies, Inc.
and ViA, Inc., dated November 27, 1996 (originally filed as Exhibit 10.13)......... (1)

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K (CONTINUED)

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

10.4 -- 1994 Stock Option Plan, as amended (originally filed as Exhibit 10.1).............. (4)

10.5 -- 1994 Formula Stock Option Plan, as amended (originally filed as Exhibit 10.2)...... (4)

10.6 -- 1999 Employee Stock Purchase Plan.................................................. Filed Herewith

10.7 -- Key Employee Agreement between Centennial Technologies, Inc. and Donald R. Peck,
dated February 1, 1997 (originally filed as Exhibit 10.18)......................... (1)

10.8 -- Agreement to Provide Interim Management and Consulting Services Between Centennial
Technologies, Inc. and Jay Alix & Associates, dated February 17, 1997 (originally
filed as Exhibit 10.19)............................................................ (1)

10.9 -- Lease Agreement by and between Centennial Technologies, Inc. and Michael A.
Howland, as Trustee of the Hownat Trust, dated April 17, 1997 (originally filed as
Exhibit 10.27)..................................................................... (5)

10.10 -- Employment Agreement between Centennial Technologies, Inc. and L. Michael Hone,
effective August 19, 1997 (originally filed as Exhibit 10.31)...................... (6)

10.11 -- Key Employee Agreement between Centennial Technologies, Inc. and Richard N. Stathes
dated September 15, 1997 (originally filed as Exhibit 10.32)....................... (6)

10.12 -- Key Employee Agreement between Centennial Technologies, Inc. and Jacques Assour
dated as of April 1, 1998 (originally filed as Exhibit 10.1)....................... (7)

10.13 -- Letter Agreement between Centennial Technologies, Inc. and John C. Nugent dated as
of January 12, 1998 (originally filed as Exhibit 10.2)............................. (7)

10.14 -- $3,500,000 Revolving Note, dated November 20, 1998, made by Centennial
Technologies, Inc. and payable to the order of Fleet National Bank (originally
filed as Exhibit 10.3)............................................................. (7)

10.15 -- $1,500,000 Term Note, dated November 20, 1998, made by Centennial Technologies,
Inc. and payable to the order of Fleet National Bank (originally filed as Exhibit
10.4).............................................................................. (7)

10.16 -- Letter Agreement, dated November 20, 1998, by and between Centennial Technologies,
Inc. and Fleet National Bank (originally filed as Exhibit 10.5).................... (7)

10.17 -- Letter Agreement between Centennial Technologies, Inc. and John J. McDonald dated
January 20, 1998................................................................... (8)

10.18 -- Executive Retention Agreement between Centennial Technologies, Inc. and L. Michael
Hone dated as of February 26, 1999................................................. Filed Herewith

10.19 -- Executive Retention Agreement between Centennial Technologies, Inc. and Richard N.
Stathes dated as of February 26, 1999.............................................. Filed Herewith

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K (CONTINUED)

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

10.20 -- Executive Retention Agreement between Centennial Technologies, Inc. and Jacques
Assour dated as of February 26, 1999............................................... Filed Herewith

10.21 -- Executive Retention Agreement between Centennial Technologies, Inc. and Donald R.
Peck dated as of February 26, 1999................................................. Filed Herewith

10.22 -- Executive Retention Agreement between Centennial Technologies, Inc. and Kathleen C.
Little dated as of February 26, 1999............................................... Filed Herewith

10.23 -- Executive Retention Agreement between Centennial Technologies, Inc. and John C.
Nugent dated as of February 26, 1999............................................... Filed Herewith

10.24 -- Letter Agreement between Centennial Technologies, Inc. and Kathleen C. Little dated
March 31, 1999..................................................................... Filed Herewith

21 -- Schedule of Subsidiaries........................................................... Filed Herewith

24.1 -- Consent of Ernst & Young LLP, Independent Auditors................................. Filed Herewith

24.2 -- Consent of PricewaterhouseCoopers LLP, Independent Auditors........................ Filed Herewith

27 -- Financial Data Schedule............................................................ Filed Herewith

(1) Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K/A filed with the Securities and Exchange Commission (the
"Commission") on April 28, 1998.

(2) Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form 8-A filed with the Commission on November 19, 1998.

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

(4) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on November 6, 1998.

(5) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on August 14, 1997.

(6) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on February 10, 1997.

(7) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on February 8, 1998.

(8) Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K filed with the Commission on August 14, 1997.

(b) Reports on Form 8-K. During the last quarter of the period covered by
this report, the Company filed a Form 8-K on March 30, 1999 regarding the
Company's Shareholder Rights Plan.

SIGNATURES

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

CENTENNIAL TECHNOLOGIES, INC.

Dated: June 4, 1999 By: /s/ L. MICHAEL HONE
-----------------------------------------
L. Michael Hone
PRESIDENT AND CHIEF EXECUTIVE OFFICER

IN ACCORDANCE WITH THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

NAME CAPACITY DATE
- ------------------------------ --------------------------- -------------------

President, Chief Executive
/s/ L. MICHAEL HONE Officer
- ------------------------------ and Director (Principal June 4, 1999
L. Michael Hone Executive Officer)

/s/ WILLIAM J. SHEA Chairman of the Board
- ------------------------------ June 4, 1999
William J. Shea

/s/ EUGENE M. BULLIS Director
- ------------------------------ June 4, 1999
Eugene M. Bullis

/s/ STEVEN M. DEPERRIOR Director
- ------------------------------ June 4, 1999
Steven M. DePerrior

/s/ JAY M. EASTMAN Director
- ------------------------------ June 4, 1999
Jay M. Eastman

/s/ DAVID A. LOVENHEIM Director
- ------------------------------ June 4, 1999
David A. Lovenheim

/s/ JOHN J. SHIELDS Director
- ------------------------------ June 4, 1999
John J. Shields

Secretary, Treasurer and
/s/ DONALD R. PECK General Counsel (Acting
- ------------------------------ Principal Financial and June 4, 1999
Donald R. Peck Accounting Officer)