**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

**QUARTERLY REPORT UNDER SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the quarterly period ended June 30,2005**

 

**Commission file number: 001-31816**

 

**Centennial Specialty FoodsCorporation**

(Exact name of smallbusiness issuer as specified in its charter)

 
| **Delaware**                                                    | ** ** | **55-0825751**                     |
|-----------------------------------------------------------------|------------|------------------------------------|
| (State  or other jurisdiction of incorporation or organization) |       | (IRS  Employer Identification No.) |
|                                                            |       |                               |
| **10700 E. Geddes Ave. #170  Centennial, Colorado**             | ** ** | **80112**                          |
| (Address  of principal executive offices)                       |       | (Zip  Code)                        |

 

**(303) 292-4018**

(Issuer’s telephone number)

 

Checkwhether the issuer (1) filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes ý    No o

 

Numbershares of common stock outstanding at the latest practicable date: July 31,2005: **5,050,000.**

 

TransitionalSmall Business Disclosure Format: Yes o    No ý

 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).  o Yes  ý No

 

 

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**INDEX**

 
| PART I – FINANCIAL INFORMATION |                                                                                                                           |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                           |
|                                     | Item 1 – Financial Statements                                                                                             |   |
|                                     |                                                                                                                           |
|                                     | Consolidated Balance Sheets as of  June 30, 2005 (Unaudited) and December 31, 2004                                   |   |
|                                     |                                                                                                                           |   |
|                                     | Consolidated Unaudited  Statements of Operations for the Three and Six Months Ended June 30,  2005 and June 30, 2004 |   |
|                                     |                                                                                                                           |   |
|                                     | Consolidated Unaudited  Statements of Cash Flows for the Six MonthsEnded June 30, 2005                                    |   |
|                                     |                                                                                                                           |   |
|                                     | Notes to Consolidated  Unaudited Financial Statements                                                                          |   |
|                                     |                                                                                                                           |
|                                     | Item 2 – Management’s Discussion and  Analysis or Plan of Operation                                                  |   |
|                                     |                                                                                                                           |   |
|                                     | Item 3 – Controls and Procedures                                                                                          |   |
|                                     |                                                                                                                           |
| PART II – OTHER INFORMATION    |                                                                                                                           |
|                                     |                                                                                                                           |   |
|                                     | Item 1 – Legal Proceedings                                                                                                |   |
|                                     |                                                                                                                           |   |
|                                     | Item 2 – Unregistered Sales of  Equity Securities and Use of Proceeds                                                     |   |
|                                     |                                                                                                                           |   |
|                                     | Item 3 – Defaults Upon Senior  Securities                                                                                 |   |
|                                     |                                                                                                                           |   |
|                                     | Item 4 – Submission of Matters to a Vote  of the Security Holders                                                         |   |
|                                     |                                                                                                                           |   |
|                                     | Item 5 – Other Information                                                                                                |   |
|                                     |                                                                                                                           |   |
|                                     | Item 6 – Exhibits                                                                                                         |   |
|                                     |                                                                                                                           |   |
| Signature  Page                          |                                                                                                                           |
|                                     |                                                                                                                           |   |
| Exhibits                                 |                                                                                                                           |
|                                     |                                                                                                                           |   |
|                                     | Exhibit 10.27 – Third Amendment to  Loan and Security Agreement                                                           |   |
|                                     |                                                                                                                           |   |
|                                     | Exhibit 31.1 – Rule 13a-14(a) Certification of CEO                                                         |   |
|                                     |                                                                                                                           |   |
|                                     | Exhibit 31.2 – Rule 13a-14(a) Certification of CFO                                                         |   |
|                                     |                                                                                                                           |   |
|                                     | Exhibit 32.1 – Section 1350 Certification of CEO                                                                |   |
|                                     |                                                                                                                           |   |
|                                     | Exhibit 32.2 – Section 1350 Certification of CFO                                                                |   |
|                                          |                                                                                                                                |  |  |  |  |  |

 

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**CENTENNIALSPECIALTY FOODS CORPORATION AND SUBSIDIARY**

 

**ConsolidatedBalance Sheets**

 
| ** **                                                                                                                                                                                | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                | ** ** | **(unaudited)**    | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                                                                                                                |       |               |       |                        |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Current assets                                                                                                                                                                            |       |               |       |                        |       |
| Cash and cash equivalents                                                                                                                                                                 |       | $                  | 658,082    |                        | $          | 415,597 |   |
| Accounts receivable, net of allowance for doubtful accounts of $30,403  and $25,483, respectively                                                                                         |       | 164,361            |       | 341,671                     |       |
| Income taxes receivable                                                                                                                                                                   |       | 14,478             |       | 14,478                      |       |
| Inventory, net                                                                                                                                                                            |       | 1,389,158          |       | 1,894,927                   |       |
| Prepaid expenses                                                                                                                                                                          |       | 81,902             |       | 153,219                     |       |
| Total current assets                                                                                                                                                                      |       | 2,307,981          |       | 2,819,892                   |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Non-current assets                                                                                                                                                                        |       |               |       |                        |       |
| Property, plant and equipment, net                                                                                                                                                        |       | 5,811,147          |       | 5,914,186                   |       |
| Goodwill, net                                                                                                                                                                             |       | 1,634,079          |       | 1,634,079                   |       |
| Other assets                                                                                                                                                                              |       | 3,771              |       | 56,488                      |       |
| Total non-current assets                                                                                                                                                                  |       | 7,448,997          |       | 7,604,753                   |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Total assets                                                                                                                                                                              |       | $                  | 9,756,978  |                        | $          | 10,424,645 |   |
| ** **                                                                                                                                                                                |       |               |       |                        |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                                            |       |               |       |                        |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Current liabilities                                                                                                                                                                       |       |               |       |                        |       |
| Accounts payable – trade                                                                                                                                                             |       | $                  | 9,193      |                        | $          | 394,830 |   |
| Accrued liabilities                                                                                                                                                                       |       | 769,267            |       | 800,473                     |       |
| Total current liabilities                                                                                                                                                                 |       | 778,460            |       | 1,195,303                   |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Long-term debt                                                                                                                                                                            |       | 2,525,622          |       | 2,436,387                   |       |
| Deferred tax liability                                                                                                                                                                    |       | —             |       | 77,015                      |       |
| Total long-term liabilities                                                                                                                                                               |       | 2,525,622          |       | 2,513,402                   |       |
| Total liabilities                                                                                                                                                                         |       | 3,304,082          |       | 3,708,705                   |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Commitments and contingencies                                                                                                                                                             |       |               |       |                        |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Stockholders’ equity                                                                                                                                                                 |       |               |       |                        |       |
| Preferred stock (liquidation preference $11,250,000 and $10,750,000,  respectively), 3,000,000 shares authorized, 2,000,000 shares issued and  outstanding, $5 stated value, 10% dividend |       | 2,334,785          |       | 2,334,785                   |       |
| Common stock, $0.0001 par value, 20,000,000 shares authorized, 5,050,000  shares issued and outstanding                                                                                   |       | 505                |       | 505                         |       |
| Additional paid-in capital                                                                                                                                                                |       | 5,794,036          |       | 5,794,036                   |       |
| Accumulated deficit                                                                                                                                                                       |       | (1,676,430         | )          | (1,413,386                  | )          |
| Total stockholders’ equity                                                                                                                                                           |       | 6,452,896          |       | 6,715,940                   |       |
|                                                                                                                                                                                      |       |               |       |                        |       |
| Total liabilities and stockholders’ equity                                                                                                                                           |       | $                  | 9,756,978  |                        | $          | 10,424,645 |   |

 

See notes to unaudited consolidated financialstatements.

 

1

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**CENTENNIAL SPECIALTY FOODSCORPORATION AND SUBSIDIARY**

 

**ConsolidatedUnaudited Statements of Operations**

 
| ** **                                                   | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                   | ** ** | **2005**                                      | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Net sales                                                    |       | $                                             | 929,277    |                                        | $          | 947,064 |   | $ | 1,878,232 |   | $ | 2,074,547 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Cost of goods sold                                           |       | 722,192                                       |       | 873,715                                     |       | 1,436,325 |   | 1,619,890 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Gross profit                                                 |       | 207,085                                       |       | 73,349                                      |       | 441,907 |   | 454,657 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Selling, general and administrative expenses                 |       | 482,674                                       |       | 735,010                                     |       | 1,017,771 |   | 1,312,698 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Loss from operations                                         |       | (275,589                                      | )          | (661,661                                    | )          | (575,864 | ) | (858,041 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Other income (expense)                                       |       |                                          |       |                                        |       |   |   |   |   |
| Interest expense                                             |       | (48,636                                       | )          | (31,223                                     | )          | (95,552 | ) | (143,228 | ) |
| Rent income                                                  |       | 172,776                                       |       | 146,710                                     |       | 331,357 |   | 305,291 |   |
| Total other income                                           |       | 124,140                                       |       | 115,487                                     |       | 235,805 |   | 162,063 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Loss before income taxes                                     |       | (151,449                                      | )          | (546,174                                    | )          | (340059 | ) | (695,978 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Income tax benefit – deferred                           |       | 7,226                                         |       | 202,084                                     |       | 77,015 |   | 257,512 |   |
| Total income tax benefit                                     |       | 7,226                                         |       | 202,084                                     |       | 77,015 |   | 257,512 |   |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Net loss                                                     |       | $                                             | (144,223   | )                                           | $          | (344,090 | ) | $ | (263,044 | ) | $ | (438,466 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Net loss before preferred stock dividends                    |       | $                                             | (144,223   | )                                           | $          | (344,090 | ) | $ | (263,044 | ) | $ | (438,466 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Preferred stock dividends – paid                        |       | —                                        |       | —                                      |       | — |   | (250,000 | ) |
| Preferred stock dividends – arrears                     |       | (250,000                                      | )          | (250,000                                    | )          | (500,000 | ) | (250,000 | ) |
| Total preferred stock dividends                              |       | (250,000                                      | )          | (250,000                                    | )          | (500,000 | ) | (500,000 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Net loss available to common shareholders                    |       | $                                             | (394,223   | )                                           | $          | (594,090 | ) | $ | (763,044 | ) | $ | (938,466 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Basic and diluted net loss per common share                  |       | $                                             | (0.08      | )                                           | $          | (0.12 | ) | $ | (0.15 | ) | $ | (0.19 | ) |
|                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Basic and diluted weighted average common shares outstanding |       | 5,050,000                                     |       | 5,050,000                                   |       | 5,050,000 |   | 5,050,000 |   |

 

See notes to unaudited consolidated financialstatements.

 

2

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**CENTENNIAL SPECIALTY FOODSCORPORATION AND SUBSIDIARY**

 

**Consolidated Unaudited Statements of Cash Flows**

 
| ** **                                                                                   | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
|                                                                                         |       |                                        |       |   |   |
| **Cash flows from operating activities:**                                                    |       |                                        |       |   |   |
| Net loss                                                                                     |       | $                                           | (263,044   | ) | $ | (438,466 | ) |
| Adjustments to reconcile net loss to net cash provided (used) by  operating activities       |       |                                        |       |   |   |
| Depreciation and amortization                                                                |       | 112,642                                     |       | 116,960 |   |
| Deferred income taxes                                                                        |       | (77,015                                     | )          | (257,512 | ) |
| Changes in assets and liabilities                                                            |       |                                        |       |   |   |
| Accounts and other receivables                                                               |       | 177,310                                     |       | (129,685 | ) |
| Inventory                                                                                    |       | 505,769                                     |       | (716,111 | ) |
| Prepaid expenses                                                                             |       | 71,317                                      |       | 79,596 |   |
| Other assets                                                                                 |       | 45,027                                      |       | — |   |
| Accounts payable – trade                                                                |       | (385,637                                    | )          | (748,364 | ) |
| Accrued liabilities                                                                          |       | (31,206                                     | )          | 24,968 |   |
| Related party payable                                                                        |       | —                                      |       | (195,394 | ) |
|                                                                                         |       | 418,207                                     |       | (1,825,542 | ) |
| Net cash provided (used) by operating activities                                             |       | 155,163                                     |       | (2,264,008 | ) |
|                                                                                         |       |                                        |       |   |   |
| **Cash flows from investing activities:**                                                    |       |                                        |       |   |   |
| Purchase of property, plant and equipment                                                    |       | (1,913                                      | )          | (18,220 | ) |
| Net cash used in investing activities                                                        |       | (1,913                                      | )          | (18,220 | ) |
|                                                                                         |       |                                        |       |   |   |
| **Cash flows from financing activities:**                                                    |       |                                        |       |   |   |
| Net proceeds from revolving line of credit                                                   |       | 89,235                                      |       | 2,084,750 |   |
| Payments on long-term debt                                                                   |       | —                                      |       | (4,253,704 | ) |
| Payments on note payable - stockholder                                                       |       | —                                      |       | (908,900 | ) |
| Payment of financing costs                                                                   |       | —                                      |       | (7,671 | ) |
| Payment of preferred stock dividends                                                         |       | —                                      |       | (422,603 | ) |
| Net cash provided (used) by financing activities                                             |       | 89,235                                      |       | (3,508,128 | ) |
|                                                                                         |       |                                        |       |   |   |
| Increase (Decrease) in cash and cash equivalents                                             |       | 242,485                                     |       | (5,790,356 | ) |
|                                                                                         |       |                                        |       |   |   |
| Cash and cash equivalents at beginning of period                                             |       | 415,597                                     |       | 6,076,479 |   |
| ** **                                                                                   |       |                                        |       |   |   |
| **Cash and cash equivalents at end of period**                                               |       | $                                           | 658,082    |   | $ | 286,123 |   |
|                                                                                         |       |                                        |       |   |   |
| **Supplemental Disclosure of Cash Flow Information:**                                        |       |                                        |       |   |   |
|                                                                                         |       |                                        |       |   |   |
| Interest Paid                                                                                |       | $                                           | 93,737     |   | $ | 283,175 |   |
|                                                                                         |       |                                        |       |   |   |
| **Supplemental Disclosure of Non-Cash Investing and Financing  Activities:**                 |       |                                        |       |   |   |
| Assignment of note receivable to major stockholder in satisfaction of  related party payable |       | $                                           | —     |   | $ | 170,000 |   |

 

Seenotes to unaudited consolidated financial statements.

 

3

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**CENTENNIALSPECIALTY FOODS CORPORATION AND SUBSIDIARY**

 

**Notes to Unaudited Consolidated FinancialStatements**

 

**Note 1 -Description of Business and Summary of Significant Accounting Policies**

 

Descriptionof Business

 

CentennialSpecialty Foods Corporation (Centennial) is a holding company that was formedunder Delaware law in February 2003 for the purpose of acquiring StokesEllis Foods, Inc. and its wholly owned subsidiary Stokes Canning Company(collectively Stokes).  Effective October 29,2003, Centennial acquired Stokes concurrently with its initial public offering.

 

StokesEllis Foods, Inc. was a holding company incorporated in the state ofDelaware during August 1998, for the purpose of acquiring Stokes CanningCompany.  Stokes Ellis Foods, Inc.was formerly known as Lewis Foods, Inc. until it changed its name in May 2003.

 

StokesCanning Company was formed in 1974 under Colorado law.  It markets, sells and distributes brandedethnic Southwestern canned sauces and food products in the Mexican food segmentof the domestic food industry.  Theproducts are currently sold through superstores, club stores, and groceryretailers throughout Colorado, Arizona, California and a small number of majormetropolitan markets in adjoining states. Centennial’s operations are conducted from its facilities located inCentennial, Colorado.

 

Management’sPlan

 

TheCompany’s board of directors previously authorized management to pursue a widerange of strategic alternatives in order to maximize value for its shareholdersgiven the poor performance in the California expansion market.  The Company has explored a number of optionswith various groups in order to evaluate alternatives to grow or enhance itsoperations; however, no definitive plans or agreements have been reached.  The Company also engaged an outside advisorygroup with substantial food industry experience to evaluate strategicalternatives.  The advisory group’s findingswere not favorable regarding the Company’s ability to find a strategicalternative within the food industry that would allow the Company to grow andmaximize shareholder value, indicating that liquidating the assets of theCompany may be the most practical solution. The Company is, therefore, also considering strategic alternativesoutside of the food industry.  In theevent the Company is unable to find a viable strategic alternative through amerger or capital infusion, the Company’s common stock will most likely be delistedby the Nasdaq Stock Market, as the continued listing requirements will not bemet.  In the event the Company’s stock isdelisted by the Nasdaq Stock Market, the Company intends to reorganize itscorporate overhead structure in an effort to reduce expenses.  This reorganization may include a “Notice ofTermination of Registration of a Class of Securities” with the Securitiesand Exchange Commission (SEC) which will allow the Company to cease all SECfiling requirements, and which management estimates will also save the Companyapproximately $350,000 in annual expenses associated with the SEC filingrequirements.

 

Principlesof Consolidation

 

Theaccompanying consolidated financial statements include the accounts ofCentennial Specialty Foods Corporation, Stokes Ellis Foods, Inc. andsubsidiary, Stokes Canning Company (collectively the Company).  All intercompany accounts and transactionshave been eliminated in consolidation.

 

Interim Financial Information

 

The interim consolidatedfinancial statements are unaudited and reflect all adjustments (consisting onlyof normal recurring adjustments), which are, in the opinion of management,necessary for a fair presentation of the financial position and operatingresults for the interim periods.  Theconsolidated results of operations for the three and six months ended June 30,2005 and 2004 are not necessarily indicative of the results of the entireyear.  The consolidated financialstatements included herein are presented in accordance with the requirements ofForm 10-QSB and consequently do not include all of the disclosuresnormally made in the Company’s annual Form 10-KSB filing.  These consolidated financial statementsshould be read in conjunction with the financial statements and notes theretocontained in the Company’s Form 10-KSB for the year ended December 31,2004.

 

4

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The preparation of consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect amounts reported in the consolidated financialstatements and the accompanying notes and the reported amounts of net sales andexpenses.  Actual results could differfrom those estimates.

 

Concentrationsof Credit Risk

 

TheCompany grants credit in the normal course of business to customers in theUnited States. The Company periodically performs credit analysis and monitorsthe financial condition of its customers to reduce the Company’s credit risk.

 

TheCompany had four customers that accounted for 31%, 21%, 17% and 8% of totalsales for the three months ended June 30, 2005 and four customers thataccounted for 33%, 17%, 12% and 12% of total sales for the three months ended June 30,2004.  These four customers accounted for28%, 13%, 13% and 2% of total accounts receivable at June 30, 2005.

 

TheCompany had four customers that accounted for 29%, 19%, 19% and 8% of totalsales for the six months ended June 30, 2005 and four customers thataccounted for 28%, 16%, 13% and 13% of total sales for the six months ended June 30,2004.  Three of these customers accountedfor 35%, 16% and 16% of total accounts receivable at December 31, 2004.

 

IncomeTaxes

 

TheCompany provides for income taxes utilizing the liability method.  Under the liability method, current incometax expense or benefit represents income taxes expected to be payable orrefundable for the current period. Deferred income taxes are recognized for the tax consequences in futureyears as a result of differences between the tax and financial reporting basesof assets and liabilities and for the expected future tax benefit to be derivedfrom tax credit and loss carry-forwards. Valuation allowances are established when necessary to reduce deferredtax assets to the amounts management believes are more likely than not to berealized in future tax returns.  Tax ratechanges are reflected in the period such changes are enacted.

 

FairValue of Financial Instruments

 

Thecarrying amounts of financial instruments including cash, receivables,prepaids, accounts payable and accrued expenses are carried at cost, whichmanagement believes approximates fair value because of the short-term maturityof these instruments.

 

Thecarrying amount of the revolving line of credit approximates fair value as of June 30,2005 as the interest rate on this instrument approximates market interestrates.

 

Revenue Recognition

 

TheCompany recognizes revenue upon the shipment of canned food products to the customer.  Provisions are made for estimated productreturns and sales allowances.

 

Billbackdiscounts, Promotional allowances, Cash discounts and Slotting fees

 

TheCompany offers various discounts and promotional allowances to customersincluding billback discounts in which retailers are given discounts onceproducts are sold through store registers. These discounts and allowances are recorded as a decrease to sales inthe period incurred.  As of June 30,2005, the Company has recorded an estimated allowance of approximately $235,000for potential return or disposition of product by California retailers, themajority of which have discontinued the Company’s products.  In addition, the Company pays slotting feesto customers to obtain shelf space in retail locations.  These one-time fees are non-refundable andare netted against sales in the period incurred.  Slotting fees for the six months ended June 30,2005 represent amounts charged by an

 

5

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existingretail customer in California for placement of additional items on storeshelves.  The retail customer initiallyrepresented that no slotting fees would be charged.

 

Discounts,promotional allowances and slotting fees are summarized below for the three andsix months ended June 30, 2005 and 2004.

 
| ** **                                      | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                      | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                            |       |                                          |       |                                        |       |   |   |   |   |
| Billback discounts & returns allowance |       | $                                             | 195,505    |                                        | $          | 60,151 |   | $ | 285,805 |   | $ | 87,491 |   |
| Promotional allowances                          |       | 125,570                                       |       | 128,430                                     |       | 215,785 |   | 223,335 |   |
| Cash discounts                                  |       | 24,836                                        |       | 23,436                                      |       | 47,491 |   | 42,391 |   |
| Total discounts and allowances                  |       | 345,911                                       |       | 212,017                                     |       | 549,081 |   | 353,217 |   |
| Slotting fees                                   |       | —                                        |       | 427,380                                     |       | 86,000 |   | 458,287 |   |
| Total adjustments to gross sales                |       | $                                             | 345,911    |                                        | $          | 639,397 |   | $ | 635,081 |   | $ | 811,504 |   |

 

Shipping Expense

 

Shipping and handling expense is comprised of coststo store, move, prepare and ship product to customers and has been included incost of goods sold.

 

AdvertisingCosts

 

The Company expenses advertising costs asincurred.  Advertising expense for thethree months ended June 30, 2005 and 2004 were $40,646 and $124,601,respectively, and for the six months ended June 30, 2005 and 2004 were$81,850 and 175,388, respectively.

 

Basicand Diluted Loss Per Common Share

 

In accordance with SFAS No. 128 *Earnings per Share*, basic earnings (loss) per share arecomputed based upon the weighted average number of common shares outstandingduring the period.  Diluted earnings(loss) per share reflects the potential dilution to basic earnings (loss) pershare that could occur upon the conversion or exercise of dilutive securities,options, warrants or other similar items to common shares using the treasurystock method based upon the weighted-average fair value of the Company’s commonshares outstanding during the period.  Asthe Company has incurred a net loss available to common shareholders for thethree and six months ended June 30, 2005 and 2004, the Company hasexcluded the effects of the common shares issuable upon the exercise ofwarrants or stock options since their effect is anti-dilutive.

 

StockBased Compensation

 

TheCompany has adopted both SFAS No. 123 *Accounting for Stock-BasedCompensation*, which requires disclosure of the fair value and othercharacteristics of stock options, and SFAS No. 148 *Accountingfor Stock-Based Compensation – Transition and Disclosure*, whichrequires more prominent disclosure about the effects of an entity’s accountingpolicy decision with respect to stock based compensation on reported netincome.  The Company has chosen under theprovisions of SFAS No. 123 to continue using the intrinsic-value method ofaccounting for employee stock compensation in accordance with AccountingPrinciples Board Opinion No. 25 *Accounting for StockIssued to Employees* (APB 25). Accordingly, no compensation cost has been recorded for the stock optionplans.  Had compensation cost for theCompany’s option plan been determined based on the fair value at the grant

 

6

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date forawards consistent with the provisions of SFAS No. 123, the Company’s netloss and basic and diluted loss per common share would have been changed to thepro forma amounts indicated below:

 
| ** **                                                               | ** ** | **For the three months ended  June 30,** | ** ** | **For the six months ended  June 30,** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                               | ** ** | **2005**                                      | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                     |       |                                          |       |                                        |       |   |   |   |   |
| Net loss available to common shareholders – as reported             |       | $                                             | (394,223   | )                                           | $          | (594,090 | ) | $ | (763,044 | ) | $ | (938,466 | ) |
| Employee stock-based compensation determined under the fair value method |       | —                                        |       | —                                      |       | (51,820 | ) | — |   |
| Pro forma net loss available to common shareholders                      |       | $                                             | (394,223   | )                                           | $          | (594,090 | ) | $ | (814,864 | ) | $ | (938,466 | ) |
| Basic and diluted loss per common share – as reported               |       | $                                             | (0.08      | )                                           | $          | (0.12 | ) | $ | (0.15 | ) | $ | (0.19 | ) |
| Basic and diluted loss per common share – pro forma                 |       | $                                             | (0.08      | )                                           | $          | (0.12 | ) | $ | (0.16 | ) | $ | (0.19 | ) |

 

Pro forma information regarding net loss is required by SFAS No. 123and has been determined as if the Company had accounted for its stock optionsunder the fair value method of SFAS No. 123.  The fair value of each option grant wasestimated on the date of grant using the Black-Scholes option pricing modelwith the following weighted average assumptions as of February 28,2005:  Approximate risk-free rate of3.61%, average expected life of 10 years, dividend yield of 0% and volatilityof 55.42%.

 

RecentlyIssued Accounting Pronouncements

 

In December 2004, the FASB issued SFAS No. 123(R), *Share Based Payment*, which replaces SFAS No. 123, *Accounting for Stock Based Compensation*, and supersedes APBOpinion No. 25, *Accounting for StockIssued to Employees*.  TheCompany is required to adopt SFAS No. 123(R) on January 1, 2006.  Among other items, the new standard willrequire the Company to expense future stock options issuances in the financialstatements.  Pro forma disclosure is nolonger an alternative.

 

In November 2004, the FASBissued SFAS No. 151, *Inventory Costs—AnAmendment of ARB No. 43, Chapter 4* (“SFAS 151”). SFAS 151amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing”, toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessivespoilage, double freight, and re-handling costs be recognized as current-periodcharges regardless of whether they meet the criterion of “so abnormal” asstated in ARB No. 43. Additionally, SFAS 151 requires that the allocationof fixed production overheads to the costs of conversion be based on the normalcapacity of the production facilities. SFAS 151 is effective for fiscal yearsbeginning after June 15, 2005, and is required to be adopted by theCompany in the first quarter of fiscal 2006, beginning on January 1, 2006.The Company is currently evaluating the effect, if any, that the adoption ofSFAS 151 will have on its consolidated results of operations.

 

**Note 2 -Long-Term Debt**

 

At June 30, 2005 and December 31, 2004, long-termdebt consisted of $2,525,622 and $2,436,387, respectively, in advances under asenior revolving line of credit.  Therevolving line of credit matures December 31, 2006 and accrues interest atthe bank’s base rate plus 1.5%, or 7.5% at June 30, 2005.  The borrowing base is limited to the sum of70% of the appraised value of the Company’s production plant, 75% of eligibleaccounts receivable and 50% of finished goods inventory.  Based upon these allowable percentages andthe amended credit limit of $4,000,000, the Company had a total of $1,474,378in funds available under the revolving line of credit at June 30,2005.  The facility calls for an unusedrevolver commitment fee of 0.5% per annum which is paid quarterly in an amountequal to the average daily unused portion of the revolving credit facility times0.5% per annum.  The facility iscollateralized by a first mortgage on the Company’s production building andunderlying land.  The facility is alsocollateralized by substantially all assets

 

7

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of the Company, including accounts receivable and inventory,and an assignment of the co-packing agreement with its supplier.  The facility is also subject to certainrestrictive covenants.

 

In March 2005, the Company and its bank amendedthe existing loan and security agreement. The material terms of the amendment are as follows:

 

•                  Thetotal amount available under the revolving line of credit was reduced to$4,000,000 until the Company attains consolidated net worth of $7,000,000 fortwo consecutive quarter ends and minimum debt service coverage ratio is met fortwo consecutive quarterly measurement periods.

•                  Theminimum consolidated net worth covenant was reduced to $6,400,000 for periodssubsequent to December 31, 2004. The minimum consolidated net worth covenant will be a continuousmeasurement rather than at quarter end.

•                  Dividendsor distributions on the capital stock of the Company will not be allowed untilthe consolidated net worth of the Company reaches $7,000,000.  Thereafter, dividends will be allowed only tothe extent of one-half of net income.

•                  Unlessthe Company requests loan availability in excess of $3,000,000, the minimumdebt service coverage ratio will not be activated.  If the Company requests loan availability inexcess of $3,000,000, the debt service coverage ratio will be activated for thequarter ending December 31, 2005.

 

As of June 30, 2005, the Company exceeded itsminimum consolidated net worth covenant requirement by $52,896.   However, subsequent to June 30, 2005the Company was in violation of its minimum consolidated net worth covenant,due in part to anticipated shortfall production penalties related to thecontract year ending June 30, 2006. In August 2005, the Company and its bank amended the existing loanand security agreement and reduced the consolidated net worth covenantrequirement to $5,700,000 for periods subsequent to June 30, 2005.  See Note 5 for further discussion.  In addition, the Company would not meet therequired debt service coverage ratio if it had to comply with the ratio as of June 30,2005.

 

The Company believes it will be required to refinancethis line of credit when it matures on December 31, 2006 as the Company doesnot expect it will generate earnings sufficient to retire the debt beforematurity.

 

**Note 3 –Preferred Stock Dividends**

 

The Company’s board of directors did not declarepreferred stock dividends for the three or six months ended June 30, 2005as the Company’s net worth was below the $7,000,000 requirement fordistribution of dividends pursuant to the Company’s senior revolving line ofcredit agreement with its bank.  As thepreferred stock dividends are cumulative dividends, an additional $250,000 ofunpaid dividends has been placed in arrearage for the three months ending June 30,2005 increasing the total dividends in arrears to $1,250,000.  Accordingly, the original $10,000,000liquidation preference on the preferred stock has been increased to$11,250,000.

 

**Note 4 –Commitments and Contingencies**

 

Purchase Commitments

 

The Company had outstanding purchase commitments for finishedinventory as of June 30, 2005 and December 31, 2004 of approximately$0 and approximately $262,000, respectively. The Company also had an outstanding purchase commitment as of June 30,2005 of $248,000 to be paid in September 2005 for diced green chile, theprimary ingredient in its green chile sauces.

 

Co-Packand Warehousing Agreement

 

In conjunction with its Plant and Equipment Lease, theCompany entered into a Co-Pack and Warehousing Agreement with the same lessee.  Under the terms of the agreement, the lesseewill produce, package, and warehouse the products the Company sells anddistributes.  As part of the agreement,the Company must purchase

 

8

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585,053 12-pack (15 oz.) equivalent cases of product duringeach contract year or pay a shortage fee of $0.80 for every 12-pack (15 oz.)equivalent case short.  The Company incurred$236,963 in shortage fees related to the contract year ending June 30,2005 as the Company did not meet the required throughput requirement as aresult of current inventory levels and minimal sales in the California market.  These shortage fees were estimated andrecorded at December 31, 2004 as the Company did not anticipate it wouldmeet the throughput requirement.  Inaddition, the Company expects it will incur an estimated $250,000 to $350,000in shortfall fees for the contract year ending June 30, 2006.  The Company also pays $0.033 per case fee permonth if storage of product based upon the pack plan exceeds 30 days due to theCompany’s shipping schedule.  Theagreement expires January 26, 2010.

 

Litigation with Tenant and SoleSupplier

 

In February 2005, the Company’s tenant and sole supplierfiled a lawsuit in Adams Country Colorado District Court against the Company’swholly owned subsidiary, Stokes Canning Company (“Stokes”), seeking to recoverapproximately $400,000 in costs paid by tenant for construction of a wastewatertreatment system at the plant owned by Stokes. Additionally, the tenant contends that the costs of certain futureimprovements for the facility should be paid for by Stokes.  The Company contends that the costs for thewastewater treatment project as well as future improvements for the facilityare the responsibility of the tenant and disputes the tenant’s claims.  The Company will vigorously defend any andall claims by the tenant.  In March 2005,the Company filed various counterclaims against the Company’s tenant and solesupplier.  The dispute has been scheduledfor a two week trial beginning on January 17, 2006.

 

Delisting of Common Stock by theNasdaq Stock Market

 

In March 2005, theCompany received a notice from the staff of The Nasdaq Stock Market (the “Staff”)stating that the bid price for the Company’s common stock had closed below theminimum $1.00 per share requirement for continued inclusion pursuant toMarketplace Rule 4310(c)(4) (the “Rule”).  In accordance with the Rule, Nasdaq informedthe Company that it will have until August 29, 2005 to regain compliancewith the Rule.  In order to regaincompliance with the Rule, the bid price for the Company’s common stock mustclose at, or above, $1.00 per share for at least 10 consecutive businessdays.  If compliance with the Rule isnot demonstrated by August 29, 2005, the Company may be provided anadditional 180 calendar days by Nasdaq to regain compliance if it meets theinitial listing requirements as set forth in Marketplace Rule 4310(c),except for bid price.  The Company doesnot believe it will be eligible for the additional compliance period as it willnot meet the initial listing requirement of $5 million in market value ofpublicly held shares excluding shares held by officers, directors andbeneficial owners of 10% or more of our common stock.  If the Company is not eligible for anadditional compliance period, the Nasdaq staff will provide writtennotification that the Company’s securities will be delisted.  At that time the Company may appeal theNasdaq staff’s determination to delist its securities to a ListingQualifications Panel.

 

EmploymentContracts

 

In the event the Company is unable to find a viablestrategic alternative through a merger or capital infusion, the Company expectsto take actions to reduce its corporate overhead.  These actions will most likely includetermination of employees under employment contracts.  Under these employment contracts, the Companyis required to give 90 days notice of termination and pay severance paymentsequal to six months’ salary and health and life insurance benefits for12 months from the date of the termination of employment.  The Company estimates the total cost ofseverance to be approximately $400,000.

 

**Note 5 –Subsequent Event**

 

Subsequent to June 30, 2005, the Company determined itwas in violation of its consolidated net worth covenant with its bank.  In August, the Company and its bank amendedthe existing loan and security agreement and reduced the consolidated net worthcovenant requirement to $5,700,000 for periods subsequent to June 30,2005.

 

9

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**Item 2.  Management’sDiscussion and Analysis or Plan of Operation**

 

*The following discussion and analysisshould be read in conjunction with the unaudited consolidated financialstatements of Centennial and the notes thereto included elsewhere in thisreport on Form 10-QSB. Some of the information contained in thisdiscussion and analysis or set forth elsewhere in this Form 10-QSB,including information with respect to our plans and strategies for our business,includes forward-looking statements that involve risk and uncertainties.**  (Seethe section titled “Forward-Looking Statements” for a more completediscussion).*

 

**OVERVIEW**

 

We are a specialty branded foodcompany that distributes and sells our ethnic Southwestern sauces and foodproducts in the Mexican food segment of the domestic food industry. Our Stokesand Ellis labels, two Southwestern brands, are each now nearly100 years old and are well-recognized in our primary market of Colorado.Our best-selling products are our Stokes Green Chile Sauces, offered infive varieties, four of which are ranked in retail sales as the mostpopular Mexican sauces in Colorado and which are among the 25 best sellingMexican food products retailed in Colorado, according to Information Resources, Inc.,an independent market research firm. Our products are currently sold in leadinggrocery retailers, superstores and club stores such as Kroger, Safeway,Wal-Mart, Sam’s Club, Albertson’s and Costco, through locations primarily inColorado, Arizona, California and in a small number of major metropolitanmarkets in adjoining states.  In theCalifornia market, which was the significant part of our 2004 expansion plan,sales of our products have been very minimal and we have been discontinued bysubstantially all of the retailers in that market.  We expect to exit the California marketshortly.

 

**CONSOLIDATED RESULTS OF OPERATIONS**

 

Thefollowing table sets forth, for the three and six months ended June 30,2005 and 2004, the percentage of net sales represented by the specified itemsincluded in our unaudited consolidated statements of operations.  We have included this comparison because webelieve it provides a more meaningful basis for period-to-period comparisons.This financial data should not be viewed as a substitute for our historicalconsolidated results of operations determined in accordance with generallyaccepted accounting principles and does not purport to be indicative of futureresults of operations. 

 
| ** **                                   | ** ** | **Consolidated**       | ** ** |
|----------------------------------------------|------------|------------------------|------------|
| ** **                                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
| ** **                                   | ** ** | **June 30,**      | ** ** | **June 30,** | ** ** |
| ** **                                   | ** ** | **2005**               | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                         |       |                   |       |   |   |   |   |   |   |
| Net sales                                    |       | 100.0                  | %          | 100.0 | % | 100.0 | % | 100.0 | % |
|                                         |       |                   |       |   |   |   |   |   |   |
| Cost of goods sold                           |       | 77.7                   |       | 92.3 |   | 76.5 |   | 78.1 |   |
| Gross profit                                 |       | 22.3                   |       | 7.7 |   | 23.5 |   | 21.9 |   |
| Selling, general and administrative expenses |       | 51.9                   |       | 77.6 |   | 54.2 |   | 63.3 |   |
| Loss from operations                         |       | (29.6                  | )          | (69.9 | ) | (30.7 | ) | (41.4 | ) |
| Total other income                           |       | 13.4                   |       | 12.2 |   | 12.6 |   | 7.8 |   |
| Income tax benefit (expense)                 |       | 0.8                    |       | 21.3 |   | 4.1 |   | 12.4 |   |
|                                         |       |                   |       |   |   |   |   |   |   |
| Net loss                                     |       | (15.4                  | )%         | (36.3 | )% | (14.0 | )% | (21.1 | )% |

 

10

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*Net Sales*

 

Our net sales are comprised ofgross sales reduced by promotional allowances, billback discounts, cashdiscounts and slotting fees.  Thefollowing table sets forth these components to provide a more thoroughunderstanding of net sales.

 
| ** **                     | ** **                                                     | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|--------------------------------|----------------------------------------------------------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                     | ** **                                                     | **2005**                                      | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|                           |                                                           |                                          |       |                                        |       |   |   |   |   |
| Sales – Stokes            |                                                           | $                                             | 1,023,997  |                                        | $          | 1,230,228 |   | $ | 1,952,299 |   | $ | 2,129,317 |   |
| Sales – Ellis             |                                                           | 251,191                                       |       | 356,233                                     |       | 561,014 |   | 756,734 |   |
| Gross sales                    |                                                           | 1,275,188                                     |       | 1,586,461                                   |       | 2,513,313 |   | 2,886,051 |   |
| Less:                          | Promotional allowances, billback  discounts and cash discounts |                                          | 345,911    |                                        | 212,017    |   | 549,081 |   | 353,217 |   |
| Net sales before slotting fees |                                                           | 929,277                                       |       | 1,374,444                                   |       | 1,964,232 |   | 2,532,834 |   |
| Less:                          | Slotting fees                                                  |                                          | —     |                                        | 427,380    |   | 86,000 |   | 458,287 |   |
|                           |                                                           |                                          |       |                                        |       |   |   |   |   |
| Net sales                      |                                                           | $                                             | 929,277    |                                        | $          | 947,064 |   | $ | 1,878,232 |   | $ | 2,074,547 |   |
|                                |                                                                |                                               |            |                                             |            |  |  |  |  |  |  |  |  |  |  |

 

•                  **Sales****–****Stokes** – Sales of our Stokesgreen chile sauces decreased $0.2 million for the three months ended June 30,2005 and $0.2 million for the six months ended June 30, 2005 compared to thesame periods in 2004due to minimal orders being received from customers inCalifornia during 2005 versus the initial orders placed by such customersduring the same period in 2004.  We havebeen discontinued by substantially all of the retailers in the Californiamarket and do not anticipate any significant future sales to remainingcustomers in the California market.  We expectto exit the California market shortly.  We have recorded all Stokes product inventory at thelower of cost or market.

 

•                  **Sales – Ellis** – Sales of our Ellis branded products continued todecrease as a result of our efforts to reduce sales of low-marginproducts.  Sales of the Ellis productsdecreased $0.1 million and $0.2 million for the three and six months ended June 30,2005, respectively, as compared to the same periods in 2004.  Cost increases from our supplier as well asstrong price competition in the commodity products category, in which manyEllis products are classified, have resulted in some of the Ellis products nolonger generating positive sales margins within certain markets andcustomers.  We have eliminated sales ofsuch products within those markets and customers, which resulted in decreasedsales of Ellis products.  We haverecorded all Ellis product inventory at the lower of cost or market.

 

•                  **Promotionalallowances, billback discounts and cash discounts** – Promotionalallowances and discounts increased $0.1 million and $0.2 million for the threeand six months, respectively, compared to the same periods in 2004.  These increases were attributable toincreased reserves related to potential return or disposition of product byCalifornia retailers due to our products being discontinued at substantiallyall retail customers in the California market. As of June 30, 2005, we have recorded an estimated reserve forreturn or disposition of California product of approximately $235,000.  We expect to exit the California marketshortly and may incur additional costs associated with product returns from theremaining few customers.

 

11

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•                  **Netsales before slotting fees** – Net sales before slotting feesdecreased $0.4 million and $0.6 million for the three and six months ended June 30,2005, respectively, compared to the same periods in 2004.  These decreases were primarily a result ofreduced sales of the Stokes and Ellis lines of products as well as the increasein reserves related to our products being discontinued at retail customers inthe California market.

 

•                  **Slottingfees** – Slotting fees decreased $0.4 million and $0.4 millionfor the three and six months ended June 30, 2005, respectively, comparedto the same periods in 2004.  This was aresult of no expansion efforts during 2005. An existing retail customer in the California market deducted $86,000 inslotting fees during 2005 for placement of additional items in which theretailer had previously represented that slotting fees would not becharged.  While we will not be recoveringthe slotting costs incurred, we are working with the customer to sell throughexisting customer inventories in order to minimize potential product returns.  We do not expect to incur significantslotting fees during the next twelve months.

 

•                  **Netsales**– Net sales decreased $0.02 million and $0.2 million forthe three and six months ended June 30, 2005, respectively, as compared tothe same periods in 2004 due to the reasons set forth above.

 

*Gross profit*

 

Gross profit increased $0.1 millionfor the three months ended June 30, 2005 and remained relatively flat forthe six months ended June 30, 2005 compared to the same periods in2004.  In addition to the reasons set forthabove, the increase in gross profit for the three months ended June 30,2005 as well as the relatively flat gross profit for the six months ended June 30,2005 was primarily attributable to significantly less slotting fee spendingduring the three and six months ended June 30, 2005 as compared to thesame periods in 2004.

 

Gross profit as a percentage of netsales before slotting fees decreased to 22% (or a 14% decrease) for the threemonths ended June 30, 2005 and decreased to 27% (or a 9% decrease) for thesix months ended June 30, 2005 as compared to the same periods in 2004 dueto the increased level of sales reserves for returns as well as increases incost of sales resulting from retailer charges for damaged product.

 

*Selling, generaland administrative expenses*

 

Selling, general and administrativeexpenses decreased $0.3 million for the three months ended June 30, 2005and $0.3 million for the six months ended June 30, 2005 compared to thesame periods in 2004. These decreases were primarily comprised of a decrease inselling and marketing spending related to our expansion efforts which wasoffset by an increase in legal fees associated with the lawsuit with our tenantand sole supplier.

 

The provisions of theSarbanes-Oxley Act of 2002 and rules adopted or proposed by the SEC, willresult in increased audit fees and administrative costs to us as we comply withthese requirements.  The SEC’s recentannouncement delays the effective date of compliance under Rule 404 of theSarbanes-Oxley Act for us until the year ending December 31, 2006. The newrules could make it more difficult for us to obtain certain types ofinsurance, including director and officer liability insurance, and we may beforced to accept reduced policy limits and coverage or incur substantiallyhigher costs to obtain coverage we consider to be adequate. The impact of theseevents could also make it more difficult for us to attract qualified persons toserve on our board of directors, our board committees, or as executiveofficers.  We are unable to determine theexact amount of additional costs we may incur, but we estimate such incrementalcosts could be in the range of $125,000.

 

*Loss fromoperations*

 

Loss from operations decreased $0.4million and $0.3 million for the three and six months ended June 30, 2005,respectively, over the same periods in 2004 to $275,589 and $575,864,respectively.  This decrease wasprimarily attributable to decreased slotting fees and decreased sales andmarketing spending.  

 

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*Other income and (expenses)*

 

Other income consisted ofproduction facility income.  Productionfacility income included rental income and EBITDA sharing income, which werereduced by production shortfall fees, all of which are related to the LeaseAgreement and Co-Pack & Warehousing Agreement with Hoopeston.  Production facility income remainedrelatively flat for the three and six months ended June 30, 2005 comparedto the same periods in 2004.  Wepreviously recorded approximately $0.25 million of production shortfall fees inthe year ended December 31, 2004 related to the contract year ended June 30,2005.  Given our existing inventorylevels and discontinued sales in California, we anticipate we will be liablefor shortfall fees for the contract year which began July 1, 2005 and endsJune 30, 2006, as our production requirements are expected to decreaseover the next 12 months.  In addition,our tenant and sole supplier has informed us that it does not anticipate anyEBITDA sharing income for the contract year ended June 30, 2005 and itscurrent projections do not forecast any EBITDA sharing for the contract yearending June 30, 2006.

 

Other expenses were comprisedentirely of interest expense and increased slightly for the three months ended June 30,2005 compared to the same period in 2004 as a result of increased borrowings onour line of credit.  Interest expensedecreased $0.05 million for the six months ended June 30, 2005 as a resultof retiring certain long-term debt using initial public offering proceeds andrepaying loans from our majority stockholder and other individual lenders usinglower interest rate funds from our revolving line of credit that we obtained inMarch 2004. 

 

*Net loss beforeincome taxes*

 

Net loss before income taxesdecreased $0.4 million and $0.4 million for the three and six months endedJune 30, 2005, respectively, compared to the same periods in 2004primarily as a result of the reasons set forth above.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Our principal sources of liquidityas of June 30, 2005 consisted of $0.7 million in cash and cash equivalentsand approximately $1.5 million available under our senior revolving line ofcredit.  We generate cash through productsales and lease of our plant and equipment.  We require capital to finance inventory andaccounts receivable, pay slotting fees to grocery chain retailers, payoperating costs, pay interest on our existing debt obligations and paydividends on our preferred stock.  Wecurrently have sufficient cash and liquidity available to fund currentoperating needs excluding preferred stock dividends; however, we violated ourminimum consolidated net worth covenant of $6.4 million subsequent to June 30,2005, due in part to anticipated shortfall production penalties for thecontract year ending June 30, 2006. In August 2005, we amended the existing loan and security agreementand reduced the consolidated net worth requirement to $5.7 million for periodssubsequent to June 30, 2005.  Ourline of credit matures December 31, 2006. Given our current operating performance, we do not anticipate we will beable to pay off the line of credit prior to its maturity.  If we are unable to pay off the line ofcredit prior to its maturity at December 31, 2006, we will be required torefinance the debt.  We cannot ensure wewill be able to refinance the debt when it matures.

 

*Operating: *Net cash provided by operating activities was $0.2 million for thesix months ended June 30, 2005 and consisted primarily of collection ofaccounts receivable and sales and existing inventories.  We did not produce any significant inventoryproducts during the six months ended June 30, 2005 due to the levels ofinventory on hand.

 

*Financing: *Net cashprovided by financing activities was $0.1 million for the six months ended June 30,2005 and was comprised of advances under our senior revolving line of credit topay interest on the line of credit.

 

Our board of directors did notdeclare any preferred stock dividends for the three months ended June 30,2005.  Preferred stock dividends areplaced in arrearage as they are cumulative dividends.  Terms of our amended revolving line of creditprohibit us from paying dividends until we reach $7,000,000 in consolidated networth.  A total of $1,250,000 of dividends were in arrearsthrough June 30, 2005, resulting in a total liquidation preference for thepreferred stock of $11,250,000 (the original $10,000,000, plus $1,250,000 ofdividends in arrears).  See additionalinformation regarding Preferred Stock liquidation preference under the “Riskand Uncertainties” heading.

 

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**CONTRACTUAL OBLIGATIONS AND COMMITMENTS**

 

The following data summarizes ourcontractual obligations and commitments as of June 30, 2005: 

 
| ** **                         | ** ** | **Payments due by periods** | ** ** |
|------------------------------------|------------|-----------------------------|------------|
| ** **                         | ** ** | ** **                  | ** ** | **Within** | ** ** | **Years** | ** ** | **Years** | ** ** | **After** | ** ** |
| ** **                         | ** ** | **Total**                   | ** ** | **1 Year** | ** ** | **2 and 3** | ** ** | **4 and 5** | ** ** | **5 Years** | ** ** |
| ** **                         | ** ** | **(In thousands)**          | ** ** |
| Contractual obligations:           |       |                        |       |   |   |   |   |   |   |   |   |
| Long-term debt                     |       | $                           | 2,526      |   | $ | — |   | $ | 2,526 |   | $ | — |   | $ | — |   |
| Operating leases                   |       | 81                          |       | 43 |   | 38 |   | — |   | — |   |
| Purchase obligations               |       | 248                         |       | 248 |   | — |   | — |   | — |   |
| Production obligations             |       | 2,382                       |       | 705 |   | 936 |   | 741 |   | — |   |
|                               |       |                        |       |   |   |   |   |   |   |   |   |
| Total contractual cash obligations |       | $                           | 5, 237     |   | $ | 996 |   | $ | 3,500 |   | $ | 741 |   | $ | — |   |

* *

*Long-term debt: *Long-term debt at June 30,2005 consisted of $2.5 million in advances under our senior revolving line ofcredit. We intend to use this line of credit to fund our working capitalrequirements.  In March 2005, weamended our loan and security agreement for this line of credit with our bank.  As a result of this amendment, the totalamount available under the line of credit was reduced from $5.0 million to $4.0million until certain covenant levels are achieved.  The amendment also reduced our net worthcovenant requirement to $6.4 million.  Inaddition, we amended our loan and security agreement in August 2005 as aresult of violation of the consolidated net worth requirement subsequent to June 30,2005 due in part to anticipated shortfall production penalties related to thecontract year ending June 30, 2006. As a result of this amendment, the consolidated net worth requirementwas reduced to $5.7 million for periods subsequent to June 30, 2005.  As of June 30, 2005, we hadapproximately $1.5 million available under the line of credit to fundoperations.  We believe we will berequired to refinance this line of credit when it matures on December 31,2006, as we will not generate earnings sufficient to retire the debt beforematurity.

 

*Operating leases: *Operating leases at June 30,2005 consisted of an office space lease for our headquarters in Centennial,Colorado.

 

*Purchase obligations: *Purchase obligations included anoutstanding purchase commitment with an unaffiliated party as of June 30,2005 of $0.25 million for diced green chile, the primary ingredient in ourgreen chile sauces.  This obligationbecomes due in September 2005.

 

*Production obligations: *Production obligations representedminimum production requirements under our co-pack contract with Hoopeston.  We are required to purchase a minimum of585,053 cases from Hoopeston in any contract year.  If we fall below the 585,053 case minimum,then we are required to pay a penalty of $0.80 for each

 

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case by which we fall short of the 585,053 caseminimum.  As we have production completedby Hoopeston, this shortfall production obligation is reduced.  We incurred shortfall penalties ofapproximately $237,000 for the contract year ended June 30, 2005 which weaccrued during the year ended December 31, 2004.  In addition, we anticipate we will incur anestimated $250,000 to $350,000 in shortfall penalties related to the upcomingcontract year ending June 30, 2006 based upon our existing inventorylevels, expected sales and limited production requests.

 

We do not anticipate anysignificant capital expenditure requirements for the next twelve months.

 

**Debt Instruments, Guaranteesand Related Covenants**

 

Except as otherwise described inthis Form 10-QSB, we have no debt instruments, guarantees or relatedcovenants.

 

**RISK AND UNCERTAINTIES**

 

**Exploring Alternatives**

 

Our Board of Directors hasauthorized an exploration of strategic alternatives to maximize value for ourshareholders.  Given the poor sales ofour products in the California market, we have been evaluating our businessplan and reviewing other alternatives, which may include other financingarrangements, mergers, acquisitions and joint ventures.  While we believe we have sufficient liquidresources available to continue our current operations, we recognize that anyfurther significant expansion will require greater capital resources than wecurrently have available.  In addition,the costs of maintaining a public company in today’s environment aresignificant for a small company, especially given the Sarbanes-Oxley reportingrequirements.  Accordingly, we haveexplored a number of options with various groups to review other alternativesto grow or enhance our operations; however, no definitive plans or agreementshave been reached.  We also engaged anoutside advisory group with substantial food industry experience to evaluatestrategic alternatives.  The advisorygroup’s findings were not favorable regarding our ability to find a strategicalternative in the food industry that would allow us to grow and maximizeshareholder value, indicating that liquidating the assets of the Company may bethe most practical solution.  We are,therefore, also considering strategic alternatives outside of the foodindustry.  In the event we are unable to finda viable strategic alternative through a merger or capital infusion, our commonstock will most likely become delisted, as described below, as the continuedlisting requirements will not be met.

 

**The Liquidation Preference of our Preferred Stock Exceeds the Company’sEstimated Net Asset Value**

 

Asindicated above, we have not declared or paid any dividends on our PreferredStock for the past five quarters.  As of June 30,2005, a total of $1,250,000 of unpaid dividends have been placed in arrears,resulting in a total liquidation preference for our Preferred Stock of$11,250,000 (the original $10,000,000 liquidation preference plus $1,250,000 ofdividends in arrears).  We expect that wewill be unable to pay any Preferred Stock dividends for the foreseeable future,which will result in an additional $250,000 per quarter of dividends in arrearsand a like amount of increase in liquidation preference for the PreferredStock.

 

Theliquidation preference of the Preferred Stock is currently in excess of the estimatednet realizable value of the Companys’ net assets and this preference continuesto increase by $250,000 per quarter.  Theexistence of the increasing amount of dividends in arrears on our PreferredStock, as well as the resulting increasing size of the liquidation preferenceof the Preferred Stock, could be a significant negative factor in any party’sdecision whether to explore any type of strategic alternative with us.  Our inability to generate net income basedupon our business plan has resulted in not meeting our dividend obligation andcausing the liquidation preference to continue to increase by $250,000 perquarter.  In addition, we do not expectto generate sufficient earnings to be able to pay dividends on our PreferredStock for the foreseeable future, and our present line of credit does not allowus to pay the dividends until we meet certain net worth requirements.  Thus, the ability for the holders of ourcommon stock to realize any value decreases as we continue to be unable toimprove operating results and, therefore, continue to increase dividends inarrears on our Preferred Stock.  If weare unable to find a viable strategic alternative as discussed above, then theexisting liquidation preference would most likely result in the holders of ourcommon stock realizing little or no future value.

 

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**Delisting of Common Stock by TheNasdaq Stock Market**

 

We were notified in March 2005by the staff of The Nasdaq StockMarket (the “Staff”) that the bid price for our common stock had closed belowthe minimum $1.00 per share requirement for continued inclusion pursuant toMarketplace Rule 4310(c)(4) (the “Rule”).  In accordance with the Rule, Nasdaq informedus that we will have until August 29, 2005 to regain compliance with theRule.  In order to regain compliance withthe Rule, the bid price for our common stock must close at, or above, $1.00 pershare for at least 10 consecutive business days.  If compliance with the Rule is notdemonstrated by August 29, 2005, we may be provided an additional 180calendar days by Nasdaq to regain compliance if we meet the initial listingrequirements as set forth in Marketplace Rule 4310(c), except for bidprice.  We do not believe we will beeligible for this additional compliance period because we will not meet theinitial listing requirement of $5 million in market value of publicly heldshares excluding shares held by officers, directors and beneficial owners of10% or more.  If we are not eligible foran additional compliance period, the Nasdaq staff will provide writtennotification that our securities will be delisted.  At that time we may appeal the Nasdaq staff’sdetermination to delist our securities to a Listing Qualifications Panel.

 

To theextent we are unable to reach definitive plans or agreements related to astrategic alternative and appeal the Nasdaq staff’s determination to delist oursecurities, our securities will be delisted on August 29, 2005.  It is our belief that the delisting of oursecurities will further limit our ability to pursue strategic alternatives asour common stock will not be quoted on the Nasdaq market quotation system.  Furthermore, if our common stock is delistedfrom Nasdaq, we would likely be subject to the penny stock rules of theSEC, which generally have the effect of reducing the level of trading activityfor stock.  An investor couldfind it more difficult to dispose of, or to obtain accurate quotation as to themarket value of our common stock. Additionally, if our common stock is delisted from the Nasdaq, an activeand liquid trading market will not be sustained, which could limit the abilityof our stockholders to sell their common stock at a desired price.

 

**Elimination of SEC Reporting**

 

In theevent our stock is delisted, we will consider termination of our obligation tofile reports with the SEC or otherwise be subject to the Securities ExchangeAct of 1934 in order to save costs.  As aresult, an investor’s ability to obtain current financial information about ouroperations and financial performance will be limited.

 

**Lessee Items**

 

In February 2005, our tenantand sole supplier, Hoopeston, filed a lawsuit in Adams County Colorado DistrictCourt against our wholly owned subsidiary, Stokes Canning Company (“Stokes”), seekingto recover costs the tenant paid for construction of a wastewater treatmentsystem at the plant owned by Stokes. Additionally, the tenant contends that the costs of certain futureimprovements for the facility should be paid for by Stokes.  We believe that the costs for the wastewatertreatment project as well as future improvements for the facility are theresponsibility of the tenant and we dispute the tenant’s claims.  We will vigorously defend any and all claimsby the tenant.

 

In March 2005, we answered theHoopeston lawsuit and filed various counterclaims as part of that answer.  The counterclaims relate to certain breachesof contract by Hoopeston regarding the series of agreements originally enteredinto on January 26, 2001, as amended. This lawsuit has been scheduled for a two week trial beginning on January 17,2006.

 

We do not control our lessee or theproduction decisions it makes at our plant. If our lessee becomes unable to timely produce our sauces and foods forany reason, or if our lessee determines to cease operations for any reason, wecould experience significant disruptions in our operations or in our ability tosupply our customers with products.  Wehave undertaken certain measures in order to mitigate part of the impact from therisk of an interruption in supply in the event our sole supplier does nottimely produce our products.  Thesemeasures include, among other things, identifying an alternative supplier forour products, building-up inventory levels and storing inventory in independentthird party warehouses.  We believe thesemeasures will help with supply of our products in the event

 

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of an interruption in supply from our existing solesupplier.  We could also be materiallyadversely impacted by our lessee’s inability to pay future monthly rents oradditional payments based on profitability, as defined in the lease overrideagreement.  Any sustained interruption inproduction of our products for any reason, or in our lessee’s ability toproduce our products, could materially injure our business.

 

If our lessee is inefficient in itsoperation of our plant or if the lessee were to lose a major customer, the costof our products could increase as our co-packing arrangement is a cost plusagreement.  We are not currently aware ofthe potential loss of any of our lessee’s customers. However, we cannot assurethat our lessee will maintain its existing customer base or profitably operateour plant which could result in significant increases in our productcosts.  We believe alternative suppliersfor our products are available and could mitigate the impact of increased costsfrom our supplier.

 

**FORWARD-LOOKING STATEMENTS**

 

Certainstatements included in “Management’s Discussion and Analysis or Plan ofOperation,” including “Results of Operations,” “Liquidity and CapitalResources,” “Contractual Obligations and Commitments,” “Risk and Uncertainties”and elsewhere in this report are “forward-looking statements” within themeaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,as amended by the Private Securities Litigation Reform Act of 1995 (the “ReformAct”).  In connection with the “safeharbor” provisions of the Reform Act, we caution readers regarding certainforward-looking statements contained in this report.  Forward-looking statements include ourexpectations with respect to industry growth trends, effect of changes in theretail grocery industry on our sales, use of estimates for revenue recognition,other estimates used for accounting purposes, corporate cost structure, our entry into newmarkets, our ability to obtain new grocery, superstore and club store customersand expanding our sales to existing and new customers, our ability to secureand keep shelf space allocated to our products, theimpact of operational and financial difficulties experienced with Hoopeston andrelated increases in our costs of production, effect of adoption of recentaccounting pronouncements, overall operating results and the availability ofcapital.

 

Forward-looking statements are notstatements of historical fact. Forward-looking statements involve risks,uncertainties and other factors that may cause our or our industry’s actualresults, levels of activity, performance or achievements to be materiallydifferent from any future results, levels of activity, performance orachievements expressed or implied by these forward-looking statements.   You can identify forward-looking statements byterminology such as “may,” “should,” “project,” “would,” “could,” “believe,” “expect,”“anticipate,” “estimate,” “intend,” “plan,” “continue” or the negative of theseterms or other comparable terms.

 

Although we believe that the statements we have made arebased on reasonable assumptions, they are based on current information andbeliefs and, accordingly, we can give no assurance that its expectations willbe achieved.  In addition, thesestatements are subject to factors that could cause actual results to differmaterially from those suggested by the forward-looking statements. Thesefactors include, but are not limited to, factors identified under the caption “FactorsThat May Affect Future Operating Results, Financial Condition or Business”in our Form 10-KSB for the year ended December 31, 2004, and otherfactors described in this Form 10-QSB. All forward-looking statementsattributable to us are expressly qualified by the cautionary statements setforth in such factors.  We caution younot to place undue reliance on our forward-looking statements. Except asrequired by law, we do not intend to update or revise any of ourforward-looking statements to conform these statements to actual results.

 

**Item 3.  Controls and Procedures**

 

We maintain disclosure controls andprocedures that are designed to ensure that information required to bedisclosed by us in the reports that we file or submit to the Securities andExchange Commission under the Securities

 

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Exchange Act of 1934, as amended, is recorded, processed,summarized and reported within the time periods specified by the Commission’s rules andforms, and that information is accumulated and communicated to our management,including our principal executive officer and principal financial officer (whowe refer to in this periodic report as our Certifying Officers), as appropriateto allow timely decisions regarding required disclosure. Our managementevaluated, with the participation of our Certifying Officers, the effectivenessof our disclosure controls and procedures as of June 30, 2005, pursuant toRule 13a-15(b) under the Exchange Act. Based upon that evaluation,our Certifying Officers concluded that, as of June 30, 2005, ourdisclosure controls and procedures were effective.

 

There were no changes in ourinternal control over financial reporting that occurred during our quarterended June 30, 2005 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

**PART II — OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

In February 2005, our tenantand sole supplier, Hoopeston, filed a lawsuit in Adams County Colorado DistrictCourt against our wholly owned subsidiary, Stokes Canning Company (“Stokes”),seeking to recover approximately $400,000 in costs the tenant paid forconstruction of a wastewater treatment system at the plant owned byStokes.  Additionally, the tenantcontends that the costs of certain future improvements for the facility shouldbe paid for by Stokes.  We believe thatthe costs for the wastewater treatment project as well as future improvementsfor the facility are the responsibility of the tenant and we dispute the tenant’sclaims.  We will vigorously defend anyand all claims by the tenant.

 

In March 2005, we answered theHoopeston lawsuit and filed various counterclaims as part of that answer.  The counterclaims relate to certain breachesof contract by Hoopeston regarding the series of agreements originally enteredinto on January 26, 2001, as amended. The dispute has been scheduled for a two week trial beginning on January 17,2006.

 

**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds**

 

None

 

**Item 3.   Defaults Upon SeniorSecurities**

 

We have$1,250,000 of preferred stock dividends in arrears as our board of directorsdid not declare any preferred stock dividends for the three month periods endedJune 30, 2004, September 30, 2004, December 31, 2004, March 31,2005 or June 30, 2005.  Thepreferred stock dividends will be placed in arrearage as they are cumulativedividends; however, our board of directors will not declare and we will not payany preferred stock dividends until we have adequate consolidated net worth tomaintain our consolidated net worth covenant with our bank.

 

**Item 4.  Submission of Matters toa Vote of the Security Holders**

 

None

 

**Item 5.  Other Information**

 

None

 

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**Item 6.  Exhibits**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                     |
|----------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1.4*               |       | Form of Indemnification  Agreement, effective at the closing of the purchase of Stokes Ellis Foods, by  and among James E. Lewis, Janis M. Lewis and Centennial Specialty Foods  Corporation.                                  |
| 2.1.6*               |       | Merger Agreement, to be  effective at the closing of the acquisition of Stokes Ellis Foods, by and  between Stokes Ellis Foods, James E. Lewis, Janis M. Lewis and Centennial  Specialty Foods Corporation.                         |
| 3.1*                 |       | Certificate of Incorporation of  Centennial Specialty Foods Corporation.                                                                                                                                                            |
| 3.2*                 |       | Bylaws of Centennial Specialty  Foods Corporation.                                                                                                                                                                                  |
| 3.3*                 |       | Amended and Restated  Certificate of Incorporation of Centennial Specialty Foods Corporation, as  filed with the Delaware Secretary of State on October 22, 2003.                                                              |
| 3.4*                 |       | Certificate of Merger of Stokes  Ellis Foods and Centennial Specialty Foods Corporation, as survivor, as filed  with the Delaware Secretary of State on November 3, 2003.                                                      |
| 4.1*                 |       | Specimen certificate for shares  of Common Stock, $0.0001 par value per share, of Centennial Specialty Foods  Corporation.                                                                                                          |
| 4.2*                 |       | Form of Warrant for the  purchase of Common Stock issued to J.P. Turner & Company, L.L.C. on  completion of the initial public offering.                                                                              |
| 4.3*                 |       | Form of Lock-Up Agreement  between J.P. Turner & Company, L.L.C. and the officers, directors  and 5% or more stockholders of Centennial Specialty Foods Corporation.                                                  |
| 10.1*                |       | Lease Agreement, dated January 26,  2001, by and between Hoopeston Foods Denver Corp. and Stokes Canning Company.                                                                                                              |
| 10.1.1*              |       | Schedules to Lease Agreement.                                                                                                                                                                                                       |
| 10.2*                |       | Equipment Lease, dated  January 26, 2001, by and between Hoopeston Foods Denver Corp. and Stokes  Canning Company.                                                                                                             |
| 10.2.1*              |       | Schedules to Equipment Lease.                                                                                                                                                                                                       |
| 10.3*                |       | Exclusive License Agreement,  dated January 26, 2001, by and between Hoopeston Foods Denver Corp. and  Stokes Canning Company.                                                                                                 |
| 10.4*@               |       | Co-Pack and Warehousing  Agreement, dated January 26, 2001, by and between Hoopeston Foods Denver  Corp. and Stokes Canning Company.                                                                                           |
| 10.4.1*@             |       | Schedules and Exhibits to  Co-Pack and Warehousing Agreement.                                                                                                                                                                       |
| 10.5*@               |       | Lease Override Agreement, dated  January 26, 2001, by and between Hoopeston Foods Denver Corp. and Stokes  Canning Company.                                                                                                    |
| 10.6*                |       | EBITDA Committee Agreement,  dated January 26, 2001, by and between Hoopeston Foods Denver Corp. and  Stokes Canning Company.                                                                                                  |
| 10.6.1*@             |       | Schedules to EBITDA Committee  Agreement                                                                                                                                                                                            |
| 10.7*                |       | Amendment Agreement, dated  March 15, 2004, by and between Hoopeston Foods Denver Corp. and Stokes  Canning Company.                                                                                                           |
| 10.7.1*              |       | Hoopeston Foods Denver Corp.  subordinated note.                                                                                                                                                                                    |
| 10.7.2*              |       | Subordination, Attornment and  Non-Disturbance Agreement between Hoopeston Foods Denver Corp., Stokes  Canning Company and Heartland Bank.                                                                                          |
| 10.9*+               |       | Employment Agreement, effective  March 1, 2003, by and between Centennial Specialty Foods Corporation and  Jeffrey R. Nieder.                                                                                                  |
| 10.10*+              |       | Employment Agreement, effective  March 1, 2003, by and between Centennial Specialty Foods Corporation and  Robert A. Beckwith.                                                                                                 |
| 10.11*               |       | Form of Escrow Agreement  among Centennial Specialty Foods Corporation, the officers and directors of  Centennial Specialty Foods Corporation, J.P. Turner & Company,  L.L.C. and Corporate Stock Transfer, Inc. |
| 10.12*               |       | Lease Agreement, dated  February 1, 2003, by and between HQ Global Workplaces and Centennial  Specialty Foods Corporation.                                                                                                     |
| 10.13*               |       | Charter of our Audit Committee.                                                                                                                                                                                                     |
| 10.14*               |       | Charter of our Nominating  Committee.                                                                                                                                                                                               |
| 10.15*               |       | Charter of our Compensation  Committee.                                                                                                                                                                                             |
| 10.16*               |       | Charter of our Disclosure  Committee.                                                                                                                                                                                               |
| 10.17*               |       | Form of Director and  Officer Indemnification Agreement.                                                                                                                                                                       |
| 10.18*+              |       | 2003 Non-Employee Directors’  Stock Option Plan.                                                                                                                                                                               |

 

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| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                             |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.19*               |       | Professional Services  Agreement, dated August 28, 2003, by and between Centennial Specialty  Foods Corporation and Sterling Rice Group, Inc.                                     |
| 10.20.3*             |       | Loan and Security Agreement,  dated March 15, 2004, by and between Heartland Bank, Centennial  Specialty Foods Corporation and Stokes Canning Company                                  |
| 10.21*               |       | Separation Agreement dated  effective September 18, 2003 by and between J. Michael Miller and  Centennial Specialty Foods Corporation.                                                 |
| 10.22*               |       | Form of Promotional Share  Escrow Agreement by and among the officers and certain stockholders of  Centennial Specialty Foods Corporation and Centennial Specialty Foods  Corporation. |
| 10.23*+              |       | 2004 Stock Incentive Plan                                                                                                                                                                   |
| 10.24*               |       | Amendment No. 1 to Loan  and Security Agreement                                                                                                                                        |
| 10.25*               |       | Amendment No. 2 to Loan  and Security Agreement                                                                                                                                        |
| 10.26*+              |       | Employment Agreement, effective  February 28, 2005, by and between Centennial Specialty Foods Corporation  and Douglas L. Evans.                                                       |
| 10.27#               |       | Amendment No. 3 to Loan  and Security Agreement                                                                                                                                        |
| 11.1                 |       | Statement Re: Computation of  per Share Earnings (see financial statements)                                                                                                                 |
| 31.1#                |       | Rule 13a-14(a) Certification  of Chief Executive Officer of Centennial Specialty Foods Corporation.                                                                               |
| 31.2#                |       | Rule 13a-14(a) Certification  of Chief Financial Officer of Centennial Specialty Foods Corporation.                                                                               |
| 32.1#                |       | Section 1350 Certification                                                                                                                                                             |
| 32.2#                |       | Section 1350 Certification                                                                                                                                                             |
| 99.1*                |       | Code of Ethics of Centennial  Specialty Foods Corporation.                                                                                                                                  |

 

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#                             Filed herewith.

 

*                             Previously filed.

 

+                             Identifies each management contract or compensatory plan or arrangement.

 

@                        Certain confidential portions of this Exhibit were omitted by meansof redacting a portion of the text (the “Omitted Text”). The full text of this Exhibit willbe filed separately with the Secretary of the Commission with the Omitted Textpursuant to the Registrant’s Application Requesting Confidential Treatmentunder Rule 406 under the Securities Act.

 

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**SIGNATURES**

 

In accordance with the requirementsof the Exchange Act, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. 

 
|                 | CENTENNIAL SPECIALTY FOODS CORPORATION |
|----------------------|----------------------------------------|
|                 |                                   |
| August 22, 2005 | By:                                    | /s/ JEFFREY R. NIEDER |
|                 |                                   | Jeffrey R. Nieder |
|                 |                                   | *Chief Executive Officer* |

 

 
|                 | CENTENNIAL SPECIALTY FOODS CORPORATION |
|----------------------|----------------------------------------|
|                 |                                   |
| August 22, 2005 | By:                                    | /s/ DOUGLAS L. EVANS |
|                 |                                   | Douglas L. Evans |
|                 |                                   | *Chief Financial Officer* |

 

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