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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934 For The Quarterly Period Ended June 30, 2004 Commission File Number: 001-31816 Centennial Specialty Foods Corporation  Delaware
    
    55-0825751(State or other jurisdiction of incorporation
    
    (IRS Employer Identification No.)or organization)10700 E. Geddes Ave. #170Centennial, Colorado
    
    80112(Address of principal executive offices)
    
    (Zip Code)
 (303) 292-4018 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
  [X]   No [   ] Number shares of common stock outstanding at the latest practicable date: July
31, 2004: 5,050,000.




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INDEX PagePart I - Financial InformationItem 1 - Financial StatementsConsolidated Balance Sheets as of June 30, 2004 (Unaudited) and
December 31, 2003
    
    
    1Consolidated Unaudited Statements of Operations For the Three Months
Ended June 30, 2004 and June 30, 2003 and the Six Months Ended
June 30, 2004 and June 30, 2003
    
    
    2Consolidated Unaudited Statements of Cash Flows For the Six Months
Ended June 30, 2004 and June 30, 2003
    
    
    3Notes to Consolidated Unaudited Financial Statements
    
    
    4Item 2 - Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    9Item 3  Controls and Procedures
    
    
    24Part II - Other Information
    
    
    24Signature Page
    
    
    28ExhibitsLoan & Security Agreement2004 Stock Incentive PlanRule 13a-14(a) Certification of CEORule 13a-14(a) Certification of CFOSection 1350 CertificationsSection 1350 Certifications




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY 
 Consolidated Balance Sheets June 30,
    
    December 31,2004
    
    2003(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    286,123
    
    
    $
    6,076,479Accounts receivable, net of allowance
for doubtful accounts of $25,483 and
$25,483, respectively
    
    
    376,036
    
    
    
    303,848Other receivable
    
    
    57,497
    
    
    
    Inventory, net
    
    
    1,759,651
    
    
    
    1,043,540Prepaid expenses
    
    
    106,490
    
    
    
    186,086Total current assets
    
    
    2,585,797
    
    
    
    7,609,953Non-current assetsProperty, plant and equipment, net
    
    
    6,020,536
    
    
    
    6,112,215Goodwill, net
    
    
    1,634,079
    
    
    
    1,634,079Other assets
    
    
    70,610
    
    
    
    70,000Other long-term receivable
    
    
    
    
    
    
    170,000Total non-current assets
    
    
    7,725,225
    
    
    
    7,986,294Total assets
    
    $
    10,311,022
    
    
    $
    15,596,247Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable  trade
    
    $
    273,904
    
    
    $
    1,022,268Accrued liabilities
    
    
    603,102
    
    
    
    578,134Accrued dividends payable
    
    
    
    
    
    
    172,603Related party payable
    
    
    
    
    
    
    365,394Current portion of long-term debt
    
    
    
    
    
    
    750,250Note payable  stockholder
    
    
    
    
    
    
    908,900Total current liabilities
    
    
    877,006
    
    
    
    3,797,549Long-term debt
    
    
    2,084,750
    
    
    
    3,503,454Deferred tax liability
    
    
    273,150
    
    
    
    530,662Total long-term liabilities
    
    
    2,357,900
    
    
    
    4,034,116Total liabilities
    
    
    3,234,906
    
    
    
    7,831,665Commitments and contingenciesStockholders equityPreferred stock (liquidation
preference $10,250,000), 3,000,000
shares authorized, 2,000,000 shares
issued and outstanding, $5 stated
value, 10% dividend
    
    
    2,334,785
    
    
    
    2,334,785Common stock, $0.0001 par value,
47,000,000 shares authorized,
5,050,000 shares issued and
outstanding
    
    
    505
    
    
    
    505Additional paid-in capital
    
    
    5,794,036
    
    
    
    5,794,036Accumulated deficit
    
    
    (1,053,210
    )
    
    
    (364,744
    )Total stockholders equity
    
    
    7,076,116
    
    
    
    7,764,582Total liabilities and stockholders equity
    
    $
    10,311,022
    
    
    $
    15,596,247
 See notes to consolidated financial statements. - 1 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY 
 Consolidated Unaudited Statements of Operations For the Three Months Ended June 30,
    
    For the Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    947,064
    
    
    $
    1,218,154
    
    
    $
    2,074,547
    
    
    $
    2,414,216Cost of goods sold
    
    
    873,715
    
    
    
    796,775
    
    
    
    1,619,890
    
    
    
    1,542,844Gross profit
    
    
    73,349
    
    
    
    421,379
    
    
    
    454,657
    
    
    
    871,372Selling, general and
administrative expenses
    
    
    735,010
    
    
    
    427,228
    
    
    
    1,312,698
    
    
    
    813,458Income (loss) from operations
    
    
    (661,661
    )
    
    
    (5,849
    )
    
    
    (858,041
    )
    
    
    57,914Other income (expense)Interest expense
    
    
    (31,223
    )
    
    
    (129,302
    )
    
    
    (143,228
    )
    
    
    (256,315
    )Rent income
    
    
    146,710
    
    
    
    158,581
    
    
    
    305,291
    
    
    
    317,162Total other income
    
    
    115,487
    
    
    
    29,279
    
    
    
    162,063
    
    
    
    60,847Income (loss) before income
taxes
    
    
    (546,174
    )
    
    
    23,430
    
    
    
    (695,978
    )
    
    
    118,761Income tax benefit 
deferred
    
    
    202,084
    
    
    
    
    
    
    
    257,512
    
    
    
    Income tax expense  pro
forma
    
    
    
    
    
    
    (8,628
    )
    
    
    
    
    
    
    (43,900
    )Total income tax benefit
(expense)
    
    
    202,084
    
    
    
    (8,628
    )
    
    
    257,512
    
    
    
    (43,900
    )Net income (loss)
    
    $
    (344,090
    )
    
    $
    14,802
    
    
    $
    (438,466
    )
    
    $
    74,861Net income (loss) before
preferred stock dividends
    
    $
    (344,090
    )
    
    $
    14,802
    
    
    $
    (438,466
    )
    
    $
    74,861Preferred stock dividends  paid
    
    
    
    
    
    
    
    
    
    
    (250,000
    )
    
    
    Preferred stock dividends -
arrears
    
    
    (250,000
    )
    
    
    
    
    
    
    (250,000
    )
    
    
    Total preferred stock
dividends
    
    
    (250,000
    )
    
    
    
    
    
    
    (500,000
    )
    
    
    Net income (loss) available to
common shareholders
    
    $
    (594,090
    )
    
    $
    14,802
    
    
    $
    (938,466
    )
    
    $
    74,861Basic and diluted net income
(loss) per common share
    
    $
    (0.12
    )
    
    $
    0.00
    
    
    $
    (0.19
    )
    
    $
    0.02Basic and diluted weighted
average common shares
outstanding
    
    
    5,050,000
    
    
    
    3,500,000
    
    
    
    5,050,000
    
    
    
    3,500,000
 See notes to consolidated financial statements. - 2 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY 
 Consolidated Unaudited Statements of Cash Flows For the Six Months EndedJune 30,2004
    
    2003Cash flows from operating activitiesNet income (loss)
    
    $
    (438,466
    )
    
    $
    118,761Adjustments to reconcile net income (loss) to net cash
provided by operating activitiesDepreciation and amortization
    
    
    116,960
    
    
    
    117,919Deferred income taxes
    
    
    (257,512
    )
    
    
    Changes in assets and liabilitiesAccounts and other receivables
    
    
    (129,685
    )
    
    
    174,356Inventory
    
    
    (716,111
    )
    
    
    (69,567
    )Prepaid expenses
    
    
    79,596
    
    
    
    (185,824
    )Accounts payable  trade
    
    
    (748,364
    )
    
    
    5,297Accrued liabilities
    
    
    24,968
    
    
    
    (154,503
    )Related party payable
    
    
    (195,394
    )
    
    
    (1,825,542
    )
    
    
    (112,322
    )Net cash provided (used) by operating activities
    
    
    (2,264,008
    )
    
    
    6,439Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (18,220
    )
    
    
    (32,200
    )Net cash used in investing activities
    
    
    (18,220
    )
    
    
    (32,200
    )Cash flows from financing activitiesNet proceeds from revolving line of credit
    
    
    2,084,750
    
    
    
    Payments on long-term debt
    
    
    (4,253,704
    )
    
    
    (55,897
    )Payments on note payable  stockholder
    
    
    (908,900
    )
    
    
    Payment of financing costs
    
    
    (7,671
    )
    
    
    Payment of preferred stock dividends
    
    
    (422,603
    )
    
    
    Net cash used by financing activities
    
    
    (3,508,128
    )
    
    
    (55,897
    )Net decrease in cash
    
    
    (5,790,356
    )
    
    
    (81,658
    )Cash and cash equivalents  beginning of period
    
    
    6,076,479
    
    
    
    379,545Cash and cash equivalents  end of period
    
    $
    286,123
    
    
    $
    297,887Supplemental Disclosure of Cash Flow Information:Interest Paid
    
    $
    283,175
    
    
    $
    262,284Supplemental Disclosure of Non-Cash Investing and
Financing Activities:Assignment of note receivable to major stockholder in
satisfaction of related party payable
    
    $
    170,000
    
    
    $
    
 See notes to consolidated financial statements. - 3 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY 
 Notes to Unaudited Financial Statements Note 1  Description of Business and Summary of Significant Accounting Policies Centennial Specialty Foods Corporation (Centennial) is a holding company that
was formed under Delaware law in February 2003 for the purpose of acquiring
Stokes Ellis Foods, Inc. and its wholly owned subsidiary Stokes Canning Company
(collectively Stokes). Effective October 29, 2003, Centennial acquired Stokes
concurrent with its initial public offering. From inception through October
29, 2003, Centennials activities consisted of planning its initial public
offering as well as developing plans for operations subsequent to the public
offering. The only sources of capital for Centennial were advances made by
Stokes and proceeds from the public offering. Stokes Ellis Foods, Inc. was a holding company formed under Delaware law in
August 1998 for the purpose of acquiring Stokes Canning Company. Stokes Ellis
Foods, Inc. was formerly known as Lewis Foods, Inc. until it changed its name
in May 2003. Stokes Canning Company was formed in 1974 under Colorado law. It markets,
sells and distributes branded ethnic Southwestern canned sauces and food
products in the Mexican food segment of the domestic food industry. The
products are sold through superstores, club stores and grocery retailers
throughout Colorado, Arizona, California and a small number of major
metropolitan markets in adjoining states. Centennials operations are
conducted from its facilities located in Centennial, Colorado. Principles of Consolidation The accompanying consolidated financial statements include the accounts of
Centennial Specialty Foods Corporation, Stokes Ellis Foods, Inc. and
subsidiary, Stokes Canning Company (collectively the Company). All
intercompany accounts and transactions have been eliminated in consolidation. The purchase of Stokes has been accounted for as a reorganization of companies
under common control in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141, in a manner similar to reverse acquisition
accounting. After completion of the public offering and issuance of preferred
stock, the former sole stockholder of Stokes has voting control of
approximately 58.2% of the outstanding capital stock of Centennial. For this
reason, Stokes Ellis Foods and Centennial are treated as being under common
control for financial statement reporting purposes. Accordingly, no goodwill
has been recorded as a result of this business combination. In addition, the
Consolidated Statements of Operations and Consolidated Statements of Cash Flows
have been consolidated for the three and six months ended June 30, 2003 under
the provisions of FASB Interpretation No. 46. Reclassifications Certain prior period amounts have been reclassified to conform to current year
presentation. Interim Financial Information The interim consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
results of operations for the three and six months ended June 30, 2004 and 2003
are not necessarily indicative of the results of the entire year. The
consolidated financial statements included herein are presented in accordance
with the requirements of Form 10-QSB and consequently do not include all of the
disclosures normally made in the Companys annual Form 10-KSB filing. These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Companys annual Form
10-KSB. The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect amounts
reported in the consolidated financial statements and the accompanying notes
and the reported amounts of net sales and expenses. Actual results could
differ from those estimates. - 4 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY Concentrations of Credit Risk The Company grants credit in the normal course of business to customers in the
United States. The Company periodically performs credit analysis and monitors
the financial condition of its customers to reduce credit risk. The Company had four customers that accounted for 33%, 17%, 12% and 12% of
total sales for the three months ended June 30, 2004 and 24%, 16%, 13% and 12%
of total sales for the three months ended June 30, 2003. These customers
accounted for 41%, 15%, 9% and 12% of total accounts receivable at June 30,
2004. The Company had four customers that accounted for 28%, 16%, 13% and 13% of
total sales for the six months ended June 30, 2004 and three customers that
accounted for 44%, 23%, and 20% of total sales for the six months ended June
30, 2003. These customers accounted for 50%, 11%, 0.1% and 8% of total
accounts receivable at December 31, 2003. Income Taxes The Company provides for income taxes utilizing the liability method. Under
the liability method, current income tax expense or benefit represents income
taxes expected to be payable or refundable for the current period. Deferred
income taxes are recognized for the tax consequences in future years as a
result of differences between the tax and financial reporting bases of assets
and liabilities and for the expected future tax benefit to be derived from tax
credit and loss carry-forwards. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts managements believes are
more likely than not to be realized in future tax returns. Tax rate changes
are reflected in the period such changes are enacted. Prior to the effective date of the initial public offering, the Company elected
to be treated as a subchapter S corporation for income tax purposes.
Accordingly, taxable income and losses of the Company prior to the public
offering is reported on the income tax returns of the Companys stockholders.
Included in the consolidated statements of operations until the public offering
in 2003, are pro forma income tax adjustments computed using the statutory
rates in effect, which represent the federal and state tax provisions that
would have been required had the Company been taxed as a C-corporation for the
entire year. The Companys effective statutory rate based on pre-tax income on
a pro forma basis would have been 37% for the three and six months ended June
30, 2003. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense for
the three months ended June 30, 2004 and 2003 were $124,601 and $13,474,
respectively, and for the six months ended June 30, 2004 and 2003 were $175,388
and $44,465, respectively. Billback discounts, Promotional allowances, Cash discounts and Slotting
fees The Company offers various discounts and promotional allowances to customers.
These amounts are recorded as a decrease to sales in the period incurred. The
Company offered billback discounts in expansion markets during the three months
ended June 30, 2004. In addition, the Company pays slotting fees to customers
to obtain shelf space in retail locations. These one-time fees are
non-refundable and are netted against sales in the period incurred. The
Company paid significant slotting fees during the three months ended June 30,
2004 to obtain shelf space in expansion markets. - 5 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY Discounts, promotional allowances and slotting fees are summarized below for
the three and six months ended June 30, 2004 and 2003. For the Three Months Ended June 30,
    
    For the Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003Billback discounts
    
    $
    60,151
    
    
    $
    20,871
    
    
    $
    87,491
    
    
    $
    34,846Promotional allowances
    
    
    128,430
    
    
    
    185,361
    
    
    
    223,335
    
    
    
    348,371Cash discounts
    
    
    23,436
    
    
    
    21,247
    
    
    
    42,391
    
    
    
    41,101Total discounts and
allowances
    
    
    212,017
    
    
    
    227,479
    
    
    
    353,217
    
    
    
    424,318Slotting Fees
    
    
    427,380
    
    
    
    1,663
    
    
    
    458,287
    
    
    
    5,325Total adjustments to
gross sales
    
    $
    639,397
    
    
    $
    229,142
    
    
    $
    811,504
    
    
    $
    429,643
 Note 2 - Long-Term Debt In March 2004, the Company obtained a $5,000,000 senior revolving line of
credit. The revolving line of credit matures December 31, 2006 and accrues
interest at the banks base rate plus 1.5%, or 5.5% at June 30, 2004. The
borrowing base is limited to the sum of 70% of the appraised value of the
production plant, 75% of eligible accounts receivable and 50% of finished goods
inventory. Based upon these allowable percentages, the Company had $2,915,250
in funds available under the revolving line of credit at June 30, 2004. The
facility calls for an unused revolver commitment fee of .5% per annum which is
paid quarterly in an amount equal to the average daily unused portion of the
revolving credit facility times .5% per annum. The facility is secured by a
first mortgage on the production building. The facility is also secured by
substantially all assets 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 certain restrictive covenants. In order to
maintain compliance with one of these covenants, the Companys board of
directors did not declare any preferred stock dividends for the three months
ended June 30, 2004. See further discussion in Note 6. In March 2004, the Company used proceeds from this revolver to retire the notes
payable to individuals and note payable to stockholder discussed in Note 3. In
addition, the Company retired the existing first mortgage note payable to a
bank using initial public offering proceeds. Long-term debt consists of the following at: June 30, 2004
    
    December 31, 2003Revolving line of credit payable to bank.
    
    $
    2,084,750
    
    
    $
    Mortgage payable to a bank. Paid in full during 2004.
    
    
    
    
    
    
    3,503,454Notes payable to two individuals. Paid in full during 2004.
    
    
    
    
    
    
    335,250Notes payable to various individuals. Paid in full during 2004.
    
    
    
    
    
    
    415,0002,084,750
    
    
    
    4,253,704Less current portion
    
    
    
    
    
    
    (750,250
    )$
    2,084,750
    
    
    $
    3,503,454
 Note 3 - Note Payable - Stockholder The Company had previously entered into a note with the majority stockholder of
the Company with interest at 12% per annum. The note matured February 2004.
The balance at December 31, 2003 was $908,900. There was $106,260 of accrued
interest outstanding on this note as of December 31, 2003. In March 2004, the
Company repaid - 6 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY the stockholder all outstanding principal of $908,900 and accrued interest of
$129,866 through proceeds from a new senior revolving line of credit described
in Note 2. Note 4  Commitments and Contingencies Plant and Equipment Lease In January 2001, the Company entered into a lease agreement with a lessee, the
Companys sole supplier and unrelated party, to lease the Companys production
plant and equipment. The lessee is using the production plant and equipment to
perform co-packing and warehousing operations for both the Company and other
non-related entities. Under the terms of the lease, the Company is to receive
monthly payments of approximately $53,000, which includes property taxes,
maintenance and repairs. The lease expires in January 2006, but the lessee has
an option to extend up to an additional 5 years. The Company received $158,581
in lease payments for the three months ended June 30, 2004 and 2003, and
$317,162 in lease payments during the six months ended June 30, 2004 and 2003.
The lessee did not make lease payments when due during April and May 2004.
Beginning in June 2004, the lessee brought all lease payments current. The Company and the lessee are also parties to a Lease Override Agreement which
requires additional payments based on profitability, as defined in the
agreement, of the lessees co-packing and warehousing operations. As of
December 31, 2003, the Company had recorded a note receivable of $170,000 for
such additional payments to be received from the lessee related to the lessees
fiscal year ended June 30, 2003. As stated in the Companys registration
statement dated October 29, 2003, this additional payment is due to the
Companys majority stockholder, as such income was earned by Stokes prior to
the Companys acquisition thereof. Accordingly, a payable to the Companys
majority stockholder of $170,000 was also recorded at December 31, 2003. During the three months ended June 30, 2004, the Company recorded an estimated
$57,497 of additional rent income related to its share of the lessees
operating profits from its co-packing and warehousing operations for the fiscal
year ended June 30, 2004. Contract Amendments The Company and its lessee amended certain terms of the existing Lease and
Lease Override Agreements in March 2004. As part of these amendments, the
Company agreed to receive payment due from its lessee for additional rent owed
under the Lease Override Agreement for the twelve months ended June 30, 2003 in
the form of a $170,000 note receivable. The note receivable matures November
1, 2004, but may be extended to April 30, 2006. Interest does not begin
accruing until certain events occur, after which point the note will accrue
interest at 7% per annum payable quarterly. In March 2004, this note was
assigned to the Companys majority stockholder in full satisfaction of the
related $170,000 liability to the stockholder. Other Matters In June 2004, the lessee asserted an unquantified claim of misrepresentation by
the Companys outside legal counsel related to the Contract Amendment described
above. The Companys management and its outside legal counsel dispute the
claim and believes it is without merit. See Note 7 below for further
discussion concerning the lessee. The lessee also asserted a demand claim in June 2004 for approximately $400,000
against the Company related to payment of costs associated with a wastewater
treatment project at the Denver production plant. The Company believes such
project costs are the responsibility of the lessee, as the wastewater treatment
is an operating permit issue which is the responsibility of the lessee under
the terms of the lease. Co-Pack and Warehousing Agreement In conjunction with the plant and equipment lease, the Company entered into a
Co-Pack and Warehousing Agreement with the same lessee. Under the terms of the
agreement, the lessee will produce, package, and warehouse the products the
Company sells and distributes. As part of the agreement, the Company must
purchase - 7 -




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CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY 585,053 12-pack (15 oz.) equivalent cases of product during each contract year
or pay a shortage fee of $0.80 for every 12-pack (15 oz.) equivalent case
short. The Company recorded shortage fees of $81,874 and $16,841 for the
contract years ended June 30, 2004 and 2003, respectively. The Company must
also pay a $0.033 per case fee per month if storage of product based upon the
pack plan exceeds 30 days due to the Companys shipping schedule. The
agreement expires in January 2008, but is automatically renewed for one
additional year at the end of each year unless either party elects to terminate
the renewal feature. Dependency on Supplier As discussed above, one supplier manufactures all of the Companys products.
If there were to be an interruption in the delivery of products from the
supplier, the Company could suffer a significant disruption to its operations
that may have a material effect on its financial condition and results of
operations. In the event of an interruption in the delivery of products from
the supplier, the Company believes it can have its products produced elsewhere. Purchase Commitments The Company had outstanding commitments for inventory as of June 30, 2004 and
December 31, 2003 of $747,900 and $926,849, respectively. Operating Lease In May 2004, the Company entered into a lease agreement for office space for
its headquarters in Centennial, Colorado. Under the terms of the lease, the
Company must make monthly lease payments for a term of three years. Note 5  Related Party Transactions As of December 31, 2003, the Company recorded a related party payable totaling
$365,394. This payable represents subchapter S corporation earnings prior to
October 29, 2003, which are owed to the majority stockholder. Such earnings
include additional rent totaling $170,000 due under the production facility
lease and Stokes operating income totaling $195,394. The Company made a partial payment of $175,000 to the majority stockholder
associated with this related party payable in January 2004. In addition, the
Company assigned the note receivable of $170,000 due from its supplier to the
majority stockholder in March 2004 and paid the remaining $20,394 in June 2004. Note 6  Preferred Stock Dividends The Companys board of directors did not declare any preferred stock dividends
for the three months ended June 30, 2004 in order for the Company to maintain
compliance with its consolidated net worth covenant in its revolving line of
credit with its bank. As the preferred stock dividends are cumulative
dividends, $250,000 of dividends will be placed in arrearage and will increase
the existing $10,000,000 liquidation preference on the preferred stock to
$10,250,000. Note 7  Subsequent Events In July 2004, the Company and its lessee and sole supplier, an unrelated party,
entered into a Memorandum of Understanding (MOU) related to a sale of the
Companys production plant and equipment to the supplier. The purchase price
of $7,000,000 would be financed by the Company. As part of this transaction,
all prior claims of both parties will be released and certain amendments will
be made to the co-pack agreement between the parties. The closing of the
transactions in the MOU are subject to a number of conditions, including
satisfactory completion of due diligence and execution of definitive documents.
However, in the event the transaction is not consummated, the Company expects
to vigorously defend the claims raised by its supplier as well as vigorously
pursue its counterclaims. If these claims are not favorably resolved for the Company,
resulting events could materially adversely impact the Companys production,
financial condition and operating results. - 8 -




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with
the consolidated financial statements of Centennial and the notes thereto
included elsewhere in this report onForm 10-QSB. Some of the information
contained in this discussion 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. (See the section titled Forward-Looking Statements for a more
complete discussion). OVERVIEW We are a specialty branded food company that is implementing its strategy
to expand its distribution and sales of ethnic Southwestern sauces and food
products in the growing Mexican food segment of the domestic food industry. Our
Stokes and Ellis labels, two Southwestern brands, are each now nearly 100 years
old and are well-recognized in our primary market of Colorado. Our best-selling
products are our Stokes green chile sauces, offered in five varieties, four of
which are ranked in retail sales as the most popular Mexican sauces in Colorado
and which are among the 25 best selling Mexican food products retailed in
Colorado, according to IRI, an independent market research firm. Our products
are currently sold in leading grocery retailers, superstores and club stores
such as Kroger, Safeway, Wal-Mart, Sams Club, Albertsons and Costco, through
locations in Colorado, Arizona, California and a small number of major
metropolitan markets in adjoining states. CONSOLIDATED RESULTS OF OPERATIONS The following table sets forth, for the three and six months ended June
30, 2004 and 2003, the percentage of net sales represented by the specified
items included in our unaudited consolidated statements of operations. We have
included this comparison because we believe it provides a more meaningful basis
for period-to-period comparisons. This financial data should not be viewed as a
substitute for our historical consolidated results of operations determined in
accordance with generally accepted accounting principles and does not purport
to be indicative of future results of operations. ConsolidatedThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    92.3
    
    
    
    65.4
    
    
    
    78.1
    
    
    
    63.9Gross margin
    
    
    7.7
    
    
    
    34.6
    
    
    
    21.9
    
    
    
    36.1Selling, general and
administrative expenses
    
    
    77.6
    
    
    
    35.1
    
    
    
    63.3
    
    
    
    33.7Income (loss) from operations
    
    
    (69.9
    )
    
    
    (0.5
    )
    
    
    (41.4
    )
    
    
    2.4Total other income
    
    
    12.2
    
    
    
    2.4
    
    
    
    7.8
    
    
    
    2.5Income tax benefit (expense)
    
    
    21.3
    
    
    
    (0.7
    )
    
    
    12.4
    
    
    
    (1.8
    )Net income (loss)
    
    
    (36.3
    )%
    
    
    1.2
    %
    
    
    (21.1
    )%
    
    
    3.1
    %
 - 9 -




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Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003 Net Sales Our net sales are comprised of gross sales reduced by promotional
allowances, billback discounts, cash discounts and slotting fees. The
following table sets forth these components to provide a more thorough
understanding of net sales. For the Three Months Ended June 30,
    
    For the Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003Sales  Stokes
    
    $
    1,230,228
    
    
    $
    828,161
    
    
    $
    2,129,317
    
    
    $
    1,670,358Sales  Ellis
    
    
    356,233
    
    
    
    605,163
    
    
    
    756,734
    
    
    
    1,129,068Sales  Greens Farm (1)
    
    
    
    
    
    
    13,972
    
    
    
    
    
    
    
    44,433Gross sales
    
    
    1,586,461
    
    
    
    1,447,296
    
    
    
    2,886,051
    
    
    
    2,843,859Less: Promotional
allowances, billback
discounts and cash
discounts
    
    
    212,017
    
    
    
    227,479
    
    
    
    353,217
    
    
    
    424,318Net sales before
slotting fees
    
    
    1,374,444
    
    
    
    1,219,817
    
    
    
    2,532,834
    
    
    
    2,419,541Less: Slotting fees
    
    
    427,380
    
    
    
    1,663
    
    
    
    458,287
    
    
    
    5,325Net sales
    
    $
    947,064
    
    
    $
    1,218,154
    
    
    $
    2,074,547
    
    
    $
    2,414,216
 (1) Discontinued product line in 2003.  
    
    Sales  Stokes Sales of our Stokes green chile sauces increased
$0.4 million or 48.6% for the three months ended June 30, 2004 over the
same period in 2003. This increase reflects our expansion efforts into
California and Arizona. For the three months ended June 30, 2004, we
sold our premium Stokes green chile sauces to Kroger, Safeway and
Albertsons affiliates in Arizona, Southern California and Northern
California representing an increase of approximately 1,700 stores.The significant increase in sales is due primarily to initial purchases
from grocery customers in the new markets to stock the product on store
shelves. Once full grocery shelf distribution is achieved, future
increases in sales volume will be directly related to consumer purchasing
of our products.
    
    Sales  Ellis Sales of our Ellis branded products continued to
decrease as a result of our concerted effort to reduce sales of
low-profit products. Sales of our Ellis products decreased $0.2
million or 41.1% for the three months ended June 30, 2004 compared to
the same period in 2003. We anticipate sales of our Ellis products will
continue to decrease somewhat throughout 2004 as we continue to focus
on our core, higher-profit products. The Ellis products will be
maintained for certain key customers who purchase significant
quantities of our premium Stokes products. - 10 -




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As we continue to focus on marketing and selling our higher margin sauces
and foods, we may further streamline our product lines to reduce the
number of lower gross margin, commodity products we sell that compete
with retailers private label products. We anticipate that any new
products we introduce will be higher margin, premium products. We believe
limiting new product introductions to premium products will allow us to
more effectively target our marketing and promotion budget and help us
enhance our gross margins.
    
    Promotional allowances, billback discounts and cash discounts
Promotional allowances and discounts decreased 6.8% for the three
months ended June 30, 2004 compared to the same period in 2003. This
decrease was primarily attributable to sales to new customers which did
not include promotional allowances. We expect promotional allowances
and billback discounts will increase throughout the remainder of 2004
as sales in new markets increase.
    
    Net sales before slotting fees We sold 78,502 cases of product in
the three months ended June 30, 2004 compared to 87,815 cases in the
same period in 2003. Average net sales price before slotting fees for
the three months ended June 30, 2004 increased approximately $3.62 per
case over the same period in 2003. This is further indicative of our
sales focus on higher margin products, specifically, the premium Stokes
green chile sauces. We expect sales to increase throughout the
remainder of fiscal 2004 as we continue to implement our strategic plan
to grow our market presence and enter new markets with our higher
margin products.
    
    Slotting fees Slotting fees increased significantly during the
three months ended June 30, 2004 primarily as a result of our expansion
into the California market. We paid slotting fees totaling $0.4 million
to obtain shelf space in retail grocery stores in new markets compared
to a nominal amount in the same period in 2003. We did not actively
pursue slotting new items in 2003 prior to our public offering due to
our focus on developing consumer and brand programs. We are now
spending a portion of the proceeds from our initial public offering
toward payment of slotting fees to obtain shelf space in grocery
stores. We anticipate slotting fees will continue to increase
throughout our 2004 and 2005 fiscal years from pre-existing levels as
we continue executing our expansion strategy. Cost of goods sold Cost of goods sold increased $0.1 million for the three months ended June
30, 2004 compared to the same period in 2003. As a percentage of net sales, our
cost of goods sold increased to 92.3% in the three months ended June 30, 2004
from 65.4% in the same period in 2003. This increase is primarily attributable
to $0.4 million of slotting fees paid during the three months ended June 30,
2004, which are recorded as a reduction of sales. This increase was partially
offset by an emphasis on higher profit, key products being sold which directly
reduced cost of goods sold as a percentage of net sales. We expect that our
cost of goods sold will increase on an absolute basis in future periods as we
increase sales through our planned expansion, with costs of goods sold as a
percentage of net sales decreasing as sales increase and slotting fees
decrease. Selling, general and administrative expenses Selling, general and administrative expenses increased $0.3 million, or
66.7%, to $0.7 million for the three months ended June 30, 2004 from $0.4
million in the same period in 2003. This increase was partially attributable to
advertising and consumer marketing spending of $0.2 million in the three months
ended June 30, 2004 associated with our expansion into new markets. Further,
directors and officers insurance, shareholder relations and accounting and
legal fees increased $0.1 as a result of additional costs associated with being
a public company. Legal fees also increased due to issues with our
tenant and sole supplier. We expect selling, general and administrative expenses will
continue to increase throughout fiscal 2004 in absolute amounts as we implement
our expanded marketing program. Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules proposed by the SEC, could result in increased administrative
costs to us as we respond to their requirements. The new rules could make it
more difficult for us to - 11 -




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obtain certain types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain coverage we consider to be adequate.
The impact of these events could also make it more difficult for us to attract
and retain qualified persons to serve on our board of directors, our board
committees, or as executive officers. We cannot predict or estimate the amount
of the additional costs we may incur or the timing of such costs. Income (loss) from operations Income from operations decreased $0.6 million to a $0.7 million loss for
the three months ended June 30, 2004. This decrease was primarily attributable
to slotting fees of $0.4 million and increased selling, general and
administrative expenses. We expect income from operations should increase in
future periods to the extent we are successful with our expansion strategy and
in controlling the rate of increase in selling, general and administrative
expenses. Other income and (expenses) Other income consists of rental income, supplier EBITDA sharing income and
production shortfall fees, all of which are related to the Building and
Equipment Lease and Co-Pack and Warehousing Agreements with Hoopeston Foods
Denver Corporation (Hoopeston). Other income remained constant at $0.15
million for the three months ended June 30, 2004 and 2003. For the three
months ended June 30, 2004, we have recorded additional rent income of $57,497
which represents our estimated share of Hoopestons EBITDA for its fiscal year
ended June 30, 2004. In addition, during the three months ended June 30, 2004,
we recorded production shortfall fees of $81,874 related to Hoopestons fiscal
year ended June 30, 2004. Other expenses are comprised entirely of interest expense and decreased
$0.1 million for the three months ended June 30, 2004 compared to the same
period in 2003. This decrease is a direct result of retiring the mortgage on
our production plant using initial public offering proceeds and repaying loans
from our majority stockholder and other individual lenders using lower interest
rate funds from our revolving line of credit we obtained in March 2004. Net income (loss) before income taxes Net income before income taxes decreased $0.6 million to a $0.5 million
loss before income taxes for the three months ended June 30, 2004. This
decrease was primarily attributable to $0.4 million in slotting fees paid to
secure shelf space in expansion markets and increased selling, general and
administrative expenses. Income tax expense We have included pro forma income tax adjustments computed using the
statutory rates in effect for the three months ended June 30, 2003 which
represent the federal and state tax provisions that would have been required
had the Company been taxed as a C-corporation during that period. The
decrease in income tax expense of $0.2 million is directly attributable to
lower income before taxes. Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003 Net Sales  
    
    Sales  Stokes Sales of our Stokes green chile sauces increased
$0.5 million or 27.5% for the six months ended June 30, 2004 over the
same period in 2003. This increase reflects our expansion efforts into
California and Arizona. As of June 30, 2004, we have sold our green
chile sauces to Kroger, Safeway and - 12 -




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Albertsons affiliates in Arizona, Southern California and Northern
California representing an increase of approximately 1,700 stores over
the same period in 2003.The significant increase in sales is due primarily to initial purchases
from grocery customers in the new markets to stock the product on store
shelves. Once full grocery shelf distribution is achieved, future
increases in sales volume will be directly related to consumer purchasing
of our products.
    
    Sales  Ellis Sales of our Ellis branded products continued to
decrease as a result of our concerted effort to reduce sales of
low-profit products. Sales of our Ellis products decreased $0.4
million or 33.0% for the six months ended June 30, 2004 compared to the
same period in 2003. We anticipate sales of our Ellis products will
continue to decrease somewhat throughout 2004 as we continue to focus
on our core, higher-profit products. The Ellis products will be
maintained for certain key customers who purchase significant
quantities of our premium Stokes products.As we continue to focus on marketing and selling our higher margin sauces
and foods, we may further streamline our product lines to reduce the
number of lower gross margin, commodity products we sell that compete
with retailers private label products. We anticipate that any new
products we introduce will be higher margin, premium products. We believe
limiting new product introductions to premium products will allow us to
more effectively target our marketing and promotion budget and help us
enhance our gross margins.
    
    Promotional allowances, billback discounts and cash discounts
Promotional allowances and discounts decreased $0.1 million, or 16.8%,
for the six months ended June 30, 2004 compared to the same period in
2003. This decrease was primarily attributable to sales to new
customers which did not include promotional allowances. We expect
promotional allowances and billback discounts will increase throughout
the remainder of 2004 as sales in new markets increase. Further, we
are shifting to a performance-based discounting program with customers
to help drive sales of our products.
    
    Net sales before slotting fees We sold 149,054 cases of product
in the six months ended June 30, 2004 compared to 163,820 cases in the
same period in 2003. Average net sales price before slotting fees for
the six months ended June 30, 2004 increased approximately $2.22 per
case over the same period in 2003. This is further indicative of our
sales focus on higher margin products, specifically, the premium Stokes
green chile sauces. We expect sales to increase throughout the
remainder of fiscal 2004 as we continue to implement our strategic plan
to grow our market presence and enter new markets with our higher
margin products.
    
    Slotting fees Slotting fees increased significantly during the
six months ended June 30, 2004 primarily as a result of our expansion
into the California market. We paid slotting fees totaling $0.5 million
to obtain shelf space in retail grocery stores in new markets compared
to a nominal amount in the same period in 2003. We did not actively
pursue slotting new items in 2003 prior to our public offering due to
our focus on developing consumer and brand programs. We are now
spending a portion of the proceeds from our initial public offering
toward payment of slotting fees to obtain shelf space in grocery
stores. We anticipate slotting fees will continue to increase
throughout our 2004 and 2005 fiscal years from pre-existing levels as
we continue executing our expansion strategy. Cost of goods sold Cost of goods sold increased $0.1 million for the six months ended June
30, 2004 compared to the same period in 2003. As a percentage of net sales, our
cost of goods sold increased to 78.1% in the six months ended June 30, 2004
from 63.9% in the same period in 2003. This increase was primarily
attributable to $0.5 million of slotting fees paid during the six months ended
June 30, 2004 which are recorded as a reduction of sales. This increase was
partially offset by an emphasis on higher profit, key products being sold,
which directly reduces cost of goods sold as a percentage of net sales. We
expect that our cost of goods sold will increase on an absolute basis in future
periods as we increase sales through our planned expansion, with costs of goods
sold as a percentage of net sales decreasing as sales increase and slotting
fees decrease. - 13 -




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Selling, general and administrative expenses Selling, general and administrative expenses increased $0.5 million, or
61.4%, to $1.3 million for the six months ended June 30, 2004 from $0.8 million
in the same period in 2003. This increase was partially attributable to
advertising and consumer marketing spending of $0.3 million in the six months
ended June 30, 2004 associated with our expansion into new markets. Further,
directors and officers insurance, shareholder relations and accounting and
legal fees increased $0.2 as a result of additional costs associated with being
a public company. Legal fees also increased due to issues with our
tenant and sole supplier. We expect selling, general and administrative expenses will
continue to increase throughout fiscal 2004 in absolute amounts as we implement
our expanded marketing program. Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules proposed by the SEC, could result in increased administrative
costs to us as we respond to their requirements. The new rules could make it
more difficult for us to obtain certain types of insurance, including director
and officer liability insurance, and we may be forced to accept reduced policy
limits and coverage or incur substantially higher costs to obtain coverage we
consider to be adequate. The impact of these events could also make it more
difficult for us to attract and retain qualified persons to serve on our board
of directors, our board committees, or as executive officers. We cannot predict
or estimate the amount of the additional costs we may incur or the timing of
such costs. Income (loss) from operations Income (loss) from operations decreased $0.9 million to a $0.9 million
loss for the six months ended June 30, 2004. This decrease was primarily
attributable to slotting fees of $0.5 million and increased selling, general
and administrative expenses. We expect income from operations will increase in
future periods to the extent we are successful with our expansion strategy and
in controlling the rate of increase in selling, general and administrative
expenses. Other income and (expenses) Other income consists of rental income, EBITDA sharing income and
production shortfall fees all of which are related to the Building and
Equipment Lease and Co-Pack and Warehousing Agreement with Hoopeston. Other
income remained constant at $0.3 million for the six months ended June 30, 2004
and 2003. For the six months ended June 30, 2004, we have recorded additional
rent income of $57,497 which represents our estimated share of Hoopestons
EBITDA for their fiscal year ended June 30, 2004. In addition, during the six
months ended June 30, 2004, we recorded production shortfall fees of $81,874
related to Hoopestons fiscal year ended June 30, 2004. Other expenses are comprised entirely of interest expense and decreased
$0.1 million for the six months ended June 30, 2004 compared to the same period
in 2003. This decrease is a direct result of retiring the mortgage on our
production plant using initial public offering proceeds and repaying loans from
our majority stockholder and other individual lenders using lower interest rate
funds from our revolving line of credit we obtained in March 2004. Net income (loss) before income taxes Net income before income taxes decreased $0.8 million to a $0.7 million
loss before income taxes for the six months ended June 30, 2004 compared to the
same period in 2003. This decrease was primarily attributable to $0.5 million
in slotting fees paid to secure shelf space in expansion markets and increased
selling, general and administrative expenses. - 14 -




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Income tax expense We have included pro forma income tax adjustments computed using the
statutory rates in effect for the six months ended June 30, 2003 which
represent the federal and state tax provisions that would have been required
had the Company been taxed as a C corporation during that period. The
decrease in income tax expense of $0.3 million is directly attributable to
lower income before taxes. LIQUIDITY AND CAPITAL RESOURCES Cash Requirements The following data summarizes our contractual obligations and commitments
as of June 30, 2004: Payments due by periodsWithin
    
    Years
    
    Years
    
    AfterTotal
    
    1 Year
    
    2 and 3
    
    4 and 5
    
    5 Years(In thousands)Contractual
obligations:Long-term
debt
    
    $
    2,085
    
    
    $
    
    
    
    $
    2,085
    
    
    $
    
    
    
    $
    Operating
leases
    
    
    115
    
    
    
    34
    
    
    
    81
    
    
    
    
    
    
    
    Purchase
obligations
    
    
    748
    
    
    
    748
    
    
    
    
    
    
    
    
    
    
    
    Production
obligations
    
    
    2,275
    
    
    
    403
    
    
    
    936
    
    
    
    936
    
    
    
    Total contractual
cash obligations
    
    $
    5,223
    
    
    $
    1,185
    
    
    $
    3,102
    
    
    $
    936
    
    
    $
    
 Long-term debt:Long-term debt at June 30, 2004 consisted of $2.1 million
in drawdowns under our senior revolving line of credit obtained in March 2004
which matures December 31, 2006. We intend to use this line of credit to fund
our working capital requirements. Operating leases:Operating leases at June 30, 2004 consisted of an
office space lease for our headquarters in Centennial, Colorado. Purchase obligations:Purchase obligations above represent costs of
inventory items we have requested and authorized Hoopeston to produce for us as
of June 30, 2004 which have not been billed to us by Hoopeston. The product
has not been billed to us because Hoopeston has either not yet produced the
inventory or, if product has been produced, it has not been released from the
10 day production hold. - 15 -




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Production obligations:Production obligations represent minimum
production requirements under our co-pack contract with Hoopeston. We are
required to purchase a minimum of 585,053 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 case by which we fall short of the 585,053 case
minimum. We do not currently anticipate any significant capital expenditure
requirements during the next twelve months. Sources and Uses of Cash Our principal sources of liquidity as of June 30, 2004 consisted of $0.3
million in cash and cash equivalents and $2.9 million available under our
senior revolving line of credit. We generate cash primarily through product
sales. We require capital to finance inventory and accounts receivable, pay
slotting fees to grocery chain retailers, pay operating costs, pay interest on
our existing debt obligations and pay dividends on our preferred stock. Operating:Net cash used by operating activities was $2.3 million for the six
months ended June 30, 2004, consisting primarily of payment of slotting fees,
build-up of inventory for our expansion into new markets, build-up of
inventory in order to mitigate the risk of an interruption in supply
due to uncertainties with our sole supplier, payment of aged
accounts payable to Hoopeston in order to avoid finance charges, payment of
accrued interest on shareholder and other individual lenders notes and payment
of related party payable outstanding at December 31, 2003. Financing:Net cash used by financing activities was $3.5 million for the six
months ended June 30, 2004 and was comprised of payoff of all outstanding
long-term debt using proceeds from the initial public offering and revolving
line of credit as well as payment of preferred stock dividends for the fourth
quarter of 2003 and first quarter of 2004. We entered into a senior credit agreement with Heartland Bank in March
2004 for borrowings up to an aggregate amount of $5.0 million. Under the
senior credit agreement, the lender advanced us $2.0 million through a senior
secured revolving credit facility, which was used to retire promissory notes
payable to various individuals, including our majority stockholder. At the same
time we obtained the senior revolving line of credit, we also retired the
existing first mortgage on our production facility, then totaling $3.5 million,
using proceeds of our initial public offering. The senior secured revolving
credit facility matures on December 31, 2006. Borrowings under this facility bear interest, payable monthly, at the
banks base rate plus 1.5%, however, the rate will never be lower than 5.5% per
annum. At June 30, 2004, the interest rate was 5.5% per annum. Under the
terms of the revolver, we can borrow up to the sum of 70% of the appraised
value of the production facility owned by us, 75% of eligible accounts
receivable and 50% of finished goods inventory. The facility also calls for an
unused revolver commitment fee of 0.5% per annum which is paid quarterly in an
amount equal to the average daily unused portion of the revolving credit
facility times 0.5% per annum. We may prepay borrowings under the senior credit agreement in whole or in
part, in minimum amounts and subject to other conditions set forth in the
amended and restated senior credit agreement. We are required to make mandatory
prepayments to the lenders from:  
    
    the net cash proceeds from asset sales in particular
circumstances specified in the senior credit agreement; and
    
    the net cash proceeds from new debt issuances in particular
circumstances specified in the senior credit agreement. Centennials obligations under the revolving credit line are secured by a
first mortgage on the production plant, a security interest in substantially
all of its assets and an assignment of our co-packing agreement with Hoopeston. - 16 -




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The senior credit agreement includes two financial covenants. Centennial
cannot permit, at the end of each fiscal quarter:  
    
    its consolidated net worth (stockholders equity less
treasury stock plus accrued preferred stock dividends) to be less
than $7 million;
    
    its ratio of consolidated senior debt service plus dividends
paid to consolidated EBITDA for the trailing four quarters to exceed
the ratio of 1.5 to 1. Compliance under this covenant does not
commence until the quarter ending September 30, 2004 and only then
includes the trailing quarters beginning with the quarter ending
September 30, 2004. Furthermore, compliance under this covenant
only applies to the extent the total outstanding principal balance
under the revolving credit facility has exceeded $3 million. The senior credit agreement also contains customary covenants, including
limitations on Centennials ability to incur debt, and events of default,
including a change of control, as defined in the senior credit agreement. The
senior credit agreement also limits Centennials ability to pay dividends under
specified circumstances. We are in compliance with all covenants currently in effect under this
credit agreement; however, our board of directors did not declare any preferred
stock dividends for the three months ended June 30, 2004 in order to maintain
compliance with the $7 million consolidated net worth covenant. Preferred
stock dividends will be placed in arrearage as they are cumulative dividends;
however, our board of directors will not declare and we will not pay any
preferred stock dividends until we have adequate consolidated net worth to
maintain compliance with the $7 million consolidated net worth covenant. Debt Instruments, Guarantees and Related Covenants Except as otherwise described in this Form 10-QSB, we have no debt
instruments, guarantees or related covenants. Cash Management We believe that cash on hand, cash availability under our senior revolving
line of credit and cash flow from operations will be adequate for us to meet
our anticipated working capital requirements for at least 12 months. Although
the line of credit adds to our financial flexibility, we do not anticipate that
we will need to utilize the full amount available to meet our cash needs over
the next 12 months. The interest rate on the revolving line of credit is
currently 5.5% which is considerably below the 12% rate we were charged by our
majority stockholder and the 10% to 12% rates we were charged by the other
individual lenders before we repaid these loans using proceeds from the
revolving line of credit in March 2004. These payoffs resulted in interest
expense savings of $0.1 million for the three months ended June 30, 2004. As part of our expansion strategy, we plan to spend significant amounts on
slotting and consumer marketing during fiscal year 2004. It is anticipated that
this spending will have a correlation to increased sales and generation of
cash. From time to time, we may evaluate potential acquisitions of complementary
companies or brands in the ordinary course of business. We have no current
plans, agreements, commitments or understandings, and are not currently engaged
in negotiations concerning any such transaction. Any such acquisition would be
made using our stock or by incurring or assuming debt as proceeds from the
initial public offering are not sufficient for this purpose. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the United States. Certain of our
accounting policies, including the estimated lives of our depreciable - 17 -




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assets and the evaluation of assets for impairment, require that management
apply significant judgment in defining the appropriate assumptions integral to
financial estimates. Judgments are based on historical experience, terms of
existing arrangements, industry trends and information available from outside
sources, as appropriate. However, by their nature, judgments are subject to an
inherent degree of uncertainty and, therefore, actual results could differ from
our estimates. As of and for the three and six months ended June 30, 2004 and
2003, management does not believe there are any highly uncertain matters or
other underlying assumptions that would have a material effect on our financial
position or results of operations if actual results differ from our estimates.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Revenue recognition We generate revenues from sales of our products to grocery chains,
superstores and club stores, as well as wholesalers that sell in turn to these
customers. Sales represent gross revenues less estimated returns and
allowances. Revenues from the sale of our products to our customers are
recognized at the time of shipment. When a food broker assists in the sale of
products to grocery chains, superstores, or club stores, the food broker does
not take title to our products and shipment takes place only as directed by the
customer. Wholesalers take title to products they purchase and direct us when
to make shipment. Most retailers and wholesalers have the right to return
products to us that are damaged, beyond their shelf life or are discontinued.
Such returns were approximately 1% of net sales for the three and six months
ended June 30, 2004 and 2003. Management monitors returns on a regular basis
and as we implement our sales initiatives, we may increase our estimates for
damaged, expired shelf life or discontinued products subject to return.
Although we have legal rights to deny our retailers the right to return
products that are salable, as a practical matter we could be forced to accept
returns from retailers that insisted on returning products to us. We have the right to return any spoiled or contaminated products to
Hoopeston for credit. These returns have been immaterial in the past. Food manufacturers, including us, have historically paid promotional
allowances and offered billback discounts to food service companies and
wholesalers. Billback discounts are generally offered for monthly or quarterly
purchases of food or beverage products reaching predetermined volumes. These
allowances and discounts may be permissible if in writing and so long as the
food manufacturer does not engage in discriminatory or unfair pricing in
violation of applicable antitrust law. The SEC has announced formal
investigations and informal inquiries of accounting practices at several
national food service companies and wholesalers that are centered on the
payment of, and accounting treatment given to, promotional allowances and
billback discounts. We estimate that less than 5% of our sales for the three
and six months ended June 30, 2004 were to food service companies. Shipments to
wholesalers account for approximately 20% of our sales. We are not currently
aware of any regulatory inquiry involving promotional allowances or billback
discounts offered by us to our limited base of food service customers or
wholesalers and we believe promotional allowances and billback discounts we
have paid in the past conformed to applicable law. We have paid promotional
allowances, as well as slotting allowances to secure shelf space in grocery
stores, and have offered billback discounts to customers in the past. We expect
to offer such allowances and discounts in the future to customers that
customarily seek such allowances and discounts, in a manner consistent with
applicable antitrust and other laws. These promotional allowances, billback
discounts and slotting fees are netted against revenues in the period incurred. In November 2001, the Emerging Issues Task Force, or EITF, of the
Financial Accounting Standards Board (FASB) issued EITF 01-09, Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendors Products), codifying certain other previously issued EITF
pronouncements. This pronouncement requires that discounts such as off-invoice
promotions and coupons, and amounts paid to retailers to advertise a companys
products such as fixed trade promotions, be recorded as a reduction of sales.
We are recording our off-invoice promotions and fixed trade promotions amounts
as a reduction of sales in accordance with the EITF. EITF 01-09 neither
prevents nor allows for capitalization of slotting fees. Slotting fees are paid
to obtain shelf space in retail locations and such fees are netted against
revenue as they are incurred. Slotting fees that were netted totaled
approximately $0.4 million for the three months ended June 30, 2004 and $0.5
million for the six months ended June - 18 -




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30, 2004 and were negligible for the same periods in 2003. We expect we will
incur additional slotting fees during the remainder of fiscal 2004 as we
implement our planned sales efforts. The EITF has reached a consensus with respect to Issue No. 00-14,
Accounting for Certain Sales Incentives, including point of sale coupons,
rebates and free merchandise. The consensus included a conclusion that the
value of such sales incentives that results in a reduction of the price paid by
the customer should be netted against sales and not classified as a sales or
marketing expense. We have classified current and prior period coupon expense
as a reduction of sales and include free merchandise in cost of goods sold as
required by this EITF consensus. Accounts Receivable We assess the recoverability of trade accounts receivable based on
estimated losses resulting from the inability of customers to make required
payments. Our estimates are based on the aging of accounts receivable balances
and historical write-off experience, net of recoveries. We review trade
accounts receivable for recoverability regularly and whenever events or
circumstances, such as deterioration in the financial condition of a customer,
indicate that additional allowances might be required. We have historically not
had to write-off material accounts receivable, although this is subject to
change. Inventories and related allowance for slow-moving, excess, discontinued and shelf life expired inventory Inventories are stated at the lower of cost, on a first-in, first-out
basis, or market value and are reduced by an allowance for slow-moving, excess,
discontinued and shelf life expired inventories. Our estimate for such
allowance is based on our managements review of inventories on hand compared
to estimated future usage and demand for our products. If actual future usage
and demand for our products are less favorable than those projected by our
management, inventory write-downs may be required. We closely monitor our
inventory and related shelf lives and have historically rarely experienced
occurrences of obsolete inventory or returns of products that have exceeded
their shelf life. Long-Lived Assets The Company depreciates long-lived assets principally by the straight-line
method over the estimated useful lives of these assets. Estimates of useful
lives are based on the nature of the underlying assets as well as the Companys
experience with similar assets. Estimates of useful lives can differ from
actual useful lives due to the inherent uncertainty in making these estimates,
particularly in the Companys significant long-lived assets such as land
improvements, buildings and equipment. Factors such as the conditions in which
the assets are used, availability of capital to replace assets and frequency of
maintenance can influence the useful lives of these assets. The Company
incurred depreciation expense of approximately $0.1 million for the six months
ended June 30, 2004 and 2003. The Company reviews long-lived assets to be held and used for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If an evaluation of recoverability is required, the
estimated total undiscounted future cash flows directly associated with the
asset is compared to the assets carrying amount. If this comparison indicates
that there is an impairment, the amount of the impairment is calculated by
comparing the carrying value to discounted future cash flows expected to result
from the use of the asset and its eventual disposition or comparable market
values, depending on the nature of the asset. Accounting for Goodwill and Other Intangible Assets In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, or SFAS No. 142, Goodwill and Other Intangible Assets. This
pronouncement continues to require recognition of goodwill and other
identifiable intangible assets with indeterminate lives as long-term assets,
but requires such assets to be tested for - 19 -




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impairment using a fair value-based approach. Our ownership interest in Stokes
Ellis Foods has been reflected at the cost basis of Stokes Ellis Foods which
included goodwill, and does not reflect any adjustment to record the fair value
of the assets. We are obligated to evaluate the carrying value of goodwill for
impairment in future periods in accordance with SFAS No. 142. The assessment of
impairment is based on the estimated undiscounted future cash flows from
operating activities compared with the carrying value of the assets. If the
undiscounted future cash flows are less than the carrying value, a write-down
will be recorded, measured by the amount of the difference between the carrying
value and the estimated fair value of the asset. We have determined that there
was no impairment necessary as of June 30, 2004. Accruals for estimated liabilities Accruals for estimated liabilities resulting from the normal course of
business will be recorded in the period in which the liability arises. The
adequacy of these accruals will be evaluated periodically and revised as
necessary based on events and circumstances present at the time, known facts,
historical experience and other relevant considerations. Research and development Research and development expenses include costs associated with the
formulation, development, and testing of our Stokes and Ellis products.
Research and development costs are expensed as incurred and included in
selling, general and administrative expenses. New product development costs
were $0 in each of the three months ended June 30, 2004 and 2003. Income taxes Stokes Ellis Foods and Centennial previously elected for federal and state
income tax purposes to be treated as subchapter S corporations under the
Internal Revenue Code and comparable state tax laws. The completion of the
initial public offering caused the automatic conversion of Centennial from
subchapter S corporation to a C corporation. Any subchapter S corporation
income tax benefits of Stokes Ellis Foods, Inc. have accrued to the pre-initial
public offering stockholders and do not belong to us. Deferred income taxes are recognized for the income tax effect of
temporary differences between financial statement carrying amounts and the
income tax bases of assets and liabilities. The Company regularly reviews its
deferred income tax assets to determine whether future taxable income will be
sufficient to realize the benefits of these assets. A valuation allowance is
provided for deferred income tax assets for which it is deemed more likely than
not that future taxable income will not be sufficient to realize the related
income tax benefits from these assets. The amount of the net deferred income
tax asset that is considered realizable could, however, be adjusted if
estimates of future taxable income are adjusted. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entitiesan Interpretation of ARB No. 51.
This interpretation addresses consolidation by business enterprises of entities
in which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. Variable interest entities are required to be consolidated by
their primary beneficiaries if they do not effectively disperse risks among
parties involved. The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entitys expected losses and receives a
majority of its expected residual returns. The consolidation requirements of
this interpretation apply immediately to variable interest entities created
after January 31, 2003 and apply to existing entities in the first fiscal year
or interim period beginning after June 15, 2003. Certain new disclosure
requirements apply to all financial statements issued after January 31, 2003.
In December 2003, the FASB issued a revised version of FIN 46 FIN46R. Among
other things, the revision clarifies the - 20 -




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definition of a variable interest entity, exempts most entities that are
businesses from the scope of FIN 46 and delays the effective date of the
revised standard to no later than the end of the first reporting period ending
after December 15, 2003 for special purpose entities and March 15, 2004 for all
other types of entities. We do not expect the adoption of this interpretation
to have a material impact on our financial position or results of operations. In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. Adoption of SFAS No. 149 did not have a material impact on the
Companys consolidated financial statements. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
these instruments were previously classified as temporary equity. This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. Adoption of SFAS No. 150 did not have a
material impact on the Companys consolidated financial statements. MARKET RISK Our interest income is sensitive to changes in the general level of U.S.
interest rates. Our cash balances are maintained in demand deposit accounts and
short-term instruments. Due to the nature of these instruments, we have
concluded that we have no material market risk exposure due to fluctuating
interest rates. Our senior revolving credit facility provides for variable rate
interest. If interest rates increase, our operating results could be adversely
affected. We may also encounter market risks arising from fluctuations in commodity
prices and fuel costs. We do not currently utilize hedging, swap, derivatives
or other instruments to mitigate these market risks. Changes in commodity
prices have the greatest potential to materially impact our business. Although
Hoopeston seeks to buy commodities and ingredients from a number of domestic
suppliers, adverse weather or poor harvests in one region of the country often
have material impacts on commodities prices elsewhere. As a result, we expect
that we will continue to encounter material market risks from changes in
commodity and ingredient prices. We may seek to manage this risk in the future
by entering into futures contracts but believe that our sales volume must
increase significantly before we will be able to use futures contracts
effectively, if at all. In addition, some types of commodities may be available
from limited sources or collectively account for a small portion of our product
ingredients, meaning that we cannot cost-effectively mitigate the risk of price
changes for these ingredients. Because delivery costs are a significant expense to us, fluctuations in
fuel prices may materially impact our business. Diesel fuel costs have
recently risen to historic highs, and supply and demand imbalances appear to
exist that may support continued high diesel fuel costs. If diesel fuel costs
remain at current high levels or continue to rise, common carriers used by us
will likely increase freight rates or impose fuel surcharges, either of which
would increase our delivery costs, perhaps substantially. As a practical
matter, it may be difficult or impossible for us to recover these costs through
price increases or surcharges passed along to our customers. Increases in prices of raw materials and energy, including commodities
such as steel and energy sources such as natural gas, are expected to impact
costs of raw materials for our industry. We were recently notified that
Hoopestons can supplier has implemented a 6% price increase for cans that it
ships to Hoopeston, which Hoopeston expects to pass on to us. Additionally, as
our co-pack agreement with Hoopeston is a cost plus contract, increases in
natural gas prices will impact the production costs that we must pay to
Hoopeston. We anticipate that our production and manufacturing costs, as well
as those paid by other companies in our industry, will be increasing through
2004 due to these factors. To the extent produce growers are also able to pass
on increases in cost of growing, harvesting and delivering produce used in our
products, our raw material costs and the raw material costs paid by our
competitors may also increase. If we cannot raise product prices to our
customers in amounts sufficient - 21 -




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to recover these increased costs, our margins and results of operations
may be materially adversely impacted. We cannot assure that we will be able to
raise our prices in amounts sufficient to offset, wholly or partially,
increased costs we may incur. We do not have transactions, arrangements or relationships with special
purpose entities and do not have any off-balance sheet debt other than the
operating lease for office space at our Centennial, Colorado headquarters. We
have not guaranteed any financial obligations of third parties. Seasonality and Inflation Our operations exhibit some seasonality as sales generally increase in
promotional periods and may decrease slightly in post-promotional periods. We
do not believe that inflation has had a material impact on our financial
position or results of operations, although it may do so in the future due to
certain factors discussed above. Our quarterly results of operations may
fluctuate during a fiscal year or from year to year as a result of any of the
factors described under Forward-Looking Statements. OTHER MATTERS Lessee and Non-payment of Rent As previously disclosed, our lessee and sole supplier, an unrelated party,
was late in making lease payments when due during April and May 2004.
Beginning in June 2004, the lessee brought all lease payments current. In June 2004, our lessee asserted an unquantified claim of
misrepresentation by our outside legal counsel related to the Contract
Amendment from March 2004. We believe the claim is without merit and will be
favorably resolved to us. The lessee also asserted a demand claim in June 2004 for approximately
$400,000 against us related to payment of costs associated with a wastewater
treatment project at the Denver production plant. We believe such project
costs are the lessees responsibility, as the wastewater treatment is an
operating permit issue which is the responsibility of the lessee. In July 2004, we entered into a Memorandum of Understanding (MOU) with
our lessee related to the sale of our production plant and equipment to the
lessee. We would finance the entire purchase price of $7,000,000. As part of
this transaction, all prior claims between us and the lessee will be released
and certain amendments will be made to the co-pack agreement between the
parties. The closing of the transactions in the MOU are subject to a number of
conditions, including satisfactory completion of due diligence and execution of
definitive documents. However, in the event the transaction is not
consummated, we expect to vigorously defend the claims raised by our lessee and
pursue our counterclaims against the lessee. If we do not favorable resolve
these claims, resulting events could materially adversely impact our
production, financial condition and operating results. We do not control our lessee or the production decisions it makes at our
plant. If our lessee becomes unable to timely produce our sauces and foods for
any reason, or if our lessee determines to cease operations for any reason, we
could experience significant disruptions in our operations or in our ability to
supply our customers with products. We have undertaken certain
measures in order to mitigate part of the impact from the risk of an
interruption in supply in the event our sole supplier does not timely
produce our products. These measures include, among other things,
identifying an alternative supplier for our products, building-up
inventory levels and storing inventory in independent third party
warehouses. We believe these measures will help with supply of our
products in the event of an interruption in supply from our existing
sole supplier. We could also be materially
adversely impacted by our lessees inability to pay future monthly rents or
additional payments based on profitability, as defined in the lease override
agreement. However, completion of the transactions set forth in the MOU should
help mitigate certain of these risks. Nevertheless, any sustained interruption
in production of our products for any reason, or in our lessees ability to
produce our products, could materially injure our business. - 22 -




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Dependence on Material Customers and Suppliers Our business depends on a limited number of material customers and
suppliers. The loss of a material customer would have a material adverse impact
on our operating results. Our customers can generally stop purchasing products
from us at any time and on minimal or no notice. Likewise, Hoopeston purchases
ingredients from suppliers using purchase orders and neither we nor Hoopeston
have any long-term arrangements with suppliers. Our production agreement with
Hoopeston extends for a period of five years, with automatic one year renewals
at the end of each year unless either party elects to terminate the renewal
feature. Hoopeston may terminate the production agreement on written notice, as
we are also permitted to do, in the event of a breach continuing after written
notice that is not cured or waived. In the three months ended June 30, 2004, we derived approximately 69% of
our sales from five customers, Kroger, Safeway, Wal-Mart, Sams Club and
Albertsons which is up from 67% in fiscal 2003. We expect that each of these
customers will account for in excess of 10% of our sales during the year ending
December 31, 2004. The loss of any of these customers would have a significant
negative impact on our business and results of operations. Hoopeston depends on a limited number of significant suppliers. These
suppliers are generally growers or their representatives who supply produce and
commodities to make our products. We believe that alternate sources of supply
are available if a relationship with one of these suppliers was terminated.
Supply disruptions could adversely impact our results of operations if
alternate sources of supply are unavailable on short notice, if at all.
Hoopeston purchases cans and labels for our products from two suppliers and we
believe that alternate sources of supply for these materials can be located on
relatively short notice. Hoopeston currently relies on two suppliers for purchases of green chiles
used in our products. Although Hoopeston has not experienced any difficulty in
obtaining green chiles from these suppliers, a sustained interruption in the
supply of green chiles for any reason would seriously harm our business.
Neither we nor Hoopeston has long-term contracts with these suppliers, so the
price of green chiles sold to Hoopeston for use in our products may increase at
any time or the quantity of green chiles supplied could be curtailed at any
time. Difficulties in obtaining green chiles or the imposition of import quotas
on agricultural products generally or green chiles in particular could also
materially harm our business or increase the production costs we pay to
Hoopeston. Related Party Transactions During 2003, we received advances from our majority stockholder that
totaled $0.035 million. We used proceeds from these advances to fund our
working capital requirements since we had no senior revolving credit facility
at that time. In March 2004, we repaid the advances from our majority
stockholder using proceeds from the senior revolving line of credit. These
advances were not repaid using proceeds of the initial public offering. FORWARD-LOOKING STATEMENTS Certain statements included in Managements Discussion and Analysis of
Financial Condition and Results of Operations, including   Critical
Accounting Policies and Estimates,   Results of Operations,   Recent
Accounting Pronouncements, and Liquidity and Capital Resources, and
elsewhere in this report are forward-looking statements within the meaning 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 Reform Act).
Forward-looking statements include our expectations with respect to industry
growth trends, effect of changes in the retail grocery industry on our sales,
use of estimates for revenue recognition, other estimates used for accounting
purposes, corporate cost structure, our entry into new markets, our ability to
obtain new grocery, superstore and club store customers and expanding our sales
to existing and new customers, our ability to secure and keep shelf space
allocated to our products, the impact of operational and financial difficulties
experienced with Hoopeston and related increases in our costs of production,
effect of adoption of recent accounting pronouncements, overall operating
results and the availability of capital. - 23 -




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Forward-looking statements are not statements of historical fact.
Forward-looking statements involve risks, uncertainties and other factors that
may cause our or our industrys actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. You can identify forward-looking statements by
terminology such as may, should, project, would, could, believe,
expect, anticipate, estimate, intend, plan, continue or the
negative of these terms or other comparable terms. Although we believe that the statements we have made are based on
reasonable assumptions, they are based on current information and beliefs and,
accordingly, we can give no assurance that its expectations will be achieved.
In addition, these statements are subject to factors that could cause actual
results to differ materially from those suggested by the forward-looking
statements. These factors include, but are not limited to, factors identified
under the caption Factors That May Affect Future Operating Results, Financial
Condition or Business in our Form 10-KSB on file with the SEC, and the factors
described in this Form 10-QSB. All forward-looking statements attributable to
us are expressly qualified by the cautionary statements set forth in such
factors. We caution you not to place undue reliance on our forward-looking
statements. Except as required by law, we do not intend to update or revise any
of our forward-looking statements to conform these statements to actual
results. 
 Item 3. Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit to the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified by the Commissions rules and forms, and that
information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer (who we refer to in
this periodic report as our Certifying Officers), as appropriate to allow
timely decisions regarding required disclosure. Our management evaluated, with
the participation of our Certifying Officers, the effectiveness of our
disclosure controls and procedures as of June 30, 2004, pursuant to Rule
13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying
Officers concluded that, as of June 30, 2004, our disclosure controls and
procedures were effective. There were no changes in our internal control over financial reporting
that occurred during our quarter ended June 30, 2004 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting. In connection with managements review of the three months ended June 30,
2004, there were no Reportable Events within the meaning of Item 304(a)(1)(v)
of Regulation S-K. 
 PART II  OTHER INFORMATION Item 1. Legal Proceedings None - 24 -




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Item 2. Changes in Securities Use of Proceeds We registered and sold 1,550,000 shares of our common stock to the public
at an aggregate offering price of $7.75 million, or $5.00 per share, pursuant
to a registration statement that was declared effective on October 29, 2003.
The offering was completed and has terminated. The lead underwriter of the
offering was J.P. Turner, L.L.C. Net proceeds to us were $5.79 million after deduction of underwriters
commissions and other issuance costs. Through June 30, 2004, we applied our
net proceeds as follows: Intended use of
    
    Actual use of proceedsproceeds
    
    through June 30, 2004(in millions)
    
    (in millions)Retirement of plant mortgage
    
    $
    3.60
    
    
    $
    3.60Payment of slotting fees
    
    
    .81
    
    
    
    .47Marketing, advertising and promotion costs
    
    
    .95
    
    
    
    .67Working capital
    
    
    .43
    
    
    
    .43$
    5.79
    
    
    $
    5.17
 Item 3. Defaults Upon Senior Securities We have $250,000 of preferred stock dividends in arrears as our board of
directors did not declare any preferred stock dividends for the three months
ended June 30, 2004 in order to maintain compliance with our $7 million
consolidated net worth covenant with Heartland Bank. The preferred stock
dividends will be placed in arrearage as they are cumulative dividends,
however, our board of directors will not declare and we will not pay any
preferred stock dividends until we have adequate consolidated net worth to
maintain our consolidated net worth covenant. Item 4. Submission of Matters to a Vote of the Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No.
    
    Description2.1.4*
    
    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.
 - 25 -




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Exhibit No.
    
    Description4.3*
    
    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 Agreement10.7*
    
    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.
 - 26 -




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##### Table of Contents



Exhibit No.
    
    Description10.17*
    
    Form of Director and Officer Indemnification Agreement.10.18*+
    
    2003 Non-Employee Directors Stock Option Plan.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 Company10.21*
    
    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 Plan11.1
    
    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 Certifications32.2#
    
    Section 1350 Certifications99.1*
    
    Code of Ethics of Centennial Specialty Foods Corporation.#
    
    Filed herewith*
    
    Previously filed.+
    
    Identifies each management contract
or compensatory plan or arrangement@
    
    Certain confidential portions of this Exhibit were
omitted by means of redacting a portion of the text (the
Omitted Text). The full text of this Exhibit will be filed
separately with the Secretary of the Commission with the Omitted
Text pursuant to the Registrants Application Requesting
Confidential Treatment under Rule 406 under the Securities Act.
 (b) Reports on Form 8-K None - 27 -




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. CENTENNIAL SPECIALTY FOODS CORPORATIONAugust 16,
2004
    
    By:
    
    /s/ JEFFREY R. NIEDERJeffrey R. Nieder,Chief Executive OfficerCENTENNIAL SPECIALTY FOODS CORPORATIONAugust 16, 2004
    
    By:
    
    /s/ DOUGLAS L. EVANSDouglas L. Evans,Chief Financial Officer
 - 28 -




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##### Table of Contents



EXHIBIT INDEX Exhibit No.
    
    Description2.1.4*
    
    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.




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##### Table of Contents



Exhibit No.
    
    Description4.3*
    
    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 Agreement10.7*
    
    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.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 Company10.21*
    
    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 Plan11.1
    
    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 Certifications32.2#
    
    Section 1350 Certifications99.1*
    
    Code of Ethics of Centennial Specialty Foods Corporation.#
    
    Filed herewith*
    
    Previously filed.+
    
    Identifies each management contract
or compensatory plan or arrangement@
    
    Certain confidential portions of this Exhibit were
omitted by means of redacting a portion of the text (the
Omitted Text). The full text of this Exhibit will be filed
separately with the Secretary of the Commission with the Omitted
Text pursuant to the Registrants Application Requesting
Confidential Treatment under Rule 406 under the Securities Act.