10QSB 1 form10q.txt FORM 10QSB FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Three Months Ended June 30, 2004 Commission File Number 0-19047 -------------- INCORPORATED IN FLORIDA IRS IDENTIFICATION NO. 59-2618503 FOOD TECHNOLOGY SERVICE, INC. 502 Prairie Mine Road, Mulberry, FL 33860 (863) 425-0039 "Indicate by check mark whether the registrant has filed all annual, quarterly and other reports required to be filed with the Commission within the past 90 days and in addition has filed the most recent annual report required to be filed. Yes X . No ." -- -- "Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date." Outstanding as of June 30,2004 and December 31, 2003 Class 2004 2003 ----- ---- ---- Common Stock $.01 Par Value 11,001,038 Shares 11,001,038 Shares FOOD TECHNOLOGY SERVICE, INC. BALANCE SHEETS JUNE 30, DECEMBER 31, 2004 2003 ASSETS ---- ---- ------ (unaudited) * Current Assets: Cash $ 152,902 $ 89,410 Accounts Receivable 180,053 152,620 Inventory 0 2,691 ---------- ---------- Total Current Assets 332,955 244,721 ---------- ---------- Property and Equipment: Cobalt 2,675,756 2,675,756 Furniture and Equipment 1,730,688 1,728,817 Building 2,883,675 2,883,675 Less Accumulated Depreciation (3,923,135) (3,728,103) ---------- ---------- Total Property & Equipment 3,366,984 3,560,145 Land 171,654 171,654 Other Assets: Deposits 5,000 5,000 ---------- ---------- Total Assets $ 3,876,593 $ 3,981,520 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------- Current Liabilities: Accounts Payable and Accrued Expense $ 56,784 $ 34,199 Financing Agreement and Debenture Payable 957,755 934,157 ---------- ---------- Total Current Liabilities 1,014,539 968,356 ---------- ---------- Stockholders' Equity: Common Stock $.01 par value, 20,000,000 shares authorized, 11,001,038 shares outstanding on June 30, 2004 and December 31, 2003 110,010 110,010 Paid in Capital 11,975,577 11,975,577 Deficit (9,167,533) (9,016,423) ---------- ---------- 2,918,054 3,069,164 Less-Common Stock Issued For Receivables (56,000) (56,000) ---------- ---------- Total Stockholders' Equity 2,862,054 3,013,164 ---------- ---------- Total Liabilities and Stockholders' Equity $ 3,876,593 $ 3,981,520 ========== ========== * Condensed from audited financial statements FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003 2004 2003 ---- ---- (unaudited) (unaudited) Net Sales $ 324,384 $ 587,999 Processing Costs: 75,783 105,418 --------- -------- Income from Operations 248,601 482,581 General Administrative and Development 166,641 213,750 Depreciation 96,783 102,661 Interest Expense 11,873 21,288 --------- -------- Income /(Loss) Before Income Taxes (26,696) 144,882 Income Taxes Provision for Income Taxes 0 43,465 Tax Benefit from Net Operating Loss 0 (43,465) --------- -------- Net Income $ (26,696) $ 144,882 ========= ======== Net Income per Common Share $(0.002) $0.013 ========= ======== NOTE 1: BASIS OF PRESENTATION The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normally recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the three month periods ended June 30, 2004 are not necessarily indicative of the results to be expected for the full year. FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2004 2003 ---- ---- (unaudited) (unaudited) Net Sales $ 564,587 $ 1,000,466 Processing Costs 144,417 235,432 --------- -------- Income from Operations 420,170 765,034 General Administrative and Development 352,648 368,917 Depreciation 195,033 178,760 Interest Expense 23,599 32,988 --------- -------- Income / (Loss) Before Income Taxes (151,110) 184,369 Income Taxes Provision for income taxes 0 55,311 Tax Benefit from Net Operating loss 0 (55,311) --------- -------- Net Income / (Loss) $(151,110) $ 184,369 ========= ======== Net Income /(Loss) Per Common Share $(0.014) $0.017 ========= ======== NOTE 1: BASIS OF PRESENTATION The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normally recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the six month periods ended June 30, 2004 are not necessarily indicative of the results to be expected for the full year. FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF CASH FLOWS Six Months Six Months Ended Ended June 30, 2004 June 30, 2003 -------------- -------------- (unaudited) (unaudited) Cash Flows from Operations: Sales Income Received $ 537,154 $ 814,869 Interest Paid 0 ( 9,433) Cash Paid for Operating Expenses (471,791) (588,647) --------- --------- 65,363 216,789 Cash Flows from Investing: Property & Equipment Purchase (1,871) (847,258) ---------- ---------- (1,871) (847,258) Cash Flows from Financing Activities: Proceeds from Borrowing 0 839,136 Repayment of Loans 0 (250,000) ---------- ---------- 0 589,136 Net Increase (Decrease) in Cash 63,492 (41,333) Cash at Beginning of Period 89,410 73,758 ---------- ---------- Cash at End of Period $ 152,902 $32,425 ========== ========== _______________________________________________________________________________ Reconciliation of Net Income to Net Cash Provided by Operations Net Income $(151,110) $184,369 Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation 195,033 178,761 Accrued Interest 23,599 23,555 (Increase) Decrease in Inventories 2,691 5,836 (Increase) Decrease in Receivables (27,435) (185,597) Increase (Decrease) in Payables and Accruals 22,585 9,865 ---------- ---------- Net Cash Provided by Operating Activities $ 65,363 $216,789 ========== ========== FOOD TECHNOLOGY SERVICE, INC. STATEMENT OF STOCKHOLDERS' EQUITY 2003(unaudited) Common Stock Paid-In Capital Deficit ------------ ------------ --------------- ------- Balance, January 1, 2003 $ 104,968 $11,975,577 ($9,413,903) Net Income for Period 0 0 184,369 ---------- ---------- ---------- Balance, June 30, 2003 $ 104,968 $11,975,577 ($9,229,534) ========== ========== ========== ______________________________________________________________________________ 2004 (unaudited) --------------- Balance, January 1, 2004 $ 110,010 $11,975,577 ($9,016,423) Net Income/(Loss)for Period 0 0 (151,110) ---------- ---------- ---------- Balance, June 30, 2004 $ 110,010 $11,975,577 ($9,167,533) ========== ========== ========== (a) Earnings per common share, assuming no dilution, are based on the number of shares outstanding on June 30, 2004 - 11,001,038 and June 30, 2003 - 10,496,837. (b) The foregoing information is unaudited, but, in the opinion of Management, includes all adjustments, consisting of normal accruals, necessary for a fair presentation of the results for the period reported. Management's Analysis of Quarterly Income Statements Operations ---------- Food Technology Service Inc., had revenue of $324,384 during the second quarter of 2004. Revenues were $564,587 during the first two quarters of 2004. This compares to revenues of $1,000,466 for the first two quarters of 2003. This is a decrease of forty-four percent compared to the same period in 2003. The company had a loss of $(151,110) during the first two quarters of 2004 compared to a profit of $184.369 during the first two quarters of 2003. Revenues declined due to discontinuation of service to a large intermittent customer. The company has some customers that require irradiation intermittently rather than incorporating irradiation into their production process. These customers make it difficult to forecast revenues. Actual general and administrative expenses decreased modestly during the second two quarters of 2003. However, as a percentage of revenue, general and administrative expenses increased from 37% to 62% because of the decline in revenue during the first two quarters of 2004 as compared to the first two quarters of 2003. Although there was some small variation of costs within individual categories of expenses, overall general and administrative expenses are relatively fixed. Similarly, depreciation as a percent of revenue increased from 18% to 35% due primarily to the decrease in revenue. Management anticipates increased revenue during the remaining quarters of 2004 based on increased demand by two non-food customers. The volume of ground beef being irradiated by the Company increased significantly during the second quarter due to the bankruptcy of a competitor and irradiation of tropical fruits from South Florida is expected to increase during the third quarter. Operating and marketing costs are expected to continue at levels similar to those in the first quarter of 2004. Management believes that demand for irradiation of ground beef and non-food items will continue to increase during 2004. Liquidity and Capital Resources ------------------------------- As of June 30, 2004, the Company has cash on hand of $152,902 and accounts receivable of $180,053. The special alliance that the Company has with MDS Nordion should guarantee the Company's survival as a going entity until the food irradiation industry develops. PART II OTHER INFORMATION Item 1. Legal proceedings Reference is made to the information contained under Item 3- Legal Proceedings in the Company's Form 10KSB Report Filed for year ended December 31, 2003. Item 2-6 Not applicable SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 12, 2004 FOOD TECHNOLOGY SERVICE, INC. /S/ Richard Hunter --------------------------------- Richard Hunter, Ph.D., President and Chief Executive Officer