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 30,2005 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, 2005 and December 31, 2004 Class 2005 2004 ----- ---- ---- Common Stock $.01 Par Value 11,001,038 Shares 11,001,038 Shares FOOD TECHNOLOGY SERVICE, INC. BALANCE SHEETS JUNE 30, DECEMBER 31, 2005 2004 ASSETS ---- ---- ------ (unaudited) * Current Assets: Cash $ 265,008 $ 231,877 Accounts Receivable 233,609 135,946 Inventory 4,934 5,557 Prepaid Expenses 53,399 - ---------- ---------- Total Current Assets 556,950 373,380 ---------- ---------- Property and Equipment: Cobalt 2,675,756 2,675,756 Furniture and Equipment 1,743,434 1,739,717 Building 2,883,675 2,883,675 Less Accumulated Depreciation (4,295,483) (4,112,815) ---------- ---------- Total Property & Equipment 3,007,382 3,186,333 Land 171,654 171,654 Other Assets: Deposits 5,000 5,000 ---------- ---------- Total Assets $ 3,740,986 $ 3,736,367 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------- Current Liabilities: Accounts Payable and Accrued Expense $ 47,118 $ 18,035 Financing Agreement and Debenture Payable 706,818 782,899 ---------- ---------- Total Current Liabilities 753,936 800,934 ---------- ---------- Stockholders' Equity: Common Stock $.01 par value, 20,000,000 shares authorized, 11,003,038 shares issued on March 31, 2005 and 11,001,038 shares issued on December 31, 2004 110,030 110,010 Paid in Capital 11,976,657 11,975,577 Deficit (9,069,637) (9,122,154) Treasury Stock, 2,000 shares at cost ( 2,000) - ---------- ---------- 3,015,050 2,963,433 Less-Common Stock Issued For Receivables (28,000) (28,000) ---------- ---------- Total Stockholders' Equity 2,987,050 2,935,433 ---------- ---------- Total Liabilities and Stockholders' Equity $ 3,740,986 $ 3,736,367 ========== ========== * Condensed from audited financial statements FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004 2005 2004 ---- ---- (unaudited) (unaudited) Net Sales $ 403,166 $ 324,384 Processing Costs: 81,622 75,783 --------- -------- Income from Operations 321,544 248,601 General Administrative and Development 188,625 166,641 Depreciation 90,782 96,783 Interest Expense 11,794 11,873 --------- -------- Income/(Loss) Before Income Taxes 30,343 ( 26,696) Income Taxes Provision for Income Taxes 9,102 - Tax Benefit from Net Operating Loss (9,102) - --------- -------- Net Income/(Loss) $ 30,343 ($ 26,696) ========= ======== Net Income/(Loss) per Common Share $0.003 ($0.002) ========= ======== 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, 2005 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, 2005 AND 2004 2005 2004 ---- ---- (unaudited) (unaudited) Net Sales $ 795,659 $ 564,587 Processing Costs 170,499 144,417 --------- -------- Income from Operations 625,160 420,170 General Administrative and Development 366,056 352,648 Depreciation 182,668 195,033 Interest Expense 23,919 23,599 --------- -------- Income / (Loss) Before Income Taxes 52,517 (151,110) Income Taxes Provision for income taxes 15,755 0 Tax Benefit from Net Operating loss (15,755) ( 0) --------- -------- Net Income / (Loss) $ 52,517 $ (151,110) ========= ======== Net Income /(Loss) Per Common Share $ 0.005 $ (0.014) ========= ======== 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, 2005 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, 2005 June 30, 2004 -------------- -------------- (unaudited) (unaudited) Cash Flows from Operations: Sales Income Received $ 697,995 $ 537,154 Interest Received 808 - Interest Paid - - Cash Paid for Operating Expenses (561,056) (471,791) --------- --------- 137,747 65,363 Cash Flows from Investing: Property & Equipment Purchase (3,716) ( 1,871) ---------- --------- (3,716) ( 1,871) Cash Flows from Financing Activities: Proceeds from Issue of Stock 1,100 - Purchase of Treasury Stock ( 2,000) Repayment of Loans (100,000) - ---------- --------- (100,900) - Net Increase (Decrease) in Cash 33,131 63,492 Cash at Beginning of Period 231,877 89,410 ---------- ---------- Cash at End of Period $265,008 $ 152,902 ========== ========== _______________________________________________________________________________ Reconciliation of Net Income to Net Cash Provided by Operations Net Income /(Loss) $ 52,517 ($151,110) Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation 182,668 195,033 Accrued Interest 23,919 23,599 (Increase) Decrease in Inventories 623 2,691 (Increase) Decrease in Receivables (97,663) (27,435) (Increase) Decrease in Prepaids (53,399) - Increase (Decrease)in Payables and Accruals 29,082 22,585 ---------- ---------- Net Cash Provided by Operating Activities $137,747 $65,363 ========== ========== FOOD TECHNOLOGY SERVICE, INC. STATEMENT OF STOCKHOLDERS' EQUITY 2004(unaudited) Common Stock Treasury Stock Paid-In Capital Deficit ------------ ------------ -------------- --------------- ------- Balance January 1, 2004 $ 110,010 - $ 11,975,577 ($9,016,423) Net Loss for Period - - - (151,110) ---------- ------------ ---------- ---------- Balance June 30, 2004 $ 110,010 - $ 11,975,577 $9,167,533) ========== ============ ========== ========== ______________________________________________________________________________ 2005 (unaudited) --------------- Balance January 1, 2005 $ 110,010 $ - $11,975,577 ($9,122,154) Issued 2,000 sh Common Stock 20 - 1,080 - Purchased 2,000 sh Treasury Stock - 2,000 - - Net Income for Period - - - 52,517 ---------- ----------- ---------- ---------- Balance June 30, 2005 $ 110,030 $ 2,000 $11,976,657 ($9,069,637) ========== ============ ========== ========== (a) Earnings per common share, assuming no dilution, are based on the number of shares outstanding on June 30, 2005 - 11,001,038 and June 30, 2004 - 11,001,038. (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 $403,166 during the second quarter of 2005. This compares to revenues of $324,384 for the same period in 2004. This is an increase of twenty-four percent. The Company had a profit during the second quarter of 2005 of $30,343 compared to a loss of ($26,696) during the second quarter of 2004. For the first half of 2005 the Company had revenues of $795,659 and a profit of $52,517. Revenues during the first half of 2004 were $564,587 and the Company had a loss of($151,110). Revenues increased by forty percent during the first half of 2005 compared to the same period in 2004. Management attributes increased revenue to a growing customer base made up of companies that regularly require irradiation of products. Past revenues have been impacted by large intermittent customers that use the Company's services unpredictably. The Company has devoted significant effort to expanding the base of customers requiring service on a regular basis. No large intermittent customers have required services since the fourth quarter of 2003. During the second quarter of 2005, processing costs as a percentage of sales were 20.2%. This compares to 23.4% in the second quarter of 2004. Processing costs as a percentage of sales decreased from 25.6% during the first half of 2004 to 21.4% in the first half of 2005. This reflects the fact that processing costs are relatively fixed. General administrative and development costs as a percentage of sales during the second quarter of 2005 were 46.8%. This compares to 51.4% in the second quarter of 2004. During the first half of 2005, general administrative and development costs as a percentage of sales were 46% compared to 62.5% during the first half of 2004. This is due to the fact that general, administrative and development costs are relatively fixed within the current revenue range. Overall, expenses during the first half of 2005 were about $16,000 higher than in the same period in 2004, an increase of about two percent. This increase was primarily due to higher payroll costs associated with quality assurance activities and one-time costs for computer upgrades and preventive maintenance on a material movement system. Those costs were offset somewhat by decreased depreciation. The Company reduced its outstanding debt by $100,000 during the first half of 2005 and currently owes approximately $720,000 in total debt. Management anticipates increased revenue during the remaining quarters of 2005 based on growing demand by both food and medical customers. Operating and marketing expenses are expected to increase during the third quarter of 2005 due to costs associated with pursuing certification to ISO standards and installation of a new dosimetry system. These are largely one-time costs. Certification to ISO standards will allow the Company to compete more effectively for sterilization of medical devices and the new dosimetry system will provide greater efficiency. Management believes base revenues will continue to exceed expenses during the remainder of 2005. Liquidity and Capital Resources ------------------------------- As of June 30, 2005, the Company has cash of $265,008 and accounts receivable of $233,609. The special alliance that the Company has with 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, 2004. 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 4, 2005 FOOD TECHNOLOGY SERVICE, INC. /S/ Richard Hunter --------------------------------- Richard Hunter, Ph.D., Chief Executive Officer and Chief Financial Officer