-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IbmkCPq/kHJrlY+Sn42D8yggQm+m2BUvZ9VV6v1zrkWXKxBGHwuNRMBJdUy+EasD ORw5Ja6TLkkzZ/GPrTVoxA== 0000868267-10-000003.txt : 20100517 0000868267-10-000003.hdr.sgml : 20100517 20100517110812 ACCESSION NUMBER: 0000868267-10-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100331 FILED AS OF DATE: 20100517 DATE AS OF CHANGE: 20100517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOOD TECHNOLOGY SERVICE INC CENTRAL INDEX KEY: 0000868267 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 592618503 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19047 FILM NUMBER: 10836380 BUSINESS ADDRESS: STREET 1: 502 PRARIE MINE RD CITY: MULBERRY STATE: FL ZIP: 33860 BUSINESS PHONE: 8634250039 MAIL ADDRESS: STREET 1: 502 PRARIE MINE RD CITY: MULBERRY STATE: FL ZIP: 33860 FORMER COMPANY: FORMER CONFORMED NAME: VINDICATOR INC /FL/ DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: VINDICATOR OF FLORIDA INC /FL/ DATE OF NAME CHANGE: 19600201 10-Q 1 form10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2010 Commission File Number 0-19047 --------- FOOD TECHNOLOGY SERVICE, INC. (Exact Name of Registrant as Specified in its charter) FLORIDA 59-2618503 (State of Incorporation or Organization) (Employer Identification Number) 502 Prairie Mine Road, Mulberry, FL 33860 (Address of Principal Executive offices)(Zip code) Registrants telephone number, including area code (863) 425-0039 Indicate by check mark whether the Registrant: (1) has filed all by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ X ] Smaller Reporting Company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes [ ] No [ X ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class March 31, 2010 ------- ---------------- Common Stock $.01 Par Value 2,756,458 shares FOOD TECHNOLOGY SERVICE, INC. TABLE OF CONTENTS PART I: Financial Statements Balance Sheets - March 31, 2010 and 2009 1 - 2 Statements of Operations - Three Months Ended March 31, 2010 and 2009 3 Statements of Cash Flows - Three Months Ended March 31, 2010 and 2009 4 Notes to Financial Statements 5 - 14 PART II: Management's Analysis of Quarterly Income Statements Operations & Liquidity and Capital Resources 15 PART III: Other Information 16 FOOD TECHNOLOGY SERVICE, INC. BALANCE SHEETS March 31, December 31, 2010 2009 ------------ ------------ (Unaudited) (Audited) ASSETS ------ Current Assets: Cash $ 875,869 $ 610,311 Accounts Receivable, Less Allowance for Doubtful Accounts of $2,500 273,641 213,752 Prepaid Expenses 49,341 31,807 Deferred Tax Asset 186,000 186,000 ------------ ------------ Total Current Assets 1,384,851 1,041,870 ------------ ------------ Property, Plant and Equipment: Buildings 3,282,029 3,282,029 Cobalt 4,404,543 4,404,543 Furniture and Equipment 1,923,743 1,923,743 Less: Accumulated Depreciation (6,096,725) (6,005,524) ------------ ------------ 3,513,590 3,604,791 Land 171,654 171,654 ------------ ------------ Total Property, Plant and Equipment 3,685,244 3,776,445 ------------ ------------ Other Assets: Deferred Tax Asset 1,042,400 1,128,000 Utility Deposits 5,000 5,000 ------------ ------------ Total Other Assets 1,047,400 1,133,000 ------------ ------------ Total Assets $ 6,117,495 $ 5,951,315 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 1 FOOD TECHNOLOGY SERVICE, INC. BALANCE SHEETS March 31, December 31, 2010 2009 ------------ ------------ (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts Payable and Accrued Liabilities $ 49,522 $ 36,556 ------------ ------------ Total Current Liabilities 49,522 36,556 ------------ ------------ Stockholders' Equity: Common Stock $.01 Par Value, Authorized 5,000,000 Shares, Issued 2,756,458 27,564 27,564 Paid-In Capital 12,198,050 12,186,827 Deficit (6,139,150) (6,281,141) ------------ ------------ 6,086,464 5,933,250 Less, 5,154 Treasury Shares at Cost (18,491) (18,491) ------------ ------------ Total Stockholders' Equity 6,067,973 5,914,759 ------------ ------------ Total Liabilities and Stockholders' Equity $ 6,117,495 $ 5,951,315 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2 FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF OPERATIONS Three Months Ended March 31, 2010 2009 ------------ ------------ (Unaudited) (Unaudited) Net Revenues $ 661,824 $ 674,830 ------------ ------------ Processing Costs 114,293 122,944 Selling, General and Administrative 228,739 264,476 Depreciation 91,201 98,835 Interest Expense - 6,703 ------------ ------------ 434,233 492,958 Income before Income Taxes 227,591 181,872 Income Taxes - Deferred (85,600) - ------------ ------------ Net Income $ 141,991 $ 181,872 ============ ============ Net Income Per Common Share -Basic $ 0.052 $ 0.066 -Diluted $ 0.050 $ 0.064 Weighted Average Number of Common Shares Used in Computation -Basic 2,756,458 2,756,458 -Diluted 2,849,458 2,827,958 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 3 FOOD TECHNOLOGY SERVICE, INC. STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2010 2009 ------------ ------------ (unaudited) (unaudited) Cash Flows from Operations: Cash Received from Customers $ 601,935 $ 675,118 Interest Received 1,044 719 Cash Paid for Operating Expenses (337,421) (357,940) ------------ ------------ Net Cash Provided/(Used) by Operations 265,558 317,897 Cash Flows from Investing Activities: Purchase of Equipment and Cobalt - (9,053) ------------ ------------ Net Cash Provided/(Used) by Investing - (9,053) Net Increase (Decrease) in Cash 265,558 308,844 Cash at Beginning of Period 610,311 216,978 ------------ ------------ Cash at End of Period $ 875,869 $ 525,822 ============ ============ Reconciliation of Net Income (Loss) to Net Cash Provided/(Used) by Operations: Net Income/(Loss) $ 141,991 $ 181,872 Adjustments to Reconcile Net Income/(Loss) to Cash Provided or Used: Loan Cost Amortization - 1,443 Deferred Income Taxes 85,600 - Depreciation 91,201 98,836 Non Cash Payments of Salaries 11,223 15,457 (Increase)/Decrease in Receivables (59,889) 288 (Increase)/Decrease in Prepaid Expenses (17,534) (12,080) Increase/(Decrease) in Payables and Accruals 12,966 32,081 ------------ ------------ Net Cash Provided/(Used) by Operations $ 265,558 $ 317,897 ============ ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 4 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note A - Summary of Significant Accounting Policies A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 1. Nature of Business The Company was organized in December 1985 and is engaged in the business of operating a gamma irradiation facility using Cobalt 60 for the sterilization of medical, surgical, pharmaceutical and packaging materials. It also disinfects fruits, vegetables and meat products which extends their shelf life. 2. Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. 3. Revenue Recognition The primary source of revenue is from treating products with Cobalt. Net Revenue is the gross income from such processing less allowances, if any. Revenues are recorded after the Company's performance obligation is completed and product has been processed in accordance with the customer's specifications and collection of the resulting receivable is probable. A provision is made for doubtful accounts which historically have not been significant. 4. Property, Plant and Equipment Property, plant and equipment are stated at cost. Assets other than Cobalt have been depreciated using the straight-line method over the following lives for both financial statement and tax purposes: Building 31.5 years Furniture and Equipment 5-15 Years The total cost basis of Cobalt has been depreciated using engineering estimates from published tables under which one-half of the remaining value is written off over 5.26 year periods. Estimated useful lives are periodically reviewed and if warranted, changes will be made resulting in acceleration of depreciation. 5 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note A - Summary of Significant Accounting Policies (continued) MDS Nordion is the Company's supplier of Cobalt 60 and has agreed to accept the return of all Cobalt 60 that has reached the end of its useful life; therefore, the Company has provided no environmental remediation liability for the disposal of the Cobalt 60. 5. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash and cash equivalents. 6. Concentration of Credit Risk The Company maintains its cash in three financial institutions. The Federal Deposit Insurance Corporation insures up to $250,000 per legal entity per financial institution and fully insures noninterest-bearing transaction accounts until June 30, 2010. At March 31, 2010, the uninsured cash balance was $0. 7. Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding. Diluted net income per share is computed by the weighted average number of common shares outstanding, plus the effect of common stock equivalents that are dilutive. 8. Fair Value of Financial Instruments The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable, accrued liabilities approximate fair value. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily exchange. 9. Stock Option Plans The Company has various stock option plans for employees and other individuals providing services to or serving as Directors of the Company. (See Note D) Compensation cost under the plans is recognized using the fair value recognition provisions of FASB ASC 718. Such cost is recognized for shares expected to vest on a straight-line basis over the requisite service period of the award using the Black-Scholes option-pricing model. 6 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note A - Summary of Significant Accounting Policies (continued) 10. Reclassification Certain reclassifications have been made to the prior year's financial statements to conform to the current year's presentation. Note B - Lines of Credit The Company has a letter of credit of $600,000 through MDS Nordian to satisfy the requirements under the Radioactive Materials License from the State of Florida. The letter of credit is guaranteed by MDS Nordion and is collateralized by the Company's warehouse facility. The Company agreed to reimburse MDS Nordian for the associated expenses relating to the letter of credit. The letter of credit bears interest at prime plus 1%. As of March 31, 2010 the letter of credit is still active with a $0 balance. The Company has a separate line of credit available for the short term capital needs of the Company with Magnify Credit Union for $300,000. The line of credit is secured by the Company's warehouse and bears interest at the Wall Street Journal prime plus 1%. As of March 31, 2010 the Company has not used the line of credit. Note C - Income Taxes and Available Carryforward As of March 31, 2010, the Company had income tax net operating loss ("NOL") carryforward for federal income tax purposes of approximately $4,704,375. The NOL will expire in various years ending through the year 2022. The benefits of NOL carryforward for the three months ended March 31, 2010 and 2009 were $85,600 and $69,111, respectively. The components of the provision for income taxes (benefits) attributable to operations are as follows: Three Months Ended March 31, 2010 2009 ----------- ----------- Current Federal $ - $ - State - - ----------- ----------- $ - $ - =========== =========== Deferred Federal $ 73,100 $ - State 12,500 - ----------- ----------- $ 85,600 $ - =========== =========== 7 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note C - Income Taxes and Available Carryforward (continued) Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows: Current Non-Current ----------- ----------- Deferred tax assets NOL carryforwards $ 186,000 $1,042,400 ----------- ----------- Deferred tax asset $ 186,000 $1,042,400 =========== =========== The change in the valuation allowance is as follows: December 31, 2009 $ 542,000 March 31, 2010 542,000 ----------- Change in valuation allowance $ - =========== A valuation allowance has been established to eliminate the net deferred tax benefit due to uncertainty as to whether the tax benefits would ever be realized. During 2009, as a result of the continuing diversification and growth in customer base, ongoing profits from operations and the Company's revised estimate of future taxable income, it was concluded that it is more likely than not that future taxable income will be sufficient to realize a larger portion of the Company's deferred asset. The Company believes that its estimate of future operations is conservative and reasonable, but inherently uncertain. Accordingly, if future operations generate taxable income greater than the projections, further adjustments to reduce the reserve are possible. Conversely, if the Company realizes unforeseen material losses in the future and its future projections of income decrease, the allowance could be increased resulting in a charge to income. Income taxes for the periods ended March 31, 2010 and 2009 differ from the amounts computed by applying the effective income tax rates of 37.63% and 37.63%, respectively, to income before income taxes as a result of the following: 8 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note C - Income Taxes and Available Carryforward (continued) Three Months Ended March 31, 2010 2009 ----------- ----------- Expected provision at US statutory rate $ 73,100 59,111 State income tax net of federal benefit 12,500 10,000 Change in estimates in available NOL carry forwards - (69,111) ----------- ----------- Income tax expense / (benefit) $ 85,600 $ - =========== =========== The Company's tax years 2006 through 2009 remain open to examination by taxing jurisdictions. Note D - Stock Options On February 9, 1999 the Board of Directors approved an option program for non- employee Directors. The program was amended in 2001 and 2005 to provide for the annual granting to each non-employee Director of five year options to purchase 1,500 shares of common stock, exercisable at the end of one year at the market value of the shares of common stock on the date of grant. Also, the Chairman of the Board is awarded annually five year options to purchase an additional 2,500 shares. Year Shares Per Share ---- ------ --------- 2006 10,000 $3.28 2007 10,000 $2.52 2008 11,500 $2.18 2009 11,500 $1.89 On June 23, 2000 the Stockholders approved the 2000 Incentive and Non-Statutory Stock Option Plan (the "2000 Plan"). The 2000 Plan is administered by the Board of Directors who is authorized to grant incentive stock options ("ISO's") to Officers and employees of the Company and non-qualified options ("NQO's") for certain other individuals providing services to or serving as Directors of the Company. The maximum number of shares of the Company's Stock that may be issued under the 2000 Plan is 125,000 shares. Options granted and outstanding under this plan are as follows: 9 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note D - Stock Options (continued) Year Shares ---- ------- 2005 2,500 2006 100,000 2007 20,000 ------- 122,500 ======= The ISO's are exercisable 20% of the authorized amount immediately and 20% in each of the following four years. ISO's granted to an optionee terminate 30 to 90 days after termination of employment or other relationship, except that ISO's terminate the earlier of the expiration date of the option, or 90 to 180 days in the event of death and 180 days to one year in the event of disability. No further options are being issued under the 2000 Plan. On May 14, 2009 the Stockholders approved the 2009 Incentive and Non-Statutory Stock Option Plan (the "2009 Plan"). The 2009 Plan is administered by the Board of Directors who is authorized to grant incentive stock options ("ISO's") to Officers and employees of the Company and non-qualified options ("NQO's") for certain other individuals providing services to or serving as Directors of the Company. The maximum number of shares of the Company's Stock that may be issued under the 2009 Plan is 125,000 shares. Options granted and outstanding under this plan are as follows: Year Shares ---- ------- 2009 11,500 The aggregate fair market value (determined at the time an ISO is granted) of the Common Stock with respect to which ISO's are exercisable for the first time by any person during any calendar year under the Plans shall not exceed $100,000. The ISO's are exercisable 20% of the authorized amount immediately and 20% in each of the following four years. ISO's granted to an optionee terminate 30 to 90 days after termination of employment or other relationship, except that ISO's terminate the earlier of the expiration date of the option, or 90 to 180 days in the event of death and 180 days to one year in the event of disability. Changes that occurred in options outstanding are summarized below: 10 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note D - Stock Options (continued) Three Months Ended March 31, 2010 2009 ---------------- ---------------- Average Average Exercise Exercise Shares Price Shares Price -------- ----- -------- ----- Outstanding at beginning of period 242,250 $2.53 232,250 $2.57 Granted -- -- -- -- Exercised -- -- -- -- Expired/canceled -- -- -- -- -------- ----- ------- ----- Outstanding at end of period 242,250 $2.53 232,250 $2.57 Exercisable at end of period 160,417 $2.84 113,417 $3.09 As mentioned in Note A, effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB ASC 718. As a result, additional compensation expense of $11,223 and $8,000 was recorded in the first quarter in 2010 and 2009, respectively. An additional $48,589 could be recorded over the remaining vesting period of 60 months. The Company used the following assumptions in applying the Black-Scholes pricing method: Three Months Ended March 31, 2010 2009 -------- -------- Risk free interest rate 1.98% 1.98% Expected Volatility 81% 81% Expected Life 5 years 5 years Dividend Yield 0% 0% Note E - Related Party Transactions The Company's supplier of Cobalt, MDS Nordion owns approximately 18.19% of the Company's outstanding common stock (see Note B for line of credit). The Company has recently purchased the following Cobalt from MDS Nordion: 11 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note E - Related Party Transactions (continued) Year Curies Amount ---- ------- -------- 2007 384,065 $799,523 2008 200,000 470,688 Note F - Earnings Per Share Earnings per share is calculated in accordance with ASC 260-10, "Earnings Per Share". Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the years. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Common share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti- dilutive. ASC 260-10 requires the presentation of both Basic EPS and Diluted EPS on the face of the Company's Statements of Operations. The following table sets forth the computation of basic and diluted per share information: Three Months Ended March 31, 2010 2009 ---------- ---------- Numerator: Net Income $ 141,991 $ 181,872 Denominator: Weighted average common shares outstanding 2,756,458 2,756,458 Dilutive effect of stock options 93,000 71,500 ---------- ---------- Weighted average common shares outstanding, assuming dilution 2,849,458 2,827,958 =========== =========== Potential common shares from out of the money options were excluded from the computation of diluted EPS because calculation of the associated potential common shares have an anti-dilutive effect on EPS. The following table lists options that were excluded from EPS. 12 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note F - Earnings Per Share (continued) Out of the money options excluded Three Months Ended March 31, 2010 2009 ------ ------ Stock option with an exercise price of $3.60 5,000 5,000 Stock option with an exercise price of $4.96 - 1,500 Stock option with an exercise price of $4.56 2,500 2,500 Stock option with an exercise price of $4.12 7,000 7,000 Stock option with an exercise price of $3.56 2,250 2,250 Stock option with an exercise price of $3.36 2,500 2,500 Stock option with an exercise price of $3.28 10,000 10,000 Stock option with an exercise price of $3.24 100,000 100,000 Stock option with an exercise price of $2.52 - 10,000 Stock option with an exercise price of $2.57 20,000 20,000 ------- ------- Total anti-dilutive options excluded from EPS 149,250 160,750 ======= ======= Note G - Concentration and Credit Risk Although the Company continues to diversify its customer base, three customers accounted for approximately 63% and 70% of revenues in the first quarter of 2010 and 2009, respectively. The Company's cash and accounts receivable are subject to potential credit risk. Management continuously monitors the credit standing of the financial institutions and customers with which the Company deals. A provision has been made for doubtful accounts which historically have not been significant. Note I - Recent Accounting Pronouncements Adoption of New Accounting Standards In May 2009, the FASB issued FASB ASC 855-10-05, "Subsequent Events", which requires companies to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities. FASB ASC 855-10-05 requires entities to recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities shall not recognize the impact of enters or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. FASB ASC 855-10-05, also requires entities to disclose the date through which subsequent events have been evaluated. FASB ASC 855-10-05 is effective for 13 FOOD TECHNOLOGY SERVICE, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 Note I - Recent Accounting Pronouncements (continued) the interim and annual reporting periods ending after June 15, 2009. We adopted the provisions of FASB ASC 855-10-05 for the year ended December 31, 2009, as required, the adoption did not have a material impact on our financial statements. In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162" ("The Codification"). The Codification reorganized existing U.S. accounting and reporting standards issued by the FASB and other related private sector standard setters into a single source of authoritative accounting principles arranged by topic. The Codification supersedes all existing U.S. accounting standards; all other accounting literature not included in the Codification (other than Securities and Exchange Commission guidance for publicly-traded companies) is considered non- authoritative. The Codification was effective on a prospective basis for interim and annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company's references to U.S. GAAP accounting standards but did not impact the Company's financial statements. Note J - Subsequent Events We have evaluated subsequent events for recognition or disclosure in these financial statements through the date of issuance of these financial statements, and determined there are no material transactions to recognize or disclose. 14 PART II Management's Analysis of Quarterly Income Statements Operations - --------- Food Technology Service, Inc. had revenues of $661,824 during the first quarter of 2010 compared to revenues of $674,830 for the same period in 2009. This is a decrease of about 1.9 percent. The Company had income before taxes during the first quarter of 2010 of $227,591 compared to income before taxes of $181,872 during the first quarter of 2009. This is an increase of about 21.9 percent. Management attributes decreased revenue to a large customer that was purchased and moved during the first quarter of 2009. That customer accounted for approximately 25% of the Company's 2008 revenue and virtually all of that revenue has been replaced. The Company's statement of operations reflects non-cash deferred income tax expense for the three months ended March 31, 2010 in the amount of $85,600. In past reporting periods, the Company had presented income tax expense with a corresponding benefit as management continued to reduce its valuation allowance for the deferred tax asset. For the three months ended March 31, 2010, management did not reduce the valuation allowance resulting in the non-cash expense for income taxes. This resulted in net income during the first quarter of 2010 of $141,991 versus net income of $181,872 during the first quarter of 2009. During the first quarter of 2010, processing costs as a percentage of sales were 17.3 percent compared to 18.2 percent in the first quarter of 2009. These costs are relatively fixed and the slight decrease reflects less processing time required for the revenue replacing that from the lost customer. General administrative and development costs as a percentage of sales during the first quarter of 2010 were 34.6 percent compared to 39.1 percent in the first quarter of 2009. The decline in general, administrative and development expenses, as a percentage of sales, was influenced by decreased insurance costs and utility savings achieved through energy efficiency measures. Liquidity and Capital Resources - --------- As of March 31, 2010, the Company has cash on hand of $875,869 and accounts receivable of $273,641. 15 PART III OTHER INFORMATION Item 1 Legal Proceedings The company is not involved in any legal proceedings. 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: May 17, 2010 FOOD TECHNOLOGY SERVICE, INC. /S/ Richard Hunter --------------------------------- Richard Hunter, Ph.D., Chief Executive Officer and Chief Financial Officer 16 EX-31 2 ex31.txt EXHIBIT 31 Exhibit 31 RULE 13a-14(a)/15d-14(a) CERTIFICATION I, Richard G. Hunter, Ph.D., Chief Executive Officer and Chief Financial Officer, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the year ended March 31, 2010 of Food Technology Service, Inc., (the "Company"). 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15d-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f)-15d-15(f)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: May 17, 2010 By: /s/ Richard G. Hunter ------------------------ Richard G. Hunter, Ph.D, Chief Executive Officer and Chief Financial Officer EX-32 3 ex32.txt EXHIBIT 32 Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Food Technology Service, Inc. (the "Company") on Form 10-K for the year ending March 31, 2010 as filed with the Securities and Exchange Commission (the "Report"), I, Richard G. Hunter, Chief Executive and Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13 (a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company at the end of, and for, this period covered by the Report. May 17, 2010 By: /s/ Richard G. Hunter ------------------------- Richard G. Hunter, Ph.D., Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----