10-K 1 d262708d10k.htm FORM 10-K Form 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [                ] to [                ]

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)

(863) 425-0039

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

 

(Title of Class)

 

(Name of exchange on which registered)

Common Stock, $.01 par value   The Nasdaq Stock Market, LLC (Nasdaq Capital Market)

 

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes   ¨     No   x

Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or 15(d) of the Exchange Act.     Yes  ¨     No  x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨

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   ¨      Smaller Reporting Company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):     Yes   ¨    No  x

The aggregate market value of the common stock held by non-affiliates of the registrant as of March 6, 2012 was approximately $16,000,000 based on the closing price for the registrant’s common stock reported by the NASDAQ Capital Market on that date. For purposes of this disclosure, shares of common stock held by officers and directors of the registrant and persons that may be deemed to be affiliates under the Act have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 6, 2012, there were 2,805,172 shares of the registrant’s common stock outstanding.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of Stockholders is scheduled to be held in 2012, which will be filed within 120 days after December 31, 2011, to the extent indicated in Part III.

 

 

 

 


Table of Contents

TABLE OF CONTENTS

 

 
       Page   
 

Part I

  

Item 1

  Business      1   

Item 2

  Properties      3   

Item 3

  Legal Proceedings      3   

Item 4

  Submission of Matters to a Vote of Security Holders      3   
 

Part II

  

Item 5

  Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer’s Purchases of Equity Securities      4   

Item 6

  Selected Financial Data      4   

Item 7

  Management’s Discussion and Analysis of Financial Conditions and Results of Operations      4   

Item 8

  Financial Statements and Supplementary Data      6   

Item 9

  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      6   

Item 9A

  Controls and Procedures      6   
 

Part III

  

Item 10

  Directors, Executive Officers, and Corporate Governance      7   

Item 11

  Executive Compensation      7   

Item 12

  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      7   

Item 13

  Certain Relationships and Related Transactions and Director Independence      7   

Item 14

  Principle Accounting Fees and Services      7   
 

Part IV

  

Item 15

  Exhibits and Financial Statement Schedules      8   
  Signatures      9   

 


Table of Contents

Part I

 

Item 1 Description of Business

Food Technology Service, Inc., (the “Company”) was organized as a Florida corporation on December 11, 1985. The Company owns and operates an irradiation facility located in Mulberry, Florida that uses gamma radiation to provide contract sterilization services to the medical device, packaging and food industries. The Company also irradiates spices and ingredients. The Company’s revenue for 2011 ($3,744,546) resulted primarily from the processing of medical items, packaging and food. The Company continues to diversify its customer base, however three customers accounted for approximately 66% of revenues in 2011.

During the past few years, the Company has aggressively pursued sterilization of medical devices to increase its customer base. Medical device manufacturing is expanding rapidly due to improvements in medical technology and an aging population structure in the U.S. The Company is certified to International Organization for Standardization (ISO) standards for radiation sterilization of medical devices, which is especially important for potential customers exporting medical products to the European Union and Canada. Medical device sterilization represented approximately 67% of revenues in 2011. The State of Florida is now the second leading state in the U.S. for FDA registered medical device companies.

Various types of packaging that contact food are irradiated to facilitate aseptic processing. The volume of packaging irradiated by the Company increased in 2011 and accounted for approximately 24% of revenues.

Food irradiation is a proven technology that can prevent food-borne illness or prevent the spread of insect pests. The process is supported by the U.S. Department of Agriculture, the U.S. Food and Drug Administration, the World Health Organization, the American Medical Association, the American Dietetic Association and other governmental and scientific organizations. Food irradiation is a developing segment of the irradiation industry and the Company is well-positioned to take advantage of future growth in this area. Food irradiation was responsible for approximately 7% of revenues in 2011.

Although the Company focuses on medical sterilization, packaging and food irradiation, the Company has and will continue to take advantage of profitable opportunities to irradiate other products. Such items include cosmetic ingredients, horticultural items and consumer goods and accounted for approximately 2% of 2011 revenues.

Processing Plant Operations Procedures

Products to be irradiated are placed in a conveying system that moves the items past a Cobalt 60 source at a rate that is dependent on the required dose. The dose is also related to the density of the product and the strength of the Cobalt 60 source. The actual dose received by a product is verified through dosimeters placed on the product. The Company produces a detailed record of the irradiation process for each product and maintains an extensive quality assurance program. The process cannot make products radioactive just as a dental x-ray does not make the patient’s teeth radioactive.

 

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Part I

 

Personnel

As of December 31, 2011, the Company had fifteen employees.

Cobalt 60 Supply

The level of radioactive energy of Cobalt 60 declines at approximately 1% per month, and new Cobalt 60 must be purchased at intervals to accommodate this decrease in energy as well as customer growth. Nordion (Canada) Inc. (“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. See “Relationship with Nordion” below.

This supplier does not have a contractual obligation or commitment to supply such radiation or specific quantities in the future. If Nordion is unable or unwilling to supply the radiation materials in quantities needed for us to properly irradiate products, our operating results could be harmed. We may not be able to find sufficient suppliers of Cobalt 60 at a reasonable price or at all, if such disruptions occur. In the event that Cobalt 60 is unavailable from Nordion, we believe we can obtain it from one other source. However, if we are unable to obtain Cobalt 60 at current prices, or if we are unable to acquire adequate supplies of it in a timely manner, our business will be materially affected.

Plant Safety and Regulatory Matters

We use hazardous materials, including radioactive material and compounds that could be dangerous to human health and safety or to the environment. Although the radiation source does require special handling, necessary precautions are implemented in regulations and practiced daily at the Company. The Company’s irradiation processing activities do not produce harmful solid, liquid or gas effluents or pollutants. As a result of long experience in designing and operating similar types of irradiation facilities, the necessary precautions for worker safety in an irradiation facility are well regulated by the U.S. Nuclear Regulatory Commission through the Florida Department of Health. The Florida Department of Health licenses the facility and inspects it on a regular basis. The facility is also inspected by the U.S. Department of Agriculture, the U.S. Food and Drug Administration and the Florida Department of Agriculture and Consumer Services. The notified body for certification to ISO standards also audits the facility regularly.

We may incur significant costs to comply with environmental laws and regulations adopted in the future and in the event we breach current or future environmental laws and/or regulations, we may be subject to liabilities that could damage our business.

Relationship with Nordion

Until February 25, 2011, Nordion owned approximately 16.8% of the Company’s outstanding shares of Common Stock and had representation on the Board of Directors. Nordion, in addition to being a substantial shareholder, has assisted the Company since its commencement of operations in 1990. It aided in the design and construction of the irradiation facility, loaned money to the Company during the 1990’s when we were not profitable and has been our supplier of Cobalt. In addition, Nordion assisted the Company in obtaining a surety bond in the sum of $600,000 in order to meet the State of Florida facility permit bonding requirements. In

 

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Part I

 

connection therewith, the Company agreed to reimburse Nordion for any liability and expense which Nordion may sustain as a result of its commitments to the bond issuer. On July 7, 2010, the Company obtained its own irrevocable standby letter of credit for $600,000 to satisfy the State’s requirements. According to reports filed with the Securities and Exchange Commission, on February 25, 2011, Nordion sold its interest in the Company to Fort Ashford Holdings, LLC, a California private equity firm.

In November 2010 the Company paid Nordion $512,978 for 200,000 curies of Cobalt to be delivered during the first quarter of 2011. This prepayment allowed the Company to receive a discount on the price of the Cobalt, which was delivered on January 4, 2011. In June, 2011, the Company installed an additional 300,000 curies of Cobalt purchased from Nordion at a cost of $795,000 plus delivery and installation costs.

Item  2 Description of Properties

The Company’s irradiation facility and executive office are located on an approximately 2.17 acre site owned by the Company in Mulberry, Polk County, Florida. The Company purchased the site because of its convenient access to State Road 60, a major transportation artery between Central Florida near the major interstate systems. The Company’s irradiation facility and executive office comprise approximately 28,800 square feet, including a 22,600 square foot warehouse and loading and unloading area, a 3,200 square foot office area, and a 3,000 square foot irradiation chamber and Cobalt 60 storage cell. The Company’s facility is designed to operate 24 hours per day, seven days per week. As of December 31, 2011, the Company had in use approximately 1,300,000 curies of Cobalt 60. The facility is licensed for a maximum of 4,500,000 curies of Cobalt 60 which allows production to be increased significantly, if needed.

The Company has an approximately 8,000 square foot warehouse on 2.17 acres of Company-owned land adjacent to the processing facility.

Item 3 Legal Proceedings

None

Item 4 Submission of Matters to a Vote of Security Holders

None

 

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Part II

Item 5 Market for Registrant’s Common Equity and Related Stockholder Matters

 

(a) The following table shows the range of closing bid prices for the Company’s Common Stock in the NASDAQ Small Cap market for the calendar quarters indicated. The quotations represent prices in the over-the-counter market between dealers in securities, do not include retail mark-up, markdown, or commissions and do not necessarily represent actual transactions.

Bid Prices

 

     2011      2010  
     High      Low      High      Low  

First Quarter

   $ 4.98       $ 3.60       $ 2.90       $ 1.68   

Second Quarter

     6.50         4.15         2.48         2.00   

Third Quarter

     7.93         4.27         2.67         1.97   

Fourth Quarter

     7.40         5.13         3.98         2.60   

 

(b) As of March 6, 2012, there were approximately 254 record holders and approximately 2,000 beneficial owners of our common stock.

 

(c) The Company has paid no dividends to date and does not anticipate paying any for the foreseeable future.

 

(d) Our major stockholder may, in the future, have significant influence over all matters admitted to a stockholder vote, which could limit the ability of other shareholders to influence corporate activities and may adversely affect the market price of our stock.

Item  6 Selected Financial Data

Not applicable.

Item 7 Management’s Discussion and Analysis

Plan of Operations

Food Technology Service, Inc. had revenue of $3,744,546 in 2011 which is a 24.4 percent increase over 2010 revenue of $3,010,320. The Company had net income of $909,502 or $0.328 per share in 2011 compared to $1,137,446 or $0.413 per share in 2010. This is a decrease of approximately 20.0 percent and is a result of accounting requirements for the deferred tax asset. The Company has periodically increased the estimated benefit of its deferred tax asset with the most recent adjustment being in 2010. Such adjustments can make comparisons to prior year operations difficult. To facilitate such comparisons, the Company had income before taxes of $1,429,602 in 2011 compared to income before taxes of $1,094,946 in 2010. This is an increase of approximately 30.6 percent. It should be noted that the Company anticipates using the entire deferred tax asset and that the valuation allowance is not expected to be further adjusted. The Company will continue to show a charge for income taxes which will be a non-cash transaction until the deferred tax asset is exhausted.

 

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Part II

 

Revenue for the fourth quarter of 2011 was $962,297 compared to $771,991 during the same period in 2010. This is an increase of about 24.7 percent.

Management attributes revenue growth in 2011 to a large customer. That customer has a long relationship with the Company and their needs are sporadic and their volumes are large. Although described in earlier filings as an intermittent customer, the customer has indicated they intend to use the Company at least through mid-2013.

During 2011, processing costs as a percentage of revenue were 17.7 percent compared to 18.8 percent in 2010. This decrease was not significant and reflects the fact that such costs are relatively fixed and decreased due to the increase in revenue. General administrative and development costs as a percentage of revenue during 2011 were 31.2 percent compared to 32.7 percent in 2010. Again, this change reflects the relatively fixed nature of these costs and the increased revenue.

In order to comply with FASB ASC 718, the Company continues to report the value of stock-options granted as an item of expense. These options have been issued to Company employees and Board members and are valued using the Black-Scholes pricing method. This action increased expenses in 2011 by $48,646.

Liquidity and Capital Resources

At December 31, 2011, the Company had cash on hand of $2,000,367.

On July 7, 2010, the Company entered into an agreement with a Regions Bank to establish an irrevocable standby letter of credit of $600,000, to satisfy State of Florida requirements for a Radioactive Materials License. The letter of credit will be automatically extended for an additional year or any further expiration date unless the bank provides a 120 day written notice to the Company. The letter of credit is collateralized by the Company’s real property and a $150,000 CD with Regions Bank to continue securing the Letter of Credit.

Additionally, On October 8, 2010, the Company entered into an agreement with a Regions Bank to provide for a line of credit of $400,000, bearing an interest rate of prime plus 1.35%, repayable in full on or before October 8, 2013. As of December 31, 2011 the Company did not draw on this line of credit.

Management will continue to closely monitor cash balances to ensure that the Company has sufficient cash on hand to meet its operating needs. Management believes that the Company has sufficient liquidity to meet our working capital and capital expenditure requirements for the next twelve months.

 

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Part II

 

Item 8 Financial Statements and Supplementary Data

Reference is made to the Company’s Financial Statements included herewith.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T) Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our Chief Executive Officer who also acts as the Company’s Chief Financial Officer. Based upon that evaluation, our Chief Executive and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective as of the end of the period covered by this report.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework as well as the results of an independent internal control review completed by an outside registered public accounting firm. Based on this assessment, management believes that, as of December 31, 2011, the Company’s internal control over financial reporting is effective.

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

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Part III

Item 10 Directors, Executive Officers, and Corporate Governance

Reference is made to the Company’s Proxy Statement to be used in conjunction with the 2012 Annual Shareholders Meeting scheduled to be held on May 18, 2012.

Item 11 Executive Compensation

Reference is made to the Company’s Proxy Statement to be used in conjunction with the 2012 Annual Shareholders Meeting scheduled to be held on May 18, 2012.

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Reference is made to the Company’s Proxy Statement to be used in conjunction with the 2012 Annual Shareholders Meeting scheduled to be held on May 18, 2012.

Item 13 Certain Relationships and Related Transactions and Director Independence

See Item 1 Business—“Relationship with Nordion.”

Item 14 Principle Accounting Fees and Services

Reference is made to the Company’s Proxy Statement to be used in conjunction with the 2012 Annual Shareholders Meeting scheduled to be held on May 18, 2012.

 

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Part IV

Item 15 Exhibits and Financial Statement Schedules

The following documents are filed as part of this report.

(a) Financial Statements

 

     Page  

Reports of Independent Registered Public Accounting Firm

     F-2   

Balance Sheets

     F-3   

Statements of Operations

     F-5   

Statements of Stockholders’ Equity

     F-6   

Statements of Cash Flows

     F-7   

Notes to Financial Statements

     F-8   

(b) Exhibits

 

No.   

Description

(1)    Articles of Incorporation. Reference is made to Exhibit 3.1 included in the Company’s Registration Statement on Form S-18 (File No. 33-36838-A).
(2)    By-Laws. Reference is made to Exhibit 3.2 included in the Company’s Registration Statement on Form S-18 (File No. 33-36838-A).
*(14)    Code of Ethics
**(31)    Certifications of Officers pursuant to Rule 13a-14(a)/15d-14(a)
**(32)    Certifications of Officers pursuant to Section 1350, of the Sarbanes—Oxley Act of 2002
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Reference is made to Exhibit 14 included in the Company’s Form 10-KSB Report filed for the year ended December 31, 2003.
** Filed herewith.

 

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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.

 

FOOD TECHNOLOGY SERVICE, INC.
By:   /s/ Richard G. Hunter, Ph.D.
  Richard G. Hunter, Ph.D.
  Chief Executive Officer and
  Chief Financial Officer

Date: March 28, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

 

Signature    Title   Date

/s/ Richard G. Hunter, Ph.D.

   Director   March 28, 2012

Richard G. Hunter, Ph.D.

  

Chief Executive Officer and

Chief Financial Officer

 

/s/ Douglas Bell

   Director   March 28, 2012

Douglas Bell

    

/s/ Gary Lifshin

   Director   March 28, 2012

Gary Lifshin

    

/s/ David Nicholds

   Director   March 28, 2012

David Nicholds

    

/s/ John T. Sinnott

   Director   March 28, 2012

John T. Sinnott, M.D., F.A.C.P

    

/s/ Ronald Thomas

   Director   March 28, 2012

Ronald Thomas, Ph.D.

    

 

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INDEX TO FINANCIAL STATEMENTS

 

Financial Statements    Page  

Report of Independent Registered Public Accounting Firm

     F-2   

Balance Sheets—As of December 31, 2011 and December 31, 2010

     F-3   

Statements of Operations—For the Years Ended December 31, 2011 and 2010

     F-5   

Statements of Stockholders’ Equity—For the Years Ended December 31, 2011 and 2010

     F-6   

Statements of Cash Flows—For the Years Ended December 31, 2011 and 2010

     F-7   

Notes to Financial Statements

     F-8   

 

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Food Technology Service, Inc.

We have audited the accompanying balance sheets of Food Technology Service, Inc. as of December 31, 2011 and 2010 and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Food Technology Service, Inc. as of December 31, 2011 and 2010 and the results of its operations and its cash flows for each of the years in the two-period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

FERLITA, WALSH & GONZALEZ, P.A.

Tampa, Florida

March 20, 2012

 

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FOOD TECHNOLOGY SERVICE, INC.

BALANCE SHEETS

 

     As of December 31,  
     2011     2010  

ASSETS

  

Current Assets:

    

Cash

   $ 2,000,367      $ 1,294,540   

Accounts Receivable, Less Allowance for Doubtful Accounts of $5,000

     511,448        354,489   

Prepaid Expenses

     28,467        24,856   

Deferred Tax Asset

     651,000        369,200   
  

 

 

   

 

 

 

Total Current Assets

     3,191,282        2,043,085   

Property, Plant and Equipment:

    

Buildings

     3,443,723        3,282,029   

Cobalt

     5,900,977        4,486,283   

Furniture and Equipment

     2,076,481        1,981,525   

Land

     171,654        171,654   

Less: Accumulated Depreciation

     (6,830,734     (6,366,316
  

 

 

   

 

 

 

Total Property, Plant and Equipment

     4,762,101        3,555,175   

Other Assets:

    

Deferred Tax Asset

     185,400        987,300   

Utility Deposits

     5,000        5,000   

Prepaid Cobalt

     —          512,978   

Loan Fees—Net

     7,046        14,955   
  

 

 

   

 

 

 

Total Other Assets

     197,446        1,520,233   
  

 

 

   

 

 

 

Total Assets

   $ 8,150,829      $ 7,118,493   
  

 

 

   

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

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FOOD TECHNOLOGY SERVICE, INC.

BALANCE SHEETS

 

     As of December 31,  
     2011     2010  

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current Liabilities:

    

Accounts Payable

   $ 32,002      $ 9,783   

Accrued Liabilities

     68,242        16,273   
  

 

 

   

 

 

 

Total Current Liabilities

     100,244        26,056   

Stockholders’ Equity:

    

Common Stock $.01 Par Value, Authorized 5,000,000 Shares, Issued 2,805,172 and 2,756,458, respectively

     28,051        27,564   

Paid-In Capital

     12,275,218        12,227,059   

Deficit

     (4,234,193     (5,143,695

Less, 5,154 Treasury Shares at Cost

     (18,491     (18,491
  

 

 

   

 

 

 

Total Stockholders’ Equity

     8,050,585        7,092,437   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 8,150,829      $ 7,118,493   
  

 

 

   

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

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FOOD TECHNOLOGY SERVICE, INC.

STATEMENTS OF OPERATIONS

 

     Years Ended December 31,  
     2011     2010  

Net Revenues

   $ 3,744,546      $ 3,010,320   
  

 

 

   

 

 

 

Costs and Operating Expenses

    

Processing Costs

     662,890        565,630   

Selling, General and Administrative

     1,168,248        983,841   

Depreciation and Amortization

     484,545        368,591   

Interest Expense

     253        6   
  

 

 

   

 

 

 

Total Costs and Operating Expenses

     2,315,936        1,918,068   
  

 

 

   

 

 

 

Income from Operations

     1,428,610        1,092,252   

Interest Income

     992        2,694   
  

 

 

   

 

 

 

Income before Income Taxes

     1,429,602        1,094,946   

Income Tax (Expense) Benefit—Deferred

     (520,100     42,500   
  

 

 

   

 

 

 

Net Income

   $ 909,502      $ 1,137,446   
  

 

 

   

 

 

 

Net Income Per Common Share

    

-Basic

   $ 0.328      $ 0.413   

-Diluted

   $ 0.312      $ 0.379   

Weighted Average Number of Common Shares Used in Computation

    

-Basic

     2,776,660        2,756,458   

-Diluted

     2,916,160        2,998,458   

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

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FOOD TECHNOLOGY SERVICE, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

 

     Common
Stock
     Paid-In
Capital
    Deficit     Treasury
Stock
 

Balance, December 31, 2009

   $ 27,564       $ 12,186,827      $ (6,281,141   $ (18,491

Stock Option Expense

     —           40,232        —          —     

Net Income

     —           —          1,137,446        —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2010

     27,564         12,227,059        (5,143,695     (18,491

Exercise of Stock Options

     487         (487     —          —     

Share-Based Compensation

     —           48,646        —          —     

Net Income

     —           —          909,502        —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2011

   $ 28,051       $ 12,275,218      $ (4,234,193   $ (18,491
  

 

 

    

 

 

   

 

 

   

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

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FOOD TECHNOLOGY SERVICE, INC.

STATEMENTS OF CASH FLOWS

 

     Years Ended December 31,  
     2011     2010  

Cash Flows from Operations:

    

Cash Received from Customers

   $ 3,587,587      $ 2,869,583   

Interest Received

     992        2,694   

Interest Paid

     (253     (6

Cash Paid for Operating Expenses

     (1,711,915     (1,512,788
  

 

 

   

 

 

 

Net Cash Provided by Operations

     1,876,411        1,359,483   

Cash Flows from Investing Activities:

    

Letter of Credit Costs

     (12,218     (22,754

Prepaid Cobalt

     —          (512,978

Purchase of Cobalt, Delivery & Installation

     (901,716     (57,782

Purchase of Equipment

     (94,956     (81,740

Building Renovation

     (161,694     —     
  

 

 

   

 

 

 

Net Cash (Used) by Investing

     (1,170,584     (675,254

Net Increase in Cash

     705,827        684,229   

Cash at Beginning of Period

     1,294,540        610,311   
  

 

 

   

 

 

 

Cash at End of Period

   $ 2,000,367      $ 1,294,540   
  

 

 

   

 

 

 

Reconciliation of Net Income to Net Cash Provided by Operations:

    

Net Income

   $ 909,502      $ 1,137,446   

Adjustments to Reconcile Net Income to Cash Provided or Used:

    

Amortization

     20,127        7,799   

Deferred Income Tax

     520,100        (42,500

Depreciation

     464,418        360,792   

Share-Based Compensation

     48,646        40,232   

(Increase)/Decrease in Receivables

     (156,959     (140,737

(Increase)/Decrease in Prepaid Expenses

     (3,611     6,951   

Increase/(Decrease) in Payables

     22,219        (5,802

Increase/(Decrease) in Accruals

     51,969        (4,698
  

 

 

   

 

 

 

Net Cash Provided by Operations

   $ 1,876,411      $ 1,359,483   
  

 

 

   

 

 

 

Non-cash Financing Transactions:

    

Common Stock Issued Pursuant to Exercised Stock Options

   $ 308,956        —     

Prepaid Cobalt Placed in Service

   $ 512,978        —     

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

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Table of Contents

FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

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, oysters and meat products to enhance safety or eliminate insect pests.

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 gamma radiation from Cobalt 60. 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.

4. Accounts Receivable and Allowances for Doubtful Accounts

Accounts receivable are customer obligations arising from the sale of services and are due under normal trade terms requiring payment within 30 days from the invoice date. Accounts over ninety days are monitored closely by Management and delinquencies are determined based on payment history, aging analysis and any specific known troubled assets. Receivables are charged off to the allowance for doubtful accounts once Management determines that they are uncollectible.

5. 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:

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

Building

   31.5-39 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.

Nordion is the Company’s supplier of Cobalt 60. When Cobalt is purchased, Nordion agrees to accept the return of all Cobalt 60 that has reached the end of its useful life for a fee. The Company’s facility has the capacity to store the Cobalt 60 and there is no regulatory or industry requirement stating when the Cobalt needs to be returned. Management periodically reviews the value of the Cobalt 60 and has determined an environmental remediation liability is not necessary since the value of the Cobalt 60 exceeds the disposal costs.

6. Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash and cash equivalents.

7. 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 all funds in noninterest-bearing transaction accounts until December 31, 2012. The Company had no uninsured cash balances at December 31, 2011 and 2010.

8. 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.

9. Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities approximate fair value.

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

10. 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 H—Stock Options) 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.

11. Advertising

The Company expenses all advertising costs when incurred. Advertising expense recognized for the years ended December 31, 2011 and 2010 was $4,713 and $8,377, respectively.

12. Reclassification

Certain reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.

Note B—Certificate of Deposit

As of January 2011 the certificate of deposit was not renewed.

Note C—Loan Fees

During the first quarter of 2011 renewal fees in the amount of $12,219 were incurred in connection with the Regions letter of credit (See Note E—Letter and Line of Credit) for a total of $34,973. These fees were amortized based on the life of the loans. Amortization expense for the years ended December 31, 2011 and 2010 was $20,127 and $7,799, respectively.

Note D—Prepaid Cobalt

In November 2010 the Company paid $512,978 to Nordion (See Note I—Related Party Transactions) for the delivery of 200,000 curies of Cobalt in early 2011. The delivery was received and placed in service in January 2011.

Note E—Letter and Line of Credit

The Company no longer uses Nordion to guarantee a $600,000 letter of credit required by the State of Florida as a condition of the Company’s Radioactive Materials License. In July, 2010, the Company obtained an irrevocable standby letter of credit of $600,000 through Regions Bank to satisfy State of Florida requirements. The letter of credit will be automatically extended for an additional year unless the bank provides a 120 day written notice to the Company. The letter of credit is collateralized by the Company’s real property and has an annual fee of $12,219. Subsequent to December 31, 2011, the Company extended the letter of credit and it is now collateralized by the Company’s real estate and a certificate of deposit (See Note L—Subsequent Events).

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

The Company has a separate $400,000 line of credit with Regions Bank that is available for the short term capital needs of the Company. The line of credit is secured by the Company’s real property and incurs interest at prime plus 1.35%. As of December 31, 2011 the Company has not used the line of credit. Subsequent to December 31, 2011, the Company renewed the line of credit and it is now secured by the Company’s real estate and a certificate of deposit (See Note L—Subsequent Events).

Note F—Income Taxes and Available Tax Loss Carryforwards

The components of income tax / (benefit) are as follows:

 

     Years Ended December 31,  
     2011      2010  

Current

     

Federal

   $ —         $ —     

State

     —           —     
  

 

 

    

 

 

 
     —           —     

Deferred-Benefit

     

Federal

     444,100         (36,300

State

     76,000         (6,200
  

 

 

    

 

 

 
     520,100         (42,500

Total Income Tax Expense /(Benefit)

   $ 520,100       $ (42,500
  

 

 

    

 

 

 

Income taxes for the years ended December 31, 2011 and 2010 differ from the amounts computed by applying the effective income tax rates of 37.63% to income before income taxes as a result of the following:

 

     Years Ended December 31,  
     2011     2010  

Expected Provision At US Statutory Rate

   $ 486,100      $ 372,300   

State Income Tax Net Of Federal Benefit

     51,900        39,700   

Nondeductible Expenses

     6,500        2,300   

Change In Estimates And Available NOL Carryforwards

     1,100        59,700   

Change In Valuation Allowance

     (25,500     (516,500
  

 

 

   

 

 

 

Income Tax Expense /(Benefit)

   $ 520,100      $ (42,500
  

 

 

   

 

 

 

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

The Company had income tax net operating loss (“NOL”) carryforwards for federal income tax purposes. The NOL will expire in various years ending through the year 2030.

The Company’s NOL carryforward is as follows:

 

     As of December 31,  
     2011     2010  

NOL Carryforward—Beginning Of Year

     3,672,530        4,933,066   

Less Used

     (1,600,605     (1,099,151

Less Expired

     —          (161,385
  

 

 

   

 

 

 

NOL Carryfoward—End Of Year

     2,071,925        3,672,530   
  

 

 

   

 

 

 

The components of the Company’s deferred tax assets are as follows:

 

     As of December 31,  
     2011      2010  

Nol Carryforward

   $ 779,700       $1,382,000   

Accrued Salary

     17,700       —     

Stock Options

     39,000       —     

Less: Valuation Allowance

     —         (25,500)   
  

 

 

    

 

  

 

 

 

Net Deferred Tax Asset

   $ 836,400       $1,356,500   

Current Portion

   $ 651,000          $ 369,200   

Noncurrent Portion

     185,400            987,300   
  

 

 

       

 

 

 

Total Net Deferred Tax Asset

   $ 836,400          $ 1,356,500   
  

 

 

       

 

 

 

The change in the valuation allowance is as follows:

 

December 31, 2010

     (25,500

December 31, 2011

     —     
  

 

 

 

Change In Valuation Allowance

     25,500   
  

 

 

 

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.

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 2011, 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 all of the Company’s deferred asset.

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

The Company believes that its estimate of future operations is conservative and reasonable, but inherently uncertain. 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.

The Company’s tax years 2008 through 2010 remain open to examination by taxing jurisdictions.

Note G—Accrued Liabilities

Effective January 1, 2011, the Board of Directors modified the President’s employment contract to include a resignation clause. This clause provides two weeks base pay for every full year worked for the company, if a six month notice is received before the President leaves. As of December 31, 2011 an accrual of $47,000 is recorded in relation to the resignation clause.

Note H- 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. Options outstanding under this plan for the years ended December 31, 2011 and 2010 are 21,500 and 31,500, respectively.

No further options are being issued under the 1999 Plan.

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 outstanding under this plan for the years ended December 31, 2011 and 2010 are 20,000 and 122,500, respectively.

 

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FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

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   

2010

     11,500   

2011

     10,000   
  

 

 

 
     33,000   
  

 

 

 

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.

A summary of the status of the Company’s stock options is as follows:

 

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Table of Contents

FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

     Number of
Shares
    Wtd.
Avg.
Exercise
Price
     Wtd. Avg.
Remaining
Contractual
Life (Yrs)
 

Outstanding At December 31, 2009

     242,250      $ 2.53      

Granted

     11,500      $ 2.15      

Exercised

     —          —        

Expired/Forfeited

     (11,750   $ 4.11      
  

 

 

      

Outstanding At December 31, 2010

     242,000      $ 2.43         3.01   

Granted

     10,000      $ 4.85      

Exercised

     (101,500   $ 3.24      

Expired/Forfeited

     (11,000   $ 3.30      
  

 

 

      

Outstanding At December 31, 2011

     139,500      $ 1.95         4.02   
  

 

 

      

Vested/Exercisable At December 31, 2011

     111,500      $ 1.70         3.51   
  

 

 

      

A summary of the status of the Company’s nonvested stock options is as follows:

 

     Number of
Shares
    Wtd. Avg.
Grant Date
Fair Value
 

Nonvested, At December 31, 2009

     101,500      $ 0.58   

Granted

     11,500      $ 3.25   

Vested

     (48,500   $ 1.27   
  

 

 

   

Nonvested, At December 31, 2010

     64,500      $ 0.58   

Granted

     10,000      $ 3.25   

Vested

     (46,500   $ 1.27   
  

 

 

   

Nonvested, At December 31, 2011

     28,000      $ 0.41   
  

 

 

   

Expired/Forfeited During 2011

     11,000      $ 0.84   
  

 

 

   

The Company estimated the fair value at the date of grant using the Black Scholes option valuation model with the following assumptions:

 

     Years Ended December 31,
     2011    2010

Risk Free Interest Rate

   0.83% - 2.24%    1.27% - 2.60%

Expected Volatility

   80.03% - 84.66%    85.47% - 86.66%

Expected Life

   5 years    5 years

Dividend Yield

   0%    0%

 

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Table of Contents

FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

Option valuation models require the input of highly subjective assumptions including the expected option life. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

During 2011, 101,500 stock options were exercised under a cashless program resulting in the issuance of 48,714 shares.

The Company recognized $48,646 and $40,232 stock-based compensation expense for the years ended December 31, 2011 and 2010, respectively.

As of December 31, 2011, there was $20,106 of unrecognized compensation costs related to non-vested stock options, which will be amortized to expense over future periods. The Company expects to recognize that cost over the weighted average vesting period 1.42 years.

Note I—Related Party Transactions

The Company’s supplier of Cobalt, Nordion (Canada) Inc., formerly MDS Nordion, owned approximately 16.8% of the Company’s outstanding common stock. By agreement entered into February 10, 2011, Nordion (Canada) Inc., formerly MDS Nordion, sold 463,317 shares of common stock to Fort Ashford Holdings, LLC for $3.60 per share. As of February 25, 2011, the closing date for the sale, Nordion (Canada) ceased to be a shareholder and no longer has any direct or indirect interest in the outstanding shares of common stock of the Company.

The Company has recently purchased the following Cobalt from Nordion:

 

Year

   Curies      Amount  

2010

     105,757       $ 81,740   

2011

     499,998       $ 1,414,694   

In November 2010, the Company paid Nordion approximately $510,000 to purchase Cobalt for delivery during the first quarter of 2011. This prepayment allowed the Company to receive a discount on the price of the Cobalt. The Cobalt was delivered as scheduled in January 2011.

Note J—Earnings Per Share

Earnings per share are calculated in accordance with ASC 260-10, “Earnings Per Share”. Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the years. Diluted earnings per share reflect 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.

 

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Table of Contents

FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

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:

 

    

For the Years Ended

December 31,

 
     2011      2010  

Numerator:

     

Net Income

   $ 909,502       $ 1,137,446   
  

 

 

    

 

 

 

Denominator:

     

Wtd. Avg. Common Shares Outstanding

     2,776,660         2,756,458   

Dilutive Effect Of Stock Options

     139,500         242,000   
  

 

 

    

 

 

 

Wtd. Avg. Common Shares Outstanding, Assuming Dilution

     2,916,160         2,998,458   
  

 

 

    

 

 

 

For the years ended December 31, 2011 and 2010 there were no out of the money options to exclude from the computation of diluted EPS.

Note K—Concentration and Credit Risk

Although the Company continues to diversify its customer base, three customers accounted for approximately 66% and 59% of revenues for the years ended December 31, 2011 and 2010, 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.

The Company’s supplier of Cobalt 60 is Nordion (Canada) Inc. In the event it is unavailable from Nordion the Company can obtain Cobalt 60 from one other source.

Note L—Subsequent Events

As disclosed in Note E—Letter and Line of Credit, the Company has a $600,000 letter of credit and a separate $400,000 line of credit. Both the letter and the line of credit are collateralized by the Company’s real property. Subsequent to December 31, 2011, the Company extended the letter of credit and renewed the line of credit. Due to the general decline in real estate values, the bank has required the Company to either have the real estate appraised to verify the value is sufficient to guarantee the $600,000 letter of credit or purchase a certificate of deposit in the amount of $150,000. The Company chose to purchase the certificate of deposit to collateralize the letter and line of credit.

 

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Table of Contents

FOOD TECHNOLOGY SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

In March, 2012 the Company entered into an agreement with Nordion for the purchase and installation of 300,000 curies of Cobalt at an estimated cost of $800,000. This Cobalt will be installed during the third quarter of 2012.

In March, 2012 the Company entered into an agreement with Nordion for the replacement of the Programmable Logic Control (PLC) system at an estimated cost of $800,000. This is the last part of a multi-year project intended to maintain the facility in good and reliable condition. The PLC replacement will take place in two phases and is expected to be substantially completed by the end of 2012.

 

F-18