Management's Analysis of Quarterly Income Statements Operations

Food Technology Service Inc. had revenues of $652,724 during the second quarter of 2009 compared to revenues of $623,061 for the same period in 2008. This is an increase of approximately 4.8 percent. The Company had net income during the second quarter of 2009 of $165,926 compared to net income of $129,773 during the second quarter of 2008. This is an increase of approximately 27.8 percent. For the first half of 2009, the Company had revenues of $1,327,554 and net income of $347,798. Revenues during the first half of 2008 were $1,181,930 and the Company had net income of $206,327. Revenues increased by about 12.3 percent and net income increased by approximately 68 percent in the first half of 2009 compared to the same period in 2008.

Included in revenue for the quarter and six month period ended June 30, 2009 is a settlement fee of $85,229 relating to the termination of a warehouse lease with a former customer. As previously reported, the customer, responsible for approximately 25% of our revenue for the year ended December 31, 2008 and the first quarter of 2009, was acquired by a third party and as a result, their operations were moved to the Southwest United States. Without the settlement fee, revenue from operations for the quarter and six months ended June 30, 2009 would have been $567,495 and $1,242,325 respectively. Cost comparisons in the following paragraphs are presented both with and without the lease settlement revenue.

During the second quarter of 2009, processing costs as a percentage of sales were 17.1 percent with the lease settlement revenue and 19.4 percent without such revenue. This compares to 21.8 percent in the second quarter of 2008. This percentage decrease was due primarily to efficiencies in operations during the second quarter and the fact that there was downtime during the second quarter of 2008 due to the installation of Cobalt. General administrative and development costs as a percentage of sales during the second quarter of 2009 were 41.4 percent with the lease settlement revenue and 47.6 percent without such revenue. This compares to 40.3 percent in the second quarter of 2008. These expenses are relatively fixed and the percentage increase is due to the decrease in revenue and the cost of renovations made to the roof of the facility beginning in the second quarter of 2009.

During the first half of 2009, processing costs as a percentage of sales were 17.6 percent with the lease settlement revenue and 18.9 percent without such revenue. This compares to 23 percent in the first half of 2008. This decrease was due, as previously mentioned, to the efficiencies in operations in the second quarter of 2009 and the downtime associated with Cobalt installation during the second quarter of 2008. General, administrative and development costs as a percentage of sales were 40.2 percent during the first half of 2009 with the lease settlement revenue and 43.1 percent during the first half of 2009 without such revenue. This compares to 41.1 percent during the first half of 2008. The 2009 percentages were slightly elevated by the cost of roof renovations but generally reflect the fact that such costs are relatively fixed over longer time periods.

Liquidity and Capital Resources

As of June 30, 2009, the Company has cash on hand of $845,335 and accounts receivable of $222,580.