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EX-32.2 - EXHIBIT 32.2 - PARADISE INCv452367_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - PARADISE INCv452367_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - PARADISE INCv452367_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - PARADISE INCv452367_ex31-1.htm

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

xQuarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934.

 

For the quarterly period ended September 30, 2016

 

or

 

¨Transition report pursuant to section 13 or 15(d) of the Securities Act of 1934.

 

Commission File No. 0-3026

 

 

 

PARADISE, INC.

 

 

 

INCORPORATED IN FLORIDA

I.R.S. EMPLOYER IDENTIFICATION NO. 59-1007583

 

1200 W. DR. MARTIN LUTHER KING, JR. BLVD.,

PLANT CITY, FLORIDA 33563

 

(813) 752-1155

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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 (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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

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 number of shares outstanding of each of the issuer’s classes of common stock as of November 14, 2016 was 519,600 shares.

 

 

 

 

PARADISE, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

INDEX

 

    PAGE
PART I. FINANCIAL INFORMATION  
     
  ITEM 1.  
     
  CONSOLIDATED BALANCE SHEETS:  
     
  Assets  
     
  As of September 30, 2016 (Unaudited), December 31, 2015 and September 30, 2015 (Unaudited) 2
     
  Liabilities and Stockholders’ Equity  
     
  As of September 30, 2016 (Unaudited), December 31, 2015 and September 30, 2015 (Unaudited) 3
     
  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED):  
     
  For the three-month periods ended September 30, 2016 and 2015 4
     
  For the nine-month periods ended September 30, 2016 and 2015 5
     
  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED):  
     
  For the nine-month periods ended September 30, 2016 and 2015 6
     
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7 – 10
     
  ITEM 2.  
     
  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 – 14
     
  ITEM 3.  
     
  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK – N/A 15
     
  ITEM 4.  
     
  CONTROLS AND PROCEDURES 15
     
PART II. OTHER INFORMATION  
     
  ITEMS 1 – 6. 16
     
SIGNATURES 17

 

 

 

 

PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   AS OF       AS OF 
   SEPTEMBER 30,   AS OF   SEPTEMBER 30, 
   2016   DECEMBER 31,   2015 
   (UNAUDITED)   2015   (UNAUDITED) 
                
ASSETS               
                
CURRENT ASSETS:               
                
Cash  $1,138,700   $8,791,938   $1,329,580 
Accounts Receivable,               
Less, Allowances of $0 (09/30/16),               
$1,066,314 (12/31/15) and $0 (09/30/15)   6,378,274    2,182,306    6,678,038 
Inventories:               
Raw Materials   7,605,280    5,114,439    6,426,620 
Work in Process   333,884    785,711    487,769 
Supplies   161,258    161,258    168,275 
Finished Goods   3,897,230    2,118,261    4,352,239 
Income Tax Asset   -    -    265,829 
Deferred Income Tax Asset   241,834    241,834    277,291 
Prepaid Expenses and Other Current Assets   455,684    318,250    437,130 
                
Total Current Assets   20,212,144    19,713,997    20,422,771 
                

Property, Plant and Equipment, Less, Accumulated Depreciation of $18,557,477 (09/30/16), $18,294,592 (12/31/15) and $18,192,229 (09/30/15)

   3,919,133    3,924,480    3,753,580 
Goodwill   413,280    413,280    413,280 
Customer Base and Non-Compete Agreement   -    62,092    93,563 
Other Assets   381,149    392,426    471,978 
                
TOTAL ASSETS  $24,925,706   $24,506,275   $25,155,172 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 2 

 

 

   AS OF       AS OF 
   SEPTEMBER 30,   AS OF   SEPTEMBER 30, 
   2016   DECEMBER 31,   2015 
   (UNAUDITED)   2015   (UNAUDITED) 
             
LIABILITIES AND STOCKHOLDERS’ EQUITY               
                
CURRENT LIABILITIES:               
                
Short Term Debt  $291,838   $582,839   $1,385,769 
Accounts Payable   712,962    615,928    1,234,036 
Accrued Liabilities   607,603    656,543    590,250 
Income Taxes Payable   193,185    111,018    - 
                
Total Current Liabilities   1,805,588    1,966,328    3,210,055 
                
DEFERRED INCOME TAX LIABILITY   315,125    315,125    203,667 
                
Total Liabilities   2,120,713    2,281,453    3,413,722 
                
STOCKHOLDERS’ EQUITY:               
Common Stock:  $0.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued, 519,600 Shares Outstanding   174,928    174,928    174,928 
Capital in Excess of Par Value   1,288,793    1,288,793    1,288,793 
Retained Earnings   21,614,491    21,034,320    20,550,948 
Treasury Stock, at Cost, 63,494 Shares   (273,219)   (273,219)   (273,219)
                
Total Stockholders’ Equity   22,804,993    22,224,822    21,741,450 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $24,925,706   $24,506,275   $25,155,172 

 

 3 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   FOR THE THREE MONTHS ENDED 
   SEPTEMBER 30, 
   2016   2015 
         
Net Sales  $8,884,152   $8,861,873 
           
Costs and Expenses:          
Cost of Goods Sold   6,173,066    6,453,619 
Selling, General and Administrative Expense   1,098,845    1,147,469 
Amortization Expense   2,000    32,471 
           
Total Costs and Expenses   7,273,911    7,633,559 
           
Income from Operations   1,610,241    1,228,314 
           
Other Expenses   (30,856)   (24,967)
           
Income from Operations Before Income Taxes   1,579,385    1,203,347 
           
Provision for Income Taxes   631,753    471,256 
           
Net Income  $947,632   $732,091 
           
Income per Common Share (Basic and Diluted)  $1.82   $1.41 
           
Dividend per Common Share  $0.00   $0.00 

 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 4 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   FOR THE NINE MONTHS ENDED 
   SEPTEMBER 30, 
   2016   2015 
         
Net Sales  $13,950,369   $14,032,757 
           
Costs and Expenses:          
Cost of Goods Sold   10,038,462    10,936,925 
Selling, General and Administrative Expense   2,774,766    2,979,115 
Amortization Expense   68,203    104,414 
           
Total Costs and Expenses   12,881,431    14,020,454 
           
Income from Operations   1,068,938    12,303 
           
Other Income   19,846    19,885 
           
Income from Operations Before Income Taxes   1,088,784    32,188 
           
Provision for Income Taxes   435,513    2,792 
           
Net Income  $653,271   $29,396 
           
Income per Common Share (Basic and Diluted)  $1.26   $0.06 
           
Dividend per Common Share  $0.15   $0.11 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 5 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   FOR THE NINE MONTHS ENDED 
   SEPTEMBER 30, 
   2016   2015 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Income  $653,271   $29,396 
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:          
Depreciation and Amortization   367,329    416,548 
(Increase) Decrease in:          
Accounts Receivable   (4,195,968)   (3,631,369)
Inventories   (3,817,983)   (3,949,994)
Prepaid Expenses   (137,434)   (130,179)
Other Assets   5,166    (30,605)
Income Tax Asset   -   (265,958)
Increase (Decrease) in:          
Accounts Payable   101,874    630,684 
Accrued Liabilities   33,227    (150,802)
           
Net Cash Used in Operating Activities   (6,990,518)   (7,082,279)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of Property and Equipment   (293,779)   (591,885)
           
Net Cash Used in Investing Activities   (293,779)   (591,885)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payments on Short Term Debt   (863,527)   (149,112)
Proceeds from Short Term Debt   572,526    1,422,002 
Dividends Paid   (77,940)   (57,156)
           
Net Cash Provided by (Used in) Financing Activities   (368,941)   1,215,734 
           
NET DECREASE IN CASH   (7,653,238)   (6,458,430)
           
CASH, AT BEGINNING OF PERIOD   8,791,938    7,788,010 
           
CASH, AT END OF PERIOD  $1,138,700   $1,329,580 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for:          
           
Income Taxes  $353,346   $268,750 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 6 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of Paradise, Inc. (the “Company”) have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

The information furnished herein reflects all adjustments and accruals of a normal recurring nature that management believes are necessary to fairly state the operating results for the respective periods. The notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2015. The Company’s management believes that the disclosures are sufficient for interim financial reporting purposes.

 

Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace’ fruit product sales are recorded during an eight to ten week period beginning in mid September. Therefore, the operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the current year.

 

Certain minor reclassifications have been made to the consolidated unaudited financial statements for the three and nine months ended September 30, 2015 to conform to the classifications used for the three and nine months ended September 30, 2016.

 

NOTE 2RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements.

 

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.

 

 7 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 2RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

 

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

Except as noted above, the Company’s management does not believe that recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the Securities and Exchange Commission will have a material impact on the Company’s current or future consolidated financial statements.

 

NOTE 3INCOME PER COMMON SHARE

 

Basic and diluted income per common share is based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600. There are no dilutive securities outstanding.

 

 8 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 4BUSINESS SEGMENT DATA

 

The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:

 

  Business Segment   Operation
       
  Fruit   Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking.  Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preservers, dairies, drink manufacturers, etc.
       
  Molded Plastics   Production of plastics containers and other molded plastics for sale to various food processors and others.

 

   Three months ended   Three months ended 
   September 30,   September 30, 
   2016   2015 
         
Net Sales in Each Segment          
           
Fruit:          
Sales to Unaffiliated Customers  $7,389,005   $7,102,818 
           
Molded Plastics:          
Sales to Unaffiliated Customers   1,495,147    1,759,055 
           
Net Sales  $8,884,152   $8,861,873 
           
   Nine months ended   Nine months ended 
   September 30,   September 30, 
   2016   2015 
         
Net Sales in Each Segment          
           
Fruit:          
Sales to Unaffiliated Customers  $8,643,663   $8,409,947 
           
Molded Plastics:          
Sales to Unaffiliated Customers   5,306,706    5,622,810 
           
Net Sales  $13,950,369   $14,032,757 

 

 9 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 4BUSINESS SEGMENT DATA (CONTINUED)

 

The Company does not prepare operating profit or loss information on a segment basis for internal use, until the end of each year. Due to the seasonal nature of the fruit segment, management believes that it is not practical to prepare this information for interim reporting purposes. Therefore, reporting is not required by accounting principles generally accepted in the United States of America.

 

   September 30,   September 30, 
   2016   2015 
         
Identifiable Assets of Each Segment are Listed Below:          
           
Fruit  $17,678,419   $16,957,811 
           
Molded Plastics   4,399,853    4,887,629 
           
Identifiable Assets   22,078,272    21,845,440 
           
General Corporate Assets   2,847,434    3,309,732 
           
Total Assets  $24,925,706   $25,155,172 

 

Identifiable assets by segment are those assets that are principally used in the operations of each segment. General corporate assets are principally cash, prepaid expenses, other current assets, land and income tax assets. 

 

 10 

 

 

PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward–Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for the purpose of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as “may”, “will”, “expects”, “potential”, or “continue”, or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties.

 

Overview

 

Paradise, Inc.’s main business segment, glace’ fruit, a prime ingredient of fruitcakes and other holiday confections, represented 68.3% of total net sales for the previous year of 2015. These products are sold to manufacturing bakers, institutional users, supermarkets and other retailers throughout the country. Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace’ fruit product sales are recorded for a period of eight to ten weeks beginning in mid September.

 

Since the majority of the Company’s customers require delivery of glace’ fruit products during this relatively short period of time, Paradise, Inc. must operate at consistent levels of production from as early as January through the middle of November of each year in order to meet peak demands. Furthermore, the Company must make substantial borrowings of short-term working capital to cover the cost of raw materials, factory overhead and labor expense associated with production for inventory. This combination of building and financing inventories during the year, without the opportunity to record any significant fruit product income, may result in the generation of operating losses well into the third quarter of each year. Therefore, it is the opinion of management that meaningful forecasts of annual net sales or profit levels require analysis of a full year’s operations.

 

In addition, comparison of current quarterly results to the preceding quarter produces an incomplete picture on the Company’s performance due to year-to-year changes in production schedules, seasonal harvests and availability of raw materials, and in the timing of customer orders and shipments. Thus, the discussion of information presented within this report is focused on the review of the Company’s current year-to-date results as compared to the similar period last year.

 

Paradise, Inc.’s other business segment, Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc. produces custom molding products, is not subject to the seasonality of the glace’ fruit business. This segment represents all injection molding and thermoforming operations, including the packaging for the Company’s fruit products. Only sales to unaffiliated customers are reported.

 

 11 

 

 

PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

 

The First Nine Months

 

Paradise, Inc.’s fruit segment net sales for the first nine months of 2016 increased 2.8% to $8,643,663 compared to $8,409,947 for the similar nine month reporting period of 2015. This increase is primarily due to timing differences in the receipt of customers’ orders and the corresponding shipping dates for delivery of the Company’s retail glace’ fruit products. Changes in dates of opening orders from customers between interim reporting periods will have a direct impact on net revenue comparisons. Paradise, Inc. recognizes net sales generally upon receipt of its products by its customers. Thus, as merchandise is shipped and received by its customers during different interim reporting periods, timing differences in reported net revenue will occur. Management has consistently disclosed that interim filings are not reliable financial indicators of year-end performance. Only after a full year’s selling season is completed which takes into consideration factors such as the timing of initial orders, product placement on supermarket shelves and consumer demand for holiday fruitcake ingredients, will the Company have any ability to determine whether its sales and marketing efforts for the current year were successful.

 

Paradise Plastics, Inc., a wholly owned company of Paradise, Inc. which accounted for 38% of total net sales to unaffiliated customers decreased by 5.6% to net sales of $5,306,706 for the nine months ended September 30, 2016 compared to $5,622,810 for the similar reporting period of 2015. While sales to customers of vacuum forming plastics parts within the housing market increased by 5% for the current reporting period over the similar reporting period of 2015, it was not enough net revenue to offset a recent decline in sales related to a long term customer within the Company’s thermoforming operations. As mentioned in previous filings, Paradise Plastics, Inc. produces various types of custom molded plastics for its customers which are then assembled into finished products by its customers. Thus, changes in demand for these finish products by the end user will have a direct impact on our sales. As of the date of filing, management is not able to predict whether the recent decline in sales will continue.

 

Consolidated cost of sales as a percentage of overall net sales decreased 6.0% for the first nine months of 2016 compared to the similar reporting period of 2015. This is less than the 10.4% decrease in cost of sales reported during the June 30, 2016 filing, however, this decrease is still due to the following two reasons. First, a greater percentage of vacuum forming plastics parts ordered and shipped during the first nine months of 2016 vs. 2015 were of higher gross margins. Secondly, the fruit segment, after not commencing brining operations of orange peel during the first nine months of 2015, produced 2.9 million lbs. of brined orange peel inventory during the first nine months of 2016. With more than an adequate amount of brined orange peel in the Company’s inventory as of January 1, 2015, brining operations for orange peel were postponed for 2015. Thus, the increase in orange peel production during the first nine months of 2016 allocated over a relatively fixed amount of factory overhead (i.e.: insurance, utilities, depreciation and taxes) had the impact of reducing cost of sales as of September 30, 2016 compared to September 30, 2015. However, it is important to understand that until a full year’s production cycle is completed, the Company will not be able to determine to what extent the additional production mentioned above will have on cost of sales as it relates to overall sales.

 

Inventory as of September 30, 2016 totaled $11,997,652 compared to $11,434,903 as of September 30, 2015 representing an increase of $562,749. This represents an increase of 4.9% and is attributable to the increased orange peel production discussed in the cost of sales section above.

 

Selling, general & administrative expenses for the first nine months of 2016 totaled $2,774,766 compared to $2,979,115 representing a decrease of $204,349 or 6.9% and is primarily related to the retirement of three senior managers during late 2015.

 

 12 

 

 

PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

 

The First Nine Months (Continued)

 

Paradise, Inc. finances ongoing operations primarily with cash provided by our operating activities which are seasonal in nature. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At September 30, 2016 and December 31, 2015, we had $1,138,700 and $8,791,938, respectively, in cash. Additionally, we have a revolving line of credit with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 60% of the Company’s eligible inventory, of which $0 was outstanding at September 30, 2016 and $0 at December 31, 2015. Within this agreement, there are letters of credit with a limit of $1,750,000, of which $291,838 was outstanding at September 30, 2016 and $582,839 December 31, 2015. The line of credit agreement expires in July, 2017. Net cash decreased by $7,653,238 for the nine months ended September 30, 2016 compared to $6,458,430 for the nine months ended September 30, 2015. The primary reason for this decrease in cash for the first nine months of 2016 compared to 2015 was the earlier repayment of short-term debt of just over $1.0 million as of September 30, 2016.

 

Summary

 

Paradise Inc.’s consolidated net sales decreased slightly to $13,950,369 for the first nine months of 2016 compared to $14,032,757 for the first nine months of 2015 as an increase in the earlier shipment of the Company’s holiday segment fruit segments products was offset by a downturn in thermoforming plastics parts during the third quarter of 2016. However, as mentioned and disclosed in all previous interim filings, due to the highly seasonal nature of the Company’s primary revenue source, glace’ fruit sales, no meaningful financial analysis can be developed from Paradise, Inc.’s interim reporting results. Only a full year’s accounting of revenue and expenses will provide the necessary information to determine the Company’s overall financial performance.

 

Critical Accounting Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assessments, estimates and assumptions that affect the amounts reported in the consolidated financial statements. We evaluate the accounting policies and estimates used to prepare the consolidated financial statements on an ongoing basis. Critical accounting estimates are those that require management’s most difficult, complex, or subjective judgments and have the most potential to impact our financial position and operating results. For a detailed discussion of our critical accounting estimates, see our Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes to our critical accounting estimates during the nine months ended September 30, 2016.

 

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PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements.

 

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.

 

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

Except as noted above, the Company’s management does not believe that recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the Securities and Exchange Commission will have a material impact on the Company’s current or future consolidated financial statements.

 

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PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 3.Quantitative and Qualitative Disclosure and Market Risk – N/A

 

Item 4.Controls and Procedures

 

As of September 30, 2016, our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, and they have concluded that we maintain effective disclosure controls and procedures. There were no significant changes in our internal control over financial reporting during the nine months ended September 30, 2016.

 

Disclosure controls and procedures mean the methods designed to ensure that information that the Company is required to disclose in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods required. Our controls and procedures are designed to ensure that all information required to be disclosed is accumulated and communicated to our management to allow timely decisions regarding disclosure. Our controls and procedures are also designed to provide reasonable assurance of the reliability of our financial reporting and accurate recording of our financial transactions.

 

A control system, however well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. There are inherent limitations in all control systems, and no evaluation of controls can provide absolute assurance that all control gaps or instances of fraud have been detected. These inherent limitations include the realities that the judgments in decision-making can be faulty, and that simple errors or mistakes can occur.

 

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PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART II.OTHER INFORMATION

 

Item 1.Legal Proceedings – N/A

 

Item 1A.Risk Factors – N/A

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds – N/A

 

Item 3.Defaults Upon Senior Securities – N/A

 

Item 4.Mine Safety Disclosures – N/A

 

Item 5.Other Information – N/A

 

Item 6.Exhibits

 

  Exhibit    
  Number   Description
       
  31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
       
  31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
       
  32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
       
  32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
       
       
  EX-101.INS   XBRL Instance Document
       
  EX-101.SCH   XBRL Taxonomy Extension Schema
       
  EX-101.CAL   XBRL Taxonomy Extension Calculation Linkbase
       
  EX-101.DEF   XBRL Taxonomy Extension Definition Linkbase
       
  EX-101.LAB   XBRL Taxonomy Extension Label Linkbase
       
  EX-101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

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PARADISE, INC. COMMISSION FILE NO. 0-3026

  

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.

 

  PARADISE, INC.      
  A Florida Corporation      
         
  /s/ Randy S. Gordon   Date: November 14, 2016
  Randy S. Gordon      
  President and Chief Executive Officer      
         
         
  /s/ Jack M. Laskowitz   Date: November 14, 2016
  Jack M. Laskowitz      
  Chief Financial Officer and Treasurer      

 

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