Company Quick10K Filing
Quick10K
Paradise
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-15 Enter Agreement, Other Events, Exhibits
8-K 2018-08-09 Amendment, Exhibits
8-K 2018-04-05 Officers, Exhibits
8-K 2018-02-13 Other Events, Exhibits
8-K 2017-10-31 Officers, Exhibits
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ANCN Anchiano Therapeutics 38
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DXYN Dixie Group 11
BICX Biocorrx 0
APTY APT Systems 0
PARF 2019-03-31
Part I.Financial Information
Item 1.Financial Statements
Note 1Basis of Presentation
Note 2Impact of Recently Issued Accounting Pronouncements
Note 3Loss per Common Share
Note 4Revenue
Note 5Business Segment Data
Note 6Subsequent Event
Part I.Financial Information
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosure About Market Risk - N/A
Item 4.Controls and Procedures
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
EX-31.1 tv521737_ex31-1.htm
EX-31.2 tv521737_ex31-2.htm
EX-32.1 tv521737_ex32-1.htm
EX-32.2 tv521737_ex32-2.htm

Paradise Earnings 2019-03-31

PARF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tv521737_10q.htm FORM 10-Q

 

 

UNITED STATES

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 March 31, 2019

 

or

 

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

 

Commission File No. 000-03026

__________________

 

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 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 every Interactive Data File required to be submitted 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 such files). Yes x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer  ¨  Accelerated filer  ¨  Non-accelerated filer  x  Smaller reporting company x

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

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

 

Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Trading symbol(s) Name of each exchange on which registered
N/A N/A N/A

 

The number of shares outstanding of each of the issuer’s classes of common stock as of May 20, 2019 was 519,600 shares.

  

 

 

 

 

PARADISE, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

INDEX

 

 

     PAGE
PART I. FINANCIAL INFORMATION 
      
  ITEM 1.   
      
  CONSOLIDATED BALANCE SHEETS:   
      
  Assets   
      
  As of March 31, 2019 (Unaudited), December 31, 2018 and March 31, 2018 (Unaudited)  2
      
  Liabilities and Stockholders’ Equity   
      
  As of March 31, 2019 (Unaudited), December 31, 2018 and March 31, 2018 (Unaudited)  3
      
  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED):   
      
  For the three-months ended March 31, 2019 and 2018  4
      
 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

   
      
  As of March 31, 2019 (Unaudited), December 31, 2018 and December 31, 2017  5
      
  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED):   
      
  For the three-months ended March 31, 2019 and 2018  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 – 15
      
  ITEM 3.   
      
  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK  16
      
  ITEM 4.   
      
  CONTROLS AND PROCEDURES  16
      
      
PART II. OTHER INFORMATION   
      
  ITEMS 1 – 6.  17
      
      
SIGNATURES  18

 

   

 

 

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 
   MARCH 31,   AS OF   MARCH 31, 
   2019   DECEMBER 31,   2018 
   (UNAUDITED)   2018   (UNAUDITED) 
ASSETS               
                
CURRENT ASSETS:               
                
Cash  $7,167,345   $8,036,052   $7,272,479 
Accounts Receivable,               
Less, Allowances of $437,043 (03/31/19),               
$1,000,826 (12/31/18) and $0 (03/31/18)   928,842    1,993,564    1,163,303 
Inventories:               
Raw Materials   8,537,465    6,509,732    8,466,419 
Work in Process   1,209    885,655    11,265 
Supplies   203,562    203,562    194,346 
Finished Goods   2,722,998    1,732,584    2,557,545 
Income Tax Receivable   294,007    175,042    334,956 
Prepaid Expenses and Other Current Assets   137,010    257,949    116,404 
                
Total Current Assets   19,992,438    19,794,140    20,116,717 
                
Property, Plant and Equipment,               
Less, Accumulated Depreciation of               
$19,556,393 (03/31/19), $19,455,531 (12/31/18) and $19,146,653 (03/31/18)   4,079,789    4,126,848    4,236,170 
Goodwill   -    413,280    413,280 
Deferred Income Taxes   126,084    126,084    - 
Other Assets   437,136    323,390    406,549 
                
TOTAL ASSETS  $24,635,447   $24,783,742   $25,172,716 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 2 

 

 

 

   AS OF       AS OF 
   MARCH 31,   AS OF   MARCH 31, 
   2019   DECEMBER 31,   2018 
   (UNAUDITED)    2018    (UNAUDITED) 
             
LIABILITIES AND STOCKHOLDERS’ EQUITY               
                
CURRENT LIABILITIES:               
                
Short Term Debt  $624,166   $284,016   $797,254 
Accounts Payable   934,108    931,424    569,533 
Accrued Credits Due Fruit Customers   100,100    333,244    455,896 
Accrued Expenses and Other Liabilities   560,221    488,248    253,269 
                
Total Current Liabilities   2,218,595    2,036,932    2,075,952 
                
DEFERRED INCOME TAXES   -    -    83,687 
                
Total Liabilities   2,218,595    2,036,932    2,159,639 
                
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   21,226,350    21,556,308    21,822,575 
Treasury Stock, at Cost, 63,494 Shares   (273,219)   (273,219)   (273,219)
                
Total Stockholders’ Equity   22,416,852    22,746,810    23,013,077 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $24,635,447   $24,783,742   $25,172,716 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 3 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   FOR THE THREE MONTHS ENDED 
   MARCH 31, 
   2019   2018 
         
Net Sales  $2,042,072   $2,126,278 
           
Costs and Expenses:          
Cost of Goods Sold   1,305,839    1,813,782 
Selling, General and Administrative Expense   818,989    779,515 
Goodwill Impairment   413,280    - 
Amortization Expense   4,500    4,500 
           
Total Costs and Expenses   2,542,608    2,597,797 
           
Loss from Operations   (500,536)   (471,519)
           
Other Income (Expense)   51,613    (1,464)
           
Loss Before Income Taxes   (448,923)   (472,983)
           
Income Tax Benefit   118,965    125,340 
           
Net Loss  $(329,958)  $(347,643)
           
           
Loss per Common Share (Basic and Diluted)  $(0.64)  $(0.67)
           
Dividend per Common Share  $0.00   $0.15 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 4 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

       CAPITAL IN             
   COMMON   EXCESS OF   RETAINED   TREASURY     
   STOCK   PAR VALUE   EARNINGS   STOCK   TOTAL 
                     
Balance, December 31, 2017  $174,928   $1,288,793   $22,248,158   $(273,219)  $23,438,660 
                          
Cash Dividends Declared, $0.15 per Share             (77,940)        (77,940)
                          
Net Loss             (613,910)        (613,910)
                          
Balance, December 31, 2018   174,928    1,288,793    21,556,308    (273,219)   22,746,810 
                          
Net Loss             (329,958)        (329,958)
                          
Balance, March 31, 2019  $174,928   $1,288,793   $21,226,350   $(273,219)  $22,416,852 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

 5 

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   FOR THE THREE MONTHS ENDED 
   MARCH 31, 
   2019   2018 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(329,958)  $(347,643)
Adjustments to Reconcile Net Loss to Net Cash          
Used in Operating Activities:          
Depreciation and Amortization   105,363    105,749 
Goodwill Impairment   413,280    - 
Decrease (Increase) in:          
Accounts Receivable   1,064,722    707,346 
Inventories   (2,133,701)   (1,700,930)
Prepaid Expenses and Other Current Assets   120,939    107,980 
Income Tax Receivable   (118,965)   (125,340)
Other Assets   (159,080)   (61,134)
Increase (Decrease) in:          
Accounts Payable   2,684    (69,360)
Accrued Liabilities   (203,009)   (197,691)
           
Net Cash Used in Operating Activities   (1,237,725)   (1,581,023)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of Property and Equipment   (11,966)   (65,692)
Increase in Cash Surrender Value of Life Insurance   45,334    - 
           
Net Cash Provided by (Used in) Investing Activities   33,368    (65,692)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from Short Term Debt   335,650    382,330 
Payments on Short Term Debt 

-
   (131,148)
           
Net Cash Provided by Financing Activities   335,650    251,182 
           
NET DECREASE IN CASH   (868,707)   (1,395,533)
           
CASH, AT BEGINNING OF PERIOD   8,036,052    8,668,012 
           
CASH, AT END OF PERIOD  $7,167,345   $7,272,479 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for:          
Income Tax  $-   $- 
           
Noncash financing activity:          
Dividends Declared  $-   $77,940 

 

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. and subsidiaries (collectively, 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 only the adjustments and accruals of a normal recurring nature 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, 2018. The Company’s management believes that the disclosures are sufficient for interim financial reporting purposes.

 

Consumer demand for glacé fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glacé fruit product sales are recorded during an eight to ten week period beginning in mid September. Therefore, the operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the current year.

 

 

NOTE 2IMPACT OF 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 replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. The revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the new standard on January 1, 2018 on a full retrospective basis. There was no material financial impact from adopting the new revenue standard.

 

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. 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 adopted the new standard on January 1, 2019 on a modified retrospective basis. A right of use asset and respective liability were included in assets and liabilities as of January 1, 2019 in the amount of approximately $42,000. There was no material financial impact.

 

 

 7 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

NOTE 2IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

 

In June 2016, the FASB issued an ASU on the measurement of credit losses on financial instruments. This ASU requires entities to measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. We are currently assessing the guidance. This ASU is not expected to have a material impact on our 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 3LOSS PER COMMON SHARE

 

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

 

 

NOTE 4REVENUE

 

The Company recognizes revenue from the sale of candied fruit products which are sold to manufacturing bakers, institutional users and retailers. The Company also recognizes revenue from the sale of molded plastics to unaffiliated customers. Revenue is recognized upon the shipment or delivery of goods depending on the agreed upon terms with the customer and is reported net of applicable provisions for discounts, returns, incentives and allowances.

 

The Company recognizes revenue when performance obligations are satisfied by transferring control of the goods to customers. Control is transferred upon shipment or delivery of the goods to the customer. At the time of delivery, the customer is invoiced with payment terms which are commensurate with the customer’s credit profile. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs.

 

The Company assesses the goods and services promised in its customers’ purchase orders and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all the goods or services promised, whether explicitly stated or implied based on customary business practices.

 

 

 8 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

NOTE 5BUSINESS 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.

 

   March 31,   March 31, 
   2019   2018 
         
Net Sales in Each Segment        
         
Fruit:          
Sales to Unaffiliated Customers  $690,918   $592,618 
           
Molded Plastics:          
Sales to Unaffiliated Customers   1,351,154    1,533,660 
           
Net Sales  $2,042,072   $2,126,278 

 

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.

 

 9 

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

NOTE 5BUSINESS SEGMENT DATA (CONTINUED)

 

   March 31,   March 31, 
   2019   2018 
         
Identifiable Assets of Each Segment are Listed Below:          
           
Fruit  $10,947,784   $11,812,208 
           
Molded Plastics   4,853,716    4,416,137 
           
Identifiable Assets   15,801,500    16,228,345 
           
General Corporate Assets   8,833,947    8,944,371 
           
Total Assets  $24,635,447   $25,172,716 

 

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.

 

 

NOTE 6SUBSEQUENT EVENT

 

On April 15, 2019, Paradise, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Seneca Foods Corporation (“Seneca”) and its subsidiary (the “Buyer”). Pursuant to the Purchase Agreement, Buyer would acquire substantially all of the assets of the Company engaged in the production, manufacture, sale and distribution of glacé fruit product (the “Fruit Business”) on the satisfaction or waiver of the closing conditions set forth in the Purchase Agreement, which include approval of the transactions contemplated by the Purchase Agreement by holders of a majority of the Company’s outstanding common stock. The Company expects to call and hold a shareholders’ meeting seeking to obtain this approval and separate approval of a plan of dissolution and liquidation of its remaining assets, including the Company’s plastics division and its real property located in Plant City, Florida.

 

 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, costs or other financial items, statements about our plans and objectives for future operations, statements about the transactions contemplated by the Asset Purchase Agreement with Seneca Foods Corporation, statements about the proposed plan of dissolution and liquidation, statements about the related shareholder approval, 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. Except as required by applicable law, we do not undertake to update any forward-looking statements.

 

Overview

 

Paradise, Inc.’s main business segment, glacé fruit, a prime ingredient of fruitcakes and other holiday confections, represented 74% of total net sales during 2018. These products are sold to manufacturing bakers, institutional users, supermarkets and other retailers throughout the country. Consumer demand for glacé fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glacé fruit product sales are ordinarily recorded during an eight to ten week period beginning in mid-September.

 

Since the majority of the Company’s customers require delivery of glacé candied 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, results 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, producing custom molding products, is not subject to the seasonality of the glacé 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.

 

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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)

 

The First Quarter

 

Paradise, Inc.’s fruit segment net sales for the first quarter of 2019 totaled $690,918 compared to net sales of $592,618 for the similar reporting period of 2018 representing an increase of $98,300. It should be noted that fruit segment net sales during the first quarter of the year in the past have represented less than 5% of annual net sales. Products sold during the first quarter are mainly fruit ingredients produced in bulk quantities for industrial bakeries and supermarkets leading up to the Easter holiday period and the processing of fresh strawberries through its production facilities on behalf of a local Plant City, Florida distributor. Paradise, Inc., receives a negotiated fee (tolling fee) based on the number of pounds processed through its plant for this distributor. The combination of sales for bulk fruit along with the tolling fees accrued for the first three months of 2019 totaled $773,541 compared to $869,944 for the first three months of 2018. Also, during the first quarter of every year, management reviews its provision for sales returns recorded as of December 31st relating to retail products shipped to its customers during the previous year’s selling season, beginning in mid-September and running through the Thanksgiving and Christmas season. In addition, the Company reviews its accrual of a certain percentage of expenses related to various customer incentive programs for media print advertising or in-store promotions during the previous holiday selling season. As a result of management improving upon and developing more conservative estimates around retail returns and customer incentive programs for the year ended, there were minimal downward adjustments during the period ended March 31, 2019.

 

Paradise, Inc.’s molded plastics segment, which accounted for 26% of total net sales to unaffiliated customers for the previous year, generated net sales of $1,351,154 for the three months ended March 31, 2019 compared to $1,533,660 for the three months ended March 31, 2018. This decrease in net sales of $182,506 is directly related to timing as the shipment of new custom molding orders completed during the first quarter of 2019 was delayed into the second quarter of 2019.

 

Consolidated cost of sales as a percentage of net sales decreased 21% for the first quarter of 2019 compared to the first quarter of 2018. There are two main reasons for this decrease. First, fruit segment expenses associated with brining operations regarding the processing of orange peel received from a Central Florida supplier did not occur during the first quarter of 2019. Instead, the Company decided to contract for brined orange peel from an overseas supplier. This eliminated the need to hire additional labor during the first quarter resulting in payroll and payroll related savings in excess of $100,000 for the first quarter of 2019 compared to the first quarter of 2018. Second, the plastics segment received an increase in new customer purchase orders during the fourth quarter of 2018 and the first quarter of 2019. These new orders resulted in an increase of plastics finished goods inventory in excess of $300,000 as of March 31, 2019 compared to March 31, 2018 as the delivery of customer orders did not begin until the start of the second quarter of 2019. As a majority of plastics overhead such as labor, depreciation, property insurance and real estate taxes are relatively fixed from quarter to quarter an increase in production will have a positive impact (decrease) on cost of sales.

 

Selling, general & administrative (SG&A) expenses for the first three months of 2019 increased $39,474 to $818,989 from $779,515 for the first three months of 2018 as activities related to increases in professional fees incurred in exploring strategic alternatives, which began in February 2018, are still ongoing as of the date of this filing.

 

 

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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)

 

Other Significant Items

 

As disclosed in Note 6 – Subsequent Event, on April 15, 2019, Paradise, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Seneca Foods Corporation (“Seneca”) and its subsidiary (the “Buyer”). Pursuant to the Purchase Agreement, Buyer would acquire substantially all of the assets of the Company engaged in the production, manufacture, sale and distribution of glacé fruit product (the “Fruit Business”) on the satisfaction or waiver of the closing conditions set forth in the Purchase Agreement, which include approval of the transactions contemplated by the Purchase Agreement by holders of a majority of the Company’s outstanding common stock.

 

The Company expects to call and hold a shareholders’ meeting seeking to obtain this approval and separate approval of a plan of dissolution and liquidation of its remaining assets, including the Company’s plastics division and its real property located in Plant City, Florida. As it relates to the liquidation of the plastics segment, management has determined the full carrying amount of goodwill exceeds its implied fair value. Therefore, Management has decided to charge this amount, $413,280, to earnings as of March 31, 2019.

 

Short Term Debt as of March 31, 2019 totaled $624,166 and primarily consist of letters of credit issued by the Company’s banking institution to Paradise, Inc.’s overseas supplier of certain raw fruit materials. The bank makes direct payments to the overseas supplier upon shipment and then charges Paradise, Inc. after receipt of these raw fruit materials with term extending to 180 days. As payment terms are consistent from period to period, the decrease in the liability as of March 31, 2019 of $624,166 compared to the liability of $797,254 as of March 31, 2018 relates to a decrease in the amount of product ordered from our overseas supplier for 2019.

 

Accounts Payable as of March 31, 2019 increased to $934,105 compared to $569,533 as of March 31, 2018, as the raw materials for several new plastics customers were purchased during the latter stage of the first quarter of 2019 compared to 2018. All outstanding invoices are paid within 30 days of receipt from our suppliers.

 

The Company after completing a Phase 1 and Phase 2 environmental study of its real property has engaged the services of an environmental consulting & contracting firm to provide remedial services. The cost to provide these services approximate $50,000. This amount is included in other liabilities on the Company’s balance sheet as of March 31, 2019.

 

Other Income (Expense) as of March 31, 2019 was $51,613 compared to ($1,464) as of March 31, 2018. This is primarily related to the split dollar life insurance policies for two senior members of Company management along with occasional recycling income related to scrap materials. For the first three months of 2019, the cash surrender value of these two polices increased $45,334 compared to a decrease of ($1,464) for the first three months of 2018.

 

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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)

 

Liquidity and Capital Resources

 

We finance our ongoing operations primarily with cash provided by our operating activities. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At March 31, 2019 and December 31, 2018, we had approximately $7.2 million and $8.0 million, respectively, in cash. The decrease in cash during the first quarter of 2019 of $0.9 million is consistent with prior years as we generally have to use available cash reserves until we start to receive payments from our fruit customers after the start of our shipping season beginning in the fourth quarter of the year. 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 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year, of which $0 was outstanding at March 31, 2019 and December 31, 2018. Within this agreement, there are letters of credit with a limit of $1,750,000, of which $624,166 was outstanding at March 31, 2019 and $284,016 at December 31, 2018. The line of credit agreement expires on July 31, 2019. 

 

Summary

 

Paradise, Inc.’s consolidated net sales for the three months ended March 31, 2019 decreased $84,206 to $2,042,072 from $2,126,278 for the three months ended March 31, 2018. This decrease is related to first, the delay in the shipment of plastics customer finished goods purchase orders made during the first quarter of 2019 into the second quarter of 2019. Secondly, the Company’s decision to purchase orange peel in brine from an overseas supplier reduced Paradise, Inc.’s fruit segment payroll in excess of $100,000 during the first quarter of 2019. Correspondingly, cost of sales as a percentage of sales decreased 21% as the factory overhead absorbed by the increased production of finished goods inventory remained on the balance sheet as of March 31, 2019. Offsetting the decrease in cost of sales was management’s decision to impair goodwill of $413,280. This coupled with an increase in SG&A expenses related to the ongoing expenses of the Company’s financial advisor in connection with the exploration of strategic opportunities resulted in a Loss from Operations of ($500,536) for the three months ended March 31, 2019 compared to a Loss from Operations of ($471,519) for the three months ended March 31, 2018. It is important to note that with less than 5% of anticipated 2019 fruit segment net sales (assuming no closing of the asset sale to Seneca) processed and shipped as of March 31, 2019 and based on historical sales data which indicates that more than 80% of the Company’s annual fruit segment’s sales occurs during the months of September through November of each year, no realistic forecast or trend as to year end results can be developed as of the date of this filing. In this context, it is also important to note that the anticipated closing of the asset sale to Seneca would mean that the Company would no longer have fruit segment sales after such closing, which is anticipated to occur prior to September. However, the Company can make no assurances that the asset sale will actually close or as to the timing of such closing.

 

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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)

 

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, 2018. There have been no material changes to our critical accounting estimates during the three months ended March 31, 2019.

 

Impact of 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 replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. The revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the new standard on January 1, 2018 on a full retrospective basis. There was no material financial impact from adopting the new revenue standard.

 

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. 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 adopted the new standard on January 1, 2019 on a modified retrospective basis. A right of use asset and respective liability were included in assets and liabilities as of January 1, 2019 in the amount of approximately $42,000. There was no material financial impact.

 

In June 2016, the FASB issued an ASU on the measurement of credit losses on financial instruments. This ASU requires entities to measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. We are currently assessing the guidance. This ASU is not expected to have a material impact on our 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 about Market Risk – N/A

 

Item 4.Controls and Procedures

 

(a)Evaluation of Disclosure Controls and Procedures.

 

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President and Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.

 

Disclosure controls and procedures mean controls and other procedures designed to ensure that information that the Company is required to disclose in the reports that it files with or submits to the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods required. Our controls and procedures include, without limitation, controls and procedures designed to ensure that all information required to be disclosed by us in the reports that we file with or submit to the Securities and Exchange Commission is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required 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.

 

Subsequent to the initial filing of the Company’s annual report on Form 10-K for the year ended December 31, 2017, management identified a material weakness in internal control relevant to the Company’s timeliness of the issuance and related year end accrual of credit memos for the customer returns, allowances, discounts and incentives that related to 2017 sales. This weakness in internal control resulted in a material misstatement of the financial statements and required restatement of the financial statements included in the Company’s Form 10-K for the year ended December 31, 2017 and in the Company’s Form 10-Q for the quarterly period ended March 31, 2018. These misstatements, which were not detected timely by management, were the result of inadequate design of controls pertaining to the Company’s review and ongoing monitoring of its procedures. The deficiency represents a material weakness in the Company’s internal control over financial reporting. 

 

As of March 31, 2019, Management has implemented and integrated additional procedures around the reporting and tracking of credit memos for returns, allowances, discounts and incentives to ensure that all amounts are properly recorded and remediate the material weakness identified above. As of March 31, 2019 and based upon its evaluation of the Company’s disclosure controls and procedures, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

(b)Changes in Internal Control over Financial Reporting.

 

Except as noted above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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
    
2.1  Asset Purchase Agreement, dated as of April 15, 2019, by and among Paradise, Inc., Gray & Company and Seneca Foods Corporation
    
10.1  Form of Voting Agreement, dated as of April 15, 2019, by and among Gray & Company and the shareholders of Paradise, Inc. signatories thereto.
    
10.2  Form of Indemnification Agreement with directors and officers of Paradise, Inc.
    
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:   May 20, 2019
Randy S. Gordon   
President and Chief Executive Officer   
    
    
/s/ Jack M. Laskowitz  Date:   May 20, 2019
Jack M. Laskowitz   
Chief Financial Officer and Treasurer   

 

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