Company Quick10K Filing
Quick10K
Paradise
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$34.00 1 $18
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
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 2019-08-29 Other Events, Exhibits
8-K 2019-07-31 M&A, Exhibits
8-K 2019-07-29 Shareholder Vote
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
FFKT Farmers Capital Bank 399
FXA Invesco Currencyshares Australian Dollar Trust 101
POWW Ammo 70
ACOL Acology 55
IDTY Ipsidy 48
PLRM Pilgrim Bancshares 46
COIL Citadel Exploration 10
IMUN Immune Therapeutics 0
INBT Inbit 0
BNI Burlington Northern Santa Fe 0
PARF 2019-06-30
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 Events
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 I.Financial Information
EX-31.1 tv527563_ex31-1.htm
EX-31.2 tv527563_ex31-2.htm
EX-32.1 tv527563_ex32-1.htm
EX-32.2 tv527563_ex32-2.htm

Paradise Earnings 2019-06-30

PARF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tv527563_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 June 30, 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 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 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 August 19, 2019 was 519,600 shares.

 

 

 

   

 

 

PARADISE, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

INDEX

 

    PAGE
PART I. FINANCIAL INFORMATION  
     
  ITEM 1.  
     
  CONSOLIDATED BALANCE SHEETS:  
     
  Assets  
     
  As of June 30, 2019 (Unaudited), December 31, 2018 and June 30, 2018 (Unaudited) 2
     
  Liabilities and Stockholders’ Equity  
     
  As of June 30, 2019 (Unaudited), December 31, 2018 and June 30, 2018 (Unaudited) 3
     
  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED):  
     
  For the three-months ended June 30, 2019 and 2018 4
     
  For the six-months ended June 30, 2019 and 2018 5
     
  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY  
     
  As of June 30, 2019 (Unaudited), December 31, 2018 and December 31, 2017 6
     
  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED):  
     
  For the six-months ended June 30, 2019 and 2018 7
     
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8 – 12
     
  ITEM 2.  
     
  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

13 – 17

     
  ITEM 3.  
     
  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 18
     
  ITEM 4.  
     
  CONTROLS AND PROCEDURES 18 - 19
     
PART II. OTHER INFORMATION  
     
  ITEMS 1 – 6. 20
     
SIGNATURES 21

 

   

 

 

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 
   JUNE 30,   AS OF   JUNE 30, 
   2019   DECEMBER 31,   2018 
   (UNAUDITED)   2018   (UNAUDITED) 
             
ASSETS               
                
CURRENT ASSETS:               
                
Cash  $2,357,595   $8,036,052   $2,569,673 
Accounts Receivable, Less, Allowances of $203,277 (06/30/19), $1,000,826 (12/31/18) and $0 (06/30/18)   905,559    1,993,564    857,674 
Inventories:               
Raw Materials   9,251,284    6,509,732    10,450,641 
Work in Process   460,237    885,655    377,973 
Supplies   203,562    203,562    194,346 
Finished Goods   4,012,623    1,732,584    3,935,679 
Income Tax Receivable   801,670    175,042    698,131 
Prepaid Expenses and Other Current Assets   313,170    257,949    455,555 
                
Total Current Assets   18,305,700    19,794,140    19,539,672 
                
Property, Plant and Equipment, Less, Accumulated Depreciation of $19,657,266 (06/30/19), $19,455,531 (12/31/18) and $19,251,118 (06/30/18)   4,024,249    4,126,848    4,400,099 
Goodwill   -    413,280    413,280 
Deferred Income Taxes   126,084    126,084    - 
Other Assets   447,142    323,390    369,300 
                
TOTAL ASSETS  $22,903,175   $24,783,742   $24,722,351 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

2

 

 

   AS OF       AS OF 
   JUNE 30,   AS OF   JUNE 30, 
   2019   DECEMBER 31,   2018 
   (UNAUDITED)   2018   (UNAUDITED) 
             
LIABILITIES AND STOCKHOLDERS’ EQUITY               
                
CURRENT LIABILITIES:               
                
Short Term Debt  $382,210   $284,016   $543,310 
Accounts Payable   1,048,649    931,424    1,379,817 
Accrued Credits Due Fruit Customers   35,516    333,244    110,000 
Accrued Expenses and Other Liabilities   473,676    488,248    144,164 
                
Total Current Liabilities   1,940,051    2,036,932    2,177,291 
                
DEFERRED INCOME TAXES   -    -    83,687 
                
Total Liabilities   1,940,051    2,036,932    2,260,978 
                
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   19,772,622    21,556,308    21,270,871 
Treasury Stock, at Cost, 63,494 Shares   (273,219)   (273,219)   (273,219)
                
Total Stockholders’ Equity   20,963,124    22,746,810    22,461,373 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $22,903,175   $24,783,742   $24,722,351 

 

3

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   FOR THE THREE MONTHS ENDED 
   JUNE 30, 
   2019   2018 
         
Net Sales  $1,472,359   $1,523,097 
           
Costs and Expenses:          
Cost of Goods Sold   2,704,546    1,517,554 
Selling, General and Administrative Expense   773,429    777,342 
Goodwill Impairment   -    - 
Amortization Expense   4,500    4,500 
           
Total Costs and Expenses   3,482,475    2,299,396 
           
Loss from Operations   (2,010,116)   (776,299)
           
Other Income   32,250    25,677 
           
Loss Before Income Taxes   (1,977,866)   (750,622)
           
Income Tax Benefit   524,135    198,915 
           
Net Loss  $(1,453,731)  $(551,707)
           
Loss per Common Share (Basic and Diluted)  $(2.80)  $(1.06)
           
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 SIX MONTHS ENDED 
   JUNE 30, 
   2019   2018 
         
Net Sales  $3,514,431   $3,649,375 
           
Costs and Expenses:          
Cost of Goods Sold   4,010,385    3,331,336 
Selling, General and Administrative Expense   1,592,418    1,556,857 
Goodwill Impairment   413,280    - 
Amortization Expense   9,000    9,000 
           
Total Costs and Expenses   6,025,083    4,897,193 
           
Loss from Operations   (2,510,652)   (1,247,818)
           
Other Income   83,866    24,213 
           
Loss Before Income Taxes   (2,426,786)   (1,223,605)
           
Income Tax Benefit   643,100    324,255 
           
Net Loss  $(1,783,686)  $(899,350)
           
Loss per Common Share (Basic and Diluted)  $(3.43)  $(1.73)
           
Dividend per Common Share  $0.00   $0.15 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

5

 

 

PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

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             (1,783,686)        (1,783,686)
                          
Balance, June 30, 2019  $174,928   $1,288,793   $19,772,622   $(273,219)  $20,963,124 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

6

 

 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   FOR THE SIX MONTHS ENDED 
   JUNE 30, 
   2019   2018 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(1,783,686)  $(899,350)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:          
Depreciation and Amortization   210,514    214,714 
Goodwill Impairment   413,280    - 
Decrease (Increase) in:          
Accounts Receivable   1,088,005    1,012,975 
Inventories   (4,596,173)   (5,429,993)
Prepaid Expenses and Other Current Assets   (55,221)   (231,171)
Income Tax Receivable   (626,628)   (488,515)
Other Assets   (123,752)   (23,885)
Increase (Decrease) in:          
Accounts Payable   117,225    740,924 
Accrued Liabilities   (354,138)   (574,750)
           
Net Cash Used in Operating Activities   (5,710,574)   (5,679,051)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of Property and Equipment   (57,077)   (334,086)
Increase in Cash Surrender Value of Life Insurance   -    - 
           
Net Cash Used in Investing Activities   (57,077)   (334,086)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from Short Term Debt   510,070    (571,572)
Payments on Short Term Debt   (420,876)   564,310 
Dividends Paid   -    (77,940)
           
Net Cash Provided by (Used in) Financing Activities   89,194    (85,202)
           
NET DECREASE IN CASH   (5,678,457)   (6,098,339)
           
CASH, AT BEGINNING OF PERIOD   8,036,052    8,668,012 
           
CASH, AT END OF PERIOD  $2,357,595   $2,569,673 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for:          
Income Tax  $-   $164,260 

 

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

 

7

 

 

 

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.

 

NOTE 2IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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.

 

8

 

 

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 is 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

 

During the reporting period, the Company recognized revenue from the sale of candied fruit products which are sold to manufacturing bakers, institutional users and retailers. See Note 6 – Subsequent Events. 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.

 

9

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 5BUSINESS SEGMENT DATA

 

During the reporting period, the Company’s operations were conducted through two business segments. These segments, and the primary operations of each, were 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 
   June 30,   June 30, 
   2019   2018 
         
Net Sales in Each Segment          
           
Fruit:          
Sales to Unaffiliated Customers  $467,043   $226,673 
           
Molded Plastics:          
Sales to Unaffiliated Customers   1,005,316    1,296,424 
           
Net Sales  $1,472,359   $1,523,097 

 

   Six months ended   Six months ended 
   June 30,   June 30, 
   2019   2018 
         
Net Sales in Each Segment          
           
Fruit:          
Sales to Unaffiliated Customers  $1,157,961   $819,291 
           
Molded Plastics:          
Sales to Unaffiliated Customers   2,356,470    2,830,084 
           
Net Sales  $3,514,431   $3,649,375 

 

10

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 5BUSINESS 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.

 

   June 30,   June 30, 
   2019   2018 
         
Identifiable Assets of Each Segment are Listed Below:          
           
Fruit  $13,966,909   $15,207,924 
           
Molded Plastics   4,210,425    4,588,675 
           
Identifiable Assets   18,177,334    19,796,599 
           
General Corporate Assets   4,725,841    4,925,752 
           
Total Assets  $22,903,175   $24,722,351 

 

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 EVENTS

 

On July 31, 2019, Paradise, Inc. (the “Company”) completed the sale of substantially all of the assets (the “Asset Sale”) of the Company engaged in the production, manufacture, sale and distribution of glacé fruit product (the “Fruit Business”) to Seneca Foods Corporation and its subsidiary (collectively, “Seneca”) in accordance with the terms of the Asset Purchase Agreement among such parties dated as of April 15, 2019 (the “Purchase Agreement”).

 

In accordance with the terms of the Purchase Agreement, the aggregate purchase price for the Fruit Business was approximately $13.7 million, consisting of cash consideration of approximately $13.4 million (as adjusted for the final inventory value calculated shortly following closing) and assumed liabilities of approximately $0.3 million. Approximately $0.4 million of the cash purchase price was used to repay the Company’s outstanding balance under its revolving credit facility, which terminated at closing, and $0.9 million of the cash purchase price is being held in escrow to satisfy indemnification obligations of the Company. There was no gain or loss to the Company based on the terms of the agreement.

 

11

 

 

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 6SUBSEQUENT EVENTS (CONTINUED)

  

Inventory Value

  $

12,757,430

  

Including Post-Closing Inventory Adjustment

         
Equipment Book Value   620,154   Book Value as of July 31, 2019
         
Closing Purchase Price   

13,377,584

    
         
Less:        
         
Escrow Account   938,800    
         
Seller short term debt   411,925    
         
One – half of escrow agent fee   1,250    
         
Balance Due Seller  $

12,025,609

    

 

   Three months ended   Three months ended 
   June 30,   June 30, 
   2019   2018 
         
Fruit:         
Sales to Unaffiliated Customers  $467,043   $226,673 
           
Fruit Operating Profit   (608,575)   (455,981)

 

    Six months ended    Six months ended 
    June 30,    June 30, 
    2019    2018 
           
Fruit:         
Sales to Unaffiliated Customers  $1,157,961   $819,291 
           
Fruit Operating Profit   (978,761)   (589,670)

 

On July 31, 2019, in connection with the Asset Sale and as contemplated by the Purchase Agreement, the Company entered into a Co-Pack Agreement with Seneca, pursuant to which the Company has agreed to process, manufacture and package the products of the Fruit Business for Seneca for the 2019 season using the equipment and inventory purchased by Seneca pursuant to the Purchase Agreement. Pursuant to the Co-Pack Agreement, Seneca will make weekly payments to the Company based on an agreed upon budget that includes a 10% profit, with a true-up payment by or to the Company to be made at the end of the season. 

 

In connection with the Purchase Agreement, Randy S. Gordon, Mark H. Gordon and Tracy W. Schulis entered into consulting agreements with Seneca. The description of such agreements is incorporated herein by reference to the section titled “Consulting Agreements” on page 43 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019.  Pursuant to his retention agreement with the Company, Jack  Laskowitz received a bonus in the amount of  $75,000 upon the closing of the Asset Sale.

 

Pursuant to their employment agreements with the Company, Randy S. Gordon, Mark H. Gordon, and Tracy W. Schulis are entitled to severance payments if terminated following either the consummation of the Asset Sale or the sale of substantially all of the assets of the Company in Liquidation. The payments are described in detail in the section titled “The Severance Payments Proposal” beginning on page 77 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.

 

On July 29, 2019, the shareholders of the Company approved the Plan of Complete Liquidation and Dissolution (the “Liquidation Plan”), which gives the Company’s Board of Directors discretion to determine when and whether to proceed with the Liquidation Plan and which the Board envisions will lead to the sale of the Company’s remaining assets, including its plastics business and real estate.   See the section titled “Timing and Effect of Liquidation and Business Activities During Liquidation”  beginning on page 57 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.  

 

The Company plans to terminate its registration under the Exchange Act and cease filing periodic reports with the SEC as soon as practicable. 

 

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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

 

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 plan of dissolution and liquidation, 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. Important factors that could cause actual results to differ from those expressed or implied by the forward-looking statements include the possibility that disruption from the pending dissolution may make it more difficult to maintain business and operational relationships for the Company; that the Company may not be successful in its attempt to sell the assets related to its plastics division and its real property located in Plant City, Florida on favorable terms, and that the other anticipated benefits from the sale of the Fruit Business or the Liquidation Plan will not be realized. Except as required by applicable law, we do not undertake to update any forward-looking statements.

 

Overview / Recent Developments

 

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 were 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 were ordinarily recorded during an eight to ten week period beginning in mid-September.

 

Since the majority of the Company’s customers required delivery of glacé candied fruit products during this relatively short period of time, Paradise, Inc. had to 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 had to 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, resulted in the generation of operating losses well into the third quarter of each year.

 

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)

  

Overview / Recent Developments (Continued)

 

On July 31, 2019, the Company completed the sale of substantially all of its assets (the “Asset Sale”) engaged in the production, manufacture, sale and distribution of glacé fruit product (the “Fruit Business”) to Seneca Foods Corporation and its subsidiary (collectively, “Seneca”) in accordance with the terms of the Asset Purchase Agreement among such parties dated as of April 15, 2019 (the “Purchase Agreement”).

 

In accordance with the terms of the Purchase Agreement, the aggregate purchase price for the Fruit Business was approximately $13.7 million, consisting of cash consideration of approximately $13.4 million (as adjusted for the final inventory value calculated shortly following closing) and assumed liabilities of approximately $0.3 million. Approximately $0.4 million of the cash purchase price was used to repay the Company’s outstanding balance under its revolving credit facility, which terminated at closing, and $0.9 million of the cash purchase price is being held in escrow to satisfy indemnification obligations of the Company.

 

On July 31, 2019, in connection with the Asset Sale and as contemplated by the Purchase Agreement, the Company entered into a Co-Pack Agreement with Seneca, pursuant to which the Company has agreed to process, manufacture and package the products of the Fruit Business for Seneca for the 2019 season using the equipment and inventory purchased by Seneca pursuant to the Purchase Agreement. Pursuant to the Co-Pack Agreement, Seneca will make weekly payments to the Company based on an agreed upon budget that includes a 10% profit, with a true-up payment by or to the Company to be made at the end of the season.

 

In connection with the Purchase Agreement, Randy S. Gordon, Mark H. Gordon and Tracy W. Schulis entered into consulting agreements with Seneca. The description of such agreements is incorporated herein by reference to the section titled “Consulting Agreements” on page 43 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019.  Pursuant to his retention agreement with the Company, Jack  Laskowitz received a bonus in the amount of  $75,000 upon the closing of the Asset Sale.

 

Pursuant to their employment agreements with the Company, Randy S. Gordon, Mark H. Gordon, and Tracy W. Schulis are entitled to severance payments if terminated following either the consummation of the Asset Sale or the sale of substantially all of the assets of the Company in Liquidation. The payments are described in detail in the section titled “The Severance Payments Proposal” beginning on page 77 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.

 

On July 29, 2019, the shareholders of the Company approved the Plan of Complete Liquidation and Dissolution (the “Liquidation Plan”), which gives the Company’s Board of Directors discretion to determine when and whether to proceed with the Liquidation Plan and which the Board envisions will lead to the sale of the Company’s remaining assets, including its plastics business and real estate.   See the section titled “Timing and Effect of Liquidation and Business Activities During Liquidation”  beginning on page 57 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.  

 

The Company plans to terminate its registration under the Exchange Act and cease filing periodic reports with the SEC as soon as practicable. 

 

As a result of the Company closing the Asset Sale and entering into the Co-Pack Agreement, the results of operations and financial condition discussed in this section are not indicative of the results of operations and financial condition the Company expects for the remainder of 2019.

  

The First Six Months

 

Paradise, Inc.’s consolidated net sales for the six months ended June 30, 2019 decreased $134,944 to $3,514,431 from $3,649,375 for the six months ended June 30, 2018. Cost of sales as a percentage of total sales increased 23% as the Company purchased finished brine inventory during the first six months instead of processing fruit through the Company’s in house brining facility as in the prior year. This increase in cost of sales combined with the impairment of the Plastics segment’s goodwill for $413,280 resulted in a loss from operations of $(2,426,786) for the first six months of 2019 compared to $(1,223,605) for the first six 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)

 

The First Six Months (Continued)

 

Paradise, Inc.’s fruit segment net sales for the first six months of 2019 totaled $1,157,961 compared to net sales of $819,291 for the similar reporting period of 2018 representing an increase of $338,670. Products sold during the first six months of the year are primarily fruit ingredients produced in bulk quantities for industrial bakeries and supermarkets leading up and through the Easter holiday period along with the processing of fresh strawberries through its production facilities on behalf of a local Plant City, Florida distributor. Paradise, Inc., received a negotiated fee (tolling fee) based on the number of pounds processed through its plant for this distributor. The combination of net sales of bulk fruit ingredients along with the tolling fees accrued for the first six months of 2019 totaled $1,284,346 compared to $1,296,935 for the first six months of 2018. During the first six months of the year, management reviewed 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 reviewed 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 for retail returns and customer incentive programs, there were minimal downward adjustments during the six month period ended June 30, 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 $2,356,470 for the six months ended June 30, 2019 compared to $2,830,084 for the six months ended June 30, 2018. This decrease in net sales of $473,614 is due to a decrease in orders from a long term customer along with delays in the shipment of new custom molding orders completed during the first several months of 2019 into the second half of 2019.

 

Consolidated cost of sales as a percentage of net sales increased 23% for the first six months of 2019 compared to the first six months of 2018. The primary reason for this increase is that the Company’s Central Florida supplier of orange peel (peel) was unable to fulfill the Company’s 2019 estimated production needs. Thus, management contracted for the purchase of brined peel from an overseas supplier and expensed significant factory overhead. It should be noted that processing of fruit materials produced in finished goods inventory was less than 25% complete for the first six months of operations for 2019. Thus, until 100% of all raw fruit materials have been processed into finished goods inventory no reasonable estimate of the cost of sales can be determined from results reported as of June 30, 2019.

 

Selling, general & administrative (SG&A) expenses remained consistent for the first six months of 2019 as SG&A expenses totaled $1,592,418 compared to $1,556,857 for the first six months of 2019 as activities related to exploring strategic alternatives, which began in February 2018 continued beyond the end of the second quarter of 2019.

 

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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

 

Short Term Debt as of June 30, 2019 totaled $382,210 and primarily consisted 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 June 30, 2019 to $382,210 compared to the liability of $543,310 as of June 30, 2018 relates to a decrease in the amount of product ordered from our overseas supplier for 2019.

 

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 $60,000. This amount is included in other liabilities on the Company’s balance sheet as of June 30, 2019.

 

Other Income for the six months ended June 30, 2019 was $83,866 compared to $24,213 for the six months ended June 30, 2018. This increase is related to the increase in value of life insurance policies for two senior members of Company’s Board of Directors. Paradise, Inc. is a beneficiary on the two insurance policies for the amount of premiums paid to-date.

  

Liquidity and Capital Resources

 

We finance our ongoing operations primarily with cash provided by our operating activities. Historically, our principal sources of liquidity have been our cash flows provided by operating activities, our existing cash, and a line of credit facility. At June 30, 2019 and December 31, 2018, we had approximately $2.4 million and $8.0 million, respectively, in cash. The decrease in cash during the first six months of 2019 of $5.6 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 had 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 June 30, 2019 and December 31, 2018. Within this agreement, there were letters of credit with a limit of $1,750,000, of which $382,210 was outstanding at June 30, 2019 and $284,016 at December 31, 2018. The line of credit agreement expired on July 31, 2019 and it was not renewed.

 

In connection with the Asset Sale described in the section entitled “Overview / Recent Developments” above, the Company received cash proceeds of approximately $13.0 million after repaying the outstanding balance under its revolving credit facility, with $0.9 million of such cash proceeds being held in escrow to satisfy indemnification obligations of the Company.

 

Following the closing of the Asset Sale on July 31, 2019 and continuing through the 2019 season, the Company is receiving weekly payments from Seneca based on an agreed upon budget that includes a 10% profit, with a true-up payment by or to the Company to be made at the end of the season, pursuant to the Co-Pack Agreement described in the section entitled “Overview / Recent Developments” above.

 

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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 six months ended June 30, 2019.

 

Impact of Recently Issued Accounting Pronouncements

 

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 June 30, 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 June 30, 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.

 

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PARADISE, INC. COMMISSION FILE NO. 0-3026

 

PART I.FINANCIAL INFORMATION

 

Item 4.Controls and Procedures (Continued)

 

(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

   
 

On July 31, 2019, in connection with the Asset Sale described in the section entitled “Overview / Recent Developments” in Item 2 above and as contemplated by the Purchase Agreement, the Company entered into a Co-Pack Agreement with Seneca, pursuant to which the Company will process, manufacture and package the products of the Fruit Business for Seneca for the 2019 season using the equipment and inventory purchased by Seneca pursuant to the Purchase Agreement. Pursuant to the Co-Pack Agreement, Seneca will make weekly payments to the Company based on an agreed upon budget that includes a 10% profit, with a true-up payment by or to the Company to be made at the end of the season. 

   
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 Food 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

 

*Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 16, 2019

 

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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: August 19, 2019
Randy S. Gordon    
President and Chief Executive Officer    
     
/s/ Jack M. Laskowitz   Date: August 19, 2019
Jack M. Laskowitz    
Chief Financial Officer and Treasurer    

 

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