UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDERPURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 20142015

Commission File No. 0-3026

PARADISE, INC.

INCORPORATED IN FLORIDA

IRS IDENTIFICATION NO. 59-1007583

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

PLANT CITY, FLORIDA 33563

TELEPHONE NO. (813) 752-1155

Securities Registered Under Section 12 (b) of the Exchange Act:

None

Securities Registered Under Section 12 (g) of the Exchange Act:

Title of Each Class

Common Stock,

$.30 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes¨Nox

Indicate by check mark if the registrant is not required to file pursuant to Section 13 or Section 15(d) of the Act.
Yes¨     Nox

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, and (2) has been subject to such filing requirements for the past 90 days. Yes  xNo  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, as defined in rule 12b-2 of the Exchange Act.

Large accelerated filer¨       Accelerated filer¨

Non-accelerated filer¨           Smaller reporting companyx

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo   ¨

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $9,335,762$7,204,023 (as of June 30, 2014,2015, bid price $29.78)$22.98)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

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

PARADISE, INC.

20142015 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I

Forward-Looking Statements

This Annual Report on Form 10-K 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 purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “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.

Paradise, Inc. was incorporated under the laws of the State of Florida in September, 1961 as Canaveral Utilities and Development Corporation. After the acquisition and merger of several other assets, the Corporation was renamed Paradise Fruit Company, Inc. in February, 1964, and the

corporate name was changed again to Paradise, Inc. during July, 1993. There have been no bankruptcies, receiverships, or similar proceedings during the corporation’s history. There have been no material reclassifications, mergers, consolidations, purchases or sales of a significant amount of assets not in the ordinary course of business during the past three years.

For further segment information, refer to Note 8 in Part II, Item 8 of this Annual Report.

In terms of candied fruit dollar sales, during 2014,2015, approximately 20% were shipped to manufacturing bakers and other institutional users, with the balance being sold through supermarkets and other retail outlets for ultimate use in the home.

Sales to retail outlets are usually generated through registered food brokers operating in exclusively franchised territories. This method of distribution is widely accepted in the food industry because of its efficiency and economy.

The principal raw materials used by the Company are fruits, fruit peels, corn syrups and plastic resins. Most of these materials are readily accessible from a number of competitive suppliers. The supply and prices may fluctuate with growing and crop conditions, factors common to all agricultural products. Feed stocks for some plastic resins are petroleum related and may be subject to supply and demand fluctuations in this market.

The trademarks “Paradise”, “Dixie”, “Mor-Fruit” and “Sun-Ripe” are registered with the appropriate Federal and State authorities for use on the Company’s candied fruit. These registrations are kept current, as required, and have a value in terms of customer recognition. The Company is also licensed to use the trademarks “White Swan”, “Queen Anne”, “Palm Beach”, “Golden Crown,” and “Pennant” in the sale of candied fruit.

The demand for fruit cake materials is highly seasonal, with over 85% of sales in these items occurring during the months of September, October and November. However, in order to meet delivery requirements during this relatively short period, the Company must process candied fruit and peels for approximately ten months during the year. Also, the Company must acquire the fruits used as raw materials during their seasonal growing periods. These factors result in large inventories, which require financing to meet relatively large short-term working capital needs.

During 1993, and through another wholly owned subsidiary, the Company launched an enterprise for the growing and selling of strawberries, both fresh and frozen. Plant City, Florida, the location of the Company’s manufacturing facilities and main office, styles itself as the “The Winter Strawberry Capital” because of the relatively large volume of fruit that is grown and harvested locally, mostly from December through April of each season. However, once competing fresh berries from the West Coast of the USA begin finding their way to market, the price of Florida fruit begins to diminish, and local growers had no other market for their product.

While there are significant freight cost advantages in the sale and marketing of local strawberries to customers in the eastern U.S., growers and producers on the West Coast, from southern California to Washington State, still dominate pricing and marketing conditions. The Company estimates more than 90% of total U.S. strawberry production is located in that area.

Therefore, Paradise, Inc. limits its activities in this market to years in which basic supply and demand statistics, such as West Coast harvest predictions and frozen strawberry prior year inventory carryovers, lead to a reasonable anticipation of profitability.

In the plastics molding segment of business, sales to unaffiliated customers continue to strengthen. This trend began several years ago when management shifted its focus from the sale of high volume, low profit “generics” to higher technology value added custom applications.

Some molded plastics container demand is seasonal, by virtue of the fact that a substantial portion of sales are made to packers of food items and horticultural interests, with well defined growing and/or harvest seasons.

In the opinion of management, the seasonal nature of some plastics sales does not have a significant impact upon the working capital requirements of the Company.

During the first several months of the year, the Company contracts with certain commercial bakers for future delivery of quantities representing a substantial portion of the sales of fruit cake materials to institutional users. Deliveries against these contracts are completed prior to the close of the fiscal year ending December 31.

It is a trade practice to allow some supermarket chains to return unopened cases of candied fruit products that remain unsold at year-end, an option for which they normally pay a premium. A provision for the estimated losses on retail returns is included in the Company’s consolidated financial statements, for the year during which the sales are made.

With the continuing acquisitions, mergers and other consolidations in the supermarket industry, there is increasing concentration of candied fruit buying activity. During 2014,2015, the Company derived approximately 15.9%14.4% of its consolidated net sales from Wal-Mart Stores, Inc. This customer is not affiliated with Paradise, Inc. in any way, and has exclusive use of a Paradise-owned controlled brand. The loss of this customer would have a material adverse effect on operating earnings.

While there is no industry-wide data available, management estimates that the Company sold approximately 85% of all candied fruits and peels consumed in the U.S. during 2014.2015. The Company knows of two major competitors; however, it estimates that neither of these has as large a share of the market as the Company’s.

The molded plastics industry is very large and diverse, and management has no reasonable estimate of its total size. Many products produced by the Company are materials for its own use in the packaging of candied fruits for sale at the retail level. Outside sales represent approximately 90% of the Company’s total plastics production at cost. During 2014,2015, the Company derived approximately 19.5%16.4% of its consolidated net sales from Aqua Cal, Inc.

In the above business segments, it is the opinion of management that price, which is to include the cost of delivery, is the largest single competitive factor, followed by product quality and customer service.

Given the above competitive criteria, it is the opinion of management that the Company is in a favorable position.

Over the years, the Company has made capital investments of over $1 million in order to comply with the growing body of environmental regulations. These have included the building of screening and pretreatment facilities for water effluent, the redesign and rebuilding of one processing department in order to improve the control of the quality of air emissions, and removing underground fuel storage tanks to approved above ground locations. All of these facilities are permitted by governmental authorities at various levels, and are subjected to periodic testing as a condition of permit maintenance and renewal. All required permitting is currently in effect, and the Company is in full compliance with all terms and conditions stated therein.

By local ordinance, it is required that all water effluent is metered, tested and discharged into a municipal industrial waste treatment plant. During 2014,2015, costs for this discharge approximated $195,000,$210,000, and management estimates that all expenses directly related to compliance with environmental regulations total well over $350,000$300,000 annually, which includes costs for permits, third party inspections and depreciation of installations.

The Company employs between 140135 and 275195 people, depending upon the season.

The Company conducts operations principally within the United States. Foreign activities are not material.

Built in 1961, the plant is located in a modern industrial subdivision at Plant City, Florida, approximately 20 miles east of the City of Tampa. It is served by three railroad sidings, and has paved road access to three major state and national highways. It has production and warehouse facilities of nearly 350,000 sq. ft.

During 1985, the Company acquired approximately 5.2 acres immediately adjacent to, and to the west of, its main plant building. Several buildings and a truck weight scale existed on the property. Some of these facilities have been significantly updated, remodeled, and/or rebuilt and are used for the strawberry processing and some plastics molding operations. In 2006, Paradise, Inc. built a new 10,000 square foot building on this land. The building is primarily used for the production of custom vacuum forming products for its plastics customers.

The Company owns its plant facilities and other properties free and clear of any mortgage obligations.

Because of the unique processing methods employed for candied fruit, much of the equipment used by the Company is designed, built and assembled by the Company’s employees. The Company considers its plant one of the most modern, automated plants in the industry. The equipment consists of vats, dehydrators, tanks, giant evaporators, carbon filter presses, syrup pumps and other scientifically designed processing equipment. Finished retail packages are stored in air-conditioned warehouses, if required.

Regarding molded plastic manufacturing, most equipment is normally available from a number of competitive sources. The molds used for specialized plastic products must be individually designed and manufactured, requiring substantial investment, and are considered proprietary.

None

NoneNot Applicable

PART II

On August 22, 1997, the Securities and Exchange Commission issued new listing requirements for companies listed on the NASDAQ Small Cap Market. The requirements became effective on February 23, 1998. As of December 2014,2015, the Company had not met the listing criteria. Paradise, Inc. is currently listed as PARF:OTCPK.

As of March 31, 2015,30, 2016, the approximate number of holders of record of each class of equity securities of the Registrant were:

Dividends have been declared and paid annually when warranted by profitability. On March 12, 2015,17, 2016, the Board of Directors declared dividends of $.11$.15 per share to stockholders of record on April 10, 2015.15, 2016. Dividends paid to stockholders for 2015 were $.15 and for 2014 were $.11 and for 2013 were $.15.$.11.

The Company does not have a standard policy in regards to the declaration and payment of dividends. Each year dividend payments, if any, are determined upon consideration of the current profitability, cash flow requirements, investment outlook and other pertinent factors.

Summary

The following tables set forth for the periods indicated (i) percentages which certain items in the financial data bear to net sales of the Company and (ii) percentage increase (decrease) of such item as compared to the indicated prior period.

Liquidity

Management is not aware of any demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, a material increase or decrease in the Company’s liquidity. As discussed in footnote 4 of the Company’s consolidated financial statements, a line of credit is available to the Company to finance short-term working capital needs.

Capital Resources

The Company does not have any material outstanding commitments for capital expenditures. Management is not aware of any material trends either favorable or unfavorable in the Company’s capital resources.

Critical Accounting Policies and Estimates

The following discussion and analysis is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, early payment discounts, customer discounts, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.

Fair Value of Financial Instruments

The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

Accounts Receivable and Revenue Recognition

Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 20142015 and 2013.2014. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.

The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.

Goodwill

Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 20142015 and 2013,2014, the Company determined that its goodwill was not impaired.

Identifiable Intangible Assets

Customer Base and Non-Compete Agreement

The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years. Accumulated amortization at December 31, 20142015 and 20132014 totaled approximately $1,070,000$1,196,000 and $944,000,$1,070,000, respectively.

Other Identifiable Intangible Assets

Identifiable intangible assets included in Other Assets consist of debt issuance costs.

Debt issuance costs at December 31, 20142015 and 2013,2014, net of accumulated amortization of approximately $27,000$21,000 and $9,000,$27,000, respectively, amounted to approximately $9,000$7,000 and $27,000,$9,000, respectively, and are amortized over the two year term of the agreement.

The Company’s identifiable intangible assets are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 20142015 and 2013,2014, the Company determined that its identifiable intangible assets were not impaired.

Impact of Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)ASU No. 2014-09,Revenue from Contracts with Customers,(Topic 606). The guidance in this update supersedeswhich requires an entity to recognize the amount of revenue recognition requirements in Topic 605,Revenue Recognition,and most industry-specific guidance throughout Industry topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts.In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles-Goodwill and Other) are amendedto which it expects to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depictentitled for the transfer of promised goods or services to customerscustomers. The ASU will replace most existing revenue recognition guidance in an amountU.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03,Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. ASU No. 2015-03 simplifies the presentation of debt issuance costs by requiring that the costs related to a recognized debt liability be presented in the consolidated balance sheet as a direct reduction from the carrying amount of that liability. ASU No. 2015-03 is effective for annual reporting periods beginning after December 15, 2016,2015, including interim periods within that reporting period. ASU No. 2015-03 is required to be applied retrospectively to all periods presented beginning in the year of adoption. Early adoption is permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.

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

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

Impact of Recently Issued Accounting Pronouncements (Continued)

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842)(ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We areThe Company is currently evaluating the impact of adoptingthese changes to the guidance on ourCompany’s consolidated financial statements.

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

2015 Compared to 2014

Results of Operations

Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 68.3% of consolidated net sales during the current twelve month reporting period ending December 31, 2015. Fruit segment net sales for 2015 decreased 2.3% to $16,202,626 from $16,581,479 for the similar reporting period of 2014 as consolidation within the Supermarket industry over the past twelve months limited the number of outlets for the company to sell its glace’ fruit products. To offset the reduction in physical store locations, Paradise, Inc. has reached out through the internet to market and sell its products. During 2015, the Company sold via Amazon’s web-site glace’ fruit products totaling approximately $117,000 in net sales. Understanding this amount is less than .5% of overall fruit segment sales, it does represent a 19% increase in internet sales over 2014 and will in the future continue to be an integral part of Paradise, Inc.’s marketing effort to expand its sale of glace’ fruit.

2015 Compared to 2014 (Continued)

Results of Operations (Continued)

Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 31.7% of consolidated net sales during 2015. Total plastics net sales decreased 12.4% to $7,531,815 for the twelve months ending December 31, 2015 compared to $8,601,555 for the similar reporting period of December 31, 2014. This decrease as first disclosed during the Company’s 2015 first quarter filing is directly attributable to a decision by a long term plastics customer within the housing market to transition production of a next generation injection molding part to their facility as of January 1, 2015. To counter this impact, Paradise Plastics, Inc. is continuing to aggressively market its plastics expertise to other industries such as medical supplies, food processing and aerospace. As mentioned in previous filings, the Company made a financial commitment during 2014 to become ISO9001 compliant. This certification process represents a series of standards, developed by the International Organization for Standardization (ISO) for manufacturing companies and will be emphasized as we continue to seek new business opportunities.

Consolidated cost of sales decreased, as a percentage of overall sales, approximately 8.8% during the twelve months ending December 31, 2015 compared to the similar reporting period of 2014. This overall percentage decrease was due to the need to process an additional 1.9 million lbs. of raw fruit materials into fruit in drum inventory during 2015. Delays in the shipment and receipt of certain raw fruit commodities from overseas suppliers during 2014 reduced the six month window of time needed to process these raw fruit commodities into fruit in drum inventory. Thus, the increase in the number of lbs. processed during the months of May through October, 2015 allocated over a relatively fixed amount of factory overhead for such major categories as labor, property insurance, maintenance and depreciation resulted in the driving factor to reduce overall cost of sales by 8.8%. Correspondingly, the increase of fruit in drum inventory resulted in a $694,760 increase in overall inventory at December 31, 2015 compared to December 31, 2014.

Selling, general and administrative expenses increased $225,168 or 4.9% for the twelve months ending December 31, 2015 compared to the similar reporting period of 2014. The main reason for this increase is related to the decision of Paradise, Inc.’s management to expense to current operations a total of $140,401 in outstanding receivables and inventory owed to Paradise Plastics, Inc. from a customer that ceased operations during the third quarter of 2015. All legal cost incurred in trying to recover any portion of this amount totaling approximately $25,000, has been expensed during 2015.

2015 Compared to 2014 (Continued)

Results of Operations (Continued)

Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2015 was $0 compared to $2,016 for December 31, 2014. Interest expense when incurred is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2015, the Company’s revolving line of credit balance was $0, its letters of credit balance was $582,839 and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial institution for a two year period maturing on July 31, 2017.

Other Significant Items

Accounts Receivable balance less allowances for sales returns at December 31, 2015 was $2,182,306 compared to $3,046,669 at December 31, 2014. This represents a decrease of $864,363 or 28.4%. The primary reason for this decrease is attributable to timing, as several large customers of Company’s retail fruit products made payments up to 60 days earlier in 2015 compared to the previous year. Furthermore, as disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2015, the Company did experience an increase in returns from customers as of December 31, 2015 which resulted in the allowance for sales returns of $1,066,314 compared to $912,789 as of December 31, 2014.

The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2015 and December 31, 2014, the Company had $8,791,938 and $7,788,010 respectively, in cash. Additionally, a revolving line of credit facility is available with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory. Up to $1,750,000 of the facility is available for issuance of import letters of credit. At December 31, 2015 and 2014, $582,839 and $112,879, respectively, was due for issued letters of credit under the facility and there were no outstanding advances at December 31, 2015 and 2014. Net cash increased $1,003,928 as net cash provided by operating and financing activities totaled $1,887,456, which was offset by $883,528 in investing activities.

2015 Compared to 2014 (Continued)

Summary

Paradise, Inc.’s consolidated net sales decreased $1,448,593 to $23,734,441 for 2015 compared to $25,183,034 for 2014 primarily due to a decision by a long term plastics customer to bring production of certain thermoforming parts produced by Paradise Plastics, Inc. to their own facility. Offsetting this loss of net sales was a decrease in cost of sales of $1,744,841 as delays in the receipt of raw fruit materials during 2014 resulted in the processing of an additional 1.9 million lbs. of fruit in drum inventory during 2015. The combination of these two events along with the write off of $140,401 in accounts receivable and inventory related to a plastics customer during the third quarter of 2015 resulted in a slight increase in net income after provision for income taxes as of December 31, 2015 of $23,192. Net income after provision of income taxes as of December 31, 2015 was $512,758 or $0.99 earnings per share compared to $489,566 or $0.94 earnings per share as of December 31, 2014.

2014 Compared to 2013

Results of Operations

Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 65.8% of consolidated net sales during the current twelve month reporting period ending December 31, 2014. Fruit segment net sales for 2014 increased $1,006,910 or 6.5% to $16,581,479 from $15,574,569 for the similar reporting period of 2013. Two major factors were responsible for this increase in glace’ fruit sales. First, additional orders were received and shipped of glace’ fruit sold in bulk quantities to large manufacturing bakers during the past year. Bulk fruit sales which represented 29% of total glace’ fruit sales were $4,805,747 for 2014 compared to $4,380,343 for 2013, an increase of $425,404. Secondly, additional purchase orders for retail glace’ fruit products sold to national and regional supermarkets were also received and shipped as a coordinated effort between Paradise, Inc.’s in-house sales force and the Company’s outside food broker network produced an increase of $581,506 in retail glace’ fruit sales during 2014 compared to 2013.

2014 Compared to 2013 (Continued)

Results of Operations (Continued)

Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 34.2% of consolidated net sales during 2014. Total plastics net sales increased 3.9% to $8,601,555 for the twelve months ending December 31, 2014 compared to $8,280,692 for the similar reporting period of December 31, 2013 as the recent trend for plastics products related to the housing market continued to offset a decline in sales of custom molding injection products. Paradise Plastics, Inc. is continuing to aggressively expand its plastics segment revenue, which includes sales to such diverse industries as medical supplies, food processing and aerospace. To assist in the effort, management made a financial and time commitment during the first half of 2014 to become ISO9001 compliant. The certification process which was completed in June of 2014, represents a series of standards, developed by the International Organization Standardization (ISO) for manufacturing companies and will be emphasized as we continue to seek new business opportunities going forward.

2014 Compared to 2013 (Continued)

Results of Operations (Continued)

Consolidated cost of sales, as a percentage of net sales, increased 2.0% during the twelve months ending December 31, 2014 compared to the similar reporting period of 2013. Two factors contributing to this change are as follows. First, as mentioned above, Paradise, Inc.’s fruit segment experienced an increase in the sale of bulk glace’ fruit products. Historically, the profit margins from the sale of bulk fruit are less than what is realized from retail glace’ fruit sales. Secondly, the amount of raw fruit materials processed into finished glace’ inventory was approximately 800,000 pounds less during the Company’s production period, May – September, 2014, compared to the similar period of 2013. While variable expenses such as labor and utilities were favorably impacted by the decrease in production, expenses such as property insurance, depreciation and amortization of the Company’s property, plant and equipment which are relatively fixed, more than offset the positive effect of labor and utility expenses.

Selling, general and administrative expenses, decreased 0.7% for the twelve months ending December 31, 2014 compared to the similar reporting period of 2013. The main reason for this decrease was related to the reduction in travel expenses of the Company’s sales force as greater emphasis was placed on Paradise, Inc.’s network of outside food brokers. These brokers, located throughout the United States, can be at times a more cost effective approach to submitting marketing and promotional programs to Paradise, Inc.’s customers.

2014 Compared to 2013 (Continued)

Results of Operations (Continued)

Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2014 was $2,216 compared to $8,054 for December 31, 2013. Interest expense during 2014 is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2014, the Company’s revolving line of credit balance was $0, its letters of credit balance was approximately $113,000 and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial institution for a two year period maturing on June 23, 2015.

2014 Compared to 2013 (Continued)

Other Significant Items

Other Income for the twelve months ended December 31, 2014 totaled $52,301 compared to $353,656 for the similar period for 2013. The reason for this decrease is related to the settlement of Paradise, Inc.’s claim filed with the Deepwater Horizon Economic and Property Program (the “Settlement Program”) arising out of damages suffered as a result of the Deepwater Horizon Incident. Upon review by the claims administrator of the Settlement Program and after a 30 day period in which BP Exploration & Production, Inc. could file a protest contesting this amount, a settlement check for $277,546 was awarded to Paradise, Inc. Funds were received on August 30, 2013 and this amount is reflected in Other Income on the Company’s Consolidated Statements of Income.

Accounts Receivable balance at December 31, 2014 was $3,046,669 compared to $2,369,321 at December 31, 2013. This represents an increase of $677,348 or 28.6%. The primary reason for this increase is attributable to timing as several large customers of glace’ retail fruit delayed their purchasing and subsequent receipt of product by as much as sixty days. Therefore, receipt of payment from these customers for product received transferred into the first quarter of 2015. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2014, the Company did experience a slight increase in returns from customers which resulted in the allowance for returns of $912,789 compared to $897,546 against the accounts receivable balance at December 31, 2013.

2014 Compared to 2013 (Continued)

Other Significant Items (Continued)

Inventory at December 31, 2014, including the annual provision for estimated returns, totaled $7,484,909 compared to $8,837,798. This decrease represents $1,352,889 or a 15.3% reduction in ending inventory at December 31, 2014 compared to December 31, 2013. This decrease is directly related to the fact that Paradise, Inc. processed approximately 800,000 pounds less of raw fruit materials into higher priced finished glace’ fruit inventory for 2014 versus 2013.

The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2014 and December 31, 2013, the Company had $7,788,010 and $5,916,366, respectively, in cash. Additionally, a revolving line of credit facility is available with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory. Up to $1,200,000 of the facility is available for issuance of import letters of credit. At December 31, 2014 and 2013, $112,879 and $0, respectively, was due for issued letters of credit under the facility and there were no outstanding advances at December 31, 2014 and 2013. Net cash provided by operating activities increased $1,424,156 for the twelve months ended December 31, 2014 as compared to December 31, 2013. The primary reasons for this increase are as follows: payments for the purchase of fruit segment inventory in 2014 were $1,363,484 less than 2013, income tax payments made during 2014 year were $604,483 less than 2013 and collections of accounts receivable decreased by $692,591 in 2014 as compared to 2013.

2014 Compared to 2013 (Continued)

Summary

Paradise, Inc.’s consolidated net sales increased to $25,183,034 for 2014 compared to $23,855,261 for 2013. Net income after provision for income taxes was $489,566 or $0.94 earnings per share for 2014 compared to $781,960 or $1.50 earnings per share for 2013.

2013 Compared to 2012

Results of Operations

Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 65.3% of consolidated net sales during the current twelve month reporting period ending December 31, 2013. Fruit segment net sales for 2013 decreased 9.2% to $15,574,569 from $17,155,559 for the similar reporting period of 2012. A major reason for this decrease is the changing buying patterns of Paradise, Inc.’s retail customers who in the past would purchase glace’ fruit at their national or regional headquarters and are now directing the local store manager to decide how much product to carry and place on their store shelves. Paradise, Inc.’s sales managers along with support from its network of food brokers continues to work with local grocery managers to increase their awareness of glace’ fruit as a staple in their traditional holiday baking displays for Thanksgiving and Christmas.

Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 34.7% of consolidated net sales during 2013. Total plastics net sales decreased less than .3% to $8,280,692 for the twelve months ending December 31, 2013 compared to $8,304,752 for the similar reporting period of December 31, 2012 as increased demand for plastics products related to the housing market continued to offset a decline in sales of custom molding injection orders.

Consolidated cost of sales, as a percentage of net sales, decreased 4.9% during the twelve months ending December 31, 2013 compared to the similar reporting period of 2012. There are two reasons for this decrease. First, Paradise, Inc. received and processed approximately 2,800,000 less pounds of strawberries through its facilities during the first six months of 2013 compared to the similar period of 2012. Secondly, certain raw fruit material received from one of the Company’s suppliers, subject to specific size and quality requirements, before being processed and placed into inventory had a higher rejection rate than in the previous year. Thus, processing a smaller amount of raw fruit production over a relatively fixed level of factory overhead resulted in a decrease of cost of sales for 2013 compared to 2012.

Selling, general and administrative expenses, as a percentage of net sales, remained consistent with the prior years as increases in health care premiums were offset by savings related to professional fees during the twelve months ending December 31, 2013 compared to the similar reporting period of 2012. This increase is primarily related to the rising cost of the Company’s employee health insurance program. Management is working closely with its insurance consultant to ensure that as the Affordable Health Care Act is implemented, Paradise, Inc. will be in compliance with all applicable federal and state laws.

Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2013 was $8,054 compared to $9,493 for December 31, 2012. Interest expense during 2013 was directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2013, the Company’s revolving line of credit balance was $0 and all loan covenants required by its primary lender were in full compliance.

2013 Compared to 2012 (Continued)

Results of Operations (Continued)

As previously reported in the Company’s second quarter filing of this year, Paradise, Inc. renewed its revolving line of credit with a financial institution for a two year period maturing on June 23, 2015. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%.

Other Significant Items

During 2012, Paradise, Inc. filed a claim with the Deepwater Horizon Economic and Property Program (the “Settlement Program”) arising out of damages suffered as a result of the Deepwater Horizon Incident. Upon review by the claims administrator of the Settlement Program and after a 30 day period in which BP Exploration & Production, Inc. could file a protest contesting this amount, a settlement check for $277,546 was awarded to Paradise, Inc. Funds were received on August 30, 2013 and this amount is reflected in Other Income on the Company’s consolidated Statements of Income.

Accounts Receivable balance at December 31, 2013 was $2,369,321 compared to $1,893,160 at December 31, 2012. This represents an increase of $476,161 or 25.2%. The primary reason for this increase is attributable to the accounting for estimated product returns. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2012, as previously reported, the Company did experience an increase in product returns from a long time customer which resulted in the allowance for product returns to total $1,562,566. For 2013, returns were in line with the Company’s historical average resulting in an allowance of $897,546 against the accounts receivable balance at December 31, 2013.

The Company finances ongoing operations primarily with cash provided by our operating activities which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2013 and December 31, 2012, the Company had $5,916,366 and $6,384,087, respectively, in cash. Additionally, a revolving line of credit with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory, of which $0 was outstanding at December 31, 2013 and December 31, 2012. The line of credit agreement which was renewed in June 2013 expires in June 2015. Net cash provided by operating activities increased $1,487,244 for the twelve months ended December 31, 2013 as compared to December 31, 2012. The primary reasons for this increase are as follows: income tax payments made during 2013 year were $323,318 less than 2012 and payments for the purchase of inventory decreased $1,759,976.

2013 Compared to 2012 (Continued)

Summary

Paradise, Inc.’s consolidated net sales decreased to $23,855,261 for 2013 compared to $25,460,311 for 2012. Net income after provision for income taxes was $781,960 or $1.50 earnings per share for 2013 compared to $1,002,932 or $1.93 earnings per share for 2012.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Paradise, Inc.

We have audited the accompanying consolidated balance sheets of Paradise, Inc., and subsidiaries (“the Company”) as of December 31, 20142015 and 20132014 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the two year period ended December 31, 2014.2015. Paradise, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Paradise, Inc. and subsidiaries as of December 31, 20142015 and 2013,2014, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 20142015 in conformity with accounting principles generally accepted in the United States of America.

  /s/ Warren Averett, LLC

Tampa, Florida

March 31, 2015

PARADISE, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

ASSETS

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

LIABILITIES AND STOCKHOLDERS’ EQUITY

PARADISE, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

PARADISE, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 20142015 and 20132014

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

PARADISE, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

PARADISE, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Paradise, Inc. operations are conducted through two business segments, candied fruit and molded plastics. The primary operations of the fruit segment is 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 preserves, dairies, drink manufacturers, etc. The moldingmolded plastics segment provides production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. Substantially all of the Company’s customers are located in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Accounts Receivable and Revenue Recognition

Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories.

Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 20142015 and 2013.2014. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.

The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes material, labor, factory overhead and depreciation.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment are:range from 3 – 40 years.

Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the current earnings. Amortization is also computed using the straight-line method over the estimated life of the asset.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Goodwill

Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 20142015 and 2013,2014, the Company determined that its goodwill was not impaired.

Identifiable Intangible Assets

Customer Base and Non-Compete Agreement

The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years.

Other Identifiable Intangible Assets

Identifiable intangible assets included in Other Assets consist of debt issuance costs.

Gross debt issuance costs, amounted to approximately $12,000 and $36,000 as of December 31, 2015 and 2014, and 2013,respectively and are amortized over the two year term of the agreement.

The Company’s identifiable intangible assets are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 20142015 and 2013,2014, the Company determined that its identifiable intangible assets were not impaired.

Amortization expense of intangible assets subject to amortization for the years ended December 31, 2015 and 2014 was $139,885 and 2013 was $143,885.$143,885, respectively.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Identifiable Intangible Assets (Continued)

Accumulated amortization as of December 31, 2015 and 2014 totaled $1,200,908 and 2013 totaled $1,097,023, and $953,138, respectively.

Future amortization expense is anticipated to be as follows:$69,092 for the year ended December 31, 2016.

Selling Expenses

The Company considers freight delivery costs to be selling expenses and has included $634,425 (2015) and $668,862 (2014) and $586,578 (2013) in selling, general and administrative expenses in the accompanying statements of income.

Advertising Expenses

The Company expenses advertising costs in the year they are incurred. Advertising expenses totaled $7,029 (2014) and $32,648 (2013) and are included in selling, general and administrative expenses in the accompanying statements of income.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Employee Benefit Plan

The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 20142015 and 2013,2014, the Company incurred $49,231$29,223 and $36,757,$49,231, respectively, in 401(k) expense.

Earnings Per Share

Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 20142015 and 2013.2014. There are no dilutive securities outstanding at December 31, 20142015 and 2013.2014.

Reclassifications

Certain minor reclassifications have been made to the 20132014 consolidated financial statements in order to conform to the classifications used in 2014.2015.

Impact of Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.ASU 2014-09,Revenue from Contracts with Customers,(Topic 606). The guidance in this update supersedeswhich requires an entity to recognize the amount of revenue recognition requirements in Topic 605,Revenue Recognition,and most industry-specific guidance throughout Industry topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts.In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles-Goodwill and Other) are amendedto which it expects to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depictentitled for the transfer of promised goods or services to customerscustomers. The ASU will replace most existing revenue recognition guidance in an amount that reflects the consideration to which the entity expects toU.S. GAAP when it becomes effective. The new standard will be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.the Company on January 1, 2018, which is the effective date for public companies. Early application is not permitted. We are currentlypermitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impacteffect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of adopting the guidancestandard on ourits consolidated financial statements.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

Impact of Recently Issued Accounting Pronouncements (Continued)

In April 2015, the FASB issued ASU No. 2015-03,Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. ASU No. 2015-03 simplifies the presentation of debt issuance costs by requiring that the costs related to a recognized debt liability be presented in the consolidated balance sheet as a direct reduction from the carrying amount of that liability. ASU No. 2015-03 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. ASU No. 2015-03 is required to be applied retrospectively to all periods presented beginning in the year of adoption. Early adoption is permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.

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

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

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

Impact of Recently Issued Accounting Pronouncements (Continued)

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842)(ASU 2016-02). Under ASU 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 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 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 is currently evaluating the impact of these changes to the Company’s consolidated financial statements.

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

Included in Finished Goods inventory are estimated returns related to the Provision for Sales Returns totaling $821,048 (2015) and $688,821 (2014) and $678,226 (2013).

Substantially all inventories are pledged as collateral for certain short-term obligations.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

Property, plant and equipment consisted of the following:

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

All of the real property, machinery and equipment are pledged as collateral for the Company’s short-term debt obligations.

Depreciation expense for the years ended December 31, 2015 and 2014 was $439,719 and 2013 was $479,617, and $460,092, respectively.

The Company has aOn July 31, 2015, Paradise, Inc. renewed its revolving loan agreementline of credit with a financial institution withSunTrust Bank through July 31, 2017. This renewal provides for a maximum limit of $12,000,000$12 million and a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January through1 to May of each year31 and 60% of eligible inventory from June 1 to December 31 of each year. ThisWithin this agreement are letters of credit with a limit of $1,750,000. The agreement is secured by all of the assets of the Company and matures on June 23, 2015. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. (1.9% at December 31, 2014).

This agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property and improvement without bank approval. The Company was in compliance with these covenants at December 31, 2014 and 2013.2015. Interest is payable monthly at the bank’s LIBOR plus 1.75% (2.0% at December 31, 2015).

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

The Company leases certain automobiles and office equipment under operating leases ranging in length from thirty-six to sixty months. Lease payments charged to operations amounted to $90,195 (2015) and $85,148 (2014) and $87,070 (2013), respectively.

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

At December 31, 2014,2015, future minimum payments required under leases with terms greater than one year are as follows:

Accrued Expenses consisted of the following:

PARADISE, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20142015 AND 20132014

The provisions for income taxes are comprised of the following amounts:

A reconciliation of the differences between the tax provisions attributable to income from continuing operations and the tax provision at the statutory Federal income tax rate follows: