See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

The information furnished herein reflects only theall adjustments and accruals of a normal recurring nature that management believes isare 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, 2013. The Company’s management believes that the disclosures are sufficient for interim financial reporting purposes.

Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace’ fruit product sales are recorded during an eight to ten week period beginning in mid September. Therefore, the operating results for the threesix months ended March 31,June 30, 2014 are not necessarily indicative of the results that may be expected for the current year.

Certain minor reclassifications have been made to the consolidated unaudited financial statements for the quarter ended June 30, 2013 to conform to the classifications used for the quarter ended June 30, 2014.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers (Topic 606).The guidance in this update supersedes the revenue recognition requirements in Topic 605,Revenue Recognition, and most industry-specific guidance throughout Industry topics of the Codification.Additionally, thisUpdate 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 amended 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 depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to 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. Early application is not permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

Except as noted above, the Company’s management does not believe that any 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.

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

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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

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.

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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

Forward–Looking Statements

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

Overview

Paradise, Inc.’s main business segment, glace’ fruit, a prime ingredient of fruitcakes and other holiday confections, represented 65.6 %65.6% of total net sales during the prior year ended December 31, 2013. These products are sold to manufacturing bakers, institutional users, supermarkets and other retailers throughout the country. Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace’ fruit product sales are recorded during an eight to ten week period beginning in mid September.

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

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

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

The First QuarterSix Months

Paradise, Inc.’s fruit segment net sales of $818,613 for the first quartersix months of 2014 were relatively consistent with net sales of $824,737increased 4.5% to $1,270,590 from $1,215,503 for the similar reporting period of 2013. The fruit segment has two primary productssales activities for salethis segment during the first quartersix months of the year. The main product isyear relate to the sale of bulk fruit with sales to supermarkets and manufacturing bakeries leading up tobakeries; and throughtolling fees generated from the traditional Easter holiday season. Grossproduction of fresh strawberries on behalf of a local Plant City, Florida distributor. For the first six months of 2014, gross sales of bulk fruit orders received and shipped as of March 31, 2014 decreased to $560,324 as of March 31, 2014totaled $919,617 compared to $627,580 as of March 31, 2013 as several buyers moved their shipment dates into the second quarter of 2014. The Company’s accounting policy is to only recognize revenue upon shipment. The other product$867,842 for sale in the first quarter, strawberry items, are produced for a local distributor. As in previous years for a negotiated price (i.e. tolling fee), Paradise, Inc. will receive and process fresh strawberries through its facilities on behalf of this distributor. With favorable conditions present during the first quarter ending March 31, 2014, gross sales increased to $311,330 from $195,763 compared to the similar reporting period of 2013. Sales of finished strawberry products totaled $340,738 compared to $280,950 for the similar reporting period of 2013. While management is pleased to report an increase in fruit segment sales as of June 30, 2014 compared to June 30, 2013 of 4.5%, this sales volume represents less than 10% of 2013’s fruit segment sales. Thus, no prediction on sales can be determined for 2014 as of the date of this filing.

Paradise Plastics, Inc.’s gross sales to unaffiliated customers for the first quarter of 2014 were $2,282,142 compared to $2,236,867 for the similar reporting period of 2013, representing a 2.0% increase. Additional demand from existing long-term customers within the commercial and home construction industry continued to increase, offsetting a decline in injection molding customer orders received and shipped during the first quartersix months of 2014.2014 remained fairly consistent with sales through June 30, 2014 of $4,511,785 compared to $4,561,311 through June 30, 2013 as increasing sales of custom molding related products offset recent losses of sales of injection molding products. Paradise Plastics, Inc. is continuing its efforts to expand its base of business which includes sales in such diverse industries as aerospace, agricultural, food processing and medical supplies. To assist in this effort, management has made a financial and personnel commitment to become ISO 9001:2008/AS9100C Certified. This certification process, completed June, 2014, represents a series of standards developed by the International Organization Standardization (ISO) for manufacturing companies and will be emphasized as the Company seeks new business opportunities.

Consolidated cost of sales, as a percentage of grossnet sales, decreased 5.1% for1.8% during the first quartersix months of 2014 compared to the similar reporting period of 2013. The primary reason for this change was related to an increaseSince less than 30% of Paradise, Inc.’s glace’ fruit has been produced as of June 30, 2014, variances in cost of sales will fluctuate depending upon the amount of materials allocated over a relatively stable amount of factory overhead during the first six months of the year. During the first half of 2014, increases in the number of strawberries processed duringpounds produced in strawberry and brining operations directly contributed to the first quarter of 2014. Paradise, Inc. processed 3,490,373 pounds of strawberries compared to 2,943,627 pounds for the first quarter of 2013. As the amount of factory overhead is relatively fixed during the first quarter of the year, an increase1.8% decrease in production of any raw materials into finished goods will yield a higher gross margin and a corresponding lowerconsolidated cost of sales. However, with more than ninety-five percent (95%) of the Company’s annual production70% of glace’ fruit production yet to commence, it is too early to projectno meaningful information or forecast any realistic changes intrending of cost of sales for 2014.as a percentage of sales can be determined until the entire production cycle has been completed.

Selling, general &and administrative expenses increased 1.4% to $897,559 for the first quartersix months of 2014 increased 1.3% compared to $884,858 for the similar reporting period of 2013 as increases in the Company’s payment of its share of employee health care premiums outpaced savings achieved in such other areas such as professional fees and travel and advertising expenses.

Other Significant Items

Other Income for the first quarter of 2014 totaled $40,262 compared to $101,600 for the similar reporting period of 2013. Other Income is periodic sales of recycled plastics materials along with changes in the cash surrender value of two insurance policies owned by the company on behalf of two senior executives.

Inventory as of March 31, 2014 was $10,597,962 compared to $10,830,423 representing a decrease of $223,461 as shipments from suppliers of raw fruit commodities, which may fluctuate based upon many factors common to agricultural products, were received in lesser quantity during the first quarter of 2014 compared to the similar period of 2013.related cost.

Other Significant Items (Continued)

Short Term Debt and Accounts Payable combined balances as of March 31, 2014 totaled $1,418,965 compared to $2,124,022 for the similar reporting period for 2013. These two accounts are related to the lesser amount of inventory on hand at March 31, 2014 as referenced in the preceding paragraph.

We finance our ongoing operations primarily with cash provided by our operating activities.activities which are seasonal in nature. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At March 31,June 30, 2014 and December 31, 2013, we had $5.4 million$2,322,051 and $5.9 million,$5,916,366, respectively, in cash. Additionally, we have a revolving line of credit with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year, of which $0 was outstanding at March 31,June 30, 2014 and $0 at December 31, 2013. Within this agreement, there are letters of credit with a limit of $1,200,000, of which $359,545$496,465 was outstanding at March 31,June 30, 2014 and $0 at December 31, 2013. The line of credit agreement expires onin June, 23, 2015. Net cash used in operating activities decreased from $1,697,966$5,163,377 for the quartersix months ended March 31,June 30, 2013 to $830,537$3,961,654 for the quartersix months ended March 31,June 30, 2014. The primary reason for this decrease is due towas Accounts Receivable net payments received from Paradise, Inc.’s customers during the first quarter ofsix months ended June 30, 2014 were $751,675$639,857 more than the similar reporting period of 2013. Lastly, netNet cash provided by financing activities increased from $283,920to $439,309 for the quartersix months ended March 31, 2013June 30, 2014 compared to $359,545$(31,980) for the quartersix months ended March 31,June 30, 2014 due to timing of payments on letters of credit.

Summary

Paradise Inc.’s consolidated net sales for the threefirst six months ended March 31,of 2014 totaled $3,100,755 compared to $3,061,604was basically unchanged for the similar reporting period of 2013, representing an increase of 1.3%.2013; $5,782,375 - June 30, 2014 compared to $5,776,814 - June 30, 2013. However, as mentioned and disclosed in all previous first quarterinterim filings, with less than 5%due to the highly seasonal nature of anticipated annualthe Company’s primary product, glace’ fruit, net sales yet to be realized as of the date of this filing, no reasonable estimate or forecastwhich accounts for approximately 65% of consolidated annual revenue, no meaningful financial performanceanalysis may be determined at this time.developed from Paradise, Inc.’s interim reporting results. Only a full year’s accounting of revenue and expenses will provide the necessary information to determine the Company’s financial performance.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assessments, estimates and assumptions that affect the amounts reported in the consolidated financial statements. We evaluate the accounting policies and estimates used to prepare the consolidated financial statements on an ongoing basis. Critical accounting estimates are those that require management’s most difficult, complex, or subjective judgments and have the most potential to impact our financial position and operating results. For a detailed discussion of our critical accounting estimates, see our Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to our critical accounting estimates during the threesix months ended March 31,June 30, 2014.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers(Topic 606).The guidance in this update supersedes the revenue recognition requirements in Topic 605,Revenue Recognition,and most industry-specific guidance throughout Industry topics of the Codification.Additionally, thisUpdate 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 amended 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 depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to 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. Early application is not permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

Except as noted above, the Company’s management does not believe that any 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.

As of March 31,June 30, 2014, our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, and they have concluded that we maintain effective disclosure controls and procedures. There were no changes in our internal control over financial reporting during the quartersix months ended March 31,June 30, 2014.

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

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

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.