FORM 10-QU.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549FORM 10-Q

For the quarterly period ended March 31,June 30, 2015

or

Commission File No. 0-3026

PARADISE, INC.

INCORPORATED IN FLORIDA

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

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

PLANT CITY, FLORIDA 33563

(813) 752-1155

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yesx      No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yesx     No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes¨ Nox

The number of shares outstanding of each of the issuer’s classes of common stock as of May 14,August 13, 2015 was 519,600 shares.

PARADISE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2015

INDEX

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS

(UNAUDITED)

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS

(UNAUDITED)

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, 2014. 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, 2015 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 quarterthree and six months ended March 31,June 30, 2014 to conform to the classifications used for the quarterthree and six months ended March 31,June 30, 2015.

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. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09. If these proposed changes are finalized, this standard would require public entities to apply the amendments in ASU No. 2014-09 for annual reporting beginning after December 15, 2017. Early adoption would be permitted as of the original effective date in ASU No. 2014-09, which is for annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact of adopting the guidance on our consolidated financial statements.

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

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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.

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

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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, prepaid expenses, other current assets, land and income tax assets.

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

On July 31, 2015, Paradise, Inc. renewed its revolving line of credit with SunTrust Banks through July 31, 2017. This renewal provides for a maximum limit of $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 1 to May 31 and 60% from June 1 to December 31 of each year. Within 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 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 plus 1.75%.

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 65.8% of total net sales during the prior year ended December 31, 2014. 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 for the first quartersix months of 2015 totaled $1,004,288 comparedincreased 6.4% to net sales of $780,930$1,307,129 from $1,228,597 for the similar reporting period of 2014 representing a 28.6% increase.2014. The fruit segment has two primary productssales activities for salethis segment during the first quartersix months of the year. The main product is glace’year relate to the sale of bulk fruit sold in bulk quantitiesto supermarkets and shipped to manufacturing bakeriesbakeries; and select supermarkets fortolling fees generated from the traditional Easter holiday season. Netproduction of fresh strawberries on behalf of a local Plant City, Florida distributor. For the first six months of 2015, net sales orders received and shipped for bulkof glace’ fruit products during the first three months of 2015 were $508,223totaled $808,786 compared to $469,630$887,859 for the similar reporting period of 2014, representing an increase2014. Sales of 8.2%. The other product for sale in the first quarter is finished strawberry items produced exclusively for a local distributor during a short period of time beginning in early March and running through mid April. As in previous years, Paradise, Inc., based on a negotiated price (i.e. tolling fee) will receive and process fresh strawberries though its production facilities on behalf of this distributor. With favorable weather conditions present during the first quarter ending March 31, 2015, sales increased to $496,065 from $311,300products totaled $498,343 compared to $340,738 for the similar reporting period of 2014.

Paradise Plastics, Inc., a wholly owned company of Paradise, Inc., which accounted for 34.2% of total net sales to unaffiliated customers for the previous year, generated net sales of $1,687,469$3,863,755 for the threesix months ended March 31,June 30, 2015 compared to $2,228,142$4,511,785 for the similar reporting period of 2014. This decline represents a decrease in net sales of $540,673 or 24.3%. The primary reason for this decrease$648,030 which was afirst reported and disclosed in Paradise, Inc.’s first quarter 10Q filing is directly related to the decision by aof an existing long term plastics customer to transitiontransfer production of a next generation injectioncustom molding partparts to their facilities as of January 1, 2015. During the first quarter of 2015, Paradise Plastics, Inc. placed into service over $325,000 of production equipment in order to process sales orders received from existing and new clients. While encouraged with these sales orders along with the increase in production capabilities, no determination can be made as to how much revenue will be generated to offset the decrease in sales noted above. Specifically, sales orders are commitments for production for a period of 30 to 90 days.  Only after the initial feedback from customers as to the success new products have with their target market will Paradise, Inc. have enough information to determine if these orders will be renewed.

Consolidated cost of sales, as a percentage of net sales, increased 10.5% for10.3% during the first quartersix months of 2015 compared to the similar reporting period of 2014. The primary reason for thisThis increase wasis two-fold; first, a delay in receiving raw fruit materials as of June 30, 2015 resulted in a lesser amount of raw materials processed into higher valued finish goods inventory compared to June 30, 2014. However, with capacity to process an increased amount of raw fruit materials into finish goods inventory during the needthird quarter of 2015, fruit segment cost of sales should return to employ consistent levelsmargins reported and disclosed in the Company’s 2014 third quarter filing. Secondly, cost of labor assales within the plastics segment transitionedhas increased as the margins generated from production transferred back to an existing client’s custom molding product, into a new production line, which involvedplastics customer, has been replaced with lower margin accounts during the purchasesecond quarter of approximately $325,000 of production assets as mentioned in the above paragraph. It is important to note, glace’ fruit, the main driver for costing analysis, does not commence production until May or June of each year. Thus, as mentioned in all previous quarterly filings, the only meaningful comparison regarding changes or trends in cost of sales can only be determined after the entire production cycle is complete.

2015.

Selling, general &and administrative expenses increased 8.5% to $933,060 for the first quartersix months of 2015 increased 9.15% compared to $859,876 for the similar reporting period of 2014 as the Company’s sales force increased their attendance and participation at various trade shows during the first six months of 2015.

Inventory as of June 30, 2015 totaled $12,481,349 compared to $14,051,869 as of June 30, 2014. This decrease of $1,570,520 is primarily related to the delay in receipt of raw fruit inventory from one of the Company’s major suppliers. On June 30, 2015, $911,436 of fruit material was in transit compared to just $109,712 at June 30, 2014. As the Company utilizes existing letters of credit to finance the purchase of in transit raw fruit commodities, short term debt correspondingly increased to $1,155,588 as of June 30, 2015 from $496,465 as of June 30, 2014.

Accounts Receivable as of June 30, 2015 totaled $1,268,723 compared to $890,095 as of June 30, 2014. The increase is attributabledue to the timing of payments received from one of the Company’s decisionlong term plastics customers. On July 31, 2015, payments totaling $511,956 related to increase its in-house sales force along with incurring additional travel expenses to attend several new trade shows to promote its fruitoutstanding invoices at June 30, 2015 have been received and plastics products.posted.

Other Significant Items

Other Income for the first quarter of 2015 totaled $18,313 compared to $40,262 for the similar reporting period of 2014. 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, 2015 was $9,028,334 compared to $10,589,791 as of March 31, 2014 representing a decrease of $1,561,457 or 14.7% as shipments from suppliers of raw fruit commodities, which may fluctuate based upon many factors common to agricultural products, were received in lesser quantities during the first quarter of 2015. Management is consistently reviewing weather and market conditions as to its suppliers to determine if inventory levels are sufficient for the upcoming selling season. Thus, it should be noted that as of the date of this filing, the Company believes it has sufficient inventory to fulfill all of its production needs for 2015.

Short term debt and Accounts Payable combined balances as of March 31, 2015 totaled $1,007,847 compared to $1,418,965 for the similar reporting period for 2014. These two accounts are directly related to the lesser amount of inventory on hand at March 31, 2015 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, 2015 and December 31, 2014, we had $6.2 million$3,356,979 and $7.8 million,$7,788,010, 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, 2015 and December 31, 2014. Within this agreement, there are letters of credit with a limit of $1,200,000,$1,750,000, of which $212,724$1,155,588 was outstanding at March 31,June 30, 2015 and $112,879 at December 31, 2014. The line of credit agreement expires July 31, 2017. Net cash used in operating activities decreased from $3,961,654 for the six months ended June 30, 2014 to $4,917,970 for the six months ended June 30, 2015. The primary reason for this decrease was as follows; Accounts Payable and income tax payments made during the six months ended June 30, 2015 were $893,579 more than the similar reporting period of 2014. Net cash provided by financing activities increased to $985,553 for the six months ended June 30, 2015 compared to $439,309 for the six months ended June 30, 2014 due to timing of payments on June 23, 2015.letters of credit.

Summary

Paradise, Inc.’s consolidated net sales for the threefirst six months ended March 31,of 2015 totaled $2,691,757decreased $569,498 compared to $3,063,072 for the similar reporting period of 2014 representing a decrease of 12.1%. This decrease is specifically attributable to the plastics segment, as a planned changemajor plastics customer decided to a next generation injectionbring in-house production of several custom molding part was brought in-house by a major customer during the first quarter of 2015.products. However, with more than 90% of the year’s anticipated glace’ fruit sales yet to occur, no reasonable forecast or trend can be ascertained from first quarter 2015 results. Asas mentioned and disclosed in all previous interim filings, due to the highly seasonal nature of the Company’s primary product, glace’ fruit, which accounts for approximately 65% of consolidated annual revenue with more than 80% of this revenue earned during an eight to ten week period commencing in mid-September of each year no meaningful financial performance can onlyanalysis may be determined afterdeveloped from Paradise, Inc.’s interim reporting results. Only a full year’s operation has been completed.accounting of revenue and expenses will provide the necessary information to determine the Company’s overall financial performance.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assessments, estimates and assumptions that affect the amounts reported in the consolidated financial statements. We evaluate the accounting policies and estimates used to prepare the consolidated financial statements on an ongoing basis. Critical accounting estimates are those that require management’s most difficult, complex, or subjective judgments and have the most potential to impact our financial position and operating results. For a detailed discussion of our critical accounting estimates, see our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no material changes to our critical accounting estimates during the threesix months ended March 31,June 30, 2015.

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(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. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09. If these proposed changes are finalized, this standard would require public entities to apply the amendments in ASU No. 2014-09 for annual reporting beginning after December 15, 2017. Early adoption would be permitted as of the original effective date in ASU No. 2014-09, which is for annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact of adopting the guidance on our consolidated financial statements.

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

As of March 31,June 30, 2015, 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, 2015.

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.