FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2016March 31, 2017

or

Commission File No. 0-3026

PARADISE, INC.

INCORPORATED IN FLORIDA

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

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

PLANT CITY, FLORIDA 33563

(813) 752-1155

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

The number of shares outstanding of each of the issuer’s classes of common stock as of November 14, 2016May 15, 2017 was 519,600 shares.

PARADISE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016MARCH 31, 2017

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 OPERATIONS

(UNAUDITED)

See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED 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 allonly the adjustments and accruals of a normal recurring nature that management believes areis 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, 2015.2016. 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 ninethree months ended September 30, 2016March 31, 2017 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 three and nine monthsquarter ended September 30, 2015March 31, 2016 to conform to the classifications used for the three and nine monthsquarter ended September 30, 2016.March 31, 2017.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,Revenue from Contracts with Customers,which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.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 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 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 todid not have a material impact on the Company’s financial position or results of operations.

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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 todid not have a material impact on the Company’s consolidated financial statements.

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. The Company does not expectis currently evaluating the adoptionimpact of this standardthese changes to have a material impact on 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.

Basic and diluted incomeloss per common share isare 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:

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.

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 68.3%68.7% of total net sales for the previous year of 2015.during 2016. 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 for a period ofduring an eight to ten weeksweek period beginning in mid September.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, may resultresults 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. producesproducing 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 Quarter

Paradise, Inc.’s fruit segment net sales for the first quarter of 2017 totaled $932,519 compared to net sales of $853,280 for the similar reporting period of 2016 representing an increase of $79,239 or 9.3%. The fruit segment has two primary products for sale during the first quarter of the year. The first product, glace’ fruitcake ingredients, is produced and sold in bulk quantities to manufacturing bakeries and select supermarkets throughout the United States in time for the traditional Easter holiday season. 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 of each year. As in previous years, Paradise, Inc., based on a negotiated price (i.e. tolling fee) will receive and process fresh strawberries through its production facilities on behalf of this distributor. With favorable weather and market conditions present during the first quarter of 2017, net sales to this local distributor increased to $526,417 for the first three months of 2017 compared to $370,691 for the first three months of 2016. Strawberry tolling fees accounted for 56.5% of fruit segment sales during the first quarter of 2017 compared to 43.4% of first quarter 2016 sales. While management is pleased to report this increase in net sales, it’s important to note that with less than 10% of annual sales recorded as of March 31, 2017, no reasonable forecast or trend can be developed from this performance. 

Paradise Plastics, Inc., (Paradise Plastics) a wholly owned company of Paradise, Inc., which accounted for 31.3% of total net sales to unaffiliated customers for the previous year, generated net sales of $1,516,081 for the three months ended March 31, 2017 compared to $2,109,676 for the similar reporting period of 2016. This represents a decrease of $593,595 or 28.1%.As mentioned in previous filings, Paradise Plastics produces various types of custom molded plastics parts for its customers which are then assembled into finished products by its customers for sale to the end user. Thus, in many cases, continued production and increased sales for these parts are based on their success achieved by the end user. However, in some cases, a change in production or product design may impact the continuation of these sales. As such, it was disclosed in the Company’s 2016 10K filing that beginning during the first quarter of 2017, a major plastics customer decided to transfer production of custom molded parts produced by thermoforming to another supplier who could produce these parts via injection molding. The major benefit to the customer was the ability to significantly lower production cost per part. These parts were previously thermoformed at Paradise Plastics facilities over the past nine years. Paradise Plastics did commit $3 million to construct a new on-site building as well as install necessary injection molding equipment to produce these parts, however, the offer was declined. Paradise, Inc. also disclosed in the Company’s year-end 2016 10K filing that depending on the timing when the new supplier was able to commence production, sales of these parts could decrease by more than $1 million for 2017. As such, with production of these parts completed during the first quarter of 2017, net sales totaled $120,625 compared to $1,757,250 for the twelve months of 2016. This represents a decrease of $1,636,625. Reacting to this situation, management has reduced its plastics staffing and is anticipated labor cost savings will exceed $250,000 for the remainder of 2017 compared to the full twelve months of 2016. It is also important to mention that Paradise Plastics is still producing other custom molding parts for this long term customer and is continuing to aggressively market its custom molding capabilities throughout the market place in order to replace as well as expand its current base of business. Furthermore, management will continue to closely monitor the impact this loss of business will have on its operations throughout the remainder of 2017 in order to determine if any additional changes to operations are warranted.

The First Nine MonthsQuarter (Continued)

Paradise, Inc.’s fruit segment net sales for the first nine months of 2016 increased 2.8% to $8,643,663 compared to $8,409,947 for the similar nine month reporting period of 2015. This increase is primarily due to timing differences in the receipt of customers’ orders and the corresponding shipping dates for delivery of the Company’s retail glace’ fruit products. Changes in dates of opening orders from customers between interim reporting periods will have a direct impact on net revenue comparisons. Paradise, Inc. recognizes net sales generally upon receipt of its products by its customers. Thus, as merchandise is shipped and received by its customers during different interim reporting periods, timing differences in reported net revenue will occur. Management has consistently disclosed that interim filings are not reliable financial indicators of year-end performance. Only after a full year’s selling season is completed which takes into consideration factors such as the timing of initial orders, product placement on supermarket shelves and consumer demand for holiday fruitcake ingredients, will the Company have any ability to determine whether its sales and marketing efforts for the current year were successful.

Paradise Plastics, Inc., a wholly owned company of Paradise, Inc. which accounted for 38% of total net sales to unaffiliated customers decreased by 5.6% to net sales of $5,306,706 for the nine months ended September 30, 2016 compared to $5,622,810 for the similar reporting period of 2015. While sales to customers of vacuum forming plastics parts within the housing market increased by 5% for the current reporting period over the similar reporting period of 2015, it was not enough net revenue to offset a recent decline in sales related to a long term customer within the Company’s thermoforming operations. As mentioned in previous filings, Paradise Plastics, Inc. produces various types of custom molded plastics for its customers which are then assembled into finished products by its customers. Thus, changes in demand for these finish products by the end user will have a direct impact on our sales. As of the date of filing, management is not able to predict whether the recent decline in sales will continue.

Consolidated cost of sales as a percentage of overall net sales decreased 6.0%increased 13.2% for the first nine monthsquarter of 20162017 compared to the similar reporting period of 2015. This is less than2016 primarily as variable cost associated with the 10.4% decrease in plastics sales mentioned above outpaced the reduction in labor expenses to produce these plastic parts as of March 31, 2017. With the loss of approximately $1.6 million in plastics sales mentioned above, management has taken the necessary steps to reduce its plastics labor expense throughout the first quarter of 2017. The reduction of plastics labor occurring throughout the first quarter of 2017 will result in estimated labor savings in excess of $175,000 by year end. For the fruit segment, cost of sales reported during the June 30, 2016 filing, however, this decrease is still due to the following two reasons. First, a greater percentage of vacuum forming plastics parts ordered and shipped during the first nine monthsquarter remained consistent with similar reporting period of 2016 vs. 2015 were of higher gross margins. Secondly, the fruit segment, after2017. The Company’s primary product, glace’ fruitcake ingredients, does not commencing brining operations of orange peel duringcommence production until the first nine months of 2015, produced 2.9 million lbs.June. Thus, with the majority of brined orange peel inventory during the first nine monthsfruitcake ingredient production contributed over 70% consolidated cost of 2016. With more than an adequate amountsales, no determination of brined orange peel in the Company’s inventory as of January 1, 2015, brining operations for orange peel were postponed for 2015. Thus, the increase in orange peel production during the first nine months of 2016 allocated over a relatively fixed amount of factory overhead (i.e.: insurance, utilities, depreciation and taxes) had the impact of reducing cost of sales as a percentage of September 30, 2016 compared to September 30, 2015. However, it is important to understand that until a full year’s production cycle is completed, the Company will notconsolidated sales can be able to determine to what extent the additional production mentioned above will have on cost of sales as it relates to overall sales.

Inventoryforecast as of September 30, 2016 totaled $11,997,652 compared to $11,434,903 asthe date of September 30, 2015 representing an increase of $562,749. This represents an increase of 4.9% and is attributable to the increased orange peel production discussed in the cost of sales section above.this filing.

Selling, general & administrative expenses for the first ninethree months of 20162017 decreased 5.3% to $878,693 from $933,355 as Paradise, Inc. continues to receive payroll savings due to fewer employees working within these departments of the Company.

Other Significant Items

Other Income for the first quarter of 2017 totaled $2,774,766$18,202 compared to $2,979,115 representing a decrease$1,743 for the similar reporting period of $204,349 or 6.9%2016. Other Income is periodic sales of recycled plastics materials from time to time along with changes in the cash surrender value of two insurance policies owned by the Company on behalf of two senior executives.

Inventory levels at March 31, 2017 were consistent with the similar reporting period of 2016 as inventory at March 31, 2017 and is primarilyMarch 31, 2016 were $10,084,244 and $10,292,846, respectively. From time to time at the end of the first quarter, timing differences in the level of inventory on hand may occur as factors related to the retirementharvest and market conditions could impact the delivery of three senior managersraw fruitcake ingredients that are received from as far away as Southeast Asia. This was not the case as of March 31, 2017. Therefore, management’s primary goal at the end of the first quarter is to determine if inventory levels are sufficient for the upcoming selling season. For the period in review, this goal has been met.

Short Term Debt and Accounts Payable combined balances which are largely comprised of liabilities for raw materials for the Company’s fruit and plastics segments as of March 31, 2017 totaled $1,591,527 compared to $1,651,185 for the similar reporting period for 2016. These two account balances are directly related to inventory levels on hand at March 31, 2017 and March 31, 2016 as referenced in the preceding paragraph.

We finance our ongoing operations primarily with cash provided by our operating activities. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At March 31, 2017 and December 31, 2016, we had $7.6 million and $9.2 million, respectively, in cash. The decrease in cash during late 2015.the first quarter of 2017 of $1.6 million is consistent with all prior years as we will continue to use available cash reserves until we start to receive payments from our fruit customers after the start of our shipping season beginning in the fourth quarter of 2017. 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, 2017 and December 31, 2016. Within this agreement, there are letters of credit with a limit of $1,750,000, of which $656,653 was outstanding at March 31, 2017 and $42,938 at December 31, 2016. The line of credit agreement expires on July 31, 2017.

The First Nine Months (Continued)

Paradise, Inc. finances ongoing operations primarily with cash provided by our operating 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 September 30, 2016 and December 31, 2015, we had $1,138,700 and $8,791,938, 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 up to 60% of the Company’s eligible inventory, of which $0 was outstanding at September 30, 2016 and $0 at December 31, 2015. Within this agreement, there are letters of credit with a limit of $1,750,000, of which $291,838 was outstanding at September 30, 2016 and $582,839 December 31, 2015. The line of credit agreement expires in July, 2017. Net cash decreased by $7,653,238 for the nine months ended September 30, 2016 compared to $6,458,430 for the nine months ended September 30, 2015. The primary reason for this decrease in cash for the first nine months of 2016 compared to 2015 was the earlier repayment of short-term debt of just over $1.0 million as of September 30, 2016.

Summary

Paradise, Inc.’s consolidated net sales decreased slightly to $13,950,369 for the first ninethree months ended March 31, 2017 totaled $2,448,600 compared to $2,962,956 for the similar reporting period of 2016, representing a decrease of 17.4%. This decrease is specifically related to the decision by a major plastics customer to change the design method and supplier for production of custom molded parts from thermoforming to injection molding during the first quarter of 2017. Correspondingly, cost of sales as a percentage of sales increased 11.9% as the decrease in plastics sales outpaced the necessary labor cost reductions during the first quarter of 2017. Selling, General and Administrative expenses were 5.3% less as of March 31, 2017 compared to $14,032,757 forMarch 31, 2016 as savings were achieved from less personnel on hand. Thus, the combination of these events, after applying income tax benefits at March 31, 2017 and March 31, 2016 of $259,036 and $138,022 resulted in a consolidated first nine monthsquarter 2017 loss of 2015$(409,036) compared to a first quarter 2016 loss of $(207,033).

However, it’s important to note that with less than 10% of annual fruit segment net sales processed and shipped as an increase in the earlier shipmentof March 31, 2017 and based on historically sales data which indicates that more than 80% of the Company’s holiday segmentannual fruit segments products was offset by a downturn in thermoforming plastics partssegment’s sales will occur during the third quartermonths of 2016. However,September through November of each year, no realistic forecast or trend as mentioned and disclosed in all previous interim filings, due to the highly seasonal nature of the Company’s primary revenue source, glace’ fruit sales, no meaningful financial analysisyear end results can be developed from Paradise, Inc.’s interim reporting results. Only a full year’s accountingas of revenue and expenses will provide the necessary information to determine the Company’s overall financial performance.date of this filing.

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, 2015.2016. There have been no material changes to our critical accounting estimates during the ninethree months ended September 30, 2016.March 31, 2017.

Impact of Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,Revenue from Contracts with Customers,which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.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 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.

Impact of Recently Issued Accounting Pronouncements (Continued)

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 todid not 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 todid not have a material impact on the Company’s consolidated financial statements.

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. The Company does not expectis currently evaluating the adoptionimpact of this standardthese changes to have a material impact on 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.

As of September 30, 2016,March 31, 2017, 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 significant changes in our internal control over financial reporting during the nine monthsquarter ended September 30, 2016.March 31, 2017.

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.