U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
FORM 10-Q
______________
x | Quarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934. |
For the quarterly period ended SeptemberJune 30, 20172018
or
¨ | Transition report pursuant to section 13 or 15(d) of the Securities Act of 1934. |
Commission File No. 0-3026
__________________000-03026
PARADISE, INC.
________________
INCORPORATED IN FLORIDA
I.R.S. EMPLOYER IDENTIFICATION NO. 59-1007583
1200 W. DR. MARTIN LUTHER KING, JR. BLVD.,
PLANT CITY, FLORIDA 33563
(813) 752-1155
__________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes¨ Nox
The number of shares outstanding of each of the issuer’s classes of common stock as of November 14, 2017August 20, 2018 was 519,600 shares.
PARADISE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20172018
INDEX
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
PARADISE, INC. AND SUBSIDIARIES
AS OF | AS OF | |||||||||||||||||||||||
JUNE 30, | AS OF | JUNE 30, | ||||||||||||||||||||||
AS OF | AS OF | 2018 | DECEMBER 31, | 2017 | ||||||||||||||||||||
SEPTEMBER 30, | AS OF | SEPTEMBER 30, | (UNAUDITED) | 2017 | (UNAUDITED) | |||||||||||||||||||
2017 | DECEMBER 31, | 2016 | ||||||||||||||||||||||
(UNAUDITED) | 2016 | (UNAUDITED) | (Restated ) | |||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash | $ | 1,085,701 | $ | 9,240,638 | $ | 1,138,700 | $ | 2,569,673 | $ | 8,668,012 | $ | 3,839,389 | ||||||||||||
Accounts Receivable, | ||||||||||||||||||||||||
Less, Allowances of $0 (09/30/17), $1,215,153 (12/31/16) and $0 (09/30/16) | 5,409,122 | 2,108,608 | 6,378,274 | |||||||||||||||||||||
Accounts Receivable, Less, Allowances of $0 (06/30/18), $1,566,578 (12/31/17) and $0 (06/30/17) | 857,674 | 1,870,649 | 613,130 | |||||||||||||||||||||
Inventories: | ||||||||||||||||||||||||
Raw Materials | 7,669,182 | 5,254,103 | 7,605,280 | 10,450,641 | 5,855,658 | 9,097,142 | ||||||||||||||||||
Work in Process | 394,889 | 1,026,657 | 333,884 | 377,973 | 1,077,718 | 414,639 | ||||||||||||||||||
Supplies | 165,413 | 165,446 | 161,258 | 194,346 | 194,346 | 165,413 | ||||||||||||||||||
Finished Goods | 4,087,294 | 1,858,827 | 3,897,230 | 3,935,679 | 2,400,924 | 4,201,945 | ||||||||||||||||||
Income Tax Receivable | 655,304 | - | - | 698,131 | 209,616 | 652,192 | ||||||||||||||||||
Prepaid Expenses and Other Current Assets | 351,500 | 296,851 | 455,684 | 455,555 | 224,384 | 431,890 | ||||||||||||||||||
Total Current Assets | 19,818,405 | 19,951,130 | 19,970,310 | 19,539,672 | 20,501,307 | 19,415,740 | ||||||||||||||||||
Property, Plant and Equipment, | ||||||||||||||||||||||||
Less, Accumulated Depreciation of $18,958,502 (09/30/17), $18,650,822 (12/31/16) and $18,557,477 (09/30/16) | 4,342,539 | 4,162,636 | 3,919,133 | |||||||||||||||||||||
Property, Plant and Equipment, Less, Accumulated Depreciation of $19,251,118 (06/30/18), $19,045,405 (12/31/17) and $18,857,109 (06/30/17) | 4,400,099 | 4,271,727 | 4,433,640 | |||||||||||||||||||||
Goodwill | 413,280 | 413,280 | 413,280 | 413,280 | 413,280 | 413,280 | ||||||||||||||||||
Other Assets | 375,718 | 393,994 | 381,149 | 369,300 | 345,415 | 339,726 | ||||||||||||||||||
TOTAL ASSETS | $ | 24,949,942 | $ | 24,921,040 | $ | 24,683,872 | $ | 24,722,351 | $ | 25,531,729 | $ | 24,602,386 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
2 |
AS OF | AS OF | |||||||||||
SEPTEMBER 30, | AS OF | SEPTEMBER 30, | ||||||||||
2017 | DECEMBER 31, | 2016 | ||||||||||
(UNAUDITED) | 2016 | (UNAUDITED) | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Short Term Debt | $ | 428,346 | $ | 42,938 | $ | 291,838 | ||||||
Accounts Payable | 1,182,998 | 808,696 | 712,962 | |||||||||
Accrued Liabilities | 536,887 | 689,177 | 607,603 | |||||||||
Income Taxes Payable | - | - | 193,185 | |||||||||
Total Current Liabilities | 2,148,231 | 1,540,811 | 1,805,588 | |||||||||
DEFERRED INCOME TAX LIABILITY | 126,482 | 126,482 | 73,291 | |||||||||
Total Liabilities | 2,274,713 | 1,667,293 | 1,878,879 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Common Stock: $0.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued, 519,600 Shares Outstanding | 174,928 | 174,928 | 174,928 | |||||||||
Capital in Excess of Par Value | 1,288,793 | 1,288,793 | 1,288,793 | |||||||||
Retained Earnings | 21,484,727 | 22,063,245 | 21,614,491 | |||||||||
Treasury Stock, at Cost, 63,494 Shares | (273,219 | ) | (273,219 | ) | (273,219 | ) | ||||||
Total Stockholders’ Equity | 22,675,229 | 23,253,747 | 22,804,993 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 24,949,942 | $ | 24,921,040 | $ | 24,683,872 |
3 |
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED | FOR THE THREE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | JUNE 30, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Net Sales | $ | 7,644,130 | $ | 8,884,152 | $ | 1,523,097 | $ | 1,351,449 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Goods Sold | 6,225,065 | 6,173,066 | 1,517,554 | 1,267,775 | ||||||||||||
Selling, General and Administrative Expense | 1,007,875 | 1,098,845 | 777,342 | 597,964 | ||||||||||||
Amortization Expense | 3,000 | 2,000 | 4,500 | - | ||||||||||||
Total Costs and Expenses | 7,235,940 | 7,273,911 | 2,299,396 | 1,865,739 | ||||||||||||
Income from Operations | 408,190 | 1,610,241 | ||||||||||||||
Loss from Operations | (776,299 | ) | (514,290 | ) | ||||||||||||
Other Expenses | (2,037 | ) | (30,856 | ) | ||||||||||||
Other Income | 25,677 | 28,513 | ||||||||||||||
Income from Operations Before Income Taxes | 406,153 | 1,579,385 | ||||||||||||||
Loss Before Income Taxes | (750,622 | ) | (485,777 | ) | ||||||||||||
Provision for Income Taxes | 164,398 | 631,753 | ||||||||||||||
Income Tax Benefit | 198,915 | 204,440 | ||||||||||||||
Net Income | $ | 241,755 | $ | 947,632 | ||||||||||||
Net Loss | $ | (551,707 | ) | $ | (281,337 | ) | ||||||||||
Income per Common Share (Basic and Diluted) | $ | 0.47 | $ | 1.82 | ||||||||||||
Loss per Common Share (Basic and Diluted) | $ | (1.06 | ) | $ | (0.54 | ) | ||||||||||
Dividend per Common Share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
4 |
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED | FOR THE SIX MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | JUNE 30, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Net Sales | $ | 11,444,179 | $ | 13,950,369 | $ | 3,649,375 | $ | 3,800,049 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Goods Sold | 9,749,021 | 10,038,462 | 3,331,336 | 3,523,956 | ||||||||||||
Selling, General and Administrative Expense | 2,484,532 | 2,774,766 | 1,556,857 | 1,476,657 | ||||||||||||
Amortization Expense | 3,000 | 68,203 | 9,000 | - | ||||||||||||
Total Costs and Expenses | 12,236,553 | 12,881,431 | 4,897,193 | 5,000,613 | ||||||||||||
(Loss) Income from Operations | (792,374 | ) | 1,068,938 | |||||||||||||
Loss from Operations | (1,247,818 | ) | (1,200,564 | ) | ||||||||||||
Other Income | 44,678 | 19,846 | 24,213 | 46,715 | ||||||||||||
(Loss) Income from Operations Before Income Taxes | (747,696 | ) | 1,088,784 | |||||||||||||
Loss Before Income Taxes | (1,223,605 | ) | (1,153,849 | ) | ||||||||||||
Benefit (Provision) for Income Taxes | 299,078 | (435,513 | ) | |||||||||||||
Income Tax Benefit | 324,255 | 463,476 | ||||||||||||||
Net (Loss) Income | $ | (448,618 | ) | $ | 653,271 | |||||||||||
Net Loss | $ | (899,350 | ) | $ | (690,373 | ) | ||||||||||
(Loss) Income per Common Share (Basic and Diluted) | $ | (0.86 | ) | $ | 1.26 | |||||||||||
Loss per Common Share (Basic and Diluted) | $ | (1.73 | ) | $ | (1.33 | ) | ||||||||||
Dividend per Common Share | $ | 0.25 | $ | 0.15 | $ | 0.15 | $ | 0.25 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
5 |
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED | ||||||||||||||||
SEPTEMBER 30, | FOR THE SIX MONTHS ENDED | |||||||||||||||
2017 | 2016 | JUNE 30, | ||||||||||||||
2018 | 2017 | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net (Loss) Income | $ | (448,618 | ) | $ | 653,271 | |||||||||||
Adjustments to Reconcile Net (Loss) Income to Net Cash Used in Operating Activities: | ||||||||||||||||
Net Loss | $ | (899,350 | ) | $ | (690,373 | ) | ||||||||||
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||||||||||
Depreciation and Amortization | 310,785 | 367,329 | 214,714 | 206,392 | ||||||||||||
(Increase) Decrease in: | ||||||||||||||||
Decrease (Increase) in: | ||||||||||||||||
Accounts Receivable | (3,300,514 | ) | (4,195,968 | ) | 1,012,975 | 1,495,478 | ||||||||||
Inventories | (4,011,745 | ) | (3,817,983 | ) | (5,429,993 | ) | (5,574,106 | ) | ||||||||
Prepaid Expenses | (54,649 | ) | (137,434 | ) | ||||||||||||
Prepaid Expenses and Other Current Assets | (231,171 | ) | (135,039 | ) | ||||||||||||
Income Tax Receivable | (488,515 | ) | (652,192 | ) | ||||||||||||
Other Assets | 15,276 | 5,166 | (23,885 | ) | 54,268 | |||||||||||
Income Tax Asset | (655,304 | ) | - | |||||||||||||
Increase (Decrease) in: | ||||||||||||||||
Accounts Payable | 374,302 | 101,874 | 740,924 | 64,166 | ||||||||||||
Accrued Liabilities | (152,290 | ) | 33,227 | (574,750 | ) | (572,388 | ) | |||||||||
Net Cash Used in Operating Activities | (7,922,757 | ) | (6,990,518 | ) | (5,679,051 | ) | (5,803,794 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchase of Property and Equipment | (487,688 | ) | (293,779 | ) | (334,086 | ) | (477,396 | ) | ||||||||
Net Cash Used in Investing Activities | (487,688 | ) | (293,779 | ) | (334,086 | ) | (477,396 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from Short Term Debt | (571,572 | ) | 1,052,779 | |||||||||||||
Payments on Short Term Debt | (680,763 | ) | (863,527 | ) | 564,310 | (42,938 | ) | |||||||||
Proceeds from Short Term Debt | 1,066,171 | 572,526 | ||||||||||||||
Dividends Paid | (129,900 | ) | (77,940 | ) | (77,940 | ) | (129,900 | ) | ||||||||
Net Cash Provided by (Used in) Financing Activities | 255,508 | (368,941 | ) | |||||||||||||
Net Cash (Used in) Provided by Financing Activities | (85,202 | ) | 879,941 | |||||||||||||
NET DECREASE IN CASH | (8,154,937 | ) | (7,653,238 | ) | (6,098,339 | ) | (5,401,249 | ) | ||||||||
CASH, AT BEGINNING OF PERIOD | 9,240,638 | 8,791,938 | 8,668,012 | 9,240,638 | ||||||||||||
CASH, AT END OF PERIOD | $ | 1,085,701 | $ | 1,138,700 | $ | 2,569,673 | $ | 3,839,389 | ||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||||
Cash paid for: | ||||||||||||||||
Income Tax | $ | 357,510 | $ | 353,346 | $ | 164,260 | $ | 190,000 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
6 |
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 | BASIS OF PRESENTATION |
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 all adjustments and accruals of a normal recurring nature that management believes are necessary to fairly state the operating results for the respective periods. The notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2016.2017. 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 ninesix months ended SeptemberJune 30, 20172018 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 SeptemberJune 30, 20162017 to conform to the classifications used for the three and nine monthsquarter ended SeptemberJune 30, 2017.
2018.
NOTE 2 | 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 revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the new standard will be effective retrospectively for the Company on January 1, 2018 which is the effective date for public companies. The standard permits the use of either theon a full 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 is finalizing reviews and working on implementing the process, policy and disclosure changes that will go into effect January 1, 2018. At this time, the Company does not expect abasis. There was no material financial impact from adopting the new revenue standard.
In April 2015, the FASB issued Accounting Standards Update No. 2015-03,Simplifying the Presentation of Debt Issuance Costs(“ASU2015-03”). The standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standards update. The Company evaluated this ASU and began early adoption beginning with the annual period ended December 31, 2016. The adoption of this ASU did 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 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 adoption of this ASU did 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 adoption of this standard did 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 continues to make progress in their due diligence and assessment of the impact of the new standard across its operations and the consolidated financial statements, which will consist primarily of recording right of use assets and corresponding lease liabilities on the balance sheet for operating leases.
7 |
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 2 | IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED) |
Except as noted above, the Company’s management does not believe that recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the Securities and Exchange Commission will have a material impact on the Company’s current or future consolidated financial statements.
NOTE 3 |
Basic and diluted incomeloss per common share is based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600. There are no dilutive securities outstanding.
NOTE 4 | REVENUE |
The Company recognizes revenue from the sale of candied fruit products which are sold to manufacturing bakers, institutional users and retailers. The Company also recognizes revenue from the sale of molded plastics to unaffiliated customers. Revenue is recognized upon the shipment or delivery of goods depending on the agreed upon terms with the customer and is reported net of applicable provisions for discounts, returns, incentives and allowances.
The Company recognizes revenue when performance obligations are satisfied by transferring control of the goods to customers. Control is transferred upon shipment or delivery of the goods to the customer. At the time of delivery, the customer is invoiced with payment terms which are commensurate with the customer’s credit profile. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs.
The Company assesses the goods and services promised in its customers’ purchase orders and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all the goods or services promised, whether explicitly stated or implied based on customary business practices.
8 |
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE | BUSINESS SEGMENT DATA |
The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
Business Segment | Operation | ||
Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preservers, dairies, drink manufacturers, etc. | ||
Molded Plastics | Production of plastics containers and other molded plastics for sale to various food processors and others. |
Three months ended | Three months ended | Three months ended | Three months ended | |||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Net Sales in Each Segment | ||||||||||||||||
Fruit: | ||||||||||||||||
Sales to Unaffiliated Customers | $ | 6,605,247 | $ | 7,389,005 | $ | 226,673 | $ | 343,856 | ||||||||
Molded Plastics: | ||||||||||||||||
Sales to Unaffiliated Customers | 1,038,883 | 1,495,147 | 1,296,424 | 1,007,593 | ||||||||||||
Net Sales | $ | 7,644,130 | $ | 8,884,152 | $ | 1,523,097 | $ | 1,351,449 | ||||||||
Six months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | |||||||||||||||
Net Sales in Each Segment | ||||||||||||||||
Fruit: | ||||||||||||||||
Sales to Unaffiliated Customers | $ | 819,291 | $ | 1,276,375 | ||||||||||||
Molded Plastics: | ||||||||||||||||
Sales to Unaffiliated Customers | 2,830,084 | 2,523,674 | ||||||||||||||
Net Sales | $ | 3,649,375 | $ | 3,800,049 |
Nine months ended | Nine months ended | |||||||
September 30, | September 30, | |||||||
2017 | 2016 | |||||||
Net Sales in Each Segment | ||||||||
Fruit: | ||||||||
Sales to Unaffiliated Customers | $ | 7,881,622 | $ | 8,643,663 | ||||
Molded Plastics: | ||||||||
Sales to Unaffiliated Customers | 3,562,557 | 5,306,706 | ||||||
Net Sales | $ | 11,444,179 | $ | 13,950,369 |
9 |
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE | BUSINESS SEGMENT DATA (CONTINUED) |
The Company does not prepare operating profit or loss information on a segment basis for internal use, until the end of each year. Due to the seasonal nature of the fruit segment, management believes that it is not practical to prepare this information for interim reporting purposes. Therefore, reporting is not required by accounting principles generally accepted in the United States of America.
September 30, | September 30, | |||||||||||||||
2017 | 2016 | June 30, | June 30, | |||||||||||||
2018 | 2017 | |||||||||||||||
Identifiable Assets of Each Segment are Listed Below: | ||||||||||||||||
Fruit | $ | 17,733,521 | $ | 17,678,419 | $ | 15,207,924 | $ | 14,445,847 | ||||||||
Molded Plastics | 4,020,398 | 4,399,853 | 4,588,675 | 4,125,240 | ||||||||||||
Identifiable Assets | 21,753,919 | 22,078,272 | 19,796,599 | 18,571,087 | ||||||||||||
General Corporate Assets | 3,196,023 | 2,605,600 | 4,925,752 | 6,031,299 | ||||||||||||
Total Assets | $ | 24,949,942 | $ | 24,683,872 | $ | 24,722,351 | $ | 24,602,386 |
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.
10 |
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward–Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for the purpose of these provisions, including statements that include projections of, or expectations about, earnings, revenues 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 68.7%77% of total net sales during 2016.2017. 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, 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.
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PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
The First Nine MonthsSecond Quarter
Paradise, Inc.’s fruit segment net sales for the first ninesix months of 2017 decreased 8.9%2018 totaled $819,291 compared to $7,881,622 from $8,643,663net sales of $1,276,375 for the similar nine month reporting period of 2016. This2017 representing a decrease is primarily relatedof $457,084. The primary reason for this decrease relates to timing differencesless revenue earned from the sale of finished strawberry products produced and sold exclusively to a local distributor beginning in the receiptearly March and running through mid-April of customer’s purchase orderseach year. As in previous years, Paradise, Inc., based on a negotiated price (i.e. tolling fee) will receive and the corresponding shipmentprocess fresh strawberries through its production facilities on behalf of these orders. Changes in datesthis distributor. With unfavorable market conditions and a shortage of opening orders from long-time customers between interim reporting periods will have a direct impact on net sales comparisons. Paradise, Inc. recognizes net sales generally upon receipt of its products by its customers. To illustrate this in financial terms, fruit segment shipments to customersavailable labor during the first five business dayssix months of October, 2017 were $2,193,2602018, tolling fees invoiced to this local distributor totaled $332,210 for the six months ended June 30, 2018 compared to $242,241$646,933 for the first five business dayssix months ended June 30, 2017, representing a decrease in net sales of October, 2016. Thus, extending the reporting period into the first week$314,723. Strawberry tolling fees historically account for less than 5% of October, 2017 and October, 2016 would have resulted in increasedannual fruit segment net sales of 13.4% compared to the 8.9% decrease reported above. Management has consistently disclosed that interim filings are not reliable financial indicators of year-end performance. Only after a full year’s selling season which eliminates such timing differences related to dates of opening orders shipped, received and placed in stores by our customers, will the Company have the necessary sales data to determine if its sales and marketing efforts for the current year were successful.decrease in 2018 tolling fees will have little impact on annual fruit segment net sales for 2018.
Paradise Plastics, Inc., (Paradise Plastics) a wholly owned company of Paradise, Inc., which accounted for 31.3%23% of total net sales to unaffiliated customers for the previous year, generated net sales of $3,562,557$2,830,084 for the ninesix months ended SeptemberJune 30, 20172018 compared to $5,306,706$2,523,674 for the similar reporting period of 2016. This represents a decrease of $1,744,149 or 32.9%. Paradisesix months ended June 30, 2017. Plastics produces various types of custom molded parts for its customersnet sales which are then assembled into finished products by its customers for salenot seasonal in nature continued to rebound from the end user. In many cases, continued production and increased sales for these parts are based on their success achieved bynegative impact absorbed from the end user. Furthermore, in some cases,loss of a change in product design may impact the continuationportion of these sales. As disclosed in previous filings, beginning first quarter of 2017,business from a major plastics customer decidedcustomer’s decision to transfer production of custom molded parts produced by thermoforming to an out of stateanother supplier whothat could produce thesethermoformed parts in a more cost effective method via injection molding. The major benefitParadise’s management offered to the customer was the ability to significantly lower their cost per unit. These parts had been previously thermoformed at Paradise Plastics facilities over the past nine years. Management in discussions with this customer offeredinvest $3 million to construct a new on-site building as well asand purchase the necessary injection molding equipment to continue production,retain this business, however, the offer was declined. With production of these parts coming to an end duringending in the latter stages of the first quarter of 2017, net sales totaled $120,625decreased $1.6 million for the remainder of 2017. However, with increased demand from other custom molding products produced for this major customer, along with recent successes in developing new accounts over the past six months of 2018, management is confident that the net sales during the second half of 2018 will continue to generate additional growth.
Consolidated cost of sales as a percentage of net sales remained fairly consistent for the first six months of 2018 compared to $1,757,250the similar reporting period of 2017. However, with less than 30% of the Company’s annual production of its estimated fruit requirements completed as of June 30, 2018, it is too early to forecast the change in annual cost of sales as a percentage of sales for the entire twelve monthsremainder of 2016. This representsthe year. It is important to note, with production beginning in June of each year, the Company adds back to inventory a decreasepercentage of $1,636,625 and is the primary reason for the decrease in plastics sales mentioned above. Reacting to this situation, management commenced an orderly reduction of hourly personnel associated with this loss of businessproduction expenses incurred during the first and second quarterssix months of 2017. Now with the reduction in hourly personnel in place and along with the recent planned retirementyear. The amount of a Senior Vice President - Plastics, management has achieved labor savings in excess of $250,000production expenses transferred into inventory as of June 30, 2018 was $1,196,715 compared to $1,207,417 as of June 30, 2017.
Selling, general & administrative expenses for the datefirst six months of this filing. It is also important2018 increased 5.4% to mention that Paradise Plastics is still producing other custom molding parts$1,556,857 from $1,476,657 for this long term customer and is continuing to aggressively marketthe similar reporting period of 2017 as the Company increased its custom molding capabilitiesbusiness travel throughout the Southeast in orderCountry to replace this business. Management continuesvisit existing customers as well as make presentations to closely monitornew customers during the impact this lossfirst six months of business will have on its operations throughout the remainder of 2017 in order to determine if any additional changes to operations are warranted. If the Company is unable to replace these lost sales, its ability to recover goodwill of $413,280 related to Paradise Plastics could be affected.2018.
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PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
The First Nine Months (Continued)
Consolidated cost of sales as a percentage of net sales increased 13.3% for the nine months ending September 30, 2017 compared to the similar reporting period of 2016. This is less than the 15% increase in cost of sales reported in the Company’s second quarter filing as variable cost associated with the decrease in plastics sales still continued to outpace the reduction in labor and other variable expenses. However, as fruit segment production, representing more than 70% of cost of sales, continues to produce inventory for sale well into the fourth quarter of the year, no meaningful forecast of consolidated cost of sales can be reported until a full twelve months accounting of operations is completed.
Selling, general & administrative expenses for the nine months ending September 30, 2017 decreased 11.7% to $2,484,532 from $2,774,766 for the nine months ending September 30, 2016 as Paradise, Inc. continues to receive payroll savings due to fewer employees working within these departments.
Other Significant Items
Other Income for the first nine monthsAccounts Receivable as of 2017June 30, 2018 totaled $44,678$857,674 compared to $19,846 for the similar reporting period$613,130 as of 2016.June 30, 2017. This increase is related to the cash surrender value of two insurance policies owned by the Company on behalf of two senior executives who have been employed by the Company for over fifty years. Paradise, Inc.$244,544 is the beneficiary as to the premiums paid on behalf of these two policies.
Inventory on hand increased by $319,126 to $12,316,778 as of September 30, 2017 from $11,997,652 as of September 30, 2016. During the year, timing differences in levels of inventory may fluctuate due to the following two factors. First, changes in harvest and or market conditions of raw fruit commodities received from as far away as Southeast Asia may overlap into different quarterly filings period. Secondly, timing differences in levels of inventory will occur as shipments of fruit segment products to retail customers will also overlap quarterly filing dates. For the current reporting period, both factors were present as an increase in raw fruit materials received from overseas suppliers during the third quarter of 2017 along with a delay in shipments to retail customers until the fourth quarter of 2017 more than offset the decrease in plastics inventory levels as of September 30, 2017.
Short Term Debt and Accounts Payable balances largely comprised of liabilities for raw fruit materials increased $606,544 to $1,611,344 as of September 30, 2017 compared to $1,004,800 as of September 30, 2016. These two account balances are directly related to the increase in fruit inventoryplastics sales reported during the first six months of 2018 compared to the similar reporting period of 2017.
Inventory levels on hand as of SeptemberJune 30, 2018 increased $1,079,500 or 7.8% to $14,958,639 from $13,879,139 as of June 30, 2017. This increase is based on the following two factors: First, plastics inventory increased $468,000 as of June 30, 2018 compared to June 30, 2017 as additional raw materials have been ordered and received to keep place with the increase in demand during 2018. Secondly, mainly due to crop availability, the Company has received approximately $560,000 more of raw fruit commodities during the first six months of 2018 compared to the first six months of 2017.
Short term debt as of June 30, 2018 decreased $509,469 to $543,310 from $1,052,779 as of June 30, 2017. Short term debt consist of letters of credit issued by the Company’s banking institution to Paradise, Inc.’s overseas supplier of certain raw fruit materials. The bank makes direct payments to the overseas supplier and then charges Paradise, Inc. after receipt of this raw fruit materials with term extending out to 180 days. As the level of overseas purchasing of brine fruit commodities for 2018 consistent with the previous year’s purchasing, the decrease in the balance owed as of June 30, 2018 compared to the balance owed as of June 30, 2017 is a function of timing as a greater percentage of raw fruit commodities wereproduct was received from our international and domestic suppliers duringearly in the third quarterfirst half of 20172018 compared to the similar periodfirst half of 2016.2017.
On July 28, 2017, Paradise, Inc. renewed its revolving lineAccounts Payable as of credit with SunTrust Bank through July 31, 2019. This renewal provides for a maximum limitJune 30, 2018 increased $506,955 to $1,379,817 from $892,862 primarily due to the timing of $12 millionreceipt of domestic fruit and a borrowing limitplastics raw materials during the first half of 80%2018 compared to 2017. As payment terms are net 30, all amounts outstanding as of June 30, 2018 have been paid as of the Company’s eligible receivables plus the lesserdate 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%.
Other Significant Items (Continued)filing.
Paradise, Inc. financesWe finance our ongoing operations primarily with cash provided by our operating activities which are seasonal in nature.activities. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At SeptemberJune 30, 20172018 and December 31, 2016,2017, we had $1,085,701approximately $2.6 million and $9,240,638,$8.7 million, respectively, in cash. The decrease in cash during the first six months of 2018 of $6.1 million is consistent with the prior year as we will continue to use available cash reserves in excess of $1 million per month until we start to receive payments from our fruit customers after the start of our shipping season beginning in the fourth quarter of the year. Additionally, we 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%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 SeptemberJune 30, 20172018 and $0 at December 31, 2016.2017. Within this agreement, there are letters of credit with a limit of $1,750,000, of which $428,346$543,310 was outstanding at SeptemberJune 30, 20172018 and $42,938$541,572 at December 31, 2016.2017. The line of credit agreement expires inon July 31, 2019. Net cash decreased by $8,154,937 for the nine months ended September 30, 2017 compared to $7,653,238 for the nine months ended September 30, 2016 as the Company needs approximately $1 million per month to acquire inventory and finance operations during the first nine months
On February 13, 2018, Paradise, Inc. issued a press release announcing that it is exploring its strategic alternatives. As of the year.
Summary
Paradise Inc.’s consolidated net sales decreased to $11,444,179 for the first nine months of 2017 from $13,950,369 for the first nine months of 2016. This decrease is due to two factors. First, timing differences in shipments of retail fruit orders were received into the first week of October, 2017. As such, fruit segment sales for the first 5 days of October, 2017 totaled $2,193,260 compared to $242,241 for the first five days of October 2016. Secondly, 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 is the primary reason that plastics segment sales decreased by $1,744,149 or 32.9% for the first nine months of 2017 compared to the similar reporting period of 2016. Correspondingly, cost of sales increased 13.2% as the decline in plastics sales outpaced the orderly reductions of labor cost that were phased in during the first and second quarters of 2017. Thus, the overall impactdate of this activity resulted in a net loss of $(448,618) for the nine months ending September 30, 2017 compared to net income of $653,271 for the nine months ending September 30, 2016.
filing, this process is on-going.
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Summary
Paradise, Inc.’s consolidated net sales for the six months ended June 30, 2018 decreased $150,674 to $3,649,375 from $3,800,049 for the similar reporting period of 2017, representing a decrease of 3.9%. The increase in plastics segment sales of $306,410 offset the decline Strawberry tolling fees of $316,723. Cost of sales as a percentage of sales remained fairly consistent for the six months ending June 30, 2018 compared to June 30, 2017 with just a 1.4% increase. Selling, general and administrative expenses increased 5.4% as of June 30, 2018 compared to June 30, 2017 as management increased its travel to visit existing customers and make presentations to new customers throughout the country. The combination of these events, after applying income tax benefits at June 30, 2018 and June 30, 2017 of $324,255 and $463,476, respectively, resulted in a consolidated loss of $899,350 for the six months ending June 30, 2018 compared to a consolidated loss of $690,373 for the six months ending June 30, 2017.
However, it’s important to note that based on historical sales data which indicates that more than 80% of the Company’s annual fruit segment’s sales will occur during the months of September through November of each year, no realistic forecast or trend as to year end results can be developed as of the 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, 2016.2017. There have been no material changes to our critical accounting estimates during the ninesix months ended SeptemberJune 30, 2017.2018.
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 revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the new standard will be effective retrospectively for the Company on January 1, 2018 which is the effective date for public companies. The standard permits the use of either theon a full 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 is finalizing reviews and working on implementing the process, policy and disclosure changes that will go into effect January 1, 2018. At this time, the Company does not expect abasis. There was no material financial impact from adopting the new revenue standard.
In April 2015, the FASB issued Accounting Standards Update No. 2015-03,Simplifying the Presentation of Debt Issuance Costs(“ASU2015-03”). The standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standards update. The Company evaluated this ASU and began early adoption beginning with the annual period ended December 31, 2016. The adoption of this ASU did not 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 adoption of this ASU did 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 adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
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. The Company continues to make progress in their due diligence and assessment of the impact of the new standard across its operations and the consolidated financial statements, which will consist primarily of recording right of use assets and corresponding lease liabilities on the balance sheet for operating leases.
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.
Item 3. | Quantitative and Qualitative Disclosure and Market Risk – N/A |
Item 4. | Controls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures.
AsPursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of September 30, 2017, ourthe Company’s management, including the Company’s President and Chief Executive Officer (“CEO”) and Chief Financial Officer have evaluated(“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.
Subsequent to the initial filing of the Company’s annual report on Form 10-K for the year ended December 31, 2017, management identified a material weakness in internal control relevant to the Company’s timeliness of the issuance and they haverelated year end accrual of credit memos for the customer returns, allowances, discounts and incentives that related to 2017. This weakness in internal control resulted in a material misstatement of the financial statements and required restatement of the financial statements included in the Company’s Form 10-K for the year ended December 31, 2017 and in the Company’s Form 10-Q for the quarterly period ended March 31, 2018. These misstatements, which were not detected timely by management, were the result of inadequate design of controls pertaining to the Company’s review and ongoing monitoring of its procedures. The deficiency represents a material weakness in the Company’s internal control over financial reporting.
As of June 30, 2018 and based upon that evaluation, including the fact that the Company has had to file restatements of its consolidated financial statements, the Company’s CEO and CFO concluded that we maintain effectivethe Company’s disclosure controls and procedures. procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Management is actively engaged in the planning for and implementation of remediation efforts to address the material weakness identified above.
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PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 4. | Controls and Procedures (Continued) |
(b) Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the nine months ended September 30, 2017.our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
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PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART II. | OTHER INFORMATION |
Item 1. | Legal Proceedings – N/A |
Item 1A. | Risk Factors – N/A |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds – N/A |
Item 3. | Defaults Upon Senior Securities – N/A |
Item 4. | Mine Safety Disclosures – N/A |
Item 5. | Other Information – N/A |
Item 6. | Exhibits |
Exhibit | ||
Number | Description | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
EX-101.INS | XBRL Instance Document | |
EX-101.SCH | XBRL Taxonomy Extension Schema | |
EX-101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
EX-101.LAB | XBRL Taxonomy Extension Label Linkbase | |
EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
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PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PARADISE, INC. | |||
A Florida Corporation | |||
/s/ Randy S. Gordon | Date: | August 20, 2018 | |
Randy S. Gordon | |||
President and Chief Executive Officer | |||
/s/ Jack M. Laskowitz | Date: | August 20, 2018 | |
Jack M. Laskowitz | |||
Chief Financial Officer and Treasurer |
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