Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - PARADISE INC | tv501119_ex32-2.htm |
| EX-32.1 - EXHIBIT 32.1 - PARADISE INC | tv501119_ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - PARADISE INC | tv501119_ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - PARADISE INC | tv501119_ex31-1.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDED REPORT
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2017
Commission File No. 000-03026
PARADISE, INC.
INCORPORATED IN FLORIDA
IRS IDENTIFICATION NO. 59-1007583
1200 W. DR. MARTIN LUTHER KING, JR., BLVD.
PLANT CITY, FLORIDA 33563
TELEPHONE NO. (813) 752-1155
Securities Registered Under Section 12 (b) of the Exchange Act:
None
Securities Registered Under Section 12 (g) of the Exchange Act:
Title of Each Class
Common Stock,
$.30 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. Yes x 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, as defined 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $9,718,221 (as of June 30, 2017, bid price $31.00)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at April 2, 2018 |
| Common Stock, | |
| $.30 Par Value | 519,600 Shares |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
PARADISE, INC.
2017 FORM 10-K/A - ANNUAL REPORT
TABLE OF CONTENTS
Explanatory Note
This Amended Report on Form 10-K/A (this “Form 10K/A”) amends and restates certain items noted below in the Annual Report on Form 10-K of Paradise, Inc. (the “Company”) for the year ended December 31, 2017, as originally filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2018 (the “Original Filing”). This Form 10K/A restates the Company’s Consolidated Financial Statements and related disclosures as of and for the year ended December 31, 2017 to reflect the correction of an error caused by a material weakness in internal control in the previously reported financial statements related to the Company’s timeliness in issuing credit memos for customer product returns, allowances, discounts and incentives.
Background and Effect of Restatement
In connection with preparing its financial statements for the quarter ending June 30, 2018, the Company determined that this material weakness in internal control in recording the timeliness of credit memos related to customer returns, allowances, discounts and incentives resulted in an overstatement of year end December 31, 2017 income before provision for income taxes of approximately $445,000. The Company is currently reviewing its internal control procedures and based upon the results of this review will implement additional internal control procedures that will strengthen the Company’s ability to prevent this material weakness from occurring in the future.
See Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K/A for additional information and a reconciliation of the previously reported amounts in the Original Filing to the restated amounts this Form 10-K/A.
Internal Control over Financial Reporting
Management has reassessed its evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2017. As a result of that reassessment, management has concluded that the Company did not maintain effective disclosure controls and procedures due to a material weakness in the Company’s internal control over financial reporting that existed at that date. For a description of the material weakness in internal control over financial reporting and the remedial actions taken, and to be taken, to address and resolve the material weakness, see Part I, Item 9A, “Controls and Procedures” of this Form 10-K/A.
Items Amended in this Filing
For the convenience of the reader, this Form 10-K/A sets forth the Original Filing, as amended, in its entirety; however, this Form 10-K/A amends and restates the following Items to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to the Company’s financial data cited elsewhere in this Form 10-K/A:
| · | Part I, Item 1 – Financial Statements |
| · | Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| · | Part I, Item 9A – Controls and Procedures |
| · | Part II, Item 6 – Exhibits |
| · | Signatures |
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing (Exhibits 31.1, 31.2, 32.1 and 32.2), and the Company has provided its restated consolidated financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibit 101.
Except as described above, no other changes have been made to the Original Filing. This Form 10-K/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing or modify or update any disclosures that may have been affected by subsequent events.
| Item 1. | Business |
Forward-Looking Statements
This Annual Report on Form 10-K/A contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties.
| (a) | Business Development |
Paradise, Inc. was incorporated under the laws of the State of Florida in September, 1961 as Canaveral Utilities and Development Corporation. After the acquisition and merger of several other assets, the Corporation was renamed Paradise Fruit Company, Inc. in February, 1964, and the corporate name was changed again to Paradise, Inc. during July, 1993. There have been no bankruptcies, receiverships, or similar proceedings during the corporation’s history. There have been no material reclassifications, mergers, consolidations, purchases or sales of a significant amount of assets not in the ordinary course of business during the past three years.
| (b) | The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows: |
| Business Segment | Operation | ||
| Candied 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 plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. |
| I-1 |
| Item 1. | Business (Continued) |
For further segment information, refer to Note 9 in Part II, Item 8 of this Annual Report.
| (c) | The Company knows of no other manufacturer in the Western Hemisphere whose sales of glace’ (candied) fruit is equal to those of Paradise, Inc. While there are no industry statistics published, from the generally reliable sources available, management believes that Company brands account for a large majority of all candied fruit sold in supermarkets and other grocery outlets in the USA. |
In terms of candied fruit dollar sales, during 2017, approximately 20% were shipped to manufacturing bakers and other institutional users, with the balance being sold through supermarkets and other retail outlets for ultimate use in the home.
Sales to retail outlets are usually generated through registered food brokers operating in exclusively franchised territories. This method of distribution is widely accepted in the food industry because of its efficiency and economy.
The principal raw materials used by the Company are fruits, fruit peels, corn syrups and plastic resins. Most of these materials are readily accessible from a number of competitive suppliers. The supply and prices may fluctuate with growing and crop conditions, factors common to all agricultural products. Feed stocks for some plastic resins are petroleum related and may be subject to supply and demand fluctuations in this market.
The trademarks “Paradise”, “Dixie”, “Mor-Fruit” and “Sun-Ripe” are registered with the appropriate Federal and State authorities for use on the Company’s candied fruit. These registrations are kept current, as required, and have a value in terms of customer recognition. The Company is also licensed to use the trademarks “White Swan”, “Queen Anne”, “Palm Beach”, “Golden Crown,” and “Pennant” in the sale of candied fruit.
The demand for fruit cake materials is highly seasonal, with over 85% of sales in these items occurring during the months of September, October and November. However, in order to meet delivery requirements during this relatively short period, the Company must process candied fruit and peels for approximately ten months during the year. Also, the Company must acquire the fruits used as raw materials during their seasonal growing periods. These factors result in large inventories, which require financing to meet relatively large short-term working capital needs.
During 1993, and through another wholly owned subsidiary, the Company launched an enterprise for the growing and selling of strawberries, both fresh and frozen. Plant City, Florida, the location of the Company’s manufacturing facilities and main office, styles itself as the “The Winter Strawberry Capital” because of the relatively large volume of fruit that is grown and harvested locally, mostly from December through April of each season. However, once competing fresh berries from the West Coast of the USA begin finding their way to market, the price of Florida fruit begins to diminish, and local growers had no other market for their product.
While there are significant freight cost advantages in the sale and marketing of local strawberries to customers in the eastern U.S., growers and producers on the West Coast, from southern California to Washington State, still dominate pricing and marketing conditions. The Company estimates more than 90% of total U.S. strawberry production is located in that area.
| I-2 |
| Item 1. | Business (Continued) |
Therefore, Paradise, Inc. limits its activities in this market to years in which basic supply and demand statistics, such as West Coast harvest predictions and frozen strawberry prior year inventory carryovers, lead to a reasonable anticipation of profitability.
In the molded plastics segment of business, sales to unaffiliated customers continue to strengthen. This trend began several years ago when management shifted its focus from the sale of high volume, low profit “generics” to higher technology value added custom applications.
Some molded plastics container demand is seasonal, by virtue of the fact that a substantial portion of sales are made to packers of food items and horticultural interests, with well defined growing and/or harvest seasons.
In the opinion of management, the seasonal nature of some plastics sales does not have a significant impact upon the working capital requirements of the Company.
During the first several months of the year, the Company contracts with certain commercial bakers for future delivery of quantities representing a substantial portion of the sales of fruit cake materials to institutional users. Deliveries against these contracts are completed prior to the close of the fiscal year ending December 31.
It is a trade practice to allow some supermarket chains to return unopened cases of candied fruit products that remain unsold at year-end, an option for which they normally pay a premium. A provision for the estimated losses on retail returns is included in the Company’s consolidated financial statements, for the year during which the sales are made.
With the continuing acquisitions, mergers and other consolidations in the supermarket industry, there is increasing concentration of candied fruit buying activity. During 2017, the Company derived 16.6% of its consolidated net sales from Walmart Stores, Inc. This customer is not affiliated with Paradise, Inc. in any way. The loss of this customer would have a material adverse effect on operating earnings.
While there is no industry-wide data available, management estimates that the Company sold approximately 85% of all candied fruits and peels consumed in the U.S. during 2017. The Company knows of two major competitors; however, it estimates that neither of these has as large a share of the market as the Company’s.
The molded plastics industry is very large and diverse, and management has no reasonable estimate of its total size. Many products produced by the Company are materials for its own use in the packaging of candied fruits for sale at the retail level. Outside sales represent approximately 90% of the Company’s total plastics production at cost. During 2017, the Company derived 10.4% of its consolidated net sales from Aqua Cal, Inc. The loss of this customer would have a material adverse effect on operating earnings.
In the above business segments, it is the opinion of management that price, which is to include the cost of delivery, is the largest single competitive factor, followed by product quality and customer service.
| I-3 |
| Item 1. | Business (Continued) |
Given the above competitive criteria, it is the opinion of management that the Company is in a favorable position.
Over the years, the Company has made capital investments of over $1 million in order to comply with the growing body of environmental regulations. These have included the building of screening and pretreatment facilities for water effluent, the redesign and rebuilding of one processing department in order to improve the control of the quality of air emissions, and removing underground fuel storage tanks to approved above ground locations. All of these facilities are permitted by governmental authorities at various levels, and are subjected to periodic testing as a condition of permit maintenance and renewal. All required permitting is currently in effect, and the Company is in full compliance with all terms and conditions stated therein.
By local ordinance, it is required that all water effluent is metered, tested and discharged into a municipal industrial waste treatment plant. During 2017, costs for this discharge approximated $295,000, and management estimates that all expenses directly related to compliance with environmental regulations total well over $325,000 annually, which includes costs for permits, third party inspections and depreciation of installations.
The Company employs between 130 and 195 people, depending upon the season.
The Company conducts operations principally within the United States. Foreign activities are not material.
| Item 2. | Properties |
Built in 1961, the plant is located in a modern industrial subdivision in Plant City, Florida, approximately 20 miles east of the City of Tampa. It is served by three railroad sidings, and has paved road access to three major state and national highways. It has production and warehouse facilities of nearly 350,000 square feet.
During 1985, the Company acquired approximately 5.2 acres immediately adjacent to, and to the west of, its main plant building. Several buildings and a truck weight scale existed on the property. Some of these facilities have been significantly updated, remodeled, and/or rebuilt and are used for the strawberry processing and some plastics molding operations. In 2006, Paradise, Inc. built a new 10,000 square foot building on this land. The building is primarily used for the production of custom vacuum forming parts for its plastics customers.
The Company owns its plant facilities and other properties free and clear of any mortgage obligations.
Because of the unique processing methods employed for candied fruit, much of the equipment used by the Company is designed, built and assembled by the Company’s employees. The Company considers its plant one of the most modern, automated plants in the industry. The equipment consists of vats, dehydrators, tanks, giant evaporators, carbon filter presses, syrup pumps and other scientifically designed processing equipment. Finished retail packages are stored in air-conditioned warehouses, if required.
Regarding molded plastic manufacturing, most equipment is normally available from a number of competitive sources. The molds used for specialized plastic products must be individually designed and manufactured, requiring substantial investment, and are considered proprietary.
| Item 3. | Legal Proceedings |
None
| Item 4. | Mine Safety Disclosures |
Not Applicable
| I-4 |
| Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities |
On August 22, 1997, the Securities and Exchange Commission issued new listing requirements for companies listed on the NASDAQ Small Cap Market. The requirements became effective on February 23, 1998. As of December 2017, the Company had not met the listing criteria. Paradise, Inc. is currently listed as PARF:OTCPK.
| (a) | The following table shows the range of closing bid prices for the Company’s Common Stock in the over-the-counter market for the calendar quarters indicated. The quotations represent prices in the over-the-counter market between dealers in securities, do not include retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions. |
| BID PRICES | ||||||||
| High | Low | |||||||
| 2017 | ||||||||
| First Quarter | 32.00 | 26.80 | ||||||
| Second Quarter | 38.50 | 29.75 | ||||||
| Third Quarter | 35.95 | 27.00 | ||||||
| Fourth Quarter | 30.00 | 26.85 | ||||||
| 2016 | ||||||||
| First Quarter | 29.00 | 22.85 | ||||||
| Second Quarter | 26.00 | 23.00 | ||||||
| Third Quarter | 28.83 | 25.35 | ||||||
| Fourth Quarter | 27.50 | 23.21 | ||||||
| (b) | Approximate Number of Equity Security Holders |
As of April 2, 2018, the approximate number of holders of record of each class of equity securities of the Registrant were:
| NUMBER OF | ||||
| TITLE OF CLASS | HOLDERS OF RECORD | |||
| Common Stock, $.30 Par Value | 105 | |||
| (c) | Dividend History and Policy |
Dividends have been declared and paid annually when warranted by profitability. On April 2, 2018, the Board of Directors declared dividends of $0.15 per share to stockholders of record on April 13, 2018. Dividends paid to stockholders for 2017 were $0.25 per share and for 2016 were $0.15 per share.
| II-1 |
| Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued) |
| (c) | Dividend History and Policy (Continued) |
The Company does not have a standard policy in regards to the declaration and payment of dividends. Each year dividend payments, if any, are determined upon consideration of the current profitability, cash flow requirements, investment outlook and other pertinent factors.
| Item 6. | Selected Financial Data – not applicable |
| II-2 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Explanatory Note
This Form 10-K/A amends and restates the Company’s audited consolidated financial statements and related disclosures in Part II, Item 8, “Consolidated Financial Statements” as of and for the year ended December 31, 2017 to reflect the correction of an error discussed in Note 2 to our Consolidated Financial Statements. Accordingly, we have amended the following Management’s Discussion and Analysis of Financial Condition and Results of Operations to the extent necessary to reflect the effects of these amendments and restatements.
Summary
The following tables set forth for the periods indicated (i) percentages which certain items in the financial data bear to net sales of the Company and (ii) percentage increase (decrease) of such item as compared to the indicated prior period.
| Relationship to | Period to Period | |||||||||||||||
| Total Revenue | Increase (Decrease) | |||||||||||||||
| Year Ended December 31, | Years Ended | |||||||||||||||
| 2017 | 2016 | 2017-2016 | 2016-2015 | |||||||||||||
| (Restated) | ( Restated ) | |||||||||||||||
| NET SALES: | ||||||||||||||||
| Candied Fruit | 77.0 | % | 68.7 | % | 3.8 | % | (1.5 | )% | ||||||||
| Molded Plastics | 23.0 | 31.3 | (31.9 | ) | (3.4 | ) | ||||||||||
| Total Sales | 100.0 | 100.0 | (7.4 | ) | (2.1 | ) | ||||||||||
| Cost of Sales | 79.6 | 73.7 | 0.0 | (4.9 | ) | |||||||||||
| Selling, General and | ||||||||||||||||
| Administrative Expenses | 18.3 | 18.4 | (7.8 | ) | (10.8 | ) | ||||||||||
| Amortization Expense | - | 0.3 | (91.2 | ) | (51.2 | ) | ||||||||||
| Interest Expense | - | - | -- | |||||||||||||
| Total Expenses | 97.9 | 92.4 | (1.9 | ) | (6.4 | ) | ||||||||||
| Income from Operations | 2.1 | 7.6 | (74.5 | ) | 120.9 | |||||||||||
| Other Income, Net | - | - | 96.0 | (78.2 | ) | |||||||||||
| Income Before Provision for Income Taxes | 2.1 | 7.6 | (74.1 | ) | 116.1 | |||||||||||
| Provision for Income Taxes | 0.7 | 2.8 | (78.3 | ) | 116.5 | |||||||||||
| Net Income | 1.5 | % | 4.8 | % | (71.6 | )% | 115.9 | % | ||||||||
| II-3 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Liquidity
Management is not aware of any demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, a material increase or decrease in the Company’s liquidity. As discussed in footnote 5 of the Company’s consolidated financial statements, a line of credit is available to the Company to finance short-term working capital needs.
Capital Resources
The Company does not have any material outstanding commitments for capital expenditures. Management is not aware of any material trends either favorable or unfavorable in the Company’s capital resources.
Critical Accounting Policies and Estimates
The following discussion and analysis is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, early payment discounts, customer discounts, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements:
Fair Value of Financial Instruments
The aggregated net fair value estimates discussed in the Company’s consolidated financial statements are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
| II-4 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Critical Accounting Policies and Estimates (Continued)
Accounts Receivable
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against accounts receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2017 and 2016. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended December 31, 2017 and 2016, the Company determined that its goodwill was not impaired.
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 on January 1, 2018 on a full retrospective basis. There was no material financial impact from adopting the new revenue standards.
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.
| II-5 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
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 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 Company adopted this ASU with retrospective application for 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 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.
| II-6 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2017 (as restated) compared to 2016
Results of Operations
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 77.0% of consolidated net sales during the current twelve month reporting period ending December 31, 2017. Fruit segment net sales for 2017 increased $609,074 or 3.8% to $16,566,096 from $15,957,022 for the similar reporting period of 2016. This increase is directly attributable to two major customers who generated additional net sales of $879,200 during the eight to ten week period of time leading up to the holidays of Thanksgiving and Christmas. This increase helped offset an additional amount of product returns as well as an increase in incentives issued to various customers during the 2017 selling season. Management, based on a five year historical average, provides an estimated for product returns by applying an allowance against accounts receivable for the invoiced price of the returns. Also, a provision to recognize a related estimate of finished goods returns is also added to inventories. However, the Company incurred additional product returns along with increases in incentives that combined total approximately $445,000. Payment of these incentives occurred in 2018 after completion of the 2017 selling season; however, the information related to these additional incentives was available before the issuance of this original report. As such, the 2017 consolidated financial statements have been restated to correct this error and reduce revenue for 2017. In addition, management will review the Company’s 2018 provisions for product returns and accrued incentives on a customer by customer basis in order to determine if the amounts reserved are adequate.
Paradise Plastics, Inc., (Paradise Plastics) a wholly owned company of Paradise, Inc., which accounted for 22.5% of total net sales to unaffiliated customers during 2017, generated net sales of $4,952,396 compared to $7,273,364 for the similar reporting period of 2016. This represents a decrease of $2,320,968 or 31.9%. Paradise Plastics produces various types of custom molded parts for customers which are then assembled into finished products by its customers for sale to the end user. In many cases, continued production for these parts are based on success achieved by the end user. Furthermore, in some cases, a change in product design may impact the continuation of these sales. As disclosed in previous filings, beginning first quarter of 2017, a major plastics customer decided to transfer production of custom molded parts produced by thermoforming to an out of state supplier who could produce these parts via injection molding. The major benefit 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 offered to construct a new on-site building as well as purchase the necessary injection molding equipment to continue production, however, the offer was declined. With production of these parts coming to an end during the first quarter of 2017, net sales totaled $120,625 compared to $1,757,250 for the entire twelve months of 2016. This represents a decrease of $1,636,625 and is the primary reason for the decrease in plastics sales mentioned above. The remaining loss revenue of $684,343 for 2017 was based on factors such as the transfer of production to facilities outside of the United States along with reduced orders for parts from other long term customers. Reacting to this situation, management commenced an orderly reduction of hourly personnel associated with this loss of business during the first and second quarters of 2017. The reduction in hourly personnel along with the recent planned retirement of a Senior Vice President - Plastics, resulted in savings in excess of $250,000 during the last three quarters of 2017.
| II-7 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2017 (as restated) compared to 2016 – (Continued)
Results of Operations (Continued)
It is also important to mention that Paradise Plastics is still producing other custom molding parts for many of its customers whose production needs decreased during 2017 and is continuing to aggressively market its custom molding capabilities throughout the United States in order to replace this business. This increased marketing effort did result in fourth quarter sales increasing 34% over third quarter 2017 plastics sales.
Consolidated cost of sales as a percentage of consolidated net sales increased 5.9% for the twelve months ending December 31, 2017 compared to the previous twelve months of 2016. This increase is primary related to Plastics segment sales discussed above as the decline in sales outpaced the savings in labor and variable expenses associated with custom molding overhead during 2017.
Selling, general and administrative expenses decreased $335,619 or 7.8% for the twelve months ending December 31, 2017 compared to the similar reporting period of 2016. The primary reasons for this continued to be the reduction in the number of employees within the SG&A departments coupled with a transfer of payroll processing and health insurance administration to a 3rd party vendor during the first quarter of 2017.
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2017 and 2016 was $0. Interest expense when incurred, is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to purchases sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2017 and 2016, the Company’s revolving line of credit balance was $0, its letters of credit balance were $541,572 and $42,938 respectively, and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial banking institution. It was renewed as of July 31, 2017 and remains in place for a two year period maturing on July 31, 2019.
| II-8 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2017 (as restated) compared to 2016 – (Continued)
Other Significant Items
Accounts Receivable balance less allowances for sales returns at December 31, 2017 was $1,870,649 compared to $2,108,608 at December 31, 2016 as payments from the Company’s retail fruit customers were relatively consistent with the timing of receipts from the prior year. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. As of December 31, 2017, an increase in returns from customers related to the 2017 selling season resulted in the allowance for sales returns to increase $351,425 to $1,566,578 compared from $1,215,153 as of December 31, 2016.
Inventory on hand increased by $1,223,613 to $9,528,646 as of December 31, 2017 from $8,305,033 as of December 31, 2016 and is partially related to the increase in plastics sales orders received during the fourth quarter. Production requirements to meet customer demand for the upcoming first quarter of 2018 resulted in the ending balance of plastics raw materials of more than $350,000 at December 31, 2017 compared to December 31, 2016. The remaining amount of this increase, which is approximately $875,000, is related to the fruit segment and is based on the following two reasons. First, an increase in fruit segment product was returned after the 2017 selling season which increased the provision for inventory returns of approximately $255,000. Secondly, timing issues from overseas suppliers impacted by such factors as changes in weather patterns, labor availability or economic conditions resulted in an increase in raw fruit materials received during the second half of 2017 compared to the similar period of time for 2016.
The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2017 and December 31, 2016, outstanding letters of credit were $541,572 and $42,938, respectively. At December 31, 2017 and 2016, the Company had $8,668,012 and $9,240,638 respectively, in cash. Due to the seasonality of the Company’s fruit segment, cash on hand at December 31, 2017 of $8,668,012 is primarily committed for 2018 purchase orders totaling more than $5 million for brined fruit, corn syrup and other miscellaneous fruit ingredients. This outlay of funds for fruit and related fruit ingredients combined with the requirements to fund payroll and factory overhead during the off-season can exceed $1,000,000 per month beginning in January and continuing through September of each year.
| II-9 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2017 (as restated) compared to 2016 – (Continued)
Summary
Paradise, Inc.’s consolidated net sales decreased 7.4% for the twelve months of operations ending December 31, 2017 to $21,518,492 from $23,230,386 for the similar reporting period of 2016. This decrease in overall sales is primarily related to the decline in plastics segment revenue of $2,220,968 for the twelve month of 2017 compared to 2016. This decrease in plastics sales also impacted the increase cost of sales as the loss of revenue from its plastics customers outpaced the savings achieved in labor and variable factory overhead achieved during the last three quarters of 2017. The fruit segment while generating an increase in 2017 net sales of $609,074 over 2016 sales experienced an almost equal amount of decline in gross profit of approximately $680,000 due to additional product returns and incentives incurred on behalf of the Company’s fruit segment customers. In summary, the combination of these factors decreased Income Before Provision For Income Taxes to $1,309,740 to $458,628 from $1,768,368. After applying Provision for Income Taxes for 2017 and 2016 of $143,815 and $661,503, respectively, Net Income for 2017 was $314,813 compared to $1,106,865 for 2016. Earnings per Share basic and diluted at December 31, 2017 and 2016 were $0.61 and $2.13, respectively.
2016 Compared to 2015
Results of Operations
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 68.7% of consolidated net sales during the current twelve month reporting period ending December 31, 2016. Fruit segment net sales for 2016 decreased 1.5% to $15,957,022 from $16,202,626 for the similar reporting period of 2015 as sales to several major customers were reduced by the number of holiday fruit ingredients ordered and placed into various holiday baking centers within their stores. As the challenges of Paradise, Inc.’s retail glace’ customers of limited space to promote the Company’s products have been well documented, Paradise, Inc.’s sales personnel have branched outside the traditional brick and mortar sites to sell its products. With improvements to the Company’s website over the past several years, consumers now have the opportunity to place orders online through our partnership with Amazon. Online sales of glace’ fruit ingredients, which represents a small portion of overall net sales, has experienced steady growth increasing 23.8% to $153,155 as of December 31, 2016 compared to $123,670 as of December 31, 2015. Online sales also offer a year round opportunity to sell fruit cake ingredients. This combined with promoting the use of fruit cake ingredients for non-traditional holiday baking ideas as shown on the Company’s web-site may add a new generation of customers and thus increased sales moving forward.
| II-10 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2016 Compared to 2015 (Continued)
Results of Operations (Continued)
Paradise Plastics, Inc., (Paradise Plastics) a wholly owned company of Paradise, Inc. which accounted for 31.3% of total consolidated net sales to unaffiliated customers, had a decline in sales of 3.4% to $7,273,364 from $7,531,815 for the twelve months ended December 31, 2016 compared to December 31, 2015. 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 for these parts are based on their success achieved by the end user. However, in some cases, a change in production technique will have an impact on sales. As such, the Company was notified in late 2016 that beginning during the first quarter of 2017, a long term plastics customer decided to transfer production of thermoformed parts away from Paradise Plastics to another supplier who is able to process these custom molding parts by injection molding. The major benefit to our customer is the ability to significantly lower their cost per part via injection molding. Paradise Plastics had offered to finance up to $3 million to construct a facility along with purchase of necessary injection molding equipment to retain this business, however the offer was declined. Therefore, based upon when the transfer of production from Paradise Plastics to the new injection molding supplier is completed, the potential loss of net sales could exceed $1 million in 2017.
Consolidated cost of sales as a percentage of consolidated net sales decreased 2.2% for the twelve months of December 31, 2016 compared to the previous twelve months of 2015 as management re-started brining operations in January of 2016. As previously reported, with more than an adequate amount of brined peel in the Company’s inventory as of January 1, 2015, brining operations were postponed for 2015. Thus, after brining over 2.9 million lbs. of peel inventory during the first and second quarters of 2016, the allocation of this production over a relatively fixed amount of factory overhead resulted in the improvement in cost of sales as reported above.
Selling, general and administrative expenses decreased $515,173 or 10.8% for the twelve months ending December 31, 2016 compared to the similar reporting period of 2015. Reasons for this decrease are as follows: first, three senior employees, two within finance and administration and one sales executive retired during late 2015. The net savings which included the hiring of two new employees within finance and administration approximated $250,000 during 2016. Secondly, as disclosed in an 8K filing on August 22, 2016, Melvin. S. Gordon, Chairman and CEO began his leave of absence due to health reasons from the Company resulting in savings of $121,531 during the third and fourth quarters of 2016. Lastly, Paradise, Inc. made a management decision during 2015 to expense to operations a total of $165,401 in outstanding receivables and legal fees owed to the Company from a customer that ceased operations during the third quarter of 2015.
| II-11 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2016 Compared to 2015 (Continued)
Results of Operations (Continued)
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2016 and 2015 was $0. Interest expense when incurred is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2016 and 2015, the Company’s revolving line of credit balance was $0, its letters of credit balance were $42,938 and $582,839, respectively, and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%.
Other Significant Items
Accounts Receivable balance less allowances for sales returns at December 31, 2016 was $2,108,608 compared to $2,182,306 at December 31, 2015 as payments from the Company’s retail fruit products were relatively consistent with the timing of receipts with the prior year. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. At December 31, 2016, returns from customers resulted in the allowance for sales returns of $1,215,153 compared to $1,066,314 as of December 31, 2015.
The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2016 and December 31, 2015, outstanding letters of credit were $42,938 and $582,839, respectively. At December 31, 2016 and 2015, the Company had $9,240,638 and $8,791,938 respectively, in cash. Due to the seasonality of our business, cash on hand at December 31, 2016 of $9,240,638 is primarily committed for estimated 2017 purchase orders totaling more than $3.5 million of brined fruit. In addition, working capital needs for payroll and for fixed and variable factory overhead can exceed as much as $1,000,000 per month during the peak production months of June through September of each year.
| II-12 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
2016 Compared to 2015 (Continued)
Summary
Paradise, Inc.’s consolidated net sales decreased 2.1% for the twelve months of operations ending December 31, 2016 to $23,230,386 from $23,734,441 for the similar reporting period of 2015 as orders from several existing customers within the fruit and plastics segments slowed during 2016. However, with the need to produce additional fruit inventory to meet existing customer demand for the 2016 holiday selling season, the Company processed 2.9 million lbs. of orange peel. This additional processing of raw material into brined and finished goods fruit inventory allocated over a relatively fixed amount of factory overhead improved cost of sales as a percentage of sales by 2.2 %. In addition, the Company achieved tremendous savings in selling, general and administrative expenses of 10.8% as several senior sales and finance employees retired during late 2015. The improvements in cost of sales and selling, general and administrative expenses more than offset the decline in sales during 2016 resulting in income before provision for income taxes of $1,768,368 compared to $818,274. After applying Provision for Income Taxes for 2016 and 2015 of $661,503 and $305,516, Net Income for 2016 was $1,106,865 compared to $512,758 for 2015. Earnings per Share at December 31, 2016 and 2015 were $2.13 and $0.99, respectively.
| II-13 |
| Item 8. | Consolidated Financial Statements |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Paradise, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Paradise, Inc., and subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Restatement of Previously Issued Financial Statements
As discussed in Notes 2, 3, 7, 8 and 9 to the consolidated financial statements, the December 31, 2017 consolidated financial statements have been restated to correct a misstatement.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| We have served as the Company’s auditor since 2007. | |
| /s/ Warren Averett, LLC | |
| Tampa, Florida |
April 2, 2018, except for the effects of the restatement as discussed in Notes 2, 3, 7, 8 and 9 to the consolidated financial statements, as to which the date is August 20, 2018.
| II-14 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
| DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 8,668,012 | $ | 9,240,638 | ||||
| Accounts Receivable, Net of Allowance for Doubtful Accounts of $ -0- and Allowance for Returns of $1,566,578 (2017-restated) and $1,215,153 (2016) | 1,870,649 | 2,108,608 | ||||||
| Inventories, Net | 9,528,646 | 8,305,033 | ||||||
| Income Tax Receivable | 209,616 | - | ||||||
| Prepaid Expenses and Other Current Assets | 224,384 | 296,851 | ||||||
| Total Current Assets | 20,501,307 | 19,951,130 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, Net | 4,271,727 | 4,162,636 | ||||||
| GOODWILL | 413,280 | 413,280 | ||||||
| OTHER ASSETS | 345,415 | 393,994 | ||||||
| TOTAL ASSETS | $ | 25,531,729 | $ | 24,921,040 | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
| II-15 |
LIABILITIES AND STOCKHOLDERS’ EQUITY
| DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-Term Debt | $ | 541,572 | $ | 42,938 | ||||
| Accounts Payable | 638,896 | 808,696 | ||||||
| Accrued Expenses | 828,914 | 689,177 | ||||||
| Total Current Liabilities | 2,009,382 | 1,540,811 | ||||||
| DEFERRED INCOME TAXES | 83,687 | 126,482 | ||||||
| Total Liabilities | 2,093,069 | 1,667,293 | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common Stock, $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued and 519,600 Shares Outstanding | 174,928 | 174,928 | ||||||
| Capital in Excess of Par Value | 1,288,793 | 1,288,793 | ||||||
| Retained Earnings | 22,248,158 | 22,063,245 | ||||||
| 23,711,879 | 23,526,966 | |||||||
| Treasury Stock, at Cost, 63,494 Shares | 273,219 | 273,219 | ||||||
| Total Stockholders’ Equity | 23,438,660 | 23,253,747 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 25,531,729 | $ | 24,921,040 | ||||
| II-16 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| NET SALES | $ | 21,518,492 | $ | 23,230,386 | ||||
| COSTS AND EXPENSES: | ||||||||
| Cost of Goods Sold | 17,122,293 | 17,122,466 | ||||||
| Selling, General and Administrative Expenses | 3,940,064 | 4,275,683 | ||||||
| Amortization Expense | 6,000 | 68,203 | ||||||
| Total Costs and Expenses | 21,068,357 | 21,466,352 | ||||||
| INCOME FROM OPERATIONS | 450,135 | 1,764,034 | ||||||
| OTHER INCOME – NET | 8,493 | 4,334 | ||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 458,628 | 1,768,368 | ||||||
| PROVISION FOR INCOME TAXES | 143,815 | 661,503 | ||||||
| NET INCOME | $ | 314,813 | $ | 1,106,865 | ||||
| EARNINGS PER SHARE: | ||||||||
| Basic | $ | 0.61 | $ | 2.13 | ||||
| Diluted | $ | 0.61 | $ | 2.13 | ||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
| II-17 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2017 and 2016
| CAPITAL IN | ||||||||||||||||||||
| COMMON | EXCESS OF | RETAINED | TREASURY | |||||||||||||||||
| STOCK | PAR VALUE | EARNINGS | STOCK | TOTAL | ||||||||||||||||
| (Restated) | ||||||||||||||||||||
| Balance, December 31, 2015 | $ | 174,928 | $ | 1,288,793 | $ | 21,034,320 | $ | (273,219 | ) | $ | 22,224,822 | |||||||||
| Cash Dividends Declared, $0.15 per Share | (77,940 | ) | (77,940 | ) | ||||||||||||||||
| Net Income | 1,106,865 | 1,106,865 | ||||||||||||||||||
| Balance, December 31, 2016 | 174,928 | 1,288,793 | 22,063,245 | (273,219 | ) | 23,253,747 | ||||||||||||||
| Cash Dividends Declared, $0.25 per Share | (129,900 | ) | (129,900 | ) | ||||||||||||||||
| Net Income | 314,813 | 314,813 | ||||||||||||||||||
| Balance, December 31, 2017 (Restated) | $ | 174,928 | $ | 1,288,793 | $ | 22,248,158 | $ | (273,219 | ) | $ | 23,438,660 | |||||||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
| II-18 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 314,813 | $ | 1,106,865 | ||||
| Adjustments to Reconcile Net Income to Net Cash provided by (used in) Operating Activities: | ||||||||
| Provision for Sales Returns | 351,425 | 148,839 | ||||||
| Provision for Estimated Inventory Returns | 255,268 | (99,609 | ) | |||||
| Provision for Deferred Income Taxes | (42,795 | ) | 53,191 | |||||
| Depreciation and Amortization | 415,381 | 460,673 | ||||||
| Decrease (Increase) in: | ||||||||
| Accounts Receivable | (113,466 | ) | (75,141 | ) | ||||
| Inventories | (1,478,881 | ) | (25,755 | ) | ||||
| Prepaid Expenses and Other Current Assets | 72,467 | 20,115 | ||||||
| Income Tax Receivable | (209,616 | ) | 77,574 | |||||
| Other Assets | 7,704 | (16,354 | ) | |||||
| Increase (Decrease) in: | ||||||||
| Accounts Payable | (169,800 | ) | 192,768 | |||||
| Accrued Expenses | 139,737 | (154,674 | ) | |||||
| Net Cash (used in) provided by Operating Activities | (457,763 | ) | 1,688,492 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of Property, Plant and Equipment | (544,472 | ) | (630,626 | ) | ||||
| Proceeds from Sale of Equipment | 26,000 | |||||||
| Change in Cash Surrender Value of Life Insurance | 40,875 | 8,675 | ||||||
| Net Cash used in Investing Activities | (477,597 | ) | (621,951 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Line of Credit Origination Costs | (36,000 | ) | - | |||||
| Proceeds from Short-Term Debt | 1,624,351 | 323,626 | ||||||
| Dividends Paid | (129,900 | ) | (77,940 | ) | ||||
| Payments on Short-Term Debt | (1,095,717 | ) | (863,527 | ) | ||||
| Net Cash provided by (used in) Financing Activities | 362,734 | (617,841 | ) | |||||
| II-19 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| NET CHANGE IN CASH | (572,626 | ) | 448,700 | |||||
| CASH, at Beginning of Year | 9,240,638 | 8,791,938 | ||||||
| CASH, at End of Year | $ | 8,668,012 | $ | 9,240,638 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Year for: | ||||||||
| Income Taxes | $ | 396,225 | $ | 718,046 | ||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
| II-20 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES |
Paradise, Inc. operations are conducted through two business segments, candied fruit and molded plastics. The primary operation of the fruit segment is production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preserves, dairies, drink manufacturers, etc. The molded plastics segment provides production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. Substantially all of the Company’s customers are located in the United States of America.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
| II-21 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Accounts Receivable and Revenue Recognition
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories.
Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2017 and 2016. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or net realizable value. Cost includes material, labor, factory overhead and depreciation.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment range from 3 – 40 years.
Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the current earnings.
| II-22 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended December 31, 2017 and 2016, the Company determined that its goodwill was not impaired.
Long-lived Assets
The Company’s long-lived assets other than goodwill are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended December 31, 2017 and 2016, the Company determined that its long-lived assets were not impaired.
Selling Expenses
The Company considers freight delivery costs to be selling expenses and has included $590,107 (2017) and $611,322 (2016) in selling, general and administrative expenses in the accompanying statements of income.
Employee Benefit Plan
The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 2017 and 2016, the Company incurred $26,630 and $21,691, respectively, in 401(k) expense.
Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 2017 and 2016. There are no dilutive securities outstanding at December 31, 2017 and 2016.
| II-23 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Reclassifications
Certain minor reclassifications have been made to the 2016 consolidated financial statements in order to conform to the classifications used in 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 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 on January 1, 2018 on a full retrospective basis. There was no material financial impact from adopting the new revenue standards.
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.
| II-24 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Impact of Recently Issued Accounting Pronouncements (Continued)
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 adopted this ASU with retrospective application for 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company 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.
| II-25 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 2: | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS |
The Company is filing this Amendment to our Annual Report on Form 10-K/A for the year ended December 31, 2017 due to the fact that the Company has determined that a material weakness in internal control relating to the recording of customer returns, allowances, discounts and incentives has resulted in an overstatement of year end income before provision of income taxes of approximately $445,000 as of December 31, 2017. As of the date of this filing, the Company is working diligently to determine the impact of this material weakness will have on the Company’s Form 10-Q for the second quarter report ending June 30, 2018.
Following is the effect of the restatement on the Company’s December 31, 2017 unaudited financial statements:
| As Previously | ||||||||||||
| Balance Sheet | Reported | Adjustment | As Restated | |||||||||
| Current Assets: | ||||||||||||
| Cash | $ | 8,668,012 | $ | - | $ | 8,668,012 | ||||||
| Accounts Receivable | 2,298,796 | (428,147 | ) | 1,870,649 | ||||||||
| Inventories, Net | 9,207,279 | 321,367 | 9,528,646 | |||||||||
| Income Tax Receivable | 92,850 | 116,766 | 209,616 | |||||||||
| Prepaid Expenses and Other Current Assets | 224,384 | - | 224,384 | |||||||||
| Total Current Assets | 20,491,321 | 9,986 | 20,501,307 | |||||||||
| Property, Plant and Equipment, Net | 4,271,727 | - | 4,271,727 | |||||||||
| Goodwill | 413,280 | - | 413,280 | |||||||||
| Other Assets | 345,415 | - | 345,415 | |||||||||
| TOTAL ASSETS | $ | 25,521,743 | $ | 9,986 | $ | 25,531,729 | ||||||
| II-26 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 2: | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
| As Previously | ||||||||||||
| Balance Sheet | Reported | Adjustment | As Restated | |||||||||
| Current Liabilities: | ||||||||||||
| Short-Term Debt | $ | 541,572 | $ | - | $ | 541,572 | ||||||
| Accounts Payable | 638,896 | - | 638,896 | |||||||||
| Accrued Expenses | 489,783 | 339,131 | 828,914 | |||||||||
| Total Current Liabilities | 1,670,251 | 339,131 | 2,009,382 | |||||||||
| Deferred Income Taxes | 111,983 | (28,296 | ) | 83,687 | ||||||||
| Total Liabilities | 1,782,234 | 310,835 | 2,093,069 | |||||||||
| Stockholders’ Equity: | ||||||||||||
| Common Stock, $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued and 519,600 Shares Outstanding | 174,928 | - | 174,928 | |||||||||
| Capital in Excess of Par Value | 1,288,793 | - | 1,288,793 | |||||||||
| Retained Earnings | 22,549,007 | (300,849 | ) | 22,248,158 | ||||||||
| 24,012,728 | (300,849 | ) | 23,711,879 | |||||||||
| Treasury Stock, at Cost, 63,494 Shares | (273,219 | ) | - | (273,219 | ) | |||||||
| Total Stockholders’ Equity | 23,739,509 | (300,849 | ) | 23,438,660 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 25,521,743 | $ | 9,986 | $ | 25,531,729 | ||||||
| II-27 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 2: | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
| As Previously | ||||||||||||
| Income Statement | Reported | Adjustment | As Restated | |||||||||
| Net Sales | $ | 21,964,403 | $ | (445,911 | ) | $ | 21,518,492 | |||||
| Costs and Expenses: | ||||||||||||
| Cost of Goods Sold | 17,122,293 | - | 17,122,293 | |||||||||
| Selling, General and Administrative Expenses | 3,940,064 | - | 3,940,064 | |||||||||
| Amortization Expense | 6,000 | - | 6,000 | |||||||||
| Total Costs and Expenses | 21,068,357 | - | 21,068,357 | |||||||||
| Income from Operations | 896,046 | (445,911 | ) | 450,135 | ||||||||
| Other Income – Net | 8,493 | - | 8,493 | |||||||||
| Income before provision for income taxes | 904,539 | (445,911 | ) | 458,628 | ||||||||
| Provision for income taxes | (288,877 | ) | 145,062 | (143,815 | ) | |||||||
| Net Income | $ | 615,662 | $ | (300,849 | ) | $ | 314,813 | |||||
| Earnings per Share: | ||||||||||||
| Basic | $ | 1.19 | $ | (0.58 | ) | $ | 0.61 | |||||
| Diluted | $ | 1.19 | $ | (0.58 | ) | $ | 0.61 | |||||
| II-28 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 2: | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
| As Previously | ||||||||||||
| Cash Flow | Reported | Adjustment | As Restated | |||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net Income | $ | 615,662 | $ | (300,849 | ) | $ | 314,813 | |||||
| Adjustments to Reconcile Net Income to Net | ||||||||||||
| Cash (used in) provided by Operating Activities: | ||||||||||||
| Provision for Sales Returns | (76,722 | ) | 428,147 | 351,425 | ||||||||
| Provision for Estimated Inventory Returns | (66,099 | ) | 321,367 | 255,268 | ||||||||
| Provision for Deferred Income Taxes | (14,499 | ) | (28,296 | ) | (42,795 | ) | ||||||
| Depreciation and Amortization | 415,381 | - | 415,381 | |||||||||
| Decrease (Increase) in: | ||||||||||||
| Accounts Receivable | (113,466 | ) | - | (113,466 | ) | |||||||
| Inventories | (836,147 | ) | (642,734 | ) | (1,478,881 | ) | ||||||
| Prepaid Expenses and Other Current Assets | 72,467 | - | 72,467 | |||||||||
| Income Tax Receivable | (92,850 | ) | (116,766 | ) | (209,616 | ) | ||||||
| Other Assets | 7,704 | - | 7,704 | |||||||||
| Increase (Decrease) in: | ||||||||||||
| Accounts Payable | (169,800 | ) | - | (169,800 | ) | |||||||
| Accrued Expenses | (199,394 | ) | 339,131 | 139,737 | ||||||||
| Net Cash (used in) provided by Operating Activities | (457,763 | ) | - | (457,763 | ) | |||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Purchase of Property, Plant and Equipment | (544,472 | ) | - | (544,472 | ) | |||||||
| Proceeds from Sale of Equipment | 26,000 | - | 26,000 | |||||||||
| Change in Cash Surrender Value of Life Insurance | 40,875 | - | 40,875 | |||||||||
| Net Cash used in Investing Activities | (477,597 | ) | - | (477,597 | ) | |||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Line of Credit Origination Costs | (36,000 | ) | - | (36,000 | ) | |||||||
| Proceeds from Short-Term Debt | 1,624,351 | - | 1,624,351 | |||||||||
| Dividends Paid | (129,900 | ) | - | (129,900 | ) | |||||||
| Payments on Short-Term Debt | (1,095,717 | ) | - | (1,095,717 | ) | |||||||
| Net Cash provided by (used in) Financing Activities | 362,734 | - | 362,734 | |||||||||
| II-29 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 2: | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
| As Previously | ||||||||||||
| Cash Flow | Reported | Adjustment | As Restated | |||||||||
| Net Change in Cash | (572,626 | ) | - | (572,626 | ) | |||||||
| Cash, at Beginning of Year | 9,240,638 | - | 9,240,638 | |||||||||
| Cash, at End of Year | $ | 8,668,012 | $ | - | $ | 8,668,012 | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||||||
| Cash Paid During the Year for: | ||||||||||||
| Income Taxes | $ | 396,225 | $ | - | $ | 396,225 | ||||||
| NOTE 3: | INVENTORIES |
| 2017 | 2016 | |||||||
| ( Restated ) | ||||||||
| Supplies | $ | 194,346 | $ | 165,446 | ||||
| Raw Materials | 5,855,658 | 5,254,103 | ||||||
| Work in Progress | 1,077,718 | 1,026,657 | ||||||
| Finished Goods | 2,400,924 | 1,858,827 | ||||||
| Total | $ | 9,528,646 | $ | 8,305,033 | ||||
Included in Finished Goods inventory are estimated returns related to the Provision for Sales Returns totaling $1,175,925 (2017-restated) and $920,657 (2016).
Substantially all inventories are pledged as collateral for certain short-term obligations.
| II-30 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 4: | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment consisted of the following:
| 2017 | 2016 | |||||||
| Land and Improvements | $ | 656,040 | $ | 656,040 | ||||
| Buildings and Improvements | 7,944,723 | 7,611,446 | ||||||
| Machinery and Equipment | 13,289,669 | 13,075,187 | ||||||
| Vehicles | 705,189 | 749,274 | ||||||
| Furniture and Fixtures | 721,511 | 721,511 | ||||||
| Total | 23,317,132 | 22,813,458 | ||||||
| Less: Accumulated Depreciation | 19,045,405 | 18,650,822 | ||||||
| Net | $ | 4,271,727 | $ | 4,162,636 | ||||
All of the real property, machinery and equipment are pledged as collateral for the Company’s short-term debt obligations.
Depreciation expense for the years ended December 31, 2017 and 2016 was $409,381 and $392,470, respectively.
| NOTE 5: | SHORT-TERM DEBT |
| 2017 | 2016 | |||||||
| Letters of credit and other short-term debt under a revolving line of credit with a bank. | $ | 541,572 | $ | 42,938 | ||||
| TOTAL | $ | 541,572 | $ | 42,938 | ||||
| II-31 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 5: | SHORT-TERM DEBT (CONTINUED) |
On July 31, 2017, Paradise, Inc. renewed its revolving line of credit with SunTrust Bank through July 31, 2019. This renewal provides for a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year. Within this agreement are letters of credit with a limit of $1,750,000. The agreement is secured by all of the assets of the Company and requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. The Company was in compliance with these covenants at December 31, 2017. Interest is payable monthly at the bank’s LIBOR plus 1.75%.
Amortization expense of loan origination costs for the years ended December 31, 2017 and 2016 was $6,000 and $8,000, respectively.
| NOTE 6: | OPERATING LEASES |
The Company leases certain automobiles and office equipment under operating leases ranging in length from thirty-six to sixty months. Lease payments charged to operations amounted to $79,457 (2017) and $84,330 (2016), respectively.
At December 31, 2017, future minimum payments required under leases with terms greater than one year are as follows:
| Years Ending | Operating | |||
| December 31, | Leases | |||
| 2018 | $ | 43,285 | ||
| 2019 | 23,372 | |||
| 2020 | 6,966 | |||
| Total Minimum Lease Payments | $ | 73,623 | ||
| II-32 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 7: | ACCRUED EXPENSES |
Accrued Expenses consisted of the following:
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Accrued Payroll and Bonuses | $ | 196,558 | $ | 231,245 | ||||
| Accrued Brokerage Payable | 181,900 | 230,432 | ||||||
| Coupon Reimbursement | 41,325 | 60,000 | ||||||
| Accrued Credits Due to Customers | 409,131 | 167,500 | ||||||
| Total | $ | 828,914 | $ | 689,177 | ||||
| NOTE 8: | PROVISION FOR FEDERAL AND STATE INCOME TAXES |
The Company’s provision for income taxes was as follows:
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Current Federal Taxes | $ | 168,909 | $ | 522,999 | ||||
| Current State Taxes | 17,701 | 85,313 | ||||||
| Current Provision | 186,610 | 608,312 | ||||||
| Deferred Federal Taxes | (38,667 | ) | 48,060 | |||||
| Deferred State Taxes | (4,128 | ) | 5,131 | |||||
| Deferred Provision | (42,795 | ) | 53,191 | |||||
| Total Provision | $ | 143,815 | $ | 661,503 | ||||
| II-33 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 8: | PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED) |
The income tax provision differs from the amount of tax determined by applying the Federal statutory rate as follows:
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Statutory tax | $ | 155,934 | $ | 601,245 | ||||
| State income tax, net of federal tax | 16,648 | 64,192 | ||||||
| Nondeductible expenses | 6,390 | (23,774 | ) | |||||
| Change in deferred taxes due to enacted changes in tax law | (35,148 | ) | - | |||||
| Other | (9 | ) | 19,840 | |||||
| $ | 143,815 | $ | 661,503 | |||||
Net deferred tax assets and liabilities were comprised of the following:
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Current deferred tax assets (liabilities): | ||||||||
| Allowance for Sales Returns and Related Provision for Return of Finished Goods | $ | 103,523 | $ | 110,819 | ||||
| Inventory Valuation | 184,580 | 244,468 | ||||||
| Prepaid Expenses | (98,653 | ) | (112,188 | ) | ||||
| Total deferred tax assets - current | $ | 189,450 | $ | 243,099 | ||||
| Non current deferred tax assets (liabilities): | ||||||||
| Tax over Book Depreciation and Amortization | $ | (273,137 | ) | $ | (369,581 | ) | ||
| Total deferred tax liabilities - noncurrent | $ | (273,137 | ) | $ | (369,581 | ) | ||
| Net deferred tax liability | $ | (83,687 | ) | $ | (126,482 | ) | ||
| II-34 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 8: | PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED) |
The Company follows Accounting Standards Codification Topic 740, “Income Taxes” (“ASC Topic 740”). This standard provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
On December 22, 2017, federal legislation was enacted which reduced the corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. The Company revalued its December 31, 2017 deferred tax assets and liabilities applicable to future years based on the enactment of these rates. The effect to deferred income tax benefit was immaterial at the beginning of 2017.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the determination of the ultimate tax effects is uncertain. We record our tax provision based on current and future income taxes that will be due. In the determination of our provision, we have taken certain tax positions in the consideration of the effects of income and expenses that have been recognized and included in the accompanying consolidated financial statements that may or may not be recognized in the determination of current or future income taxes. We record a liability for these unrecognized tax benefits when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We review our liability for unrecognized tax benefits quarterly and adjust it in light of changing facts and circumstances, such as the outcome of tax audit.
As of December 31, 2017 and 2016, we do not expect that any of the tax positions taken by the Company, if challenged, would result in a significant tax liability.
| II-35 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 9: | 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 | ||
| Candied 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. |
| YEAR ENDED | YEAR ENDED | |||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| NET SALES IN EACH SEGMENT | ||||||||
| Candied Fruit: | ||||||||
| Sales to Unaffiliated Customers | $ | 16,566,096 | $ | 15,957,022 | ||||
| Molded Plastics: | ||||||||
| Sales to Unaffiliated Customers | 4,952,396 | 7,273,364 | ||||||
| Net Sales | $ | 21,518,492 | $ | 23,230,386 | ||||
| II-36 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 9: | BUSINESS SEGMENT DATA (CONTINUED) |
| YEAR ENDED | YEAR ENDED | |||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| THE OPERATING PROFIT OF EACH SEGMENT IS LISTED BELOW | ||||||||
| Candied Fruit | $ | 4,148,227 | $ | 4,763,316 | ||||
| Molded Plastics | 247,972 | 1,276,401 | ||||||
| Operating Profit of Segments | 4,396,199 | 6,039,717 | ||||||
| General Corporate Expenses, Net | (3,905,263 | ) | (4,234,000 | ) | ||||
| General Corporate Depreciation and Amortization Expense | (40,801 | ) | (41,683 | ) | ||||
| Other Income | 8,493 | 4,334 | ||||||
| Income Before Provision for Income Taxes | $ | 458,628 | $ | 1,768,368 | ||||
Operating profit is composed of net sales, less direct costs and overhead costs associated with each segment. The candied fruit segment purchases items from the molded plastics segment at cost. These transactions are then eliminated during consolidation. Due to the high degree of integration between the segments of the Company, it is not practical to allocate general corporate expenses, interest, and other income between the various segments.
| YEAR ENDED | YEAR ENDED | |||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Identifiable Assets of Each Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 11,078,549 | $ | 9,946,683 | ||||
| Molded Plastics | 4,231,007 | 4,211,696 | ||||||
| Identifiable Assets | 15,309,556 | 14,158,379 | ||||||
| General Corporate Assets | 10,222,173 | 10,762,661 | ||||||
| Total Assets | $ | 25,531,729 | $ | 24,921,040 | ||||
| II-37 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 9: | BUSINESS SEGMENT DATA (CONTINUED) |
Included in Identifiable Assets of the Molded Plastics Segment is goodwill totaling $413,280 at both December 31, 2017 and 2016.
Identifiable assets by segment are those assets that are principally used in the operations of each segment. General corporate assets are principally cash, land and buildings.
| YEAR ENDED | YEAR ENDED | |||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Depreciation and Amortization Expense of Each Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 216,607 | $ | 268,124 | ||||
| Molded Plastics | 157,973 | 150,866 | ||||||
| Segment Depreciation and Amortization Expense | 374,580 | 418,990 | ||||||
| General Corporate Depreciation and Amortization Expense | 40,801 | 41,683 | ||||||
| Total Depreciation and Amortization Expense | $ | 415,381 | $ | 460,673 | ||||
| YEAR ENDED | YEAR ENDED | |||||||
| 2017 | 2016 | |||||||
| (Restated) | ||||||||
| Capital Expenditures of Each Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 492,425 | $ | 270,117 | ||||
| Molded Plastics | 41,757 | 278,970 | ||||||
| Segment Capital Expenditures | 534,182 | 549,087 | ||||||
| General Corporate Capital Expenditures | 10,290 | 81,539 | ||||||
| Total Capital Expenditures | $ | 544,472 | $ | 630,626 | ||||
The Company conducts operations only within the United States. Foreign sales are insignificant; primarily all sales are to domestic companies.
| II-38 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
| NOTE 10: | MAJOR CUSTOMERS |
During 2017, the Company derived 17% and 10% of its consolidated revenues from Walmart Stores, Inc. and Aqua Cal, Inc., respectively. During 2016, the Company derived 13% and 18% of its consolidated revenues from Walmart Stores, Inc. and Aqua Cal, Inc., respectively. As of December 31, 2017 and 2016, Walmart Stores, Inc.’s accounts receivable balance represented 63% and 56% of total accounts receivable before allowance for returns, respectively, and Aqua Cal, Inc.’s accounts receivable balance represented 9% and 13% of total accounts receivable at December 31, 2017 and 2016, respectively.
| NOTE 11: | MAJOR VENDORS |
During 2017 and 2016, the Company purchased 35% and 48% of its inventory from three suppliers. At December 31, 2017 and 2016, amounts owed to these suppliers is 10% and 38% of total accounts payable, respectively.
| NOTE 12: | CONCENTRATION OF CREDIT RISK |
Cash is maintained at a major financial institution and, at times, balances may exceed federally insured limits. The Company’s deposits in excess of federally insured limits at December 31, 2017 and 2016 were approximately $8,188,000 and $8,794,000, respectively.
| NOTE 13: | SUBSEQUENT EVENT |
On April 2, 2018, Paradise, Inc. declared a regular dividend of $0.15 per share to stockholders of record on April 13, 2018.
| II-39 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
| Item 9A. | Controls and Procedures |
(a) Evaluation of Disclosure Contr1ols and Procedures
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President and Chief Executive Officer (“CEO”) and Chief Financial Officer (“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 related year end accrual of credit memos for customer returns, allowances, discounts and incentives that related to 2017 sale. 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 the Company’s disclosure controls and 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.
(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 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.
| II-40 |
| Item 9A. | Controls and Procedures (Continued) |
b) Changes in Internal Control over Financial Reporting (Continued)
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.
Management’s Annual Report on Internal Control over Financial Reporting (Continued)
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements. |
Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control Over Financial Reporting does not include an attestation report from the Company’s registered public accounting firm Warren Averett, LLC. Based on management evaluation, we believe our internal controls over financial reporting as of December 31, 2017 were ineffective. Subsequent to the initial filing, a weakness in internal controls relating to the recording of customer returns, allowances, discounts and incentives did have a material effect on the Company’s December 31, 2017 audited consolidated financial statements. Procedures are being established to ensure the timeliness of recording customer returns, allowances, discounts and incentives will be in place going forward.
Important Considerations
The effectiveness of our disclosure and procedures and our internal control over financial reporting is subject to various inherent limitations, include cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
| Item 9B. | Other Information |
Not applicable.
| II-41 |
| Item 10. | Directors and Executive Officers of the Registrant |
Directors of the Registrant
| Melvin S. Gordon | – | Chairman and Director of the
Registrant, 84 years old. Term of office will expire at next stockholders’ meeting. Officer with Registrant past 53 years. |
| Eugene L. Weiner | – | Vice-President of the Registrant, 86
years old. Term of office will expire at next stockholders’ meeting. Officer with Registrant past 52 years. |
| Randy S. Gordon | – | CEO and President of the Registrant, 62 years
old. Term of office will expire at next stockholders’ meeting. Employee or officer of Registrant past 39 years. |
| Tracy W. Schulis | – | Senior Vice-President and Secretary of
the Registrant, 60 years old. Term of office will expire at next stockholders’ meeting. Employee or officer of Registrant past 38 years. |
| Mark H. Gordon | – | Executive Vice-President of the Registrant,
55 years old. Term of office will expire at next stockholders’ meeting. Employee or Officer of Registrant past 32 years. |
Executive Officers of the Registrant
| Randy S. Gordon | – | CEO and President, 62 years old. |
| Term of office will expire at next annual directors’ meeting. | ||
| Employee or officer of Registrant past 39 years. | ||
| Eugene L. Weiner | – | Vice-President, 86 years old. |
| Term of office will expire at next annual directors’ meeting. | ||
| Officer with Registrant past 52 years. | ||
| Tracy W. Schulis | – | Senior Vice-President and Secretary, 60 years old. |
| Term of office will expire at next annual directors’ meeting. Employee or officer of Registrant past 38 years. | ||
| Mark H. Gordon | – | Executive Vice-President, 55 years old. |
| Term of office will expire at next annual directors’ meeting. Employee or Officer of Registrant past 32 years. | ||
| Jack M. Laskowitz | – | CFO and Treasurer, 61 years old. |
| Term of office will expire at next annual directors’ meeting. Employee or officer with Registrant past 17 years. |
| III-1 |
| Item 10. | Directors and Executive Officers of the Registrant (Continued) |
Family Relationships
Melvin S. Gordon is the father of Randy S. Gordon and Mark H. Gordon.
Audit Committee Financial Expert
Rules adopted by the Securities and Exchange Commission (the “SEC”) to implement sections of the Sarbanes-Oxley Act of 2002 (the “Act”) require disclosure of whether the Company has an audit committee financial expert on its audit committee. The Company has not formally designated an audit committee; however, the Act stipulates that if no such committee exists, then the audit committee is the entire board of directors.
The Company’s Board of Directors has determined that Eugene L. Weiner, is “an audit committee financial expert”. Eugene L. Weiner is a Director and also a Vice-President of the Company and therefore is not independent of management.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all executive officers, directors and employees of the Company. The Code of Business Conduct and Ethics is attached as an exhibit to this Annual Report on Form 10-K.
| III-2 |
| Item 11. | Executive Compensation |
| (a) and (b) | The following summary compensation table sets forth all remuneration paid or accrued by the Company and its subsidiaries for the years ended December 31, 2017 and 2016 to its Chief Executive Officer and the four other highest paid executive officers whose total remuneration exceeded $100,000. |
| COMPENSATION | ||||||||||||||||
| ALL OTHER | ||||||||||||||||
| NAME AND PRINCIPAL | COMPENSATION | |||||||||||||||
| POSITION | YEAR | SALARY | BONUS | ( 1 and 2) | ||||||||||||
| Randy S. Gordon, | ||||||||||||||||
| President and Chief | ||||||||||||||||
| Executive Officer | 2017 | $ | 220,855 | $ | 49,246 | $ | 30,559 | |||||||||
| 2016 | 209,464 | 62,421 | 30,763 | |||||||||||||
| Mark H. Gordon, | ||||||||||||||||
| Executive Vice-President | 2017 | 213,150 | 46,646 | 28,821 | ||||||||||||
| 2016 | 202,070 | 55,746 | 30,190 | |||||||||||||
| Tracy W. Schulis, | ||||||||||||||||
| Senior Vice-President | ||||||||||||||||
| and Secretary | 2017 | 213,542 | 52,441 | 45,496 | ||||||||||||
| 2016 | 202,070 | 65,043 | 45,624 | |||||||||||||
| Jack M. Laskowitz, | ||||||||||||||||
| Chief Financial Officer | 2017 | 137,260 | 26,822 | 14,147 | ||||||||||||
| 2016 | 130,936 | 34,498 | 14,712 | |||||||||||||
NOTES TO THE ABOVE TABLE
| 1. | Includes personal use of Company automobiles and PS-58 costs. |
| 2. | All Other Compensation includes life insurance premiums paid on behalf of the officers in accordance with the Company’s 162 bonus plan along with matching contributions provided for by the Company’s 401(k) Retirement Savings Plan. |
| III-3 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
| (a) | The following table sets forth as of December 31, 2017, information concerning the beneficial ownership of the common stock of the Company by the persons who own, are known by the company to own, or who the Company has been advised have filed with the S.E.C. declarations of beneficial ownership, of more than 5% of the outstanding common stock. |
| AMOUNT & NATURE | ||||||||||||
| NAME AND ADDRESS OF | TITLE OF | OF BENEFICIAL | PERCENT | |||||||||
| BENEFICIAL OWNER | CLASS | OWNERSHIP (1) | OF CLASS | |||||||||
| Melvin S. Gordon | Common | |||||||||||
| 2611 Bayshore Blvd. | ||||||||||||
| Tampa, Florida | 192,742 | (1) | 37.1 | % | ||||||||
| TOTAL | 192,742 | 37.1 | % | |||||||||
| Salvatore Muoio | Common | |||||||||||
| c/o S. Muoio & Co. LLC | ||||||||||||
| 509 Madison Ave. Suite 406 | ||||||||||||
| New York, NY 10022 | 40,740 | (2) | 7.8 | % | ||||||||
| TOTAL | 40,740 | 7.8 | % | |||||||||
| (1) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, trustee. |
| (2) | The nature of the beneficial ownership for all shares is sole voting and investment power. |
| III-4 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Continued) |
| (b) | Beneficial ownership of common stock held by all directors and officers of the Company as a group: |
| AMOUNT & NATURE | ||||||||||||
| TITLE OF | OF BENEFICIAL | PERCENT | ||||||||||
| CLASS | OWNERSHIP (1) | OF CLASS | ||||||||||
| Directors and Officers as a Group | Common | 206,109 | 39.7 | % | ||||||||
| Melvin S. Gordon | Common | 192,742 | (2) | 37.1 | % | |||||||
| Eugene L. Weiner | Common | 307 | - | |||||||||
| Randy S. Gordon | Common | 7,400 | 1.4 | |||||||||
| Tracy W. Schulis | Common | 2,060 | 0.4 | |||||||||
| Mark H. Gordon | Common | 3,600 | 0.7 | |||||||||
| (1) | The nature of the beneficial ownership for all shares is sole voting and investment power. |
| (2) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, trustee. |
| (c) | The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. |
| III-5 |
| Item 13. | Certain Relationships and Related Transactions |
None
| Item 14. | Principal Accountant Fees and Services |
Audit Fees
The aggregate fees billed for professional services rendered by Warren Averett, LLC for the audits of the Company’s annual consolidated financial statements and review of consolidated financial statements included in the Company’s Form 10-K and Forms 10-Q for fiscal years 2017 and 2016 were $157,443 and $147,470, respectively. At the time of this filing, not all audit fees had been billed for the 2017 fiscal year.
All Other Fees
Fees billed by Warren Averett, LLC for other products and services provided during the years ended December 31, 2017 and 2016 were approximately $27,681 and $26,200, respectively.
The Company has not formally designated an audit committee and as a result, the entire board of directors performs the duties of an audit committee. It’s the Board’s policy to pre-approve all services provided by our auditors.
| III-6 |
| Item 15. | Exhibits and Financial Statement Schedules |
| Exhibit (3) | – | Articles of Incorporation and By-Laws (Incorporated by reference from Exhibits to Paradise, Inc.’s Annual Report on Form 10-KSB for the year ended December 31, 1993, filed on March 31, 1994) |
| Exhibit (11) | – | Statement Re: Computation of Per Share Earnings (Incorporated by reference from Exhibits to page II-23 of this Form 10-K/A) |
| Exhibit (31.1) | – | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith) |
| Exhibit (31.2) | – | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith) |
| Exhibit (32.1) | – | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith) |
| Exhibit (32.2) | – | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith) |
Exhibit (EX-101.INS) – XBRL Instance Document
Exhibit (EX-101.SCH) – XBRL Taxonomy Extension Schema
Exhibit (EX-101.CAL) – XBRL Taxonomy Extension Calculation Linkbase
Exhibit (EX-101.DEF) – XBRL Taxonomy Extension Definition Linkbase
Exhibit (EX-101.LAB) – XBRL Taxonomy Extension Label Linkbase
Exhibit (EX-101.PRE) – XBRL Taxonomy Extension Presentation Linkbase
| III-7 |
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| August 20, 2018 | PARADISE, INC. |
| Date | |
| /s/ Randy S. Gordon | |
| Randy S. Gordon | |
| President and Chief Executive Officer |
In accordance with the Exchange Act this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| /s/ Melvin S. Gordon | Chairman and Director | August 20, 2018 |
| Melvin S. Gordon | Date | |
| /s/ Eugene L. Weiner | Vice-President | August 20, 2018 |
| Eugene L. Weiner | and Director | Date |
| /s/ Randy S. Gordon | CEO, President and Director | August 20, 2018 |
| Randy S. Gordon | Date | |
| /s/ Tracy W. Schulis | Senior Vice-President, | August 20, 2018 |
| Tracy W. Schulis | Secretary and Director | Date |
| /s/ Mark H. Gordon | Executive Vice-President | August 20, 2018 |
| Mark H. Gordon | and Director | Date |
| /s/ Jack M. Laskowitz | CFO and Treasurer | August 20, 2018 |
| Jack M. Laskowitz | Date |
| III-8 |