FORM 10 - QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) Quarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934. For the quarterly period ended March 31, 2007 or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Act of 1934. Commission File No. 0-3026 PARADISE, INC. INCORPORATED IN FLORIDA I.R.S. EMPLOYER IDENTIFICATION NO. 59-1007583 1200 DR. MARTIN LUTHER KING, JR. BLVD., PLANT CITY, FLORIDA 33566 (813) 752-1155 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ; No --- --- Indicate by check mark whether the registration is a shell company (as defined In Rule 125-2 of the Exchange Act) Yes; No X --- --- The number of shares outstanding of each of the issuer's classes of common Stock: Class Outstanding as of March 31, ----- --------------------------- 2007 2006 ---- ---- Common Stock $0.30 Par Value 519,350 Shares 519,350 Shares Transitional Small Business Disclosure Format (Check One): Yes; No X --- --- PARADISE, INC. COMMISSION FILE NO. 0-3026 PART I. FINANCIAL INFORMATION Item 1. Financial Statements PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) --------------------------------- AS OF MARCH 31, --------------- 2007 2006 ---- ---- ASSETS ------ CURRENT ASSETS: Cash and Unrestricted Demand Deposits $ 1,676,144 $ 2,051,542 Accounts and Notes Receivable, Less Allowances of $-0- (2007 and 2006) 1,730,068 1,319,551 Inventories: Raw Materials 2,789,009 2,357,771 Work in Process 6,259 55,282 Finished Goods 4,953,386 4,989,977 Deferred Income Tax 391,185 175,932 Income Tax Refund Receivable 15,235 45,107 Prepaid Expenses and Other Current Assets 322,419 309,125 ---------- ---------- TOTAL CURRENT ASSETS 11,883,705 11,304,287 Property, Plant and Equipment, Less Accumulated Depreciation of $15,672,101 (2007) and $14,892,966 (2006) 5,820,503 6,140,817 Goodwill 413,280 413,280 Customer Base and Non-Compete Agreement 1,195,057 Other Assets 363,338 451,934 ---------- ---------- TOTAL ASSETS $ 19,675,883 $ 18,310,318 ========== ========== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ AS OF MARCH 31, --------------- 2007 2006 ---- ---- CURRENT LIABILITIES: Notes and Trade Acceptances Payable $ 226,379 $ 386,487 Current Portion of Long-Term Debt 613,978 199,244 Accounts Payable 1,129,414 773,214 Accrued Liabilities 1,052,690 512,941 --------- --------- TOTAL CURRENT LIABILITIES 3,022,461 1,871,886 LONG-TERM DEBT, NET OF CURRENT PORTION 807,499 565,285 DEFERRED INCOME TAX LIABILITY 352,595 431,784 --------- --------- TOTAL LIABILITIES 4,182,555 2,868,955 --------- --------- STOCKHOLDERS' EQUITY: Common Stock: $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued, 519,350 Shares Outstanding 174,928 174,928 Capital in Excess of Par Value 1,288,793 1,288,793 Retained Earnings 14,622,193 14,292,699 Unrealized Holding Gain (Loss) on Securities ( 315,667 ) ( 38,138 ) Treasury Stock, at Cost, 63,744 Shares ( 276,919 ) ( 276,919 ) ---------- ---------- Total Stockholders' Equity 15,493,328 15,441,363 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,675,883 $ 18,310,318 ========== ========== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) ----------------------------------- FOR THE THREE MONTHS ENDED -------------------------- MARCH 31 -------- 2007 2006 ---- ---- Net Sales $ 2,865,457 $ 2,664,619 --------- --------- Costs and Expenses: Cost of Goods Sold (excluding Depreciation) 2,236,032 2,105,325 Selling, General and Administrative Expense 896,210 870,577 Depreciation and Amortization 227,223 209,096 Interest Expense 26,789 13,353 --------- --------- Total Costs and Expenses 3,386,254 3,198,351 --------- --------- Loss from Operations ( 520,797 ) ( 533,732 ) Other Income 41,573 27,025 --------- --------- Loss from Operations Before Provision for Income Taxes ( 479,224 ) ( 506,707 ) Provision for Income Taxes 0 0 --------- --------- Net Loss $( 479,224 ) $( 506,707 ) ========= ========= Loss per Common Share $( .92 ) $( .97 ) ==== ==== Dividend per Common Share $( .10 ) $ .15 ==== ==== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) --------------------------------------- FOR THE THREE MONTHS ENDED -------------------------- MARCH 31, --------- 2007 2006 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $( 479,224 ) $( 506,707 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation and Amortization 227,223 209,096 Decrease (Increase) in: Accounts Receivable ( 1,088,394 ) 765,482 Inventories ( 1,315,252 ) ( 1,325,616 ) Prepaid Expenses 175,146 17,533 Other Assets 14,100 14,073 Income Tax Receivable ( 15,235 ) ( 45,107 ) Increase (Decrease) in: Accounts Payable 69,378 202,669 Accrued Expense ( 919,739 ) ( 883,240 ) Income Taxes Payable ( 305,766 ) ( 390,097 ) --------- --------- Net Cash Used in Operating Activities ( 3,637,763 ) ( 1,941,914 ) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Property and Equipment ( 47,787 ) ( 387,296 ) --------- --------- Net Cash Used in Investing Activities ( 47,787 ) ( 387,296 ) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net Proceeds of Short-Term Debt 135,703 375,701 Principal Payments of Long-Term Debt ( 45,394 ) ( 64,833 ) --------- --------- Net Cash Provided by Financing Activities 90,309 310,868 --------- --------- Net Decrease in Cash ( 3,595,241 ) ( 2,018,342 ) CASH AT BEGINNING OF PERIOD 5,271,385 4,069,884 --------- --------- CASH AT END OF PERIOD $ 1,676,144 $ 2,051,542 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 11,514 $ 13,353 ========= ========= Noncash financing activity: Dividends Declared $ 51,935 $ 77,903 ========= ========= See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------- Note 1 Basis of Presentation -------------------------------- The accompanying unaudited consolidated financial statements of Paradise, Inc. (the "Company") have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements. The information furnished herein reflects all adjustments and accruals that management believes is necessary to fairly state the operating results for the respective periods. The notes to the financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company's Form 10-KSB for the year ended December 31, 2006. The Company's management believes that the disclosures are sufficient for interim financial reporting purposes. Note 2 Net Loss per Share -------------------------------------- Net loss per share, assuming no dilution, are based on the weighted average number of shares outstanding during the period: 519,350 (2007 and 2006). Note 3 Business Segment Data -------------------------------- The Company's operations are conducted through two business segments. These segments, and the primary operations of each, are as follows: Business Segment Operation ---------------- --------- Fruit Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, the processing of frozen strawberry products, for sale to commercial and institutional users such as preservers, dairies, drink manufacturers, etc. Molded Plastics Production of plastics containers and other molded plastics for sale to various food processors and others. Three Months Three Months Ended Ended March 31, 2007 March 31, 2006 -------------- -------------- Net Sales in Each Segment ------------------------- Fruit: Sales to Unaffiliated Customers $ 781,614 $ 583,272 Molded Plastics: Sales to Unaffiliated Customers 2,083,843 2,081,347 --------- --------- Net Sales $ 2,865,457 $ 2,664,619 ========= ========= For the three month period ended March 31, 2007 and 2006, sales of frozen strawberry products totaled $242,682 and $167,464, respectively. The Company does not account for intersegment transfers as if the transfers were to third parties. The Company does not prepare operating profit or loss information on a segment basis for internal use, until the end of each year. Due to the seasonal nature of the fruit segment management believes that it is not practical to prepare this information for interim reporting purposes. Therefore, reporting is not required by generally accepted accounting principles. Three Months Three Months Ended Ended March 31, 2007 March 31, 2006 -------------- -------------- Identifiable Assets of Each Segment are Listed Below --------------------------- Fruit $ 8,889,159 $ 7,543,651 Molded Plastics 7,041,233 6,601,365 ---------- ---------- Identifiable Assets 15,930,392 14,145,016 General Corporate Assets 3,745,491 4,165,302 ---------- ---------- Total Assets $ 19,675,883 $ 18,310,318 ========== ========== 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, and investments. Note 4 Retirement Plan ------------------------ As discussed in the 10-KSB for the year ended December 31, 2006, the Company elected to freeze the pension plan benefit accruals effective November 30, 2006. The Company has filed with the appropriate regulators and will terminate the plan in 2007 once approvals have been given. The Company has treated the action as a curtailment as no further benefits have accrued after November 30, 2006. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------------------ Forward-Looking Statements -------------------------- This Quarterly Report on Form 10-QSB 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 purpose of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as "may", "will", "expects", "potential", or "continue", or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties. Overview -------- Paradise, Inc.'s main business segment, glace' fruit, a prime ingredient of fruitcakes and other holiday confections, represented 70% of total net sales during 2006. These products are sold to manufacturing bakers, institutional users, supermarkets and other retailers throughout the country. Consumer demand for glace' fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace' fruit product sales are recorded from the eight to ten weeks beginning in mid September. Since the majority of the Company's customers require delivery of glace' candied fruit products during this relatively short period of time, Paradise must operate at consistent levels of production from as early as January through the middle of November of each year in order to meet peak demands. Furthermore, the Company must make substantial borrowings of short-term working capital to cover the cost of raw materials, factory overhead and labor expense associated with production for inventory. This combination of building and financing inventories during the year, without the opportunity to record any significant fruit product income, results in the generation of operating losses well into the third quarter of each year. Therefore, it is the opinion of management that meaningful forecasts of annual net sales or profit levels require analysis of a full year's operations. In addition, comparison of current quarterly results to the preceding quarter produces an incomplete picture on the Company's performance due to year-to-year changes in production schedules, seasonal harvests and availability of raw materials, and in the timing of customer orders and shipments. Thus, the discussion of information presented within this report is focused on the review of the Company's current year-to-date results as compared to the similar period last year. Paradise's other business segment, Paradise Plastics, Inc. a wholly owned subsidiary of Paradise, Inc. producing custom molding products is not subject to the seasonality of the glace' fruit business. This segment represents all injection molding and thermoforming operations, including the packaging for the Company's fruit products. Only sales to unaffiliated customers are reported. The First Quarter ----------------- Paradise, Inc.'s fruit segment net sales for the first quarter of 2007 increased 34% compared to the first quarter of 2006. Contributing to this growth was an increase in customer orders received and shipped for bulk glace' fruit products sold to supermarkets and bakeries leading up to and through the Easter holiday season. Additional net sales were realized as Paradise, Inc. received an increase amount of fresh strawberries from a Florida based distributor. For the past several years, Paradise, Inc. has entered into an annual agreement to process fresh strawberries, delivered to the Company's facility, into finished strawberry products on behalf of this distributor. With favorable weather conditions prevailing during the annual spring harvest season, Paradise, Inc. generated net sales of finished strawberry products of $242,682 for the first quarter of 2007 compared to $167,464 for the similar period of 2006. Paradise Plastics, Inc.'s net sales to unaffiliated customers, during the first quarter of 2007 remained consistent with the prior year's reporting period. Plastics segment net sales for the three months ended March 31, 2007 were $2,083,843 compared to $2,081,347 as of March 31, 2006. This segment which has experienced cumulative growth of more than 80% over the past five years has seen a decrease in re-orders for certain manufactured parts due to the recent slow down within the housing industry. Management continues to aggressively seek new plastics customers and is confident that the successful expansion of its high-tech custom molding business over the past five years will yield positive results moving forward. Cost of sales as a percentage of net sales decreased 1% for the first quarter of 2007 compared to the prior year's reporting period as the Company benefited from its ability to process additional pounds of fresh strawberries over a fixed level of factory overhead during the first quarter of this year. Selling, general & administrative expenses for the first quarter of 2007 increased 2.9% compared to the previous year's reporting period. Increases in professional fees along with rising health insurance premiums paid on behalf of Paradise, Inc. employees were partially offset by savings achieved in consolidating the administrative operations of Mastercraft Products Corporation into Paradise, Inc's. headquarters located in Plant City, Florida during 2006. Depreciation and amortization expenses increased $18,127 for the first quarter of 2007 compared to the similar period of 2006. The increase is attributable to the commencement of amortization expense associated with the Company's decision to purchase an unrelated entity's inventory and customer list along with the execution of a non-compete agreement. This asset purchase agreement disclosed in previous filings was completed in June 2006 and is being amortized over a ten year period. Interest expense for the first quarter of 2007 increased $13,436 compared to the prior year's reporting period as Paradise, Inc. accrued interest expense in accordance with the financial terms of the above mentioned asset purchase agreement. Furthermore, with no borrowings on the Company's revolving short-term working capital loan during the first quarter of 2007, interest expense continued to be less than 1% of consolidated net sales. Summary ------- Overall, fruit segment net sales increased 34% for the first quarter of 2007 compared to the similar reporting period of 2006 as increased customer demand for the sale of various bulk glace' fruit items and strawberry products were realized. Plastics segment sales for the current quarter remained consistent with the prior reporting period as the slow down in the housing market led to reduced demand for re- orders of several products specifically related to this industry. However, with less than 5% of fruit segment net sales earned as of March 31, 2007 no reasonable estimate of a full year's operating performance can be projected at this time. ITEM 3. Controls and Procedures ----------------------------------- The Company's Chief Executive Officer and Chief Financial Officer have, within 90 days of the filing date of this quarterly report, evaluated the Company's disclosure controls and procedures. Based on their evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the most recent evaluation of these controls by the Company's Chief Executive Officer and Chief Financial Officer. No significant deficiencies or material weaknesses in the Company's internal controls were identified therefore no corrective actions were taken. PART II. OTHER INFORMATION --------------------------- Item 1. Legal Proceedings - N/A Item 2. Changes in Securities - N/A Item 3. Defaults Upon Senior Securities - N/A Item 4. Submission of Matters to a Vote of Security Holders - N/A Item 5. Other Information - N/A Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit Number Description ------- ----------- 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. None. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PARADISE, INC. A Florida Corporation /s/ Melvin S. Gordon Date: May 14, 2007 ----------------------------- Melvin S. Gordon Chief Executive Officer and Chairman /s/ Jack M. Laskowitz Date: May 14, 2007 ------------------------------ Jack M. Laskowitz Chief Financial Officer and Treasurer