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 September 30, 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 --- ---. The number of shares outstanding of each of the issuer's classes of common stock: Class Outstanding as of September 30, ----- ------------------------------- 2007 2006 ---- ---- Common Stock $0.30 Par Value 519,350 Shares 519,350 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 --- --- 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 SEPTEMBER 30, ------------------- 2007 2006 ---- ---- ASSETS ------ CURRENT ASSETS: Cash and Unrestricted Demand Deposits $ 21,175 $ 37,156 Accounts and Notes Receivable, Less Allowances of $-0- (2007 and 2006) 8,273,985 10,071,287 Inventories: Raw Materials 2,293,140 2,625,765 Work in Process 509,425 386,245 Finished Goods 7,491,938 6,335,528 Deferred Income Tax Asset 391,185 175,932 Income Tax Refund Receivable 12,353 45,107 Prepaid Expenses and Other Current Assets 610,367 540,868 ---------- ---------- TOTAL CURRENT ASSETS 19,603,568 20,217,888 Property, Plant and Equipment, Less Accumulated Depreciation of $16,040,329 (2007) and $15,320,072 (2006) 5,646,140 6,108,219 Deferred Charges and Other Assets 414,060 423,216 Goodwill 413,280 413,280 Intangible Assets - Net 1,100,644 1,226,529 ---------- ---------- TOTAL ASSETS $ 27,177,692 $ 28,389,132 ========== ========== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ AS OF SEPTEMBER 30, ------------------- 2007 2006 ---- ---- CURRENT LIABILITIES: Notes and Trade Acceptances Payable $ 4,997,640 $ 5,648,402 Current Portion of Long-Term Debt 608,221 195,908 Accounts Payable 2,377,022 2,794,028 Accrued Liabilities 1,583,959 1,240,465 Income Taxes Payable 218,907 305,950 ---------- ---------- Total Current Liabilities 9,785,749 10,184,753 LONG-TERM DEBT, NET OF CURRENT PORTION 709,994 1,325,705 DEFERRED INCOME TAX LIABILITY 352,595 431,784 ---------- ---------- Total Liabilities 10,848,338 11,942,242 ---------- ---------- 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 15,458,219 15,298,226 Unrealized Holding Gain (Loss) on Securities ( 29,768 ) ( 38,138 ) Accumulated Other Comprehensive Income (Loss) ( 285,899 ) Treasury Stock, at Cost, 63,744 Shares ( 276,919 ) ( 276,919 ) ---------- ---------- Total Stockholders' Equity 16,329,354 16,446,890 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,177,692 $ 28,389,132 ========== ========== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) ----------------------------------- FOR THE THREE MONTHS ENDED -------------------------- SEPTEMBER 30 ------------ 2007 2006 ---- ---- Net Sales $ 10,359,037 $ 11,625,447 --------- --------- Costs and Expenses: Cost of Goods Sold (excluding Depreciation) 7,464,623 8,380,927 Selling, General and Administrative Expense 1,400,493 1,388,291 Depreciation and Amortization 204,513 267,619 Interest Expense 113,716 159,631 --------- --------- Total Costs and Expenses 9,183,345 10,196,468 --------- ---------- Income from Operations 1,175,692 1,428,979 Other Income 39 4,685 --------- --------- Income from Operations Before Provision for Income Taxes 1,175,731 1,433,664 Provision for Income Taxes 218,907 305,950 --------- --------- Net Income $ 956,824 $ 1,127,714 ========= ========= Net Income per Share $ 1.84 $ 2.17 ==== ==== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) ----------------------------------- FOR THE NINE MONTHS ENDED ------------------------ SEPTEMBER 30 ------------ 2007 2006 ---- ---- Net Sales $ 15,345,931 $ 16,662,387 ---------- ---------- Costs and Expenses: Cost of Goods Sold (excluding Depreciation) 10,894,793 11,820,326 Selling, General and Administrative Expense 3,113,878 3,184,510 Depreciation and Amortization 652,546 696,030 Interest Expense 181,968 198,808 ---------- ---------- Total Costs and Expenses 14,843,185 15,899,674 ---------- ---------- Income from Operations 502,746 762,713 Other Income 73,324 42,418 ---------- ---------- Income from Operations Before Provision for Income Taxes 576,070 805,131 Provision for Income Taxes 218,907 305,950 ---------- ---------- Net Income $ 357,163 $ 499,181 ========== ========= Net Income per Common Share $ .69 $ .96 ==== ==== See Accompanying Notes to these Consolidated Financial Statements (Unaudited) PARADISE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) --------------------------------------- FOR THE NINE MONTHS ENDED ------------------------ SEPTEMBER 30, ------------- 2007 2006 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 357,163 $ 499,181 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: Depreciation and Amortization 652,546 696,030 Decrease (Increase) in: Accounts Receivable ( 7,632,310 ) ( 7,986,253 ) Inventories ( 3,861,101 ) ( 3,270,125 ) Prepaid Expenses ( 112,802 ) ( 214,210 ) Other Assets 85,003 42,790 Income Tax Receivable ( 12,353 ) ( 45,107 ) Increase (Decrease) in: Accounts Payable 1,316,986 2,223,484 Accrued Expense ( 440,405 ) ( 110,971 ) Income Taxes Payable ( 86,598 ) ( 84,147 ) --------- --------- Net Cash Used in Operating Activities ( 9,733,871 ) ( 8,249,328 ) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Property and Equipment ( 217,696 ) ( 777,365 ) Cash Paid in Connection with Acquisition of Customer Base and Non-Compete Agreement with Unrelated Entity ( 425,000 ) --------- --------- Net Cash Used in Investing Activities ( 217,696 ) ( 1,202,364 ) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net Proceeds (Repayments) of Short-Term Debt 4,906,965 5,637,616 Principal Payments of Long-Term Debt ( 146,293 ) ( 140,750 ) Dividends Paid ( 59,315 ) ( 77,903 ) --------- --------- Net Cash Provided by Financing Activities 4,701,357 5,418,963 --------- --------- Net Decrease in Cash ( 5,250,210 ) ( 4,032,729 ) CASH AT BEGINNING OF PERIOD 5,271,385 4,069,885 --------- --------- CASH AT END OF PERIOD $ 21,175 $ 37,156 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 136,143 $ 198,808 Income Tax 300,000 320,000 --------- --------- Net Supplemental Cash Flows $ 463,143 $ 518,808 ========= ========= NONCASH INVESTING AND FINANCING ACTIVITIES: Customer List and Non-Compete Agreement Acquired in Connection with Unrelated Entity and Related Note Payable $ $ 833,850 ========= ========= 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 Income (Loss) per Share -------------------------------------- Net income (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 ---------------- --------- Candied 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. Nine Months Nine Months Ended Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Net Sales in Each Segment ------------------------- Candied Fruit: Sales to Unaffiliated Customers $ 9,739,641 $ 11,102,484 Molded Plastics: Sales to Unaffiliated Customers 5,606,290 5,559,903 ---------- ---------- Net Sales $ 15,345,931 $ 16,662,387 ========== ========== For the nine month period ended September 30, 2007 and 2006, sales of frozen strawberry products totaled $329,961 and $244,599 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. Nine Months Nine Months Ended Ended September 30, 2007 September 30, 2006 ------------------ ------------- Identifiable Assets of Each Segment are Listed Below --------------------------- Candied Fruit $ 19,304,911 $ 20,127,037 Molded Plastics 5,466,433 5,874,925 ---------- ---------- Identifiable Assets 24,771,344 26,001,962 General Corporate Assets 2,406,348 2,387,170 ---------- ---------- Total Assets $ 27,177,692 $ 28,389,132 ========== ========== 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 69.9% 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' fruit products during this relatively short period of time, Paradise, Inc. must operate at consistent levels of production from as early as January through the middle of November of each year in order to meet peak demands. Furthermore, the Company must make substantial borrowings of short-term working capital to cover the cost of raw materials, factory overhead and labor expense associated with production for inventory. This combination of building and financing inventories during the year, without the opportunity to record any significant fruit segment 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 Nine Months --------------------- Paradise, Inc.'s fruit segment net sales decreased 12.3% compared to the similar reporting period last year, primarily due to timing differences in the receipt of customer orders and shipping dates for delivery of the Company's glace' fruit products. Paradise, Inc.'s selling season for glace' fruit begins in mid September and continues through November of each year. Changes in shipping dates received from customers between interim reporting dates will lead to significant fluctuations in net sales. This is the primary reason that net sales decreased 12.3% as several significant customers requested shipping dates in October, 2007 versus September, 2006. As mentioned in all previous filings, quarterly information is not a reasonable indicator of annual trends and should not be used to predict year-end performance. Only a full year's accounting will provide any meaningful comparison as to financial performance. Paradise Plastics, Inc.'s net sales, to unaffiliated customers increased by less than 1.0% for the first nine months of 2007 compared to the prior year's reporting period. As mentioned in previous filings, plastics sales to unaffiliated customers have slowed due to recent turmoil in the housing market. However, increase sales for custom molding products for clients in the aerospace and food processing industries have offset the decline in sales related to the housing sector. Overall cost of goods sold expressed as a percentage of net sales remained consistent with the similar nine month reporting period of 2006. The Company has been able to maintain its margins within the fruit and plastics segments despite absorbing energy related increases from suppliers for various raw fruit products and plastics resins. Selling expenses decreased 1.7% for the current nine month period for 2007 compared to the similar reporting period of 2006. This decrease is directly related to the timing difference noted above regarding the changes in shipping dates of several significant customers to October, 2007 compared to September, 2006. Thus, selling expenses such as accrued commissions earned by food brokers to promote the sale of the Company's glace' fruit products coupled with freight-out expenses to transport these products to customers, declined proportionately. General & administrative expenses decreased 2.7% for the current reporting period compared to the similar reporting period of 2006. The primarily reason for this decrease is the continued benefit received from the relocation and subsequent consolidation of all Mastercraft Products Corporation's operations to Plant City, Florida during the first and second quarters of 2006. Depreciation and amortization expenses decreased 6.3% for the current nine month reporting period as capital improvements placed into service were more than offset by asset retirements and disposals as reported in the previous year's nine month reporting period. Interest expense decreased 8.5% for current reporting period compared to the similar reporting period last year as Paradise, Inc.'s need for short-term borrowing from its primary lender to finance the Company's glace' fruit inventory was offset by an increase in cash reserves as of December 31, 2006. As of the date of this filing, the Company's revolving line of credit balance has been repaid in full. Summary ------- With several significant glace' fruit customers moving their purchase orders and shipping dates to October, 2007 versus September, 2006 Paradise, Inc.'s fruit segment net sales decreased 12.3% compared to the similar reporting period last year. As a result of this timing difference, consolidated income from operations before taxes was $576,070 for the nine months ended September 30, 2007 compared to $805,131 for the nine months ended September 30, 2006. However, as outlined above and in numerous previous filings, with more than 80% of Paradise, Inc.'s fruit segment net sales occurring during an eight to ten week period beginning in mid September, only a full year's accounting will yield the necessary information to determine the Company's overall financial performance for 2007. 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, as of September 30, 2007, 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 changes in the Company's internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The most recent evaluation of these controls by the Company's Chief Executive Officer and Chief Financial Officer did not identify any deficiencies or weaknesses in the Company's internal controls over financial reporting; 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 The annual meeting of the shareholders of Paradise, Inc. was held on May 29, 2007. The purpose of this meeting was to elect five directors to hold office until the next annual meeting of shareholders and to ratify the reappointment of Bella, Hermida, Gillman, Hancock & Mueller as the Company's independent certified public accountants for 2007. The results of the election of Directors are as follows: Nominee Votes for Votes Withheld ------- --------- -------------- Melvin S. Gordon 426,961 64,154 Randy S. Gordon 426,973 64,154 Tracy W. Schulis 427,973 63,142 Mark H. Gordon 452,938 38,177 Eugene L. Weiner 437,521 53,594 The results of the ratification of Bella, Hermida, Gillman, Hancock & Mueller as the Company's independent accountants for 2007 are as follows: For Against Abstain --- ------- ------- 455,108 9,792 26,215 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: November 13, 2007 ----------------------------- Melvin S. Gordon Chief Executive Officer and Chairman /s/ Jack M. Laskowitz Date: November 13, 2007 ------------------------------ Jack M. Laskowitz Chief Financial Officer and Treasurer