PARADISE INC

In accordance with the terms of the Purchase Agreement, the aggregate purchase price for the Fruit Business was approximately $13.7 million, consisting of cash consideration of approximately $13.4 million (as adjusted for the final inventory value calculated shortly following closing) and assumed liabilities of approximately $0.3 million. Approximately $0.4 million of the cash purchase price was used to repay the Company’s outstanding balance under its revolving credit facility, which terminated at closing, and $0.9 million of the cash purchase price is being held in escrow to satisfy indemnification obligations of the Company. There was no gain or loss to the Company based on the terms of the agreement.

Pursuant to their employment agreements with the Company, Randy S. Gordon, Mark H. Gordon, and Tracy W. Schulis are entitled to severance payments if terminated following either the consummation of the Asset Sale or the sale of substantially all of the assets of the Company in Liquidation. The payments are described in detail in the section titled “The Severance Payments Proposal” beginning on page 77 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.

On July 29, 2019, the shareholders of the Company approved the Plan of Complete Liquidation and Dissolution (the “Liquidation Plan”), which gives the Company’s Board of Directors discretion to determine when and whether to proceed with the Liquidation Plan and which the Board envisions will lead to the sale of the Company’s remaining assets, including its plastics business and real estate.   See the section titled “Timing and Effect of Liquidation and Business Activities During Liquidation”  beginning on page 57 of the Company’s definitive proxy statement on Schedule 14A filed on July 8, 2019, which disclosure is incorporated herein by reference.  

Paradise, Inc.’s consolidated net sales for the six months ended June 30, 2019 decreased $134,944 to $3,514,431 from $3,649,375 for the six months ended June 30, 2018. Cost of sales as a percentage of total sales increased 23% as the Company purchased finished brine inventory during the first six months instead of processing fruit through the Company’s in house brining facility as in the prior year. This increase in cost of sales combined with the impairment of the Plastics segment’s goodwill for $413,280 resulted in a loss from operations of $(2,426,786) for the first six months of 2019 compared to $(1,223,605) for the first six months of 2018.

Consolidated cost of sales as a percentage of net sales increased 23% for the first six months of 2019 compared to the first six months of 2018. The primary reason for this increase is that the Company’s Central Florida supplier of orange peel (peel) was unable to fulfill the Company’s 2019 estimated production needs. Thus, management contracted for the purchase of brined peel from an overseas supplier and expensed significant factory overhead. It should be noted that processing of fruit materials produced in finished goods inventory was less than 25% complete for the first six months of operations for 2019. Thus, until 100% of all raw fruit materials have been processed into finished goods inventory no reasonable estimate of the cost of sales can be determined from results reported as of June 30, 2019.