Attached files
| file | filename |
|---|---|
| EX-31.1 - EXHIBIT 31.1 - CHASE GENERAL CORP | ex31-1.htm |
| EX-32.1 - EXHIBIT 32.1 - CHASE GENERAL CORP | ex32-1.htm |
| EXCEL - IDEA: XBRL DOCUMENT - CHASE GENERAL CORP | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2013
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 2-5916
| Chase General Corporation | ||
| (Exact name of small business issuer as specified in its charter) | ||
| MISSOURI | 36-2667734 | |||
| (State or other jurisdiction of | (IRS Employer Identification No.) | |||
| incorporation or organization) |
| 1307 South 59th, St. Joseph, Missouri 64507 | ||
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(Address of principal executive offices, Zip Code)
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| (816) 279-1625 | ||
| (Issuer’s telephone number, including area code) | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12, 13, or 15(d) of the Securities 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 o
Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | ||
| Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes o No x
As of November 7, 2013, there were 969,834 shares of common stock, $1.00 par value, outstanding.
CHASE GENERAL CORPORATION AND SUBSIDIARY
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2013
TABLE OF CONTENTS
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3
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6
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16
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CONDENSED CONSOLIDATED BALANCE SHEETS
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ASSETS
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September 30,
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June 30,
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|||||||
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2013
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2013
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(Unaudited)
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 26,093 | $ | 28,564 | ||||
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Trade receivables, net of allowance for doubtful accounts of $16,496 and $16,196, respectively
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600,399 | 166,585 | ||||||
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Inventories:
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Finished goods
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333,302 | 258,392 | ||||||
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Goods in process
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12,636 | 10,942 | ||||||
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Raw materials
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87,290 | 81,515 | ||||||
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Packaging materials
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99,699 | 158,283 | ||||||
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Prepaid expenses
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13,435 | 5,414 | ||||||
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Deferred income taxes
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7,340 | 6,863 | ||||||
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Total current assets
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1,180,194 | 716,558 | ||||||
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PROPERTY AND EQUIPMENT
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Land
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35,000 | 35,000 | ||||||
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Buildings
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77,348 | 77,348 | ||||||
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Machinery and equipment
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726,441 | 717,985 | ||||||
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Trucks and autos
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188,594 | 188,594 | ||||||
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Office equipment
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30,826 | 30,826 | ||||||
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Leasehold improvements
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72,068 | 72,068 | ||||||
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Total
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1,130,277 | 1,121,821 | ||||||
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Less accumulated depreciation
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781,428 | 759,996 | ||||||
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Total property and equipment, net
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348,849 | 361,825 | ||||||
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TOTAL ASSETS
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$ | 1,529,043 | $ | 1,078,383 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 3 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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September 30,
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June 30,
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|||||||
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2013
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2013
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(Unaudited)
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CURRENT LIABILITIES
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Accounts payable
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$ | 295,546 | $ | 66,598 | ||||
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Current maturities of notes payable
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259,767 | 54,172 | ||||||
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Accrued expenses
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43,357 | 27,466 | ||||||
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Income taxes payable
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11,225 | 3,711 | ||||||
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Deferred income
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1,299 | 1,299 | ||||||
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Total current liabilities
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611,194 | 153,246 | ||||||
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LONG-TERM LIABILITIES
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Deferred income
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13,636 | 13,960 | ||||||
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Notes payable, less current maturities
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27,494 | 39,787 | ||||||
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Deferred income taxes
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88,165 | 93,973 | ||||||
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Total long-term liabilities
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129,295 | 147,720 | ||||||
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Total liabilities
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740,489 | 300,966 | ||||||
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS’ EQUITY
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Capital stock issued and outstanding:
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Prior cumulative preferred stock, $5 par value:
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Series A (liquidation preference $2,167,500 and $2,160,000, respectively)
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500,000 | 500,000 | ||||||
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Series B (liquidation preference $2,122,500 and $2,115,000, respectively)
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500,000 | 500,000 | ||||||
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Cumulative preferred stock, $20 par value
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Series A (liquidation preference $4,916,765 and $4,902,131, respectively)
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1,170,660 | 1,170,660 | ||||||
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Series B (liquidation preference $801,284 and $798,899, respectively)
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190,780 | 190,780 | ||||||
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Common stock, $1 par value
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969,834 | 969,834 | ||||||
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Paid-in capital in excess of par
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3,134,722 | 3,134,722 | ||||||
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Accumulated deficit
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(5,677,442 | ) | (5,688,579 | ) | ||||
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Total stockholders’ equity
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788,554 | 777,417 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 1,529,043 | $ | 1,078,383 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
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September 30
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2013
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2012
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NET SALES
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$ | 911,260 | $ | 797,592 | ||||
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COST OF SALES
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658,354 | 583,645 | ||||||
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Gross profit on sales
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252,906 | 213,947 | ||||||
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OPERATING EXPENSES
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Selling
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96,922 | 92,374 | ||||||
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General and administrative
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138,390 | 125,302 | ||||||
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Gain on sale of equipment
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- | (22,500 | ) | |||||
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Total operating expenses
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235,312 | 195,176 | ||||||
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Income from operations
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17,594 | 18,771 | ||||||
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OTHER INCOME (EXPENSE)
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Miscellaneous income
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364 | 365 | ||||||
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Interest expense
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(2,586 | ) | (3,734 | ) | ||||
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Total other income (expense), net
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(2,222 | ) | (3,369 | ) | ||||
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Net income before income taxes
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15,372 | 15,402 | ||||||
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PROVISION (CREDIT) FOR INCOME TAXES
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4,235 | 4,851 | ||||||
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NET INCOME
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$ | 11,137 | $ | 10,551 | ||||
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NET LOSS PER SHARE OF COMMON STOCK
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- BASIC
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$ | (0.02 | ) | $ | (0.02 | ) | ||
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- DILUTED
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$ | (0.02 | ) | $ | (0.02 | ) | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 5 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
(Unaudited)
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Three Months Ended
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September 30
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2013
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2012
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 11,137 | $ | 10,551 | ||||
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Adjustments to reconcile net income to net cash used in operating activities:
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Depreciation and amortization
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21,432 | 23,032 | ||||||
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Allowance for bad debts
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300 | 300 | ||||||
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Deferred income amortization
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(324 | ) | (325 | ) | ||||
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Deferred income taxes
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(6,285 | ) | 4,851 | |||||
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Gain on sale of equipment
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- | (22,500 | ) | |||||
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Effects of changes in operating assets and liabilities:
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Trade receivables
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(434,114 | ) | (392,756 | ) | ||||
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Inventories
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(23,795 | ) | (129,067 | ) | ||||
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Prepaid expenses
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(8,021 | ) | (3,432 | ) | ||||
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Accounts payable
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228,948 | 215,100 | ||||||
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Accrued expenses
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15,891 | 23,383 | ||||||
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Income taxes payable
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7,514 | - | ||||||
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Net cash used in operating activities
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(187,317 | ) | (270,863 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Proceeds from sale of equipment
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- | 22,500 | ||||||
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Purchases of property and equipment
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(8,456 | ) | - | |||||
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Net cash provided by (used in) investing activities
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(8,456 | ) | 22,500 | |||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from line-of-credit
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205,000 | 285,000 | ||||||
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Principal payments on notes payable
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(11,698 | ) | (13,735 | ) | ||||
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Net cash provided by financing activities
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193,302 | 271,265 | ||||||
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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(2,471 | ) | 22,902 | |||||
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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28,564 | 17,949 | ||||||
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 26,093 | $ | 40,851 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 6 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
(Unaudited)
NOTE 1 - GENERAL
The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as “Chase”, “we”, “our”, and “us”) at June 30, 2013 has been taken from audited consolidated financial statements at that date and condensed. The condensed consolidated financial statements as of and for the three months ended September 30, 2013 and for the three months ended September 30, 2012 are unaudited and reflect all normal and recurring accruals and adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods presented in this quarterly report. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended June 30, 2013. The results of operations for the three months ended September 30, 2013 and cash flows for the three months ended September 30, 2013 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included.
No events have occurred subsequent to September 30, 2013, through the date of filing this form, that would require disclosure in this Form 10-Q or would be required to be recognized in the condensed consolidated financial statements as of or for the three month period ended September 30, 2013.
NOTE 2 - LOSS PER SHARE
The income (loss) per share was computed on the weighted average of outstanding common shares during the period. Diluted earnings per share is calculated by including contingently issuable shares with the weighted averages shares outstanding.
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Three Months Ended
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September 30
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2013
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2012
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Net income
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$ | 11,137 | $ | 10,551 | ||||
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Preferred dividend requirements:
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6% Prior Cumulative Preferred, $5 par value
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15,000 | 15,000 | ||||||
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5% Convertible Cumulative Preferred, $20 par value
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17,018 | 17,018 | ||||||
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Total dividend requirements
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32,018 | 32,018 | ||||||
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Net loss - common stockholders
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$ | (20,881 | ) | $ | (21,467 | ) | ||
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Weighted average shares - basic
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969,834 | 969,834 | ||||||
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Dilutive effect of contingently issuable shares
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1,033,334 | 1,033,334 | ||||||
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Weighted average shares - diluted
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2,003,168 | 2,003,168 | ||||||
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Basic loss per share
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$ | (0.02 | ) | $ | (0.02 | ) | ||
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Diluted loss per share
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$ | (0.02 | ) | $ | (0.02 | ) |
| 7 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - LOSS PER SHARE (CONTINUED)
Cumulative Preferred Stock dividends in arrears at September 30, 2013 and 2012 totaled $7,596,608 and $7,468,536, respectively. Total dividends in arrears, on a per share basis, consist of the following:
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Three Months Ended
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September 30
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2013
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2012
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6% Convertible
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Series A
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$ | 16 | $ | 16 | ||||
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Series B
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$ | 16 | $ | 16 | ||||
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5% Convertible
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Series A
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$ | 64 | $ | 63 | ||||
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Series B
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$ | 64 | $ | 63 | ||||
The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid accrued dividends to date of redemption. In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends. It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.
The Company has the privilege of redemption of 5% convertible cumulative preferred stock at $21.00 a share plus unpaid accrued dividends. In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20.00 a share plus unpaid accrued dividends. It may be exchanged for common stock at the option of the shareholders, in the ratio of 3.795 common shares for one of preferred.
| 8 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - NOTES PAYABLE
The Company’s long-term debt consists of:
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September 30,
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June 30,
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Payee
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Terms
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2013
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2013
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Nodaway Valley Bank
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$350,000 line-of-credit agreement expiring on January 3, 2014, with a variable interest rate at prime but not less than 5%. The line-of-credit agreement replaced two existing line-of-credit agreements that expired on January 3, 2013. The line-of-credit is collateralized by substantially all assets of the Company.
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$
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205,000
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$
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-
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Ford Credit
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$679 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
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20,375
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22,413
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Ford Credit
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$517 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
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16,017
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17,050
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Nodaway Valley Bank
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$3,192, including interest of 5.75%; final payment due June 2015, secured by equipment.
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40,943
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48,698
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Toyota Financial
Services
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$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.
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4,926
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5,798
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Total
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287,261
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93,959
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Less current portion
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259,767
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54,172
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Long-term portion
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$
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27,494
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$
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39,787
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| 9 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - NOTES PAYABLE (CONTINUED)
Future minimum payments for the twelve months ending September 30 are:
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2014
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$ | 259,767 | ||
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2015
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19,802 | |||
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2016
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7,692 | |||
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Total
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$ | 287,261 |
NOTE 4 - INCOME TAXES
The Company follows the provisions for uncertain tax positions as addressed in Financial Accounting Standards Board Accounting Standards Codification 740-10. The Company recognized no liability for unrecognized tax benefits at September 30, 2013. The Company has no material tax positions at September 30, 2013 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company’s federal income tax returns for the fiscal years ended 2011, 2012 and 2013 are subject to examination by the IRS taxing authority.
NOTE 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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Three Months Ended
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September 30
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2013
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2012
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Cash paid for:
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Interest
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$ | 2,586 | $ | 4,253 | ||||
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Income taxes
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- | - | ||||||
NOTE 6 - CONTINGENCIES
The Company received correspondence from the legal counsel for the Public Building Commission of Chicago (PBC) in August 2012, alleging that the Company previously owned and operated a manufacturing facility in Chicago and that the Company is a liable party for environmental response costs incurred by the PBC in the amount of $822,642. It is the opinion of management, after reviewing the letter with counsel, that further information is required to determine the validity of the claim, the likelihood of an unfavorable outcome to the Company, and an amount of potential loss to the Company if any at all. Management believes significant questions need to be resolved and answered before completing its assessment of the validity of the claim. In the event that a loss were to be incurred by the Company in connection with this claim, the loss would be material.
| 10 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Chase General Corporation (Chase) is a holding company for its wholly-owned subsidiary, Dye Candy Company. This subsidiary is the main operating company that is engaged in the manufacture of confectionery products which are sold primarily to wholesale houses, grocery accounts, vendors, and repackers. The subsidiary (Company) operates two divisions, Chase Candy division and Seasonal Candy division, which share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two divisions is not maintained by Management.
The Company’s business, like that of many other confectionary product manufacturers, is seasonal. Historically, the Company has realized more of its revenue and earnings in the fiscal second quarter, which includes the majority of the holiday shopping season, than in any other fiscal quarter.
RESULTS OF OPERATIONS - Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
The following management comments regarding Chase’s results of operations and outlook should be read in conjunction with the condensed consolidated financial statements included pursuant to Item 1 of the quarterly report.
The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:
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Three Months Ended
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September 30
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2013
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2012
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Net sales
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100 | % | 100 | % | ||||
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Cost of sales
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72 | 73 | ||||||
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Gross profit on sales
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28 | 27 | ||||||
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Operating expenses
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26 | 25 | ||||||
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Income from operations
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2 | 2 | ||||||
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Other income (expense), net
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- | - | ||||||
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Income before income taxes
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2 | 2 | ||||||
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Provision (credit) for income taxes
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1 | 1 | ||||||
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Net income
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1 | % | 1 | % | ||||
| 11 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NET SALES
Net sales increased $113,668 or 14% for the three months ended September 30, 2013 to $911,260 compared to $797,592 for the three months ended September 30, 2012. Gross sales for Chase Candy increased $100,676 to $508,097 for the three months ended September 30, 2013, compared to $407,421 for 2012. Gross sales for Seasonal Candy increased $12,300 to $415,727 for the three months ended September 30, 2013, compared to $403,427 for 2012.
The 25% increase in gross sales of Chase Candy of $100,676 for the three months ended September 30, 2013 over the same period ended September 30, 2012, is primarily due to the net effect of the following: 1) two customers increasing orders by approximately $70,000 versus the first quarter a year ago of the single bar packs of Cherry Mash; 2) increased sales of Mini Mash of approximately $22,000 due to improved distribution of one customer; and 3) increased sales for the Cherry Mash Merchandisers of approximately $9,000.
The 3% increase in gross sales of Seasonal Candy of $12,300 for the three months ended September 30, 2013 over the same period ended September 30, 2012, is primarily due to the net effect of the following: 1) increased orders from two customers of approximately $20,000 due to increased business; offset by 2) decreased orders from various customers in the bulk seasonal product category totaling approximately $6,000 versus first quarter a year ago due to timing of orders and a sales price decrease of approximately 5%; and 3) decreased orders from various customers in the clamshell seasonal product category totaling approximately $2,000 versus first quarter a year ago due to timing of orders.
COST OF SALES
The cost of sales increased $74,709 to $658,354 decreasing to 72% of related revenues for the three months ended September 30, 2013, compared to $583,645 or 73% of related revenues for the three months ended September 30, 2012.
The 13% increase in cost of sales of $74,709 is primarily due to the 14% increase in net sales of $113,668 combined with a small decrease in the raw material costs of peanuts compared to the same period ended September 30, 2012. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand.
| 12 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COST OF SALES (CONTINUED)
The Company increased total inventory $23,795 or 5% to $532,927 at September 30, 2013 from $509,132 held in inventory at June 30, 2013 as a result of building up inventory product to be delivered in October and November 2013. The Company increased finished goods inventory 29% during the three months ended September 30, 2013 to $333,302 from the June 30, 2013 finished goods inventory levels of $258,392. The Company increased goods in process inventory 15% during the three months ended September 30, 2013 to $12,636 from the June 30, 2013 goods in process inventory levels of $10,942. The Company increased raw materials inventory 7% during the three months ended September 30, 2013 to $87,290 from the June 30, 2013 raw materials inventory levels of $81,515. The Company decreased packaging materials inventory 37% during the three months ended September 30, 2013 to $99,699 from the June 30, 2013 packaging materials inventory levels of $158,283.
SELLING EXPENSES
Selling expenses for the three months ended September 30, 2013 increased $4,548 to $96,922, which is 11% of sales, compared to $92,374 or 12% of sales for the three months ended September 30, 2012.
The increase of $4,548 in selling expenses for the three months ended September 30, 2013 is primarily due to higher promotions expense for the period. Promotions expense increased $6,567 to $17,892 for this period from $11,325 for the three months ended September 30, 2012.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended September 30, 2013 increased $13,088 to $138,390 and decreased to 15% of sales, compared to $125,302 or 16% of sales for the three months ended September 30, 2012. The increased costs are primarily because of a $5,193 increase in insurance expense and a $9,364 increase in professional fees.
OTHER INCOME (EXPENSE)
Other income and (expense) decreased by $1,147 for the three months ended September 30, 2013 to $(2,222), compared to $(3,369) for the three months ended September 30, 2012 primarily due to a decrease in interest expense.
| 13 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROVISION (CREDIT) FOR INCOME TAXES
The
Company recorded tax expense for the three months ended September 30, 2013 of $4,235 as compared to tax expense of $4,851
for the three months ended September 30, 2012. The net tax expense recorded for the three months ended September
30, 2013 is primarily due to the change in deferred income taxes as a result of various timing differences between book
income and taxable income.
NET INCOME
The
Company reported net income for the three months ended September 30, 2013 of $11,137, compared to net income of $10,551 for
the three months ended September 30, 2012. This increase of $586 is explained above.
PREFERRED DIVIDENDS
Preferred dividends were $32,018 for the three months ended September 30, 2013 and 2012, which reflects additional preferred stock dividends in arrears on the Company’s Series A and Series B $5 par value preferred stock and its Series A and Series B $20 par value preferred stock.
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
Net loss applicable to common stockholders for the three months ended September 30, 2013 was $(20,881) which is a decrease of $586 as compared to the net loss for the three months ended September 30, 2012 of $(21,467).
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the summary of cash flow for the fiscal year indicated.
|
Three Months Ended
|
||||||||
|
September 30,
|
||||||||
|
2013
|
2012
|
|||||||
|
Net cash used in operating activities
|
$ | (187,317 | ) | $ | (270,863 | ) | ||
|
Net cash provided by (used in) investing activities
|
$ | (8,456 | ) | $ | 22,500 | |||
|
Net cash provided by financing activities
|
$ | 193,302 | $ | 271,265 | ||||
Management has no material commitments for capital expenditures during the remainder of fiscal 2014. The $193,302 of cash provided by financing activities is the receipt of $205,000 drawn from a line-of-credit, net of principal payments on equipment and vehicle loans. At September 30, 2013, the Company had $145,000 remaining on the line-of-credit, which could be utilized to help fund any working capital requirements. Management expects that projected cash flows will enable the Company to pay the full balance on the line-of-credit prior to December 31, 2013.
| 14 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Management believes that the projected cash flow from operations, combined with its existing cash balances, will be sufficient to meet its funding requirements for the foreseeable future.
Management believes that inflation will have only a minimal effect on future operations since such effects will be offset by sales price increases, which are not expected to have a significant effect upon demand.
CRITICAL ACCOUNTING POLICIES
Forward-Looking Information
This report, as well as our other reports filed with the Securities and Exchange Commission (“SEC”), contains forward-looking statements made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict” and similar expressions are intended to identify forward-looking statements. This report contains forward-looking statements regarding, among other topics, our expected financial position, results of operations, cash flows, strategy, and management’s plans and objectives. Accordingly, these forward-looking statements are based on assumptions about a number of important factors. While we believe that our assumptions about such factors are reasonable, such factors involve risks and uncertainties that could cause actual results to be different from what appear here. These risk factors include: the ability to adequately pass through customers unanticipated future increases in raw material costs, decreased demand for products, expected orders that do not occur, loss of key customers, the impact of competition and price erosion as well as supply and manufacturing constraints, and other risks and uncertainties. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will prove accurate, and our actual results may differ materially from these forward-looking statements. We assume no obligation to update any forward-looking statements made herein.
| 15 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
Not applicable to a smaller reporting company.
(a) Evaluation of Disclosure Controls and Procedures
Chase’s Management, with the participation of the Chief Executive Officer, has evaluated the effectiveness of Chase’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Management has concluded that Chase’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in periodic filings under the Exchange Act is accumulated and communicated to management, including those officers, and to members of the Board of Directors, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no significant changes in Chase’s internal control over financial reporting or in other factors that in management’s estimates are reasonably likely to materially affect Chase’s internal control over financial reporting subsequent to the date of the evaluation.
| 16 |
| ITEM 1. | LEGAL PROCEEDINGS |
|
The Company has received correspondence from the legal counsel for the Public Building Commission of Chicago (PBC) in August 2012, alleging that the Company previously owned and operated a manufacturing facility in Chicago and that the Company is a liable party for environmental response costs incurred by the PBC in the amount of $822,642. It is the opinion of management, after reviewing the letter with counsel, that further information is required to determine the validity of the claim, the likelihood of an unfavorable outcome to the Company, and an amount of potential loss to the Company, if any at all. Management believes significant questions need to be resolved and answered before completing its assessment of the validity of the claim. In the event that a loss were to be incurred by the Company in connection with this claim, the loss would be material.
|
|
| ITEM 1A. | RISK FACTORS |
|
Not applicable to a smaller reporting company.
|
|
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|
None
|
|
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
|
a. None
|
|
| b. The total cumulative preferred stock dividends contingency at September 30, 2013 is $7,596,608. | |
| ITEM 4. | MINE SAFETY DISCLOSURES |
|
Not applicable.
|
|
| ITEM 5. | OTHER INFORMATION |
|
a. None
|
| 17 |
PART II. OTHER INFORMATION (CONTINUED)
|
a.
|
Exhibits.
|
|
|
Exhibit 31.1
|
Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
|
|
|
Exhibit 32.1
|
Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Exhibit 101
|
The following financial statements for the quarter ended September 30, 2013, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
|
| 18 |
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.
|
Chase General Corporation and Subsidiary
|
|||
|
(Registrant)
|
|||
| November 8, 2013 | /s/ Barry M. Yantis | ||
|
Date
|
Barry M. Yantis | ||
|
Chairman of the Board, Chief Executive Officer and
|
|||
|
Chief Financial Officer, President and Treasurer
|
|||
| 19 |