Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - CHASE GENERAL CORP | Financial_Report.xls |
| EX-32.1 - EXHIBIT 32.1 - CHASE GENERAL CORP | ex32-1.htm |
| EX-31.1 - EXHIBIT 31.1 - CHASE GENERAL CORP | ex31-1.htm |
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, 2014
o 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) | ||
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MISSOURI
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36-2667734
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(State or other jurisdiction of
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(IRS Employer Identification No.)
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incorporation or organization)
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| 1307 South 59th, St. Joseph, Missouri 64507 | ||
| (Address of principal executive offices, Zip Code) | ||
| (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.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o (Do not check if a smaller reporting company)
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Smaller reporting company x
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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 11, 2014, there were 969,834 shares of common stock, $1.00 par value, outstanding.
CHASE GENERAL CORPORATION AND SUBSIDIARY
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2014
TABLE OF CONTENTS
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3
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3
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5
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6
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18
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19
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| 2 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
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ASSETS
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September 30,
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June 30,
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|||||||
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2014
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2014
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(Unaudited)
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 1,806 | $ | 162,435 | ||||
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Trade receivables, net of allowance for doubtful accounts of $17,158 and $16,508, respectively
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686,878 | 178,686 | ||||||
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Inventories:
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Finished goods
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238,056 | 258,726 | ||||||
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Goods in process
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16,369 | 11,950 | ||||||
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Raw materials
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86,242 | 80,088 | ||||||
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Packaging materials
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167,077 | 145,046 | ||||||
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Prepaid expenses
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13,683 | 12,233 | ||||||
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Deferred income taxes
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7,114 | 7,047 | ||||||
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Total current assets
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1,217,225 | 856,211 | ||||||
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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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751,347 | 739,962 | ||||||
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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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31,518 | 31,518 | ||||||
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Leasehold improvements
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72,068 | 72,068 | ||||||
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Total
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1,155,875 | 1,144,490 | ||||||
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Less accumulated depreciation
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863,258 | 841,445 | ||||||
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Total property and equipment, net
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292,617 | 303,045 | ||||||
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TOTAL ASSETS
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$ | 1,509,842 | $ | 1,159,256 | ||||
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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2014
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2014
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(Unaudited)
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CURRENT LIABILITIES
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Accounts payable
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$ | 340,348 | $ | 51,947 | ||||
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Current maturities of notes payable
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146,382 | 21,537 | ||||||
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Accrued expenses
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42,227 | 139,098 | ||||||
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Income taxes payable
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29,925 | 21,203 | ||||||
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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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560,181 | 235,084 | ||||||
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LONG-TERM LIABILITIES
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Deferred income
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12,337 | 12,661 | ||||||
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Notes payable, less current maturities
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3,100 | 4,650 | ||||||
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Deferred income taxes
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71,838 | 79,176 | ||||||
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Total long-term liabilities
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87,275 | 96,487 | ||||||
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Total liabilities
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647,456 | 331,571 | ||||||
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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 $2,197,500 and $2,190,000, respectively)
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500,000 | 500,000 | ||||||
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Series B (liquidation preference $2,152,500 and $2,145,000, respectively)
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500,000 | 500,000 | ||||||
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Cumulative preferred stock, $20 par value
Series A (liquidation preference $4,975,298 and $4,960,664, respectively) |
1,170,660 | 1,170,660 | ||||||
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Series B (liquidation preference $810,823 and $808,438, respectively)
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190,780 | 190,780 | ||||||
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Common stock, $1 par value
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969,834 | 969,834 | ||||||
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Paid-in capital in excess of par
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3,134,722 | 3,134,722 | ||||||
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Accumulated deficit
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(5,603,610 | ) | (5,638,311 | ) | ||||
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Total stockholders’ equity
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862,386 | 827,685 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 1,509,842 | $ | 1,159,256 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
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September 30
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2014
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2013
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NET SALES
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$ | 991,908 | $ | 911,260 | ||||
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COST OF SALES
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715,070 | 658,354 | ||||||
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Gross profit on sales
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276,838 | 252,906 | ||||||
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OPERATING EXPENSES
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Selling
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114,641 | 96,922 | ||||||
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General and administrative
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121,381 | 138,390 | ||||||
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Total operating expenses
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236,022 | 235,312 | ||||||
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Income from operations
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40,816 | 17,594 | ||||||
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OTHER INCOME (EXPENSE)
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Miscellaneous income
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12,022 | 364 | ||||||
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Interest expense
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(887 | ) | (2,586 | ) | ||||
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Total other income (expense), net
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11,135 | (2,222 | ) | |||||
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Net income before income taxes
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51,951 | 15,372 | ||||||
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PROVISION FOR INCOME TAXES
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17,250 | 4,235 | ||||||
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NET INCOME
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$ | 34,701 | $ | 11,137 | ||||
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NET LOSS PER SHARE OF COMMON STOCK
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- BASIC
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$ | 0.00 | $ | (0.02 | ) | |||
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- DILUTED
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$ | 0.00 | $ | (0.02 | ) | |||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 5 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
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September 30
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 34,701 | $ | 11,137 | ||||
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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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21,814 | 21,432 | ||||||
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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 | ) | (324 | ) | ||||
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Deferred income taxes
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(7,405 | ) | (6,285 | ) | ||||
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Effects of changes in operating assets and liabilities:
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Trade receivables
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(508,492 | ) | (434,114 | ) | ||||
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Inventories
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(11,934 | ) | (23,795 | ) | ||||
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Prepaid expenses
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(1,450 | ) | (8,021 | ) | ||||
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Accounts payable
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288,401 | 228,948 | ||||||
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Accrued expenses
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(96,871 | ) | 15,891 | |||||
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Income taxes payable
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8,722 | 7,514 | ||||||
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Net cash used in operating activities
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(272,538 | ) | (187,317 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchases of property and equipment
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(11,386 | ) | (8,456 | ) | ||||
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Net cash used in investing activities
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(11,386 | ) | (8,456 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from line-of-credit
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135,000 | 205,000 | ||||||
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Principal payments on notes payable
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(11,705 | ) | (11,698 | ) | ||||
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Net cash provided by financing activities
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123,295 | 193,302 | ||||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS
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(160,629 | ) | (2,471 | ) | ||||
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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162,435 | 28,564 | ||||||
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 1,806 | $ | 26,093 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 6 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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, 2014 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, 2014 and for the three months ended September 30, 2013 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, 2014. The results of operations for the three months ended September 30, 2014 and cash flows for the three months ended September 30, 2014 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2015. 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, 2014, 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, 2014.
NOTE 2 – EARNINGS PER SHARE
The income 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 average shares outstanding.
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Three Months Ended
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September 30
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2014
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2013
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Net income
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$ | 34,701 | $ | 11,137 | ||||
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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, $20 par value
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17,018 | 17,018 | ||||||
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Total dividend requirements
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32,018 | 32,018 | ||||||
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Net income (loss) - common stockholders
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$ | 2,683 | $ | (20,881 | ) | |||
| 7 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – INCOME (LOSS) PER SHARE (CONTINUED)
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Three Months Ended
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September 30
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2014
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2013
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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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$ | 0.00 | $ | (0.02 | ) | |||
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Diluted loss per share
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$ | 0.00 | $ | (0.02 | ) | |||
Cumulative Preferred Stock dividends in arrears at September 30, 2014 and 2013 totaled $7,724,680 and $7,596,608, respectively. Total dividends in arrears, on a per share basis, consist of the following:
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Three Months Ended
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September 30
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2014
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2013
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6% Convertible
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Series A
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$ | 17 | $ | 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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$ | 65 | $ | 64 | ||||
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Series B
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$ | 65 | $ | 64 | ||||
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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2014
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2014
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| Nodaway Valley Bank |
$350,000 line-of-credit agreement expiring on January 3, 2015, with a variable interest rate at prime but not less than 5%. The line-of-credit is collateralized by substantially all assets of the Company.
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$ | 135,000 | $ | - | |||||
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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. | 9,300 | 10,850 | |||||||
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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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3,290 | 12,547 | |||||||
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Toyota Financial Services
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$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.
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1,892 | 2,790 | |||||||
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Total
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149,482 | 26,187 | ||||||||
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Less current portion
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146,382 | 21,537 | ||||||||
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Long-term portion
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$ | 3,100 | $ | 4,650 | ||||||
| Future minimum payments for the twelve months ending September 30 are: | ||||||||||
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2015
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$ | 146,382 | ||||||||
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2016
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3,100 | |||||||||
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Total
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$ | 149,482 | ||||||||
| 9 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 2014. The Company has no material tax positions at September 30, 2014 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 2012, 2013 and 2014 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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2014
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2013
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Cash paid for:
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Interest
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$ | 887 | $ | 2,586 | ||||
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Income taxes
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15,933 | - | ||||||
NOTE 6 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board issued new accounting guidance for the recognition of revenue from contracts with customers, which will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company’s fiscal year 2018, and early adoption is not permitted. The Company is evaluating the effect the new guidance will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effect of the standard on its ongoing financial reporting.
There have been no other newly issued or newly applicable accounting pronouncements that have, or are expected to have, a significant impact on the Company’s financial statements.
| 10 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
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, 2014 Compared with Three Months Ended September 30, 2013
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:
| Three Months Ended | ||||||
| September 30 | ||||||
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2014
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2013
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Net sales
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100
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%
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100
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%
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Cost of sales
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72
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72
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Gross profit on sales
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28
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28
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Operating expenses
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24
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26
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Income from operations
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4
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2
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Other income (expense), net
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1
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-
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Income before income taxes
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5
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2
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Provision for income taxes
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2
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1
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Net income
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3
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%
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1
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%
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| 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 $80,648 or 9% for the three months ended September 30, 2014 to $991,908 compared to $911,260 for the three months ended September 30, 2013. Gross sales for Seasonal Candy increased $91,897 to $507,624 for the three months ended September 30, 2014, compared to $415,727 for 2013. Gross sales for Chase Candy decreased $16,017 to $492,080 for the three months ended September 30, 2014, compared to $508,097 for 2013. Sales returns and allowances for the Company decreased $5,254 to $8,710 for the three months ended September 30, 2014, compared to $13,964 for 2013. Other sales for the Company decreased $486 to $914 for the three months ended September 30, 2014, compared to $1,400 for 2013.
The 22% increase in gross sales of Seasonal Candy of $91,897 for the three months ended September 30, 2014 over the same period ended September 30, 2013, is primarily due to the following: 1) increased orders from various customers in the clamshell seasonal division totaling approximately $71,000 versus the same period a year ago primarily due a to earlier shipments; 2) increased orders from various customers in the bulk seasonal division netting approximately $32,000 versus the same period a year ago primarily due a to earlier shipments; offset by 3) decreased orders in the generic seasonal division by approximately $11,000 due to decreased sales to one customer.
The 3% decrease in gross sales of Chase Candy of $16,017 for the three months ended September 30, 2014 over the same period ended September 30, 2013, is primarily due to the net effect of the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $42,000 versus the same period a year ago primarily due to one customer decreasing their orders; offset by 2) increased sales of the L212 Mini Mash division by approximately $14,000 versus the same period a year ago due to one customer increasing their orders; 3) increased sales of the L278 Mini Mash division by approximately $10,000 versus the same period a year ago due to two customers increasing their orders; and 4) other fluctuations netting an increase of approximately $2,000.
COST OF SALES
The cost of sales increased $56,716 to $715,070 or 72% of related revenues for the three months ended September 30, 2014, compared to $658,354 or 72% of related revenues for the three months ended September 30, 2013.
The 9% increase in cost of sales of $56,716 is primarily due to the 9% increase in net sales of $80,648. 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 $11,934 or 2% to $507,744 at September 30, 2014 from $495,810 held in inventory at June 30, 2014 as a result of building up inventory product to be delivered in October and November 2014. The Company decreased finished goods inventory 8% during the three months ended September 30, 2014 to $238,056 from the June 30, 2014 finished goods inventory levels of $258,726. The Company increased goods in process inventory 37% during the three months ended September 30, 2014 to $16,369 from the June 30, 2014 goods in process inventory levels of $11,950. The Company increased raw materials inventory 8% during the three months ended September 30, 2014 to $86,242 from the June 30, 2014 raw materials inventory levels of $80,088. The Company increased packaging materials inventory 15% during the three months ended September 30, 2014 to $167,077 from the June 30, 2014 packaging materials inventory levels of $145,046.
SELLING EXPENSES
Selling expenses for the three months ended September 30, 2014 increased $17,719 to $114,641, which is 12% of sales, compared to $96,922 or 11% of sales for the three months ended September 30, 2013.
The increase of $17,719 in selling expenses for the three months ended September 30, 2014 is primarily due to higher premium promotions expense and higher commissions expense for the period. Premium promotions, which are paid to customers for various marketing reasons, increased $8,992 to $24,070 for this period from $15,078 for the three months ended September 30, 2013. Commissions expense increased $5,458 to $39,107 for this period from $33,649 for the three months ended September 30, 2013 primarily due to an increase in net sales and to a change in the mix of net sales.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended September 30, 2014 decreased $17,009 to $121,381 and decreased to 12% of sales, compared to $138,390 or 15% of sales for the three months ended September 30, 2013. The decreased costs are primarily because of a $17,581 decrease in professional fees.
OTHER INCOME (EXPENSE)
Other income and (expense) increased by $13,357 for the three months ended September 30, 2014 to $11,135, compared to $(2,222) for the three months ended September 30, 2013 primarily due to a decrease in interest expense of $1,699, a freight claim of approximately $4,000 and a refund of approximately $7,000 from a customer related to a underpayment written off during the year ending June 30, 2014.
| 13 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
| Item 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
PROVISION FOR INCOME TAXES
The Company recorded a provision for income tax expense for the three months ended September 30, 2014 of $17,250 as compared to tax expense of $4,235 for the three months ended September 30, 2013. The income tax expense recorded for the three months ended September 30, 2014 is primarily due to improved profitability and 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, 2014 of $34,701, compared to net income of $11,137 for the three months ended September 30, 2013. This increase of $23,564 is explained above.
PREFERRED DIVIDENDS
Preferred dividends were $32,018 for the three months ended September 30, 2014 and 2013, 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 INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
Net income applicable to common stockholders for the three months ended September 30, 2014 was $2,683 which is an increase of $23,564 as compared to the net loss for the three months ended September 30, 2013 of $(20,881).
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the summary of cash flow for the fiscal year indicated.
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2014 | 2013 | |||||||
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Net cash used in operating activities
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$ | (272,538 | ) | $ | (187,317 | ) | ||
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Net cash used in investing activities
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$ | (11,386 | ) | $ | (8,456 | ) | ||
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Net cash provided by financing activities
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$ | 123,295 | $ | 193,302 | ||||
| 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 has no material commitments for capital expenditures during the remainder of fiscal 2015. The $11,386 of cash used in investing activities is the purchase of equipment used during the manufacturing process. The $272,538 of cash used in operating activities is fully detailed in the condensed consolidated statement of cash flow on page six and does include a $100,000 settlement payment made on July 7, 2014. The $123,295 of cash provided by financing activities is the receipt of $135,000 drawn from a line-of-credit, net of principal payments on equipment and vehicle loans. At September 30, 2014, the Company had $215,000 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, 2014.
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
| ITEM 3. - |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Not applicable to a smaller reporting company.
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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.
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| (b) |
Changes in Internal Control over Financial Reporting
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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.
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| 16 |
PART II. OTHER INFORMATION (CONTINUED)
| ITEM 6. | EXHIBITS | ||
| a. |
Exhibits.
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Exhibit 31.1
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Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
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Exhibit 32.1
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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.
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Exhibit 101
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The following financial statements for the quarter ended September 30, 2014, 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.
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| 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.
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Chase General Corporation and Subsidiary
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(Registrant)
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| November 12, 2014 | /s/ Barry M. Yantis | ||
| Date | Barry M. Yantis | ||
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Chairman of the Board, Chief Executive Officer and
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Chief Financial Officer, President and Treasurer
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| 19 |