UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31,
20022008
¨ 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(Exact name of
registrantsmall business issuer as specified in itsCharter) Missouri 36-2667734 (State of incorporation) (I.R.S. Employer Identification No.) 3600 Leonard Road,charter)
MISSOURI 36-2667734 (State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
1307 South 59th, St. Joseph, Missouri
64503 (Address64507(Address of principal executive
offices) (Zipoffices, Zip Code)Registrant's(816) 279-1625
(Issuer’s telephone number, including area
code (816)279-1625 Not Applicable (Former Name,code)NONE
(Former
Addressname, former address andFormer Fiscal Year,former fiscal year, ifChanged Since Last Report) Indicate by check markchanged since last report)Check whether the
registrantissuer (1)hasfiled all reports required to be filed by Section 12, 13 or 15(d) of theSecuritiesExchange Actof 1934during theprecedingpast 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]x No[ ] APPLICABLE ONLY TO CORPORATE ISSUERS:¨Indicate by check mark whether the
numberregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions ofshares outstanding of each“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of theissuer's classesExchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (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 ¨ No x
As of January 31, 2009, there were 969,834 shares of common stock,
as$1 par value, issued and outstanding.Table of
the latest practicable date: 969,834 as of January 31, 2003. 1Contents CHASE GENERAL CORPORATION
IndexAND SUBSIDIARYINDEX
2CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2002 and June 30, 2002ASSETS
December 31, June 30, 2002 2002* ------------ ---------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 251,891 $ 188,528 Trade receivables, net of allowance of $13,044 and $9,834, respectively 126,376 121,918 Income tax receivable -- 7,053 Inventories: Finished goods 8,022 79,382 Goods in process 8,923 2,557 Raw materials 49,356 23,377 Packaging materials 130,216 60,635 Prepaid expense 266 22,110 Prepaid income taxes -- 1,316 ---------- ---------- Total current assets 575,050 506,876 ---------- ---------- PROPERTY AND EQUIPMENT - AT COST 1,101,730 1,146,035 Less accumulated depreciation 930,445 941,495 ---------- ---------- Total property and equipment 171,285 204,540 ---------- ---------- TOTAL ASSETS $ 746,335 $ 711,416 ========== ========== 3LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30, 2002 2002* ------------ ----------- (Unaudited)CURRENT LIABILITIES Accounts payable $ 34,979 $ 66,600 Notes payable, Series B current maturities 22,032 51,010 Accrued expenses 52,242 36,490 ----------- ----------- Total current liabilities 109,253 154,100 ----------- ----------- Total liabilities 109,253 154,100 ----------- ----------- STOCKHOLDERS' EQUITY Capital stock issued and outstanding: Prior cumulative preferred stock, $5 par value: Series A (liquidation preference $1,320,000 and $1,305,000 respectively) 500,000 500,000 Series B (liquidation preference $1,275,000 and $1,260,000 respectively) 500,000 500,000 Cumulative preferred stock, $20 par value Series A (liquidation preference $3,116,884 and $3,087,616 respectively) 1,170,660 1,170,660 Series B (liquidation preference $507,950 and $503,182 respectively) 190,780 190,780 Common stock, $1 par value 969,834 969,834 Paid-in capital in excess of par 3,134,722 3,134,722 Retained earnings (deficit) (5,828,914) (5,908,680) ----------- ----------- Total stockholders' equity 637,082 557,316 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 746,335 $ 711,416 =========== ===========* The balance sheet at June 30, 2002 has been derived from the audited financial statements at that date.
December 31,
2008June 30,
2008(Unaudited) (Audited) CURRENT ASSETS
Cash and cash equivalents
$ 249,125 $ 24,828 Trade receivables, net
150,919 211,932 Inventories:
Finished goods
22,742 72,651 Goods in process
7,040 3,857 Raw materials
81,609 56,346 Packaging materials
184,300 170,276 Prepaid expenses
3,321 6,146 Deferred income taxes
2,205 8,890 Total current assets
701,261 554,926 PROPERTY AND EQUIPMENT—NET
299,925 274,024 OTHER ASSETS
Deferred income taxes - noncurrent
— 12,024 TOTAL ASSETS
$ 1,001,186 $ 840,974 The accompanying notes are an integral part of
thesethecondensed consolidated financial statements.
4CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)BALANCE SHEETS
Six Months Ended Three Months Ended December 31 December 31 ----------------------- --------------------- 2002 2001 2002 2001 ---------- ---------- ---------- --------NET SALES $1,348,429 $1,291,449 $1,022,055 $979,472 COST OF SALES 990,888 910,023 729,485 668,385 ---------- ---------- ---------- -------- Gross profit on sales 357,541 381,426 292,570 311,087 ---------- ---------- ---------- -------- OPERATING EXPENSES Selling expense 136,591 139,168 92,619 89,910 General and administrative expense 103,638 104,182 55,830 54,682 ---------- ---------- ---------- -------- Total operating expenses 240,229 243,350 148,449 144,592 ---------- ---------- ---------- -------- Income from operations 117,312 138,076 144,121 166,495 OTHER INCOME (EXPENSE) (9,335) (1,163) 589 (706) ---------- ---------- ---------- -------- Income before income taxes 107,977 136,913 144,710 165,789 PROVISION FOR INCOME TAXES 28,210 41,224 35,534 47,224 ---------- ---------- ---------- -------- NET INCOME 79,767 95,689 109,176 118,565 Preferred dividends (64,036) (64,036) (32,018) (32,018) ---------- ---------- ---------- -------- Net income applicable to common shareholders $ 15,731 $ 31,653 $ 77,158 $ 86,547 ========== ========== ========== ======== INCOME PER SHARE OF COMMON STOCK $ .02 $ .03 $ .08 $ .09 ========== ========== ========== ========LIABILITIES AND STOCKHOLDERS’ EQUITY
December 31,
2008June 30,
2008(Unaudited) (Audited) CURRENT LIABILITIES
Accounts payable
$ 107,334 $ 84,879 Current maturities of notes payable
23,314 62,007 Current maturities of forgivable loan—bank
5,000 5,000 Notes payable—stockholder
— 140,000 Accrued expenses
10,756 17,582 Deferred income
1,299 1,299 Accrued income taxes payable
52,073 — Total current liabilities
199,776 310,767 LONG-TERM LIABILITIES
Deferred income
14,805 10,454 Forgivable loan—bank, less current maturities
— 5,000 Notes payable, less current maturities
43,184 21,012 Deferred income taxes
6,011 — Total long-term liabilities
64,000 36,466 Total liabilities
263,776 347,233 STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $2,025,000 and $2,010,000 respectively)
500,000 500,000 Series B (liquidation preference $1,980,000 and $1,965,000 respectively)
500,000 500,000 Cumulative preferred stock, $20 par value
Series A (liquidation preference $4,638,735 and $4,609,469 respectively)
1,170,660 1,170,660 Series B (liquidation preference $755,971 and $751,201 respectively)
190,780 190,780 Common stock, $1 par value
969,834 969,834 Paid-in capital in excess of par
3,134,722 3,134,722 Accumulated deficit
(5,728,586 ) (5,972,255 ) Total stockholders’ equity
737,410 493,741 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 1,001,186 $ 840,974 The accompanying notes are an integral part of
thesethecondensed consolidated financial statements.
5CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWSOPERATIONS(Unaudited)
Six Months Ended December 31 ------------------- 2002 2001 -------- --------CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 79,767 $ 95,689 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,703 22,341 Provision for bad debts 3,210 3,210 Loss on disposition of equipment 9,747 -- Effects of changes in operating assets and liabilities: Receivables (615) (25,929) Inventories (30,566) 59,956 Prepaid expense 23,160 43,942 Accounts payable (31,621) 42,228 Accrued expenses 15,752 17,060 -------- -------- Net cash provided by operating activities 86,537 258,497 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment 5,500 -- (Purchases) credit of property and equipment 304 (3,637) -------- -------- Net cash provided by (used in) investing activities 5,804 (3,637) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on Series B notes (28,978) (26,662) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 63,363 228,198 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 188,528 117,114 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $251,891 $345,312 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (received) during the period for: Interest $ 3,860 Income taxes (7,053)
Three Months Ended
December 312008 2007 NET SALES
$ 1,470,385 $ 1,479,052 COST OF SALES
1,000,230 1,012,546 Gross profit on sales
470,155 466,506 OPERATING EXPENSES
Selling
157,008 143,353 General and administrative
74,237 67,253 (Gain) on sale of equipment
(5,252 ) — Total operating expenses
225,993 210,606 Income from operations
244,162 255,900 OTHER INCOME (EXPENSE)
(1,952 ) (3,092 ) Net income before income taxes
242,210 252,808 PROVISION FOR INCOME TAXES
67,661 28,762 NET INCOME
174,549 224,046 Preferred dividends
(32,018 ) (32,018 ) Net income applicable to common stockholders
$ 142,531 $ 192,028 NET INCOME PER SHARE OF COMMON STOCK—
BASIC
$ .15 $ .20 DILUTED
$ .07 $ .10 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
969,834 969,834 The accompanying notes are an integral part of
thesethecondensed consolidated financial statements.
6CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
December 312008 2007 NET SALES
$ 2,158,842 $ 1,882,480 COST OF SALES
1,428,501 1,311,056 Gross profit on sales
730,341 571,424 OPERATING EXPENSES
Selling
230,555 200,075 General and administrative
179,959 165,510 (Gain) on sale of equipment
(5,252 ) — Total operating expenses
405,262 365,585 Income from operations
325,079 205,839 OTHER INCOME (EXPENSE)
(4,617 ) (4,074 ) Net income before income taxes
320,462 201,765 PROVISION FOR INCOME TAXES
76,793 25,030 NET INCOME
243,669 176,735 Preferred dividends
(64,036 ) (64,036 ) Net income applicable to common stockholders
$ 179,633 $ 112,699 NET INCOME PER SHARE OF COMMON STOCK—
BASIC
$ .19 $ .12 DILUTED
$ .09 $ .06 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
969,834 969,834 The accompanying notes are an integral part of the
condensed consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 312008 2007 CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$ 243,669 $ 176,735 Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
34,040 29,330 Provision for bad debts
600 600 Deferred income amortization
(650 ) (650 ) Deferred income taxes
24,720 22,901 (Gain) on sale of equipment
(5,252 ) — Effects of changes in operating assets and liabilities:
Trade receivables
60,413 (11,092 ) Inventories
7,439 (89,307 ) Prepaid expenses
2,825 3,395 Accounts payable
22,455 (48,914 ) Accrued expenses
(6,826 ) (20,039 ) Income taxes payable
52,073 2,129 Net cash provided by operating activities
435,506 65,088 CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment
13,000 — Purchases of property and equipment
(25,987 ) (503 ) Net cash (used in) investing activities
(12,987 ) (503 ) CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line-of-credit
145,000 250,000 Principal payments on line-of-credit
(195,000 ) (250,000 ) Proceeds from notes payable—stockholder
— 20,000 Principal payments on notes payable—stockholder
(140,000 ) (65,000 ) Principal payments on vehicles notes payable
(8,222 ) — Net cash (used in) financing activities
(198,222 ) (45,000 ) NET INCREASE IN CASH AND CASH EQUIVALENTS
224,297 19,585 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
24,828 22,232 CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 249,125 $ 41,817 The accompanying notes are an integral part of the
condensed consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION OrganizationGENERALThe condensed consolidated balance sheet of Chase General Corporation
and subsidiary ('the Company'(“Chase” or “we”, “us”, or “our”)operates in the confectionery products industry. As of December 31, 2002, the Company's operations were primarily conducted through its wholly-owned subsidiary, Dye Candy Company. Basis of Presentationat June 30, 2008 has been derived from audited consolidated financial statements at that date. Theaccompanyingcondensed consolidated financial statements as of and for the three months and six months ended December 31, 2008 and for the three months and six months ended December 31, 2007 are unaudited anddo not include certain informationreflect all normal anddisclosures required by accounting principles generally accepted in the United States of America for complete financial statements. However,recurring accruals and adjustments which are, in the opinion of management,all adjustments, consisting onlynecessary for a fair presentation ofnormal recurring adjustments considered necessary to present fairlytheCompany's consolidatedfinancial position, operating results andresults of operations, have been included. Thesecash 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 andrelatednotesincludedthereto, together with management’s discussion and analysis of financial condition and results of operations, contained inthe Company's 2002our Annual Report on Form10-K. Results10-KSB forinterim periods are not necessarily indicativethe year ended June 30, 2008. The results oftrends or of resultsoperations fora full year. A summary oftheCompany's significant accounting policies is presented on pages 19three months and20 (not shown) of its 2002 Annual Report to Shareholders. Users of financial information producedsix months ended December 31, 2008 and cash flows forinterim periods are encouraged to refer to the footnotes contained in the Annual Report to Shareholders when reviewing interim financial results. There has been no material change in the accounting policies followed by the Company duringthe six months ended December 31,2002.2008 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2009. Where appropriate, items within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation. 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.NOTE 2 - NET INCOME 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. No computation was made on common stock equivalents outstanding for 2007 EPS because loss per share would be anti-dilutive.
Three Months Ended
December 31Six Months Ended
December 312008 2007 2008 2007 Net income
$ 174,549 $ 224,046 $ 243,669 $ 176,735 Preferred dividend requirements:
6% Prior Cumulative Preferred, $5 par value
15,000 15,000 30,000 30,000 5% Convertible Cumulative Preferred, $20 par value
17,018 17,018 34,036 34,036 Total dividend requirements
32,018 32,018 64,036 64,036 Net income common stockholders
$ 142,531 $ 192,028 $ 179,633 $ 112,699 CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - NET INCOME PER SHARE (CONTINUED)
Three Months Ended
December 31Six Months Ended
December 312008 2007 2008 2007 Weighted average shares—basic
969,834 969,834 969,834 969,834 Dilutive effect of contingently issuable shares
1,033,334 1,033,334 1,033,334 1,033,334 Weighted Average Shares—Diluted
2,003,168 2,003,168 2,003,168 2,003,168 Basic earnings per share
$ .15 $ .20 $ .19 $ .12 Diluted earnings per share
$ .07 $ .10 $ .09 $ .06 Cumulative Preferred Stock dividends in arrears at December 31, 2008 and 2007, totaled $6,988,266 and $6,860,194, respectively. Total dividends in arrears, on a per share basis, consist of the following at September 30:
Six Months Ended
December 312008 2007 6% Convertible
Series A
$ 15 $ 15 Series B
15 14 5% Convertible
Series A
59 58 Series B
59 58 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.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - FORGIVABLE LOAN AND DEFERRED INCOME
During 2004, the Company received a $25,000 economic development incentive from Buchanan County, which is a five year forgivable loan at a rate of $5,000 per year. The Nodaway Valley Bank has established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company has met the criteria of occupying a 20,000 square foot building and the criteria of creating a minimum of two new full-time equivalent jobs during the first year of operation in the new facility. In addition, the Company maintained 19 existing jobs for three years thereafter and will be required to do so until the five year term has expired. Once the Company is no longer legally entitled to return the monies, the liability will be reclassified as deferred revenue and amortized into income over the life on the lease term of the new facility. At December 31, 2008 and June 30, 2008, a total of $20,000 and $15,000, respectively, had been reclassified to deferred revenue. Deferred revenue is recognized on a straight-line basis over the lease term of 20 years. During the six months ended December 31, 2008 and 2007, deferred revenue of $650 was amortized into income for each period.
NOTE 4 - NOTE PAYABLE - VEHICLES
The Company has three vehicle loans payable as follows:
1) $1,001 monthly payments, including interest of -0-%; final payment due March 2011, secured by a vehicle.
2) $573 monthly payments, including interest of 6.99%; final payment due July 2012, secured by a vehicle.
3) $508 monthly payments, including interest of 1.9%; final payments due January 2012, secured by a vehicle. Future minimum payments are:
2009
$ 23,314 2010
23,863 2011
15,386 2012
3,935 Total
$ 66,498 CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - NOTES PAYABLE - BANK
Effective July 1, 2008, the Company had a $250,000 line-of-credit agreement which expired on January 1, 2009. This line-of-credit agreement was renewed on that date to extend until January 3, 2010 with a variable interest rate at prime. The line-of-credit was collateralized by certain equipment. At December 31, 2008 and June 30, 2008, the outstanding balance on the line-of-credit was $-0- and $50,000, respectively.
NOTE 6 - NOTES PAYABLE - STOCKHOLDER
The Company borrowed $140,000, from a stockholder/officer during the fiscal year ending June 30, 2008, which was repaid by December 31, 2008. These unsecured loans had no maturity date and carried a 4.5% annual interest rate effective September 1, 2008.
NOTE 7 - INCOME TAXES
The Company adopted the provisions of Financial Accounting Standard Board Interpretation No. 48 (“FIN 48”)Accounting for Uncertainty in Income Taxes – An Interpretation of FASB No. 109 effective July 1, 2007, which clarified the accounting for uncertainty in tax positions. The Company had no unrecognized tax benefits as of the date of adoption, the income tax positions taken for open years are appropriately stated and supported for all open years, and the adoption of FIN 48 did not have a material effect on the Company’s consolidated financial statements.
As of June 30, 2008 and 2007, the Company had a net operating loss carryforward of approximately $170,706 and $203,000, respectively. However, for the six months ended December 31, 2008 and 2007, the Company’s profit absorbed the available net operating loss carryforward so that no allowance has been recorded for this period. The deferred income taxes for the six months ended December 31, 2008 decreased $24,720 to $(3,806) compared to $20,914 at June 30, 2008.
The net deferred tax assets (liability) are presented in the accompanying balance sheet as follows:
December 31,
2008June 30,
2008Current deferred tax asset
$ 2,205 $ 8,890 Noncurrent deferred tax asset
— 12,024 Long-term deferred tax liability
(6,011 ) — Net deferred tax assets (liability)
$ (3,806 ) $ 20,914 CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Three Months Ended
December 312008 2007 Cash paid for:
Interest
$ 5,347 $ 5,312 Non-cash transaction:
Financing of new vehicles
41,702 — Reclass of forgivable loan to deferred income
5,000 5,000 CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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.
RESULTS OF OPERATIONS - Three Months Ended December 31, 2008 Compared with Three Months Ended December 31, 2007 and Six Months Ended December 31, 2008 Compared with Six Months Ended December 31, 2007
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
December 31Six Months Ended
December 312008 2007 2008 2007 Net sales
100 % 100 % 100 % 100 % Cost of sales
68 69 66 70 Gross profit
32 31 34 30 Operating expenses
15 14 19 19 Income from operations
17 17 15 11 Net income before income taxes
17 17 15 11 Provision for income taxes
5 2 3 1 Net income
12 % 15 % 12 % 10 % CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
NET SALES
Net sales decreased $8,667 or 1% for the three months ended December 31, 2008 to $1,470,385 compared to $1,479,052 for the three months ended December 31, 2007. Gross sales for Chase Candy decreased $81,073 to $477,444 for the three months ended December 31, 2008 compared to $396,371 for 2007. Gross sales for Seasonal Candy decreased $86,052 to $1,008,205 for the three months ended December 31, 2008 compared to $1,094,257 for 2007.
Net sales increased $276,362 or 15% for the six months ended December 31, 2008 to $2,158,842 compared to $1,882,480 for the six months ended December 31, 2007. Gross sales for Chase Candy increased $194,619 to $924,717 for the six months ended December 31, 2008 compared to $730,098 for 2007. Gross sales for Seasonal Candy increased $87,434 to $1,260,809 for the six months ended December 31, 2008 compared to $1,173,375 for 2007.
The 15% increase in net sales of $276,362 for the six month period ended December 31, 2008, over the same period ended December 31, 2007 is due to price increase in the Chase Candy line put into place in April and November of 2008 along with Cherry Mash Bar and Mini Mash sales increasing 61% over last year. In addition, Chase Candy line includes increases for new customer orders of $60,500. Certain Seasonal Candy customers placed orders earlier this year of approximately $85,000, which are reflected in the prior quarter sales rather than in the current quarter. Seasonal sales from new business orders for the six months amounted to approximately $44,000 of the $87,434 increase in net sales, along with an average 6.2% price increase.
COST OF SALES
The cost of sales decreased $12,316 to $1,000,230 decreasing to 68% of related revenues for the three months ended December 31, 2008, compared to $1,012,546 or 69% of related revenues for the three months ended December 31, 2007. The cost of sales increased $117,445 to $1,428,501 decreasing to 66% of related revenues for the six months ended December 31, 2008, compared to $1,311,056 or 70% of related revenues for the six months ended December 31, 2007.
The decrease in cost of sales is a 1% decrease which is proportionate to the 1% decrease in net sales for the three months ended December 31, 2008 as reflected above. Direct costs of goods for materials manufactured and production labor force for the three months ended December 31, 2008 decreased $20,767 to $497,203 as compared to $517,970 for the three months ended December 31, 2007, which includes packaging materials decreasing $23,346 as a result of purchasing a new label machine to print labels in house.
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
COST OF SALES (CONTINUED)
Direct costs of goods for materials manufactured and production labor force for the six months ended December 31, 2008, increased $59,528 to $1,004,382 as compared to $944,854 for the six months ended December 31, 2007, which is a result of raw material price increases for sugar - 4 cents per pound; peanuts 8 cents per pound and a 4% raise for the production labor force.
The Company decreased finished goods inventory for the three months ended December 31, 2008 to $22,742 or 69% from the June 30, 2008 finished goods inventory of $72,651 due to the end of the Company’s busy season. Raw material inventory of $81,609 and packaging materials inventory of $184,300 is 17% higher than the June 30, 2008 inventories of $56,346 raw material and $170,276 packaging materials as a result of purchasing inventory to take advantage of favorable pricing, but not all of this inventory was used during the second quarter ending December 31, 2008.
SELLING EXPENSES
Selling expenses for the three months ended December 31, 2008 increased $13,655 to $157,008, which is 10% of sales, compared to $143,353 or 10% of sales for the three months ended December 31, 2007. Selling expenses for the six months ended December 31, 2008 increased $30,480 to $230,555, which is 11% of sales, compared to $200,075 or 10% of sales for the six months ended December 31, 2007.
The increase of $13,655 in selling expenses for the three months ended December 31, 2008 is due to higher commissions and premium promotions being paid and sample costs for the period. Commissions and premium promotions, and sample costs increased 11% to $114,522 for this period from $103,393 for the three months ended December 31, 2007.
The increase of $30,480 in selling expenses for the six months ended December 31, 2008 is also due to higher commissions and premium promotions being paid as a result of increased sales along with sample costs for this period. Commissions and premium promotions, and sample costs increased 23% to $150,597 for this period from $122,622 for the six months ended December 31, 2007.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended December 31, 2008 increased $6,984 to $74,237, and increased to 5% of sales, compared to $67,253 or 4% of sales for the three months ended December 31, 2007. General and administrative expenses for the six months ended December 31, 2008 increased $14,449 to $179,959, and decreased to 8% of sales, compared to $165,510 or 9% of sales for the six months ended December 31, 2007. The increased costs are primarily because of a $11,035 increase in costs updating Chase’s website.
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
OTHER INCOME (EXPENSE)
Other income and (expense) decreased by $1,140 for the three months ended December 31, 2008 to $(1,952), compared to $(3,092) for the three months ended December 31, 2007. Other income and expense increased by $543 for the six months ended December 31, 2008 to $(4,617), compared to $(4,074) for the six months ended December 31, 2007. This was primarily due to an increase in interest expense.
PROVISION FOR INCOME TAXES
The Company recorded a tax provision for the three months ended December 31, 2008 of $67,661 as compared to $28,762 for the three months ended December 31, 2007. The Company recorded a tax provision for the six months ended December 31, 2008 of $76,793 as compared to $25,030 for the six months ended December 31, 2007. The effective tax rate of 16% for the six months ended December 31, 2008 increased from 12% for the six months ended December 31, 2007. The Company had incurred losses for the past two years, which is not available to carry back to obtain previously paid income taxes. This loss can be fully utilized against taxable income for the six months ended December 31, 2008 which results in an effective tax rate of 16%. The net change in deferred taxes for the three months and six months ended December 31, 2008 was $(15,588) and $(24,720), respectively. There was no valuation allowance at December 31, 2008 or 2007, since the losses are fully utilized.
NET INCOME
The Company reported a net income for the quarter ended December 31, 2008 of $174,549, compared to a net income of $224,046 for the quarter ended December 31, 2007. This decrease of $49,497 is explained above.
The Company reported a net income for the six months ended December 31, 2008 of $243,669, compared to a net income of $176,735 for the six months ended December 31, 2007. This increase of $66,934 is explained above.
PREFERRED DIVIDENDS
These amounts reflect additional preferred stock dividends in arrears for the three and six months ended December 31, 2008 and 2007, respectively, 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.
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
Net income applicable to common stockholders for the three months ended December 31, 2008 was $142,531, which is a decrease of $49,497 as compared to the three months ended December 31, 2007 of $192,028.
Net income applicable to common stockholders for the six months ended December 31, 2008 was $179,633 which is an increase of $66,934 as compared to the six months ended December 31, 2007 of $112,699. These items are explained above.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the summary of cash flow for the fiscal period indicated.
2008 2007 Net cash provided by operating activities
$ 435,506 $ 65,088 Net cash used in investing activities
$ (12,987 ) $ (503 ) Net cash used in financing activities
$ (198,222 ) $ (45,000 ) The $12,987 of cash used in investing activities was the result of capital expenditures. Management has an $18,000 commitment for capital expenditures during the remainder of fiscal 2009. The $198,222 of cash used in financing activities is receipt of $145,000 proceeds from the line-of-credit and payments on the vehicle loans, line-of-credit and stockholder loan. 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. Chase does have $250,000 remaining on its bank line-of-credit, which could be utilized to help fund any working capital requirements.
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.
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
CRITICAL ACCOUNTING POLICIES
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates used in preparing these condensed consolidated financial statements include those assumed in computing the carrying value of equipment and allowance for doubtful accounts receivable. Accordingly, actual results could differ from those estimates. Any changes in estimates are recorded in the period in which they become known.
Credit Risk
Financial instruments that potentially subject Chase to concentrations of credit risk consist principally of cash and accounts receivable. Chase grants unsecured credit to substantially all of its customers. Management does not believe that it is exposed to any extraordinary credit risk as a result of this policy. Chase deposits all monies at the Nodaway Valley Bank. These accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation. Chase has not experienced any losses in such accounts. Management does not believe Chase is exposed to any significant credit risk with respect to its cash and cash equivalents.
Revenue Recognition
The Company recognizes revenues as product is shipped to the customers. Net sales are comprised of the total sales billed during the period including shipping and handling charges to customers, less the estimated returns, customer allowances
freight paid on these shipped goods,and customer discounts.Impairment of Long-Lived Assets Long-lived assets are reviewedAllowance for
impairment whenever events or changes in circumstances indicate that theDoubtful AccountsThe carrying amount of
an asset mayaccounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not berecoverable. Recoverabilitycollected. The allowance for doubtful accounts is based on management’s assessment ofassetsthe collectibility of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to behelduncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.Inventories
Inventories are carried at the “lower of cost or market value” with cost being determined on the “first-in, first-out” basis of accounting. Finished goods and
used is measured bygoods in process include acomparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. 7provision for manufacturing overhead. CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2ITEM 2. -
EARNINGS PER SHAREMANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)CRITICAL ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment is recorded at cost. The Company’s property and equipment are being depreciated on straight-line and accelerated methods over the following estimated useful lives:
Buildings
39 years Machinery and equipment
5 – 7 years Trucks and autos
5 years Office equipment
5 – 7 years Leasehold improvements
Lesser of estimated
useful life or thelease term
Cash Flows
For purposes of the statements of cash flows, Chase considers all short-term investments purchased with original maturity dates of three months or less to be cash equivalents.
New Accounting Pronouncements
Effective July 1, 2008, Chase adopted Statement of financial Accounting Standard No. 157 (“SFAS 157”),Fair Value Measurements, SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements. The adoption of SFAS 157 did not have any effect on Chase’s results of operations, financial condition and cash flows.
Effective July 1, 2008, Chase adopted Statement of Financial Accounting Standard No. 159 (“SFAS 159”),The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings
per share was computedcause by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. Most of the provisions of this Statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115,Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. The adoption of SFAS 159 did not have any effect onthe weighted averageChase’s results ofoutstanding common shares as follows:
Six Months Three Months Ended December 31 December 31 ------------------- ------------------- 2002 2001 2002 2001 -------- -------- -------- --------Net income $ 79,767 $ 95,689 $109,176 $118,565 -------- -------- -------- -------- Preferred dividend requirements: 6% Prior Cumulative Preferred, $5 par value 30,000 30,000 15,000 15,000 5% Convertible Cumulative Preferred, $20 par value 34,036 34,036 17,018 17,018 -------- -------- -------- -------- Total dividend requirements 64,036 64,036 32,018 32,018 -------- -------- -------- -------- Net income to common shareholders $ 15,731 $ 31,653 $ 77,158 $ 86,547 -------- -------- -------- -------- Weighted average of outstanding common shares 969,834 969,834 969,834 969,834 ======== ======== ======== ======== Income per share $ .02 $ .03 $ .08 $ .09 ======== ======== ======== ========No computation was made on common stock equivalents outstanding because loss per share would be anti-dilutive. 8operations, financial condition and cash flows. CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. -
MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Chase GeneralOPERATION (CONTINUED)CRITICAL ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
In December 2007, the FASB issued SFAS No. 141(R),Business Combinations (“SFAS 141R”) and
its wholly-owned subsidiarySFAS No. 160,Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements(“SFAS 160”). These statements significantly change the accounting for and reporting of business combinations and noncontrolling (minority) interests in consolidated financial statements. These statements will require noncontrolling interests to be reclassified to equity, consolidated net income to be adjusted to include net income attributed to the noncontrolling interest, and consolidated comprehensive income to be adjusted to include the comprehensive income attributed to the noncontrolling interest. SFAS 141R and SFAS 160 areengagedrequired to be adopted simultaneously. SFAS 141 is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 14, 2008. SFAS 160 is to be applied prospectively as of the beginning of the fiscal year inthe manufacture of confectionery productswhichare sold primarily to wholesale houses, grocery accounts, vendors, and repackers. RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2001: Income from Operations Net salesit is initially adopted except for thethree months ended December 31, 2002 increased 4.4% to $1.022 million from $979 thousand in the three months ended December 31, 2001.presentation and disclosure requirements which will be applied retrospectively for all periods. Early adoption is prohibited. Theincrease was primarily attributable to improved sales from increase in prices to retailers of their chocolate products. The gross profit margin was 28.6% in the three months ended December 31, 2002 compared to 31.8% in the comparable 2001 period. Revamping packaging to a clam shell, and manufacturing labor rate increases, hadCompany is currently evaluating the impact ofreducingadopting SFAS 141R and SFAS 160 on its consolidated financial statements.Forward-Looking Information
This report as well as our other reports filed with the
2002 gross profit margin percentage by 10%. Selling, generalSecurities andadministrative expenses increased 3%, primarily dueExchange Commission (“SEC”) contains forward-looking statements made pursuant torate increasethe 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 forhealth insurance, samples given away and web site maintenance. Income from operations for the three months ended December 31, 2002 was $144,121, which represented a 13% decrease from the $166,495 profit reported during the comparable 2001 period. SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2001: Income from Operations Net sales for the six months ended December 31, 2002 increased 4.4% to $1.348 million from $1.291 million in the six months ended December 31, 2001. The increase was primarily attributable to improved sales with a wider distributionproducts, expected orders that do not occur, loss ofmini mash produced for a major customer and an increase in the prices to retailers of their chocolate products. The gross profit margin was 26.5% in the six months ended December 31, 2002 compared to 29.5% in the comparable 2001 period. Revamping packaging to a clam shell, and manufacturing labor rate increases, hadkey customers, the impact ofreducingcompetition 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 the2002 gross profit margin percentage by 10%. Selling, generalforward-looking information contained in this report will prove accurate, andadministrative expenses decreased 1%, primarily dueour actual results may differ materially from these forward-looking statements. We assume no obligation toreduced office personnel and lower sales incentive bonuses. Income from operations for the six months ended December 31, 2002 was $117,312, which represented a 15% decrease from the $138,076 income reported during the comparable 2001 period. 9update any forward-looking statements made herein. CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM
2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2002, the Company anticipates capital expenditures of $7,000 to upgrade production equipment. Cash increased $63,363 during the current six month period as a result of completing the busy season. The additional expense for the six months ended December 31, 2002 included a $9,747 loss on disposition of fixed assets. The Company reduced several items in the vehicle fleet that caused this loss. Inventories increased $30,566 for this six month period ending December 31, 2002. The Company believes that cash flow from Dye Candy Company's operating activities and cash on hand will be adequate to meet its liquidity requirements. Cash and cash equivalents were $251,891 at December 31, 2002 compared to $188,528 at June 30, 2002. Working capital at December 31, 2002 was $465,797 and the current ratio was 5.3 to 1 compared to working capital at June 30, 2002 of $352,776 and a current ratio of 3.3 to 1. The increase in working capital is primarily due to the Company's completion of busy season. CASH FLOW FROM OPERATING ACTIVITIES Cash provided by operating activities in the six months ended December 31, 2002 was $86,537 compared to cash provided of $258,497 in the six months ended December 31, 2001. The decrease in cash provided by operations for the six months ended December 31, 2002 compared to the same period ended December 31, 2001 was mainly due to increased inventories and reduced accounts payable. MARKET RISK The Company's debt securities with a stated interest rate are not subject to market risk for changes in interest rates. There have been no material changes from the information provided in the June 30, 2002 Form 10-K. FORWARD-LOOKING STATEMENTS This report does not contain forward-looking statements. 10CHASE GENERAL CORPORATION AND SUBSIDIARY ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See the "Market Risk" section under Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 4.4T. - CONTROLS AND PROCEDURESChase General's chief financial officer is chargedEvaluation of Disclosure Controls and Procedures
Chase’s management, with
making an evaluationthe participation ofChase General'sthe Chief Executive Officer, has evaluated the effectiveness of Chase’s disclosure controls andprocedures. Theseprocedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as mended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, this officer has concluded that Chase’s disclosure controls and procedures aredesignedeffective toensureprovide reasonable assurance that information required to be disclosed inreports mandated byperiodic filings under theSecuritiesExchange Actof 1934 is recorded, processed, summarized, and reported within the required time periods. Additionally, these controls and procedures are designed to ensure that the appropriate information required to be disclosed in the reportsis accumulated and communicated toChase General'smanagement, includingChase General's chief executive officer,those officers, and to members of the Board of Directors, to allowfortimely decisions regarding required disclosure.Chase General's chief financial officer has concluded, based upon his evaluation of these controls and procedures as of December 31, 2002, that Chase General's financial disclosure controls and procedures are effective. Chase General's chief financial officer is also charged with making an evaluation as to the effectiveness of the design and operation of Chase General's internal controls and procedures for financial reporting purposes. Chase General's chief financial officer has concluded, based upon his evaluation of these controls and procedures as of December 31, 2002, that Chase General's internal controls and procedures are effective. Additionally, there have beenChange in Internal Controls
There were no significant changes in
Chase General'sChase’s internal controls over financial reporting or in other factors thatcould significantlyin management’s estimates are reasonably likely to materially affecttheseChase’s internal controls over financial reporting subsequent to the date ofhisthe evaluation.11PART II. OTHER INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
a. None ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a. None b. The total cumulative preferred stock dividends contingency at December 31, 2002 is $6,219,834
a. None
b. The total cumulative preferred stock dividends contingency at December 31, 2008 is $6,988,266. ITEM 6. EXHIBITS
AND REPORTS ON FORM 8-K. a. Exhibits - 99.01 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K: There were no reports on Form 8-K filed during October, November and December, 2002. 12
a. Exhibits.
Exhibit 31.1 Officer Certification Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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 Registrant 2-10-03 /s/ Barry M. Yantis - ------------------------- ------------------------------ Date Barry M. Yantis President, CEO and Treasurer 13CERTIFICATIONS I, Barry M. Yantis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Chase General Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am the registrant's certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to me by others within that entity, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. Presented in this quarterly report conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the evaluation date; 5. I am the registrant's officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control; 14CERTIFICATIONS 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 2-10-03 /s/ Barry M. Yantis --------------------------------- Barry M. Yantis, President, CEO & Treasurer 15EXHIBIT INDEX Exhibit No. Name - ----------- ---- 99.01 Certification of Chief Executive Officer and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 16
Chase General Corporation and Subsidiary (Registrant) |
/s/ Barry M. Yantis |
Barry M. Yantis |
President, Chief Executive Officer, |
Treasurer and Chairman of the Board |
Date: February 12, 2009 |
23