UNITED STATES
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2014
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 2-5916
Chase General Corporation | ||
(Exact name of small business issuer as specified in its charter)
| MISSOURI | 36-2667734 | |||||||
| (State or other jurisdiction of | (IRS Employer Identification No.) | |||||||
| incorporation or organization) | ||||||||
| 1307 South 59th, St. Joseph, Missouri 64507 | ||
(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 ☐
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 ☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratednonaccelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | |
| Smaller reporting company |
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 February 12, 2015,11, 2016, there were 969,834 shares of common stock, $1.00 par value, outstanding.
CHASE GENERAL CORPORATION AND SUBSIDIARYQuarterly Report on Form
QUARTERLY REPORT ON FORM 10-QFor the Three Months Ended December 31, 2014
TABLE OF CONTENTS
FOR THE SIX MONTHS ENDEDDECEMBER 31, 2015
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| ASSETS | ||||||||
| December 31, | June 30, | |||||||
| 2014 | 2014 | |||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 452,930 | $ | 162,435 | ||||
Trade receivables, net of allowance for doubtful accounts of $17,858 and $16,508, respectively | 268,933 | 178,686 | ||||||
| Inventories: | ||||||||
| Finished goods | 58,389 | 258,726 | ||||||
| Goods in process | 15,108 | 11,950 | ||||||
| Raw materials | 70,826 | 80,088 | ||||||
| Packaging materials | 106,760 | 145,046 | ||||||
| Prepaid expenses | 34,621 | 12,233 | ||||||
| Deferred income taxes | 6,991 | 7,047 | ||||||
| Total current assets | 1,014,558 | 856,211 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Land | 35,000 | 35,000 | ||||||
| Buildings | 77,348 | 77,348 | ||||||
| Machinery and equipment | 753,837 | 739,962 | ||||||
| Trucks and autos | 196,982 | 188,594 | ||||||
| Office equipment | 31,518 | 31,518 | ||||||
| Leasehold improvements | 72,068 | 72,068 | ||||||
| Total | 1,166,753 | 1,144,490 | ||||||
| Less accumulated depreciation | 839,352 | 841,445 | ||||||
| Total property and equipment, net | 327,401 | 303,045 | ||||||
| TOTAL ASSETS | $ | 1,341,959 | $ | 1,159,256 | ||||
| December 31, | June 30, | |||||||
| 2015 | 2015 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and Cash Equivalents | $ | 371,114 | $ | 84,204 | ||||
| Trade Receivables, Net of Allowance for Doubtful Accounts of $16,896 and $16,296, Respectively | 175,289 | 187,607 | ||||||
| Inventories: | ||||||||
| Finished Goods | 118,215 | 377,853 | ||||||
| Goods in Process | 8,733 | 13,815 | ||||||
| Raw Materials | 89,489 | 90,506 | ||||||
| Packaging Materials | 172,059 | 130,726 | ||||||
| Prepaid Expenses | 38,239 | 5,689 | ||||||
| Deferred Income Taxes | 6,727 | 7,288 | ||||||
| Total Current Assets | 979,865 | 897,688 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Land | 35,000 | 35,000 | ||||||
| Buildings | 77,348 | 77,348 | ||||||
| Machinery and Equipment | 817,836 | 807,325 | ||||||
| Trucks and Autos | 213,116 | 198,845 | ||||||
| Office Equipment | 31,518 | 31,518 | ||||||
| Leasehold Improvements | 72,068 | 72,068 | ||||||
| Total | 1,246,886 | 1,222,104 | ||||||
| Less Accumulated Depreciation | 841,424 | 861,341 | ||||||
| Total Property and Equipment, Net | 405,462 | 360,763 | ||||||
| Total Assets | $ | 1,385,327 | $ | 1,258,451 | ||||
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
1
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| December 31, | June 30, | |||||||
| 2014 | 2014 | |||||||
| (Unaudited) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 104,898 | $ | 51,947 | ||||
| Current maturities of notes payable | 10,832 | 21,537 | ||||||
| Accrued expenses | 15,072 | 139,098 | ||||||
| Income taxes payable | 99,925 | 21,203 | ||||||
| Deferred income | 1,299 | 1,299 | ||||||
| Total current liabilities | 232,026 | 235,084 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Deferred income | 12,012 | 12,661 | ||||||
| Notes payable, less current maturities | 18,146 | 4,650 | ||||||
| Deferred income taxes | 74,850 | 79,176 | ||||||
| Total long-term liabilities | 105,008 | 96,487 | ||||||
| Total liabilities | 337,034 | 331,571 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Capital stock issued and outstanding: | ||||||||
| Prior cumulative preferred stock, $5 par value: | ||||||||
Series A (liquidation preference $2,205,000 and $2,190,000, respectively) | 500,000 | 500,000 | ||||||
Series B (liquidation preference $2,160,000 and $2,145,000, respectively) | 500,000 | 500,000 | ||||||
| Cumulative preferred stock, $20 par value | ||||||||
Series A (liquidation preference $4,989,931 and $4,960,664, respectively) | 1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $813,207 and $808,438, 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 | (5,461,071 | ) | (5,638,311 | ) | ||||
| Total stockholders’ equity | 1,004,925 | 827,685 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,341,959 | $ | 1,159,256 | ||||
| December 31, | June 30, | |||||||
| 2015 | 2015 | |||||||
| (Unaudited) | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts Payable | $ | 125,767 | $ | 111,944 | ||||
| Current Maturities of Notes Payable | 15,107 | 8,297 | ||||||
| Accrued Expenses | 14,903 | 17,966 | ||||||
| Income Taxes Payable | 20,335 | 26,119 | ||||||
| Deferred Income | 1,299 | 1,299 | ||||||
| Total Current Liabilities | 177,411 | 165,625 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Deferred Income | 10,713 | 11,362 | ||||||
| Notes Payable, Less Current Maturities | 63,209 | 14,004 | ||||||
| Deferred Income Taxes | 96,462 | 98,866 | ||||||
| Total Long-Term Liabilities | 170,384 | 124,232 | ||||||
| Total Liabilities | 347,795 | 289,857 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Capital Stock Issued and Outstanding: | ||||||||
| Prior Cumulative Preferred Stock, $5 Par Value: | ||||||||
| Series A (Liquidation Preference $2,235,000 and $2,220,000, Respectively) | 500,000 | 500,000 | ||||||
| Series B (Liquidation Preference $2,190,000 and $2,175,000, Respectively) | 500,000 | 500,000 | ||||||
| Cumulative Preferred Stock, $20 Par Value: | ||||||||
| Series A (Liquidation Preference $5,048,464 and $5,019,197, Respectively) | 1,170,660 | 1,170,660 | ||||||
| Series B (Liquidation Preference $822,746 and $817,977, 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 | (5,428,464 | ) | (5,497,402 | ) | ||||
| Total Stockholders' Equity | 1,037,532 | 968,594 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,385,327 | $ | 1,258,451 | ||||
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
2
| Three Months Ended | ||||||||
| December 31 | ||||||||
| 2014 | 2013 | |||||||
| NET SALES | $ | 1,291,273 | $ | 1,402,545 | ||||
| COST OF SALES | 846,057 | 938,247 | ||||||
| Gross profit on sales | 445,216 | 464,298 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling | 149,763 | 161,115 | ||||||
| General and administrative | 90,453 | 95,111 | ||||||
| Loss (gain) on sale of equipment | (15,912 | ) | 93 | |||||
| Total operating expenses | 224,304 | 256,319 | ||||||
| Income from operations | 220,912 | 207,979 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Miscellaneous income | 422 | 1,972 | ||||||
| Interest expense | (1,069 | ) | (555 | ) | ||||
| Total other income (expense), net | (647 | ) | 1,417 | |||||
| Net income before income taxes | 220,265 | 209,396 | ||||||
| PROVISION FOR INCOME TAXES | 77,726 | 73,564 | ||||||
| NET INCOME | $ | 142,539 | $ | 135,832 | ||||
| NET INCOME PER SHARE OF COMMON STOCK | ||||||||
| - BASIC | $ | 0.11 | $ | 0.11 | ||||
| - DILUTED | $ | 0.06 | $ | 0.05 | ||||
(UNAUDITED)
| Three Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| NET SALES | $ | 1,278,677 | $ | 1,291,273 | ||||
| COST OF SALES | 920,887 | 846,057 | ||||||
| Gross Profit on Sales | 357,790 | 445,216 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling | 156,957 | 149,763 | ||||||
| General and Administrative | 95,236 | 90,453 | ||||||
| Gain on Sale of Equipment | (8,990 | ) | (15,912 | ) | ||||
| Total Operating Expenses | 243,203 | 224,304 | ||||||
| Income from Operations | 114,587 | 220,912 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Miscellaneous Income | 421 | 422 | ||||||
| Interest Expense | (2,741 | ) | (1,069 | ) | ||||
| Total Other Income (Expense), Net | (2,320 | ) | (647 | ) | ||||
| Income before Income Taxes | 112,267 | 220,265 | ||||||
| PROVISION FOR INCOME TAXES | 39,581 | 77,726 | ||||||
| NET INCOME | $ | 72,686 | $ | 142,539 | ||||
| NET INCOME PER SHARE OF COMMON STOCK | ||||||||
| Basic | $ | 0.04 | $ | 0.11 | ||||
| Diluted | $ | 0.02 | $ | 0.06 | ||||
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
3
CHASE GENERAL CORPORATION AND SUBSIDIARY
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2014 | 2013 | |||||||
| NET SALES | $ | 2,283,181 | $ | 2,313,805 | ||||
| COST OF SALES | 1,561,127 | 1,596,601 | ||||||
| Gross profit on sales | 722,054 | 717,204 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling | 264,404 | 258,037 | ||||||
| General and administrative | 211,834 | 233,501 | ||||||
| Loss (gain) on sale of equipment | (15,912 | ) | 93 | |||||
| Total operating expenses | 460,326 | 491,631 | ||||||
| Income from operations | 261,728 | 225,573 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Miscellaneous income | 12,444 | 2,336 | ||||||
| Interest expense | (1,956 | ) | (3,141 | ) | ||||
| Total other income (expense), net | 10,488 | (805 | ) | |||||
| Net income before income taxes | 272,216 | 224,768 | ||||||
| PROVISION FOR INCOME TAXES | 94,976 | 77,799 | ||||||
| NET INCOME | $ | 177,240 | $ | 146,969 | ||||
| NET INCOME PER SHARE OF COMMON STOCK | ||||||||
| - BASIC | $ | 0.12 | $ | 0.09 | ||||
| - DILUTED | $ | 0.06 | $ | 0.04 | ||||
(UNAUDITED)
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| NET SALES | $ | 2,341,780 | $ | 2,283,181 | ||||
| COST OF SALES | 1,764,270 | 1,561,127 | ||||||
| Gross Profit on Sales | 577,510 | 722,054 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling | 279,733 | 264,404 | ||||||
| General and Administrative | 210,287 | 211,834 | ||||||
| Gain on Sale of Equipment | (21,364 | ) | (15,912 | ) | ||||
| Total Operating Expenses | 468,656 | 460,326 | ||||||
| Income from Operations | 108,854 | 261,728 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Miscellaneous Income | 799 | 12,444 | ||||||
| Interest Expense | (3,014 | ) | (1,956 | ) | ||||
| Total Other Income (Expense), Net | (2,215 | ) | 10,488 | |||||
| Income before Income Taxes | 106,639 | 272,216 | ||||||
| PROVISION FOR INCOME TAXES | 37,701 | 94,976 | ||||||
| NET INCOME | $ | 68,938 | $ | 177,240 | ||||
| NET INCOME PER SHARE OF COMMON STOCK | ||||||||
| Basic | $ | 0.01 | $ | 0.12 | ||||
| Diluted | $ | - | $ | 0.06 | ||||
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
4
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 177,240 | $ | 146,969 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 50,127 | 43,294 | ||||||
| Allowance for bad debts | 1,350 | 600 | ||||||
| Deferred income amortization | (649 | ) | (649 | ) | ||||
| Deferred income taxes | (4,270 | ) | (10,519 | ) | ||||
| Loss (gain) on sale of equipment | (15,912 | ) | 93 | |||||
| Effects of changes in operating assets and liabilities: | ||||||||
| Trade receivables | (91,597 | ) | (76,808 | ) | ||||
| Inventories | 244,727 | 268,049 | ||||||
| Prepaid expenses | (22,388 | ) | (21,010 | ) | ||||
| Accounts payable | 49,484 | 43,068 | ||||||
| Accrued expenses | (124,026 | ) | (11,603 | ) | ||||
| Income taxes payable | 78,722 | 84,135 | ||||||
| Net cash provided by operating activities | 342,808 | 465,619 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | (33,876 | ) | (21,132 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line-of-credit | 265,000 | 290,000 | ||||||
| Principal payments on line-of-credit | (265,000 | ) | (290,000 | ) | ||||
| Principal payments on notes payable | (18,437 | ) | (34,403 | ) | ||||
| Net cash used in financing activities | (18,437 | ) | (34,403 | ) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 290,495 | 410,084 | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 162,435 | 28,564 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 452,930 | $ | 438,648 | ||||
(UNAUDITED)
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income | $ | 68,938 | $ | 177,240 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
| Depreciation and Amortization | 60,968 | 50,127 | ||||||
| Allowance for Bad Debts | 600 | 1,350 | ||||||
| Deferred Income Amortization | (649 | ) | (649 | ) | ||||
| Deferred Income Taxes | (1,843 | ) | (4,270 | ) | ||||
| (Gain) on Sale of Equipment | (21,364 | ) | (15,912 | ) | ||||
| Effects of Changes in Operating Assets and Liabilities: | ||||||||
| Trade Receivables | 11,718 | (91,597 | ) | |||||
| Inventories | 224,404 | 244,727 | ||||||
| Prepaid Expenses | (32,550 | ) | (22,388 | ) | ||||
| Accounts Payable | 13,823 | 49,484 | ||||||
| Accrued Expenses | (3,063 | ) | (124,026 | ) | ||||
| Income Taxes Payable | (5,784 | ) | 78,722 | |||||
| Net Cash Provided by Operating Activities | 315,198 | 342,808 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of Property and Equipment | (21,622 | ) | (33,876 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Line-of-Credit | 300,000 | 265,000 | ||||||
| Principal Payments on Line-of-Credit | (300,000 | ) | (265,000 | ) | ||||
| Principal Payments on Notes Payable | (6,666 | ) | (18,437 | ) | ||||
| Net Cash Used by Financing Activities | (6,666 | ) | (18,437 | ) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 286,910 | 290,495 | ||||||
| Cash and Cash Equivalents - Beginning of Period | 84,204 | 162,435 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 371,114 | $ | 452,930 | ||||
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
5
(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, 20142015 has been taken from audited consolidated financial statements at that date and condensed. The condensed consolidated financial statements as of and for the three and six months ended December 31, 20142015 and for the three and six months ended December 31, 20132014 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, 2014.2015. The results of operations for the three and six months ended December 31, 20142015 and cash flows for the six months ended December 31, 20142015 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2015.2016. 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 December 31, 2014,2015, 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 six month period ended December 31, 2014.2015.
6
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| 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.
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net Income | $ | 72,686 | $ | 142,539 | $ | 68,938 | $ | 177,240 | ||||||||
| 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 | $ | 40,668 | $ | 110,521 | $ | 4,902 | $ | 113,204 | ||||||||
| 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 | $ | 0.04 | $ | 0.11 | $ | 0.01 | $ | 0.12 | ||||||||
| Diluted Earnings per Share | $ | 0.02 | $ | 0.06 | $ | - | $ | 0.06 | ||||||||
7
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net income | $ | 142,539 | $ | 135,832 | $ | 177,240 | $ | 146,969 | ||||||||
| 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 | $ | 110,521 | $ | 103,814 | $ | 113,204 | $ | 82,933 | ||||||||
| 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 | $ | 0.11 | $ | 0.11 | $ | 0.12 | $ | 0.09 | ||||||||
| Diluted earnings per share | $ | 0.06 | $ | 0.05 | $ | 0.06 | $ | 0.04 | ||||||||
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| note 2 | EARNINGS PER SHARE (continued) |
Cumulative Preferred Stock dividends in arrears at December 31, 2015 and 2014 totaled $7,884,770 and 2013 totaled $7,756,698, and $7,628,626, respectively. Total dividends in arrears, on a per share basis, consist of the following:
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2014 | 2013 | |||||||
| 6% Convertible | ||||||||
| Series A | $ | 17 | $ | 17 | ||||
| Series B | $ | 16 | $ | 16 | ||||
| 5% Convertible | ||||||||
| Series A | $ | 65 | $ | 64 | ||||
| Series B | $ | 65 | $ | 64 | ||||
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| 6% Convertible | ||||||||
| Series A | $ | 17 | $ | 17 | ||||
| Series B | 17 | 16 | ||||||
| 5% Convertible | ||||||||
| Series A | $ | 66 | $ | 65 | ||||
| Series B | 66 | 65 | ||||||
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:
| December 31, | June 30, | |||||||||
| Payee | Terms | 2015 | 2015 | |||||||
| Nodaway Valley Bank | $350,000 line-of-credit agreement expiring on January 4, 2017, 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. Management anticipates renewal of the line-of-credit agreement at similar terms upon expiration. | $ | - | $ | - | |||||
| Ford Credit | $468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle. | 16,596 | 19,151 | |||||||
| Ford Credit | $705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle. | 41,720 | - | |||||||
| Ford Credit | $364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle. | 20,000 | - | |||||||
| Ford Credit | $517 monthly payments, interest of 0%; secured by a vehicle. | - | 3,150 | |||||||
| Total | 78,316 | 22,301 | ||||||||
| Less Current Portion | 15,107 | 8,297 | ||||||||
| Long-Term Portion | $ | 63,209 | $ | 14,004 | ||||||
9
| December 31, | June 30, | |||||||||
| Payee | Terms | 2014 | 2014 | |||||||
| Nodaway Valley Bank | $350,000 line-of-credit agreement expiring on January 3, 2016, 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. | $ | - | $ | - | |||||
| Ford Credit | $468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle. | 21,228 | - | |||||||
| Ford Credit | $517 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle. | 7,750 | 10,850 | |||||||
| Nodaway Valley Bank | $3,192, including interest of 5.75%; final payment due June 2015, secured by equipment; paid in full in December 2014. | - | 12,547 | |||||||
Toyota Financial Services | $305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle; paid in full in December 2014. | - | 2,790 | |||||||
| Total | 28,978 | 26,187 | ||||||||
| Less current portion | 10,832 | 21,537 | ||||||||
| Long-term portion | $ | 18,146 | $ | 4,650 | ||||||
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| note 3 | NOTES PAYABLE (continued) |
Future minimum payments for the twelve months ending December 31 are:
| 2015 | $ | 10,832 | ||
| 2016 | 6,772 | |||
| 2017 | 5,375 | |||
| 2018 | 5,533 | |||
| 2019 | 466 | |||
| Total | $ | 28,978 |
| December 31: | Amount | |||
| 2016 | $ | 15,107 | ||
| 2017 | 15,793 | |||
| 2018 | 16,481 | |||
| 2019 | 11,974 | |||
| 2020 | 12,098 | |||
| Thereafter | 6,863 | |||
| Total | $ | 78,316 | ||
| 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 December 31, 2014.2015. The Company has no material tax positions at December 31, 20142015 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company had no accruals for interest or penalties at December 31, 2014.2015. The Company’s federal income tax returns for the fiscal years ended 2012, 2013, 2014 and 20142015 are subject to examination by the IRSInternal Revenue Service taxing authority.
| NOTE 5 | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| Cash Paid for: | ||||||||
| Interest | $ | 3,014 | $ | 1,956 | ||||
| Income Taxes | $ | 45,368 | $ | 28,504 | ||||
| Noncash Transactions: | ||||||||
| Financing of New Vehicles | $ | 62,681 | $ | 21,228 | ||||
| Sales Tax on New Vehicle in Accounts Payable | $ | - | $ | 3,467 | ||||
10
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2014 | 2013 | |||||||
| Cash paid for: | ||||||||
| Interest | $ | 1,956 | $ | 3,141 | ||||
| Income taxes | 28,504 | 4,105 | ||||||
| Non-cash transactions: | ||||||||
| Financing of new vehicle | 21,228 | - | ||||||
| Sales tax on new vehicle in accounts payable | 3,467 | - | ||||||
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| NOTE 6 | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance for the recognition of revenueAccounting Standards Updates (“ASU”) No. 2014-09, Revenue from contractsContracts with customers, whichCustomers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. The updated standard becomes effective for interim and annual periods beginning after December 15, 2017, but allows the Company to adopt the standard one year earlier if it so chooses. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," ("ASU 2015-11"). An entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new standardguidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This update is effective for the Company’s fiscal year 2018, andas of January 1, 2017, with early adoption is not permitted. The Company is evaluatingcurrently assessing the effect theimpact that adopting this new guidanceaccounting standard will have on its consolidated financial statements and relatedfootnote 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.
11
CHASE GENERAL CORPORATION AND SUBSIDIARY
| Three Months Ended | Six Months Ended | ||||||||||||||||
| December 31 | December 31 | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Net sales | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
| Cost of sales | 66 | 67 | 68 | 69 | |||||||||||||
| Gross profit on sales | 34 | 33 | 32 | 31 | |||||||||||||
| Operating expenses | 17 | 18 | 20 | 21 | |||||||||||||
| Income from operations | 17 | 15 | 12 | 10 | |||||||||||||
| Other income (expense), net | - | 1 | - | - | |||||||||||||
| Income before income taxes | 17 | 16 | 12 | 10 | |||||||||||||
| Provision for income taxes | 6 | 5 | 4 | 3 | |||||||||||||
| Net income | 11 | % | 11 | % | 8 | % | 7 | % | |||||||||
| ITEM | |
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.
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.
12
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS - Three Months Ended December 31, 2015 Compared to Three Months Ended December 31, 2014, and Six Months Ended December 31, 2015 Compared to Six Months Ended December 31, 2014
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 | Six Months Ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net Sales | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Cost of Sales | 72 | 66 | 75 | 68 | ||||||||||||
| Gross Profit on Sales | 28 | 34 | 25 | 32 | ||||||||||||
| Operating Expenses | 19 | 17 | 20 | 20 | ||||||||||||
| Income from Operations | 9 | 17 | 5 | 12 | ||||||||||||
| Other Income (Expense), Net | (1 | ) | - | - | - | |||||||||||
| Income before Income Taxes | 8 | 17 | 5 | 12 | ||||||||||||
| Provision for Income Taxes | 3 | 6 | 2 | 4 | ||||||||||||
| Net Income | 5 | % | 11 | % | 3 | % | 8 | % | ||||||||
13
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
NET SALES
Net sales decreased $12,596 or 1% for the three months ended December 31, 2015 to $1,278,677 compared to $1,291,273 for the three months ended December 31, 2014. Gross sales for Chase Candy decreased $113,845 to $432,883 for the three months ended December 31, 2015, compared to $546,728 for the three months ended December 31, 2014. Gross sales for Seasonal Candy increased $107,633 to $865,036 for the three months ended December 31, 2015, compared to $757,403 for the three months ended December 31, 2014. Gross sales for other sales for the Company decreased $3,458 to $7,310 for the three months ended December 31, 2015, compared to $3,852 for the three months ended December 31, 2014. Sales returns and allowances for the Company increased $2,926 to $23,094 for the three months ended December 31, 2015, compared to $20,168 for the three months ended December 31, 2014.
The 21% decrease in gross sales of Chase Candy of $113,845 for the three months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $63,000 versus the same period a year ago primarily due to two customers decreasing orders; 2) decreased sales of the L278/L212 Mini Mash division by approximately $30,000 versus the same period a year ago primarily due to one customer decreasing orders; 3) decreased sales of the Cherry Mash Merchandiser division by approximately $15,000 versus the same period a year ago primarily due to five customers decreasing orders; 4) various other fluctuations netting to a decrease of approximately $4,000; 5) decreased sales of the L279/L299 Bulk Mini Mash division by approximately $1,000 versus the same period a year ago primarily due to two customers decreasing orders; and 6) decreased sales of the L260 Changemaker Jar division by approximately $100 versus the same period a year ago primarily due to two customers decreasing orders.
The 14% increase in gross sales of Seasonal Candy of $107,633 for the three months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $168,000 due to sales to two new customers offset by the loss of one customer; 2) increased sales in the bulk seasonal division by approximately $22,000 versus the same period a year ago primarily due to increased orders from one customer; offset by 3) decreased sales in the clamshell seasonal division by approximately $82,000 versus the same period a year ago primarily due to decreased sales to four customers.
Net sales increased $58,599 or 3% for the six months ended December 31, 2015 to $2,341,780 compared to $2,283,181 for the six months ended December 31, 2014. Gross sales for Chase Candy decreased $113,940 to $924,868 for the six months ended December 31, 2015, compared to $1,038,808 for the six months ended December 31, 2014. Gross sales for Seasonal Candy increased $180,037 to $1,445,064 for the six months ended December 31, 2015, compared to $1,265,027 for the six months ended December 31, 2014. Gross sales for other sales for the Company decreased $3,646 to $4,578 for the six months ended December 31, 2015, compared to $8,224 for the six months ended December 31, 2014. Sales returns and allowances for the Company increased $3,582 to $32,730 for the six months ended December 31, 2015, compared to $28,878 for the six months ended December 31, 2014.
14
| Six Months Ended | |||||||||
| December 31 | |||||||||
| 2014 | 2013 | ||||||||
| Net cash provided by operating activities | $ | 342,808 | $ | 465,619 | |||||
| Net cash used in investing activities | $ | (33,876 | ) | $ | (21,132 | ) | |||
| Net cash used in financing activities | $ | (18,437 | ) | $ | (34,403 | ) | |||
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
NET SALES (CONTINUED)
The 11% decrease in gross sales of Chase Candy of $113,940 for the six months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $88,000 versus the same period a year ago primarily due to two customers decreasing orders; 2) decreased sales of the L278/L212 Mini Mash division by approximately $10,000 versus the same period a year ago primarily due to two customers decreasing orders; 3) various other fluctuations netting to a decrease of approximately $6,000; 4) decreased sales of the L279/L299 Bulk Mini Mash division by approximately $4,000 versus the same period a year ago primarily due to two customers decreasing orders; 5) decreased sales of the Cherry Mash Merchandiser division by approximately $4,000 versus the same period a year ago primarily due to one customer decreasing orders; and 6) decreased sales of the L260 Changemaker Jar division by approximately $1,000 versus the same period a year ago primarily due to one customer decreasing orders.
The 14% increase in gross sales of Seasonal Candy of $180,037 for the six months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $213,000 due to increased orders from one customer offset by decreased orders of another customer; 2) increased sales in the bulk seasonal division by approximately $34,000 versus the same period a year ago primarily due to increased orders from one customer; offset by 3) decreased sales in the clamshell seasonal division by approximately $67,000 versus the same period a year ago primarily due to decreased orders from four customers.
COST OF SALES
The cost of sales increased $74,830 to $920,887 or 72% of related revenues for the three months ended December 31, 2015, compared to $846,057 or 66% of related revenues for the three months ended December 31, 2014. The 9% increase in cost of sales of $74,830 is primarily due to a 10% increase in the price of sugar and a 7% increase in the price of corn syrup.
The cost of sales increased $203,143 to $1,764,270 or 75% of related revenues for the six months ended December 31, 2015, compared to $1,561,127 or 68% of related revenues for the six months ended December 31, 2014. The 13% increase in cost of sales of $203,143 is primarily due to a 10% increase in the price of sugar, a 7% increase in the price of corn syrup, and a 3% increase in net sales of $58,599. 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.
15
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
SELLING EXPENSES
Selling expenses for the three months ended December 31, 2015 increased $7,194 to $156,957, which is 12% of sales, compared to $149,763, or 12% of sales for the three months ended December 31, 2014. The increase of $7,194 in selling expenses for the three months ended December 31, 2015 is primarily due to higher premium promotions expense and higher commissions expense offset by lower automobile expense. Premium promotions, which are paid to customers for various marketing reasons, increased $3,481 to $40,314 for this period from $36,833 for the three months ended December 31, 2014. Commissions expense, which are based on sales, increased $6,798 to $48,817 for this period from $42,019 for the three months ended December 31, 2014. Automobile expense decreased $3,832 to $3,038 for this period from $6,870 for the three months ended December 31, 2014.
Selling expenses for the six months ended December 31, 2015 increased $15,329 to $279,733, which is 12% of sales, compared to $264,404 or 12% of sales for the six months ended December 31, 2014. The increase of $15,329 in selling expenses for the six months ended December 31, 2015 is primarily due to higher commissions expense, and depreciation expense for the period. Commissions expense increased $9,276 to $90,402 for this period from $81,126 for the six months ended December 31, 2014 primarily due to a change in the mix of sales. Depreciation expense increased $6,433 to $27,979 for this period from $21,546 primarily due to the purchases of property and equipment of $84,303 during the six months ended December 31, 2015.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended December 31, 2015 increased $4,783 to $95,236 and 7% of sales, compared to $90,453 or 7% of sales for the three months ended December 31, 2014. The increase of $4,783 in general and administrative expenses for the three months ended December 31, 2015 is primarily due to higher professional fees offset by lower insurance expense. Professional fees increased $14,625 to $31,666 for this period from $17,041 for the three months ending December 31, 2014 due to timing of regular invoices. Insurance expense decreased $11,180 to $24,225 for this period from $35,405 for the three months ending December 31, 2014 due to employees changing their enrollment in insurance plans.
General and administrative expenses for the six months ended December 31, 2015 decreased $1,547 to $210,287 or 9% of sales, compared to $211,834 or 9% of sales for the six months ended December 31, 2014. The decrease of $1,547 in general and administrative expenses for the six months ended December 31, 2015 is primarily due to higher professional fees offset by lower insurance expense. Professional fees increased $19,107 to $86,337 for this period from $67,230 for the six months ending December 31, 2014 due to timing of regular invoices. Insurance expense decreased $21,716 to $46,582 for this period from $68,298 for the six months ending December 31, 2014 due to employees changing their enrollment in insurance plans.
16
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
OTHER INCOME (EXPENSE)
Other income (expense) decreased by $1,673 for the three months ended December 31, 2015 to $(2,320), compared to $(647) for the three months ended December 31, 2014 primarily due to an increase of $1,673 in interest expense.
Other income (expense) decreased by $12,703 for the six months ended December 31, 2015 to $(2,215), compared to $10,488 for the six months ended December 31, 2014 primarily due to a decrease of $1,058 in interest expense, and a decrease of $11,645 in miscellaneous income. The decrease in miscellaneous income is primarily due to these unusual items that occurred during the six months ended December 31, 2014: 1) a freight claim of approximately $4,000 and 2) a refund of approximately $7,000 from a customer related to an underpayment written off in a previous period.
PROVISION FOR INCOME TAXES
The Company recorded income tax expense for the three months ended December 31, 2015 of $39,581 as compared to income tax expense of $77,726 for the three months ended December 31, 2014. The Company recorded income tax expense for the six months ended December 31, 2015 of $37,701 as compared to income tax expense of $94,976 for the six months ended December 31, 2014. The net income tax expense recorded for the three and six months ended December 31, 2015 is primarily due to recognizing income taxes related to current profitable operations.
NET INCOME
The Company reported net income for the three months ended December 31, 2015 of $72,686, compared to net income of $142,539 for the three months ended December 31, 2014. This decrease of $69,853 is explained above. The Company reported net income for the six months ended December 31, 2015 of $68,938, compared to net income of $177,240 for the six months ended December 31, 2014. This decrease of $108,302 is explained above.
PREFERRED DIVIDENDS
Preferred dividends were $32,018 for the three months ended December 31, 2015 and 2014, 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.
Preferred dividends were $64,036 for the six months ended December 31, 2015 and 2014, 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.
17
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
Net income applicable to common stockholders for the three months ended December 31, 2015 was $40,668 which is a decrease of $69,853 as compared to the net income for the three months ended December 31, 2014 of $110,521.
Net income applicable to common stockholders for the six months ended December 31, 2015 was $4,902 which is a decrease of $108,302 as compared to the net income for the six months ended December 31, 2014 of $113,204.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the summary of cash flow for the fiscal period indicated.
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2015 | 2014 | |||||||
| Net Cash Provided by Operating Activities | $ | 315,198 | $ | 342,808 | ||||
| Net Cash Used in Investing Activities | $ | (21,622 | ) | $ | (33,876 | ) | ||
| Net Cash Used by Financing Activities | $ | (6,666 | ) | $ | (18,437 | ) | ||
Management has no material commitments for capital expenditures during the remainder of fiscal 2016. The $315,198 of cash provided by operating activities is fully detailed in the condensed consolidated statement of cash flows on page five. The $21,622 of cash used in investing activities is the purchase of equipment used during the manufacturing process and an automobile. The $6,666 of cash used in financing activities is the principal payments on equipment and vehicle loans. At December 31, 2015, the Company had $350,000 remaining on the line-of-credit, which could be utilized to help fund any working capital requirements.
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.
18
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
Not applicable to a smaller reporting company.
| ITEM 4. | CONTROLS AND PROCEDURES |
(a) Evaluation of Disclosure Controls and Procedures
Chase’s Management, with the participation of the Chief Executive Officer, has evaluated the effectiveness of Chase’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Management has concluded that Chase’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in periodic filings under the Exchange Act is accumulated and communicated to management, including those officers, and to members of the Board of Directors, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no significant changes in Chase’s internal control over financial reporting or in other factors that in management’s estimates are reasonably likely to materially affect Chase’s internal control over financial reporting subsequent to the date of the evaluation.
19
CHASE GENERAL CORPORATION AND SUBSIDIARY
| ITEM 1. | LEGAL PROCEEDINGS |
None.
| ITEM 1A. | RISK FACTORS |
Not applicable to a smaller reporting company.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
| a. | None |
| b. | The total cumulative preferred stock dividends contingency at December 31, |
| ITEM 5. |
None
20
CHASE GENERAL CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
(CONTINUED)| Exhibit 31.1 | Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
| Exhibit 32.1 | Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Exhibit 101 | The following financial statements for the quarter ended December 31, |
21
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Chase General Corporation and Subsidiary | ||
| (Registrant) | ||
| February | /s/ Barry M. Yantis | |
| Date | Barry M. Yantis | |
| Chairman of the Board, Chief Executive Officer and | ||
| Chief Financial Officer, President and Treasurer |
22