Chase General (CSGN) 10-Q 2014 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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 September 30, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to

Commission File Number 2-5916

	Chase General Corporation
(Exact name of small business issuer as specified in its charter)

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 o

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o  (Do not check if a smaller reporting company)	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)  Yes  o     No  x

As of November 7, 2013, there were 969,834 shares of common stock, $1.00 par value, outstanding.

CHASE GENERAL CORPORATION AND SUBSIDIARY

Quarterly Report on Form 10-Q

For the Three Months Ended September 30, 2013

TABLE OF CONTENTS

PART I           FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements	3
		Condensed Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and June 30, 2013	3
		Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2013 and 2012 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2013 and 2012 (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
PART II           OTHER INFORMATION
	Item 1.	Legal Proceedings	17
	Item 1A.	Risk Factors	17
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
	Item 3.	Defaults Upon Senior Securities	17
	Item 4.	Mine Safety Disclosures	17
	Item 5.	Other Information	17
	Item 6.	Exhibits	18
	Signatures		19

PART I. FINANCIAL INFORMATION

ITEM 1.            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
	September 30,		June 30,
	2013		2013
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	26,093	$	28,564
Trade receivables, net of allowance for doubtful accounts of $16,496 and $16,196, respectively		600,399		166,585
Inventories:
Finished goods		333,302		258,392
Goods in process		12,636		10,942
Raw materials		87,290		81,515
Packaging materials		99,699		158,283
Prepaid expenses		13,435		5,414
Deferred income taxes		7,340		6,863
Total current assets		1,180,194		716,558
PROPERTY AND EQUIPMENT
Land		35,000		35,000
Buildings		77,348		77,348
Machinery and equipment		726,441		717,985
Trucks and autos		188,594		188,594
Office equipment		30,826		30,826
Leasehold improvements		72,068		72,068
Total		1,130,277		1,121,821
Less accumulated depreciation		781,428		759,996
Total property and equipment, net		348,849		361,825
TOTAL ASSETS	$	1,529,043	$	1,078,383

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS’ EQUITY
	September 30,			June 30,
	2013			2013
	(Unaudited)
CURRENT LIABILITIES
Accounts payable	$	295,546		$	66,598
Current maturities of notes payable		259,767			54,172
Accrued expenses		43,357			27,466
Income taxes payable		11,225			3,711
Deferred income		1,299			1,299
Total current liabilities		611,194			153,246
LONG-TERM LIABILITIES
Deferred income		13,636			13,960
Notes payable, less current maturities		27,494			39,787
Deferred income taxes		88,165			93,973
Total long-term liabilities		129,295			147,720
Total liabilities		740,489			300,966
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $2,167,500 and $2,160,000, respectively)		500,000			500,000
Series B (liquidation preference $2,122,500 and $2,115,000, respectively)		500,000			500,000
Cumulative preferred stock, $20 par value
Series A (liquidation preference $4,916,765 and $4,902,131, respectively)		1,170,660			1,170,660
Series B (liquidation preference $801,284 and $798,899, 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		(5,677,442	)		(5,688,579	)
Total stockholders’ equity		788,554			777,417
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,529,043		$	1,078,383

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended
	September 30
	2013			2012
NET SALES	$	911,260		$	797,592
COST OF SALES		658,354			583,645
Gross profit on sales		252,906			213,947
OPERATING EXPENSES
Selling		96,922			92,374
General and administrative		138,390			125,302
Gain on sale of equipment		-			(22,500	)
Total operating expenses		235,312			195,176
Income from operations		17,594			18,771
OTHER INCOME (EXPENSE)
Miscellaneous income		364			365
Interest expense		(2,586	)		(3,734	)
Total other income (expense), net		(2,222	)		(3,369	)
Net income before income taxes		15,372			15,402
PROVISION (CREDIT) FOR INCOME TAXES		4,235			4,851
NET INCOME	$	11,137		$	10,551
NET LOSS PER SHARE OF COMMON STOCK
- BASIC	$	(0.02	)	$	(0.02	)
- DILUTED	$	(0.02	)	$	(0.02	)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	September 30
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,137		$	10,551
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		21,432			23,032
Allowance for bad debts		300			300
Deferred income amortization		(324	)		(325	)
Deferred income taxes		(6,285	)		4,851
Gain on sale of equipment		-			(22,500	)
Effects of changes in operating assets and liabilities:
Trade receivables		(434,114	)		(392,756	)
Inventories		(23,795	)		(129,067	)
Prepaid expenses		(8,021	)		(3,432	)
Accounts payable		228,948			215,100
Accrued expenses		15,891			23,383
Income taxes payable		7,514			-
Net cash used in operating activities		(187,317	)		(270,863	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment		-			22,500
Purchases of property and equipment		(8,456	)		-
Net cash provided by (used in) investing activities		(8,456	)		22,500
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line-of-credit		205,000			285,000
Principal payments on notes payable		(11,698	)		(13,735	)
Net cash provided by financing activities		193,302			271,265
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(2,471	)		22,902
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		28,564			17,949
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	26,093		$	40,851

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as “Chase”, “we”, “our”, and “us”) at June 30, 2013 has been taken from audited consolidated financial statements at that date and condensed.  The condensed consolidated financial statements as of and for the three months ended September 30, 2013 and for the three months ended September 30, 2012 are unaudited and reflect all normal and recurring accruals and adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods presented in this quarterly report.  The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended June 30, 2013.  The results of operations for the three months ended September 30, 2013 and cash flows for the three months ended September 30, 2013 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2014.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included.

No events have occurred subsequent to September 30, 2013, through the date of filing this form, that would require disclosure in this Form 10-Q or would be required to be recognized in the condensed consolidated financial statements as of or for the three month period ended September 30, 2013.

NOTE 2 - LOSS PER SHARE

The income (loss) per share was computed on the weighted average of outstanding common shares during the period.  Diluted earnings per share is calculated by including contingently issuable shares with the weighted averages shares outstanding.

	Three Months Ended
	September 30
	2013			2012
Net income	$	11,137		$	10,551
Preferred dividend requirements:
6% Prior Cumulative Preferred, $5 par value		15,000			15,000
5% Convertible Cumulative Preferred, $20 par value		17,018			17,018
Total dividend requirements		32,018			32,018
Net loss - common stockholders	$	(20,881	)	$	(21,467	)

Weighted average shares - basic		969,834			969,834
Dilutive effect of contingently issuable shares		1,033,334			1,033,334
Weighted average shares - diluted		2,003,168			2,003,168
Basic loss per share	$	(0.02	)	$	(0.02	)
Diluted loss per share	$	(0.02	)	$	(0.02	)

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2 - LOSS PER SHARE (CONTINUED)

Cumulative Preferred Stock dividends in arrears at September 30, 2013 and 2012 totaled $7,596,608 and $7,468,536, respectively.  Total dividends in arrears, on a per share basis, consist of the following:

	Three Months Ended
	September 30
	2013		2012
6% Convertible
Series A	$	16	$	16
Series B	$	16	$	16
5% Convertible
Series A	$	64	$	63
Series B	$	64	$	63

The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid accrued dividends to date of redemption.  In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends.  It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.

The Company has the privilege of redemption of 5% convertible cumulative preferred stock at $21.00 a share plus unpaid accrued dividends.  In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20.00 a share plus unpaid accrued dividends.  It may be exchanged for common stock at the option of the shareholders, in the ratio of 3.795 common shares for one of preferred.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 - NOTES PAYABLE

The Company’s long-term debt consists of:

			September 30,		June 30,
Payee	Terms		2013		2013
Nodaway Valley Bank	$350,000 line-of-credit agreement expiring on January 3, 2014, with a variable interest rate at prime but not less than 5%.  The line-of-credit agreement replaced two existing line-of-credit agreements that expired on January 3, 2013.  The line-of-credit is collateralized by substantially all assets of the Company.	$	205,000	$	-
Ford Credit	$679 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.		20,375		22,413
Ford Credit	$517 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.		16,017		17,050
Nodaway Valley Bank	$3,192, including interest of 5.75%; final payment due June 2015, secured by equipment.		40,943		48,698
Toyota Financial Services	$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.		4,926		5,798
	Total		287,261		93,959
	Less current portion		259,767		54,172
	Long-term portion	$	27,494	$	39,787

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 - NOTES PAYABLE (CONTINUED)

Future minimum payments for the twelve months ending September 30 are:

2014	$	259,767
2015		19,802
2016		7,692
Total	$	287,261

NOTE 4 - INCOME TAXES

The Company follows the provisions for uncertain tax positions as addressed in Financial Accounting Standards Board Accounting Standards Codification 740-10.  The Company recognized no liability for unrecognized tax benefits at September 30, 2013.  The Company has no material tax positions at September 30, 2013 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.  The Company’s federal income tax returns for the fiscal years ended 2011, 2012 and 2013 are subject to examination by the IRS taxing authority.

NOTE 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Three Months Ended
	September 30
	2013		2012
Cash paid for:
Interest	$	2,586	$	4,253
Income taxes		-		-

NOTE 6 - CONTINGENCIES

The Company received correspondence from the legal counsel for the Public Building Commission of Chicago (PBC) in August 2012, alleging that the Company previously owned and operated a manufacturing facility in Chicago and that the Company is a liable party for environmental response costs incurred by the PBC in the amount of $822,642.  It is the opinion of management, after reviewing the letter with counsel, that further information is required to determine the validity of the claim, the likelihood of an unfavorable outcome to the Company, and an amount of potential loss to the Company if any at all.  Management believes significant questions need to be resolved and answered before completing its assessment of the validity of the claim.  In the event that a loss were to be incurred by the Company in connection with this claim, the loss would be material.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Chase General Corporation (Chase) is a holding company for its wholly-owned subsidiary, Dye Candy Company.  This subsidiary is the main operating company that is engaged in the manufacture of confectionery products which are sold primarily to wholesale houses, grocery accounts, vendors, and repackers.  The subsidiary (Company) operates two divisions, Chase Candy division and Seasonal Candy division, which share a common labor force and utilize the same basic equipment and raw materials.  Therefore, segment reporting for the two divisions is not maintained by Management.

The Company’s business, like that of many other confectionary product manufacturers, is seasonal.  Historically, the Company has realized more of its revenue and earnings in the fiscal second quarter, which includes the majority of the holiday shopping season, than in any other fiscal quarter.

RESULTS OF OPERATIONS - Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012

The following management comments regarding Chase’s results of operations and outlook should be read in conjunction with the condensed consolidated financial statements included pursuant to Item 1 of the quarterly report.

The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:

	Three Months Ended
	September 30
	2013			2012
Net sales		100	%		100	%
Cost of sales		72			73
Gross profit on sales		28			27
Operating expenses		26			25
Income from operations		2			2
Other income (expense), net		-			-
Income before income taxes		2			2
Provision (credit) for income taxes		1			1
Net income		1	%		1	%

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CHASE GENERAL CORPORATION AND SUBSIDIARY

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

NET SALES

Net sales increased $113,668 or 14% for the three months ended September 30, 2013 to $911,260 compared to $797,592 for the three months ended September 30, 2012.  Gross sales for Chase Candy increased $100,676 to $508,097 for the three months ended September 30, 2013, compared to $407,421 for 2012.  Gross sales for Seasonal Candy increased $12,300 to $415,727 for the three months ended September 30, 2013, compared to $403,427 for 2012.

The 25% increase in gross sales of Chase Candy of $100,676 for the three months ended September 30, 2013 over the same period ended September 30, 2012, is primarily due to the net effect of the following:  1) two customers increasing orders by approximately $70,000 versus the first quarter a year ago of the single bar packs of Cherry Mash; 2) increased sales of Mini Mash of approximately $22,000 due to improved distribution of one customer;  and 3) increased sales for the Cherry Mash Merchandisers of approximately $9,000.

The 3% increase in gross sales of Seasonal Candy of $12,300 for the three months ended September 30, 2013 over the same period ended September 30, 2012, is primarily due to the net effect of the following:  1) increased orders from two customers of approximately $20,000 due to increased business; offset by 2) decreased orders from various customers in the bulk seasonal product category totaling approximately $6,000 versus first quarter a year ago due to timing of orders and a sales price decrease of approximately 5%; and 3) decreased orders from various customers in the clamshell seasonal product category totaling approximately $2,000 versus first quarter a year ago due to timing of orders.

COST OF SALES

The cost of sales increased $74,709 to $658,354 decreasing to 72% of related revenues for the three months ended September 30, 2013, compared to $583,645 or 73% of related revenues for the three months ended September 30, 2012.

The 13% increase in cost of sales of $74,709 is primarily due to the 14% increase in net sales of $113,668 combined with a small decrease in the raw material costs of peanuts compared to the same period ended September 30, 2012.  Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

COST OF SALES (CONTINUED)

The Company increased total inventory $23,795 or 5% to $532,927 at September 30, 2013 from $509,132 held in inventory at June 30, 2013 as a result of building up inventory product to be delivered in October and November 2013.  The Company increased finished goods inventory 29% during the three months ended September 30, 2013 to $333,302 from the June 30, 2013 finished goods inventory levels of $258,392.  The Company increased goods in process inventory 15% during the three months ended September 30, 2013 to $12,636 from the June 30, 2013 goods in process inventory levels of $10,942.  The Company increased raw materials inventory 7% during the three months ended September 30, 2013 to $87,290 from the June 30, 2013 raw materials inventory levels of $81,515.  The Company decreased packaging materials inventory 37% during the three months ended September 30, 2013 to $99,699 from the June 30, 2013 packaging materials inventory levels of $158,283.

SELLING EXPENSES

Selling expenses for the three months ended September 30, 2013 increased $4,548 to $96,922, which is 11% of sales, compared to $92,374 or 12% of sales for the three months ended September 30, 2012.

The increase of $4,548 in selling expenses for the three months ended September 30, 2013 is primarily due to higher promotions expense for the period.  Promotions expense increased $6,567 to $17,892 for this period from $11,325 for the three months ended September 30, 2012.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended September 30, 2013 increased $13,088 to $138,390 and decreased to 15% of sales, compared to $125,302 or 16% of sales for the three months ended September 30, 2012.  The increased costs are primarily because of a $5,193 increase in insurance expense and a $9,364 increase in professional fees.

OTHER INCOME (EXPENSE)

Other income and (expense) decreased by $1,147 for the three months ended September 30, 2013 to $(2,222), compared to $(3,369) for the three months ended September 30, 2012 primarily due to a decrease in interest expense.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

Item 2             MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

PROVISION (CREDIT) FOR INCOME TAXES

The Company recorded tax expense for the three months ended September 30, 2013 of $4,235 as compared to tax expense of $4,851 for the three months ended September 30, 2012.  The net tax expense recorded for the three months ended September 30, 2013 is primarily due to the change in deferred income taxes as a result of various timing differences between book income and taxable income.

NET INCOME

The Company reported net income for the three months ended September 30, 2013 of $11,137, compared to net income of $10,551 for the three months ended September 30, 2012.  This increase of $586 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended September 30, 2013 and 2012, which reflects additional preferred stock dividends in arrears on the Company’s Series A and Series B $5 par value preferred stock and its Series A and Series B $20 par value preferred stock.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended September 30, 2013 was $(20,881) which is a decrease of $586 as compared to the net loss for the three months ended September 30, 2012 of $(21,467).

LIQUIDITY AND CAPITAL RESOURCES

The table below presents the summary of cash flow for the fiscal year indicated.

	Three Months Ended
	September 30,
	2013			2012
Net cash used in operating activities	$	(187,317	)	$	(270,863	)
Net cash provided by (used in) investing activities	$	(8,456	)	$	22,500
Net cash provided by financing activities	$	193,302		$	271,265

Management has no material commitments for capital expenditures during the remainder of fiscal 2014.  The $193,302 of cash provided by financing activities is the receipt of $205,000 drawn from a line-of-credit, net of principal payments on equipment and vehicle loans. At September 30, 2013, the Company had $145,000 remaining on the line-of-credit, which could be utilized to help fund any working capital requirements.  Management expects that projected cash flows will enable the Company to pay the full balance on the line-of-credit prior to December 31, 2013.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Management believes that the projected cash flow from operations, combined with its existing cash balances, will be sufficient to meet its funding requirements for the foreseeable future.

Management believes that inflation will have only a minimal effect on future operations since such effects will be offset by sales price increases, which are not expected to have a significant effect upon demand.

CRITICAL ACCOUNTING POLICIES

Forward-Looking Information

This report, as well as our other reports filed with the Securities and Exchange Commission (“SEC”), contains forward-looking statements made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995.  The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict” and similar expressions are intended to identify forward-looking statements. This report contains forward-looking statements regarding, among other topics, our expected financial position, results of operations, cash flows, strategy, and management’s plans and objectives.  Accordingly, these forward-looking statements are based on assumptions about a number of important factors.  While we believe that our assumptions about such factors are reasonable, such factors involve risks and uncertainties that could cause actual results to be different from what appear here.  These risk factors include:  the ability to adequately pass through customers unanticipated future increases in raw material costs, decreased demand for products, expected orders that do not occur, loss of key customers, the impact of competition and price erosion as well as supply and manufacturing constraints, and other risks and uncertainties.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will prove accurate, and our actual results may differ materially from these forward-looking statements.  We assume no obligation to update any forward-looking statements made herein.

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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.

16

PART II.  OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS
	The Company has received correspondence from the legal counsel for the Public Building Commission of Chicago (PBC) in August 2012, alleging that the Company previously owned and operated a manufacturing facility in Chicago and that the Company is a liable party for environmental response costs incurred by the PBC in the amount of $822,642.  It is the opinion of management, after reviewing the letter with counsel, that further information is required to determine the validity of the claim, the likelihood of an unfavorable outcome to the Company, and an amount of potential loss to the Company, if any at all.  Management believes significant questions need to be resolved and answered before completing its assessment of the validity of the claim.  In the event that a loss were to be incurred by the Company in connection with this claim, the loss would be material.
ITEM 1A.	RISK FACTORS
	Not applicable to a smaller reporting company.
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	None
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
	a.   None
	b.   The total cumulative preferred stock dividends contingency at September 30, 2013 is $7,596,608.
ITEM 4.	MINE SAFETY DISCLOSURES
	Not applicable.
ITEM 5.	OTHER INFORMATION
	a.     None

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PART II.  OTHER INFORMATION (CONTINUED)

ITEM 6.        EXHIBITS

a.     Exhibits.

Exhibit 31.1 Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

Exhibit 32.1 Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101 The following financial statements for the quarter ended September 30, 2013, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Chase General Corporation and Subsidiary
	(Registrant)
November 8, 2013	/s/ Barry M. Yantis
Date	Barry M. Yantis
	Chairman of the Board, Chief Executive Officer and
	Chief Financial Officer, President and Treasurer

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