UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2004
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
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 incorporation or organization) | (IRS Employer Identification No.) |
3600 Leonard Road, St. Joseph, Missouri 64503
(Address of principal executive offices, Zip Code)
(816) 279-1625
(Issuer’s telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨
As of January 31, 2005, there were 969,834 shares of common stock, $1 par value, issued and outstanding.
Transitional Small Business Disclosure Format Yes ¨ No x
Index
Form 10-QSB for the Quarter Ended December 31, 2004
2
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| December 31, 2004 | June 30, 2004 | |||||
| (Unaudited) | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | $ | 197,931 | $ | 177,919 | ||
Trade receivables, net | 163,282 | 141,297 | ||||
Inventories: | ||||||
Finished goods | 50,197 | 111,351 | ||||
Goods in process | 4,469 | 3,609 | ||||
Raw materials | 59,204 | 36,156 | ||||
Packaging materials | 100,802 | 124,846 | ||||
Prepaid expenses | 2,568 | 2,940 | ||||
Total current assets | 578,453 | 598,118 | ||||
PROPERTY AND EQUIPMENT - NET | 293,275 | 180,198 | ||||
TOTAL ASSETS | $ | 871,728 | $ | 778,316 | ||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
| December 31, 2004 | June 30, 2004 | |||||||
| (Unaudited) | ||||||||
CURRENT LIABILITIES | ||||||||
Forgivable loan - bank (Note 3) | $ | 5,000 | $ | — | ||||
Notes payable - Series B | — | 7,032 | ||||||
Accounts payable | 30,453 | 94,651 | ||||||
Accrued expenses | 14,909 | 27,930 | ||||||
Income taxes payable | 40,265 | 24,852 | ||||||
Total current liabilities | 90,627 | 154,465 | ||||||
Long-term liabilities | ||||||||
Forgivable loan | 20,000 | — | ||||||
Total liabilities | 110,627 | 154,465 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Capital stock issued and outstanding: | ||||||||
Prior cumulative preferred stock, $5 par value: | ||||||||
Series A (liquidation preference $1,905,000 and $1,890,000 respectively) | 500,000 | 500,000 | ||||||
Series B (liquidation preference $1,860,000 and $1,845,000 respectively) | 500,000 | 500,000 | ||||||
Cumulative preferred stock, $20 par value | ||||||||
Series A (liquidation preference $4,404,607 and $4,375,341 respectively) | 1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $717,811 and $713,041 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 | (5,704,895 | ) | (5,842,145 | ) | ||||
Total stockholders’ equity | 761,101 | 623,851 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 871,728 | $ | 778,316 | ||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended December 31 | ||||||||
| 2004 | 2003 | |||||||
NET SALES | $ | 1,216,367 | $ | 1,104,450 | ||||
COST OF SALES | 833,436 | 729,296 | ||||||
Gross profit on sales | 382,931 | 375,154 | ||||||
OPERATING EXPENSES | ||||||||
Selling expense | 110,596 | 100,773 | ||||||
General and administrative expenses | 54,496 | 57,234 | ||||||
Total operating expenses | 165,092 | 158,007 | ||||||
Income from operations | 217,839 | 217,147 | ||||||
OTHER INCOME (EXPENSE) | (854 | ) | 200 | |||||
Net income before income taxes | 216,985 | 217,347 | ||||||
PROVISION FOR INCOME TAXES | 58,766 | 62,759 | ||||||
NET INCOME | 158,219 | 154,588 | ||||||
Preferred dividends | (32,018 | ) | (32,018 | ) | ||||
Net income applicable to common stockholders | $ | 126,201 | $ | 122,570 | ||||
NET INCOME PER SHARE OF COMMON STOCK - BASIC | $ | .13 | $ | .13 | ||||
NET INCOME PER SHARE OF COMMON STOCK - DILUTED | $ | .08 | $ | .08 | ||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended December 31 | ||||||||
| 2004 | 2003 | |||||||
NET SALES | $ | 1,718,322 | $ | 1,447,232 | ||||
COST OF SALES | 1,219,554 | 977,887 | ||||||
Gross profit on sales | 498,768 | 469,345 | ||||||
OPERATING EXPENSES | ||||||||
Selling expense | 169,769 | 149,596 | ||||||
General and administrative expenses | 136,597 | 126,390 | ||||||
Total operating expenses | 306,366 | 275,986 | ||||||
Income from operations | 192,402 | 193,359 | ||||||
OTHER INCOME (EXPENSE) | (1,607 | ) | 3,693 | |||||
Net income before income taxes | 190,795 | 197,052 | ||||||
PROVISION FOR INCOME TAXES | 53,545 | 61,275 | ||||||
NET INCOME | 137,250 | 135,777 | ||||||
Preferred dividends | (64,036 | ) | (64,036 | ) | ||||
Net income applicable to common stockholders | $ | 73,214 | $ | 71,741 | ||||
NET INCOME PER SHARE OF COMMON STOCK - BASIC | $ | .08 | $ | .07 | ||||
NET INCOME PER SHARE OF COMMON STOCK - DILUTED | $ | .06 | $ | .06 | ||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended December 31 | ||||||||
| 2004 | 2003 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 137,250 | $ | 135,777 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 23,755 | 18,142 | ||||||
Provision for bad debts | 2,130 | 3,210 | ||||||
Effects of changes in operating assets and liabilities: | ||||||||
Trade receivables | (24,115 | ) | 29,263 | |||||
Inventories | 61,290 | 2,540 | ||||||
Prepaid expense | 372 | 15,834 | ||||||
Accounts payable | (64,198 | ) | 1,067 | |||||
Accrued expenses | (13,021 | ) | 28,416 | |||||
Income taxes payable | 15,413 | — | ||||||
Net cash provided by operating activities | 138,876 | 234,249 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of equipment | (136,832 | ) | (15,177 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Principal payments on notes payable, Series B | (7,032 | ) | (15,000 | ) | ||||
Proceeds from forgivable loan | 25,000 | — | ||||||
Net cash provided by (used in) financing activities | 17,968 | (15,000 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 20,012 | 204,072 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 177,919 | 138,806 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 197,931 | $ | 342,878 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash payments for: | ||||||||
Income taxes | $ | 38,132 | $ | 1,808 | ||||
Interest | $ | 2,140 | $ | 1,322 | ||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The condensed consolidated balance sheet of Chase General Corporation (“Chase” or “we”, “us”, or “our”) at June 30, 2004 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 and six months ended December 31, 2004 and for the three months and six months ended December 31, 2003 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-KSB for the year ended June 30, 2004. The results of operations for the three months and six months ended December 31, 2004 and cash flows for the six months ended December 31, 2004 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2005. Where appropriate, items within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation.
NOTE 2 - NET INCOME PER SHARE
The basic income per share was computed on the weighted average of outstanding common shares as follows:
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
Net income | $ | 158,219 | $ | 154,588 | $ | 137,250 | $ | 135,777 | ||||
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 | $ | 126,201 | $ | 122,570 | $ | 73,214 | $ | 71,741 | ||||
Weighted average of outstanding common shares | 969,834 | 969,834 | 969,834 | 969,834 | ||||||||
Net income per share - basic | $ | .13 | $ | .13 | $ | .08 | $ | .07 | ||||
8
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTE 2 - NET INCOME PER SHARE(CONTINUED)
The diluted earnings per share was computed on the weighted average of outstanding common shares plus potential dilutive common shares as follows:
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
Net income | $ | 158,219 | $ | 154,588 | $ | 137,250 | $ | 135,777 | ||||
Preferred dividend requirements: | ||||||||||||
6% Series Convertible | ||||||||||||
Series A | — | — | — | — | ||||||||
Series B | — | — | — | — | ||||||||
5% Series Convertible | ||||||||||||
Series A | — | — | 29,266 | 29,266 | ||||||||
Series B | — | — | 4,770 | 4,770 | ||||||||
Total Dividend Requirements | — | — | 34,036 | 34,036 | ||||||||
Net Income Common Stockholders | 158,219 | 154,588 | 103,214 | 101,741 | ||||||||
Weighted average of outstanding common shares | 969,834 | 969,834 | 969,834 | 969,834 | ||||||||
Dilutive effect of conversion: | ||||||||||||
6% Series Convertible | ||||||||||||
Series A | 400,000 | 400,000 | 400,000 | 400,000 | ||||||||
Series B | 375,000 | 375,000 | 375,000 | 375,000 | ||||||||
5% Series Convertible | ||||||||||||
Series A | 222,133 | 222,133 | — | — | ||||||||
Series B | 36,201 | 36,201 | — | — | ||||||||
Weighted average of diluted outstanding common shares | 2,003,168 | 2,003,168 | 1,744,834 | 1,744,834 | ||||||||
Diluted Earnings Per Share | $ | .08 | $ | .08 | .06 | $ | .06 | |||||
9
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTE 2 - NET INCOME PER SHARE(CONTINUED)
Cumulative Preferred Stock dividends in arrears at December 31, 2004 and 2003, totaled $6,475,978 and $6,347,906, respectively. Total dividends in arrears, on a per share basis, consist of the following at December 31:
| Six Months Ended December 31 | ||||||
| 2004 | 2003 | |||||
6% Convertible | ||||||
Series A | $ | 14 | $ | 14 | ||
Series B | 13 | 13 | ||||
5% Convertible | ||||||
Series A | 55 | 54 | ||||
Series B | 55 | 54 | ||||
Six percent 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.
NOTE 3 - FORGIVABLE LOAN
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 Company must meet the criteria of constructing a 20,000 square foot building, create a minimum of two new full-time equivalent jobs during the first year of operation in the new facility, and maintain 19 existing jobs each year thereafter until the five year term has expired. Currently, the building is tentatively planned for occupation during March 2005.
NOTE 4 - RECLASSIFICATIONS
Certain reclassifications have been made to the 2003 presentation to conform to the 2004 presentation. The reclassifications had no effect on net income or shareholders’ equity.
10
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION
This Management’s Discussion and Analysis of Financial Condition and Results of Operations section and other parts of this Report contain forward-looking statements that involve risks and uncertainties. The Company’s actual results and the timing of certain events may differ significantly from the results and timing discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed or referred to in this report and in Item 7 of the Annual Report on Form 10-KSB for the year ended June 30, 2004.
The following discussion is intended to provide a better understanding of the significant changes in trends relating to Chase’s financial condition and results of operations. Management’s Discussion and Analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.
OVERVIEW
Chase General 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 Company and Poe Candy Company, which share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two division is not maintained by Management.
RESULTS OF OPERATIONS
The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
Net sales | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Cost of sales | 69 | 66 | 71 | 68 | ||||||||
Gross profit | 31 | 34 | 29 | 32 | ||||||||
Operating expenses | 13 | 14 | 18 | 19 | ||||||||
Net income from operations | 18 | 20 | 11 | 13 | ||||||||
Net income before income taxes | 18 | 20 | 11 | 13 | ||||||||
Provision for income taxes | 5 | 6 | 3 | 4 | ||||||||
Net income | 13 | % | 14 | % | 8 | % | 9 | % | ||||
11
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
NET SALES
Net sales increased $111,917 or 10% for the three months ended December 31, 2004 to $1,216,367 compared to $1,104,450 for the three months ended December 31, 2003. Gross sales for Chase Candy Company increased $55,835 to $416,334 for the three months ended December 31, 2004 compared to $360,499 for 2003. Gross sales for Poe Candy Company increased $31,158 to $818,933 for the three months ended December 31, 2004 compared to $787,775 for 2003.
Net sales increased $271,090 or 19% for the six months ended December 31, 2004 to $1,718,322 compared to $1,447,232 for the six months ended December 31, 2003. Gross sales for Chase Candy Company increased $154,613 to $876,844 for the six months ended December 31, 2004 compared to $722,231 for 2003. Gross sales for Poe Candy Company increased $64,555 to $866,351 for the six months ended December 31, 2004 compared to $801,796 for 2003.
The overall increase in net sales for the three month period ended December 31, 2004 is primarily due to this time completes the busy season for the Company, along with expansion of the sales market and its website sales, which continued from the first quarter so that year to date net sales have significant gains.
COST OF SALES
The cost of sales increased $104,140 to $833,436 increasing to 69% of related revenues for the three months ended December 31, 2004, compared to $729,296 or 66% of related revenues for the three months ended December 31, 2003. The cost of sales increased $241,667 to $1,219,554 increasing to 71% of related revenues for the six months ended December 31, 2004, compared to $977,887 or 68% of related revenues for the six months ended December 31, 2003.
This dollar increase in cost of sales is anticipated due to the increased volume of sales. Included in the cost of sales are increases of labor rates 3-4%, shipping cost of 21%, and packaging material of 16% year to date. The multiple changes in rates for fuel and petroleum products have caused these increases for freight and packaging material.
SELLING EXPENSES
Selling expenses for the three months ended December 31, 2004 increased $9,823 to $110,596, which is 9% of sales, compared to $100,773 or 9% of sales for the three months ended December 31, 2003. Selling expenses for the six months ended December 31, 2004 increased $20,173 to $169,769, which is 10% of sales, compared to $149,596 or 10% of sales for the six months ended December 31, 2003. The increase in selling expenses consisting of commissions, sales salaries, promotions and samples are due to the Company’s increased sales and marketing activity which resulted in the net sales increase as explained above.
12
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended December 31, 2004 decreased $2,738 to $54,496, and decreased to 4% of sales, compared to $57,234 or 5% of sales for the three months ended December 31, 2003. General and administrative expenses for the six months ended December 31, 2004 increased $10,207 to $136,597, and decreased to 8% of sales, compared to $126,390 or 9% of sales for the six months ended December 31, 2003. The increase in costs is due to increased professional fees.
OTHER INCOME (EXPENSE)
Other income and expense decreased by $1,054 for the three months ended December 31, 2004 to $(854), compared to $200 for the three months ended December 31, 2003. Other income and expense decreased by $5,300 for the six months ended December 31, 2004 to $(1,607), compared to $3,693 for the six months ended December 31, 2003. This was due to a decrease in miscellaneous income of $3,733 and an increase in interest expense of $1,567 due to the Notes Payable, Series B being paid off in the current year and obtaining a short-term operating note during this period.
PROVISION FOR INCOME TAXES
The Company recorded a tax provision for the three months ended December 31, 2004 of $58,766 as compared to $62,759 for the three months ended December 31, 2003. The Company recorded a tax provision for the six months ended December 31, 2004 of $53,545 as compared to $61,275 for the six months ended December 31, 2003.
NET INCOME
The Company reported a net income for the quarter ended December 31, 2004 of $158,219, compared to a net profit of $154,588 for the quarter ended December 31, 2003. This increase of $3,631 is explained above.
The Company reported a net income for the six months ended December 31, 2004 of $137,250, compared to a net income of $135,777 for the six months ended September 30, 2003. This increase of $1,473 is explained above.
PREFERRED DIVIDENDS
These amounts reflect additional preferred stock dividends in arrears for the three and six months ended December 31, 2004 and 2003, 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.
13
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
Net income applicable to common stockholders for the three months ended December 31, 2004 was $126,201 which is an increase of $3,631 as compared to the three months ended December 31, 2003.
Net income applicable to common stockholders for the six months ended December 31, 2004 was $73,214 which is an increase of $1,473 as compared to the six months ended December 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended December 31, 2004, the Company obtained bank financing totaling $80,010, of which $68,730 was used to complete the purchase of a new bagger machine and $11,280 was used to fund operations. This loan was paid in full during the second quarter ended December 31, 2004. In addition, the Company purchased a new vehicle for $31,785.
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 Company must meet the criteria of building a 20,000 square foot building, create a minimum of two new full-time equivalent jobs during the first year of operation in the new facility, and maintain 19 existing jobs each year thereafter until the five year term has expired. Currently, the building is tentatively planned for occupation during March 2005.
The Company’s series B notes to a related party were paid in full on December 20, 2004 at the current 6% rate of interest.
Net cash provided by financing activities was $17,968 and $(15,000) for the six months ended December 31, 2004 and 2003, respectively.
The Company’s lease on its office and plant facility is effective through March 31, 2005 at $2,955 per month. The Company decided not to renew this lease. The Company will lease a new office/warehouse facility from a Company, owned by one of the Company’s directors. The facility is currently being built with intended occupancy March 1, 2005. The Company has expended $28,230 to date for various costs in anticipation of the move to new facilities. However, the Company has no plans for acquiring major acquisitions for the new facility.
The Company believes it will have sufficient resources to finance its current operations for at least the next twelve months through working capital. Cash and cash equivalents increased $20,012 to $197,931 at December 31, 2004 from $177,919 at June 30, 2004. To date, there are no material commitments by the Company for capital expenditures. At December 31, 2004, the Company’s accumulated deficit was $5,704,895, compared to accumulated deficit of $5,842,145 as of June 30, 2004. Working capital as of December 31, 2004 increased 10% to $487,826 from $443,653 as of June 30, 2004.
14
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In order to maintain funds to finance operations and meet debt obligations, it is the intention of management to continue its efforts to expand the present market area and increase sales to its existing customers. Management also intends to continue tight control on all expenditures.
There has been no material impact from inflation and changing prices on net sales or on income from continuing operations for the last three months.
ITEM 3. - CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
| a. | None |
| b. | The total cumulative preferred stock dividends contingency at December 31, 2004 is $6,475,978. |
Exhibits.
| 31 | Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32 | 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. | |
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 | ||||
Dated: February 10, 2005 | By: | /s/ Barry M. Yantis | ||
| Barry M. Yantis | ||||
| President, Chief Executive Officer, | ||||
| Treasurer and Chairman of the Board | ||||
Dated: | ||||
16
