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 March 31, 2007
| ¨ | 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.) |
1307 South 59th, St. Joseph, Missouri 64507
(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 12, 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 ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
As of April 30, 2007, there were 969,834 shares of common stock, $1 par value, issued and outstanding.
Transitional Small Business Disclosure Format Yes ¨ No x
CHASE GENERAL CORPORATION
Form 10-QSB for the Quarter Ended March 31, 2007
Condensed Consolidated Balance Sheets at March 31, 2007 (Unaudited) and June 30, 2006 | 3 | |
| 5 | ||
| 6 | ||
| 7 | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 8 | |
Item 2. Management’s Discussion and Analysis or Plan of Operation | 10 | |
| 14 | ||
| 15 | ||
Item 2. Unregistered Shares of Equity Securities and Use of Proceeds—None | ||
| 15 | ||
Item 4. Submission of Matters to a Vote of Security Holders—None | ||
Item 5. Other Information—None | ||
| 15 | ||
| 16 | ||
Exhibit 31 - Certification of Chief Executive Officer and Treasurer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 | 17 | |
Exhibit 32 - Certification 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 19 | |
2
| ITEM 1. | FINANCIAL STATEMENTS |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| March 31, 2007 | June 30, 2006 | |||||
| (Unaudited) | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | $ | 53,035 | $ | 26,558 | ||
Trade receivables, net | 110,868 | 111,217 | ||||
Advance to shareholder | — | 9,000 | ||||
Income tax refund claims receivable | — | 29,197 | ||||
Inventories: | ||||||
Finished goods | 62,831 | 71,631 | ||||
Goods in process | 6,797 | 4,515 | ||||
Raw materials | 48,207 | 37,202 | ||||
Packaging materials | 124,026 | 80,675 | ||||
Prepaid expenses | 7,654 | 12,446 | ||||
Deferred income taxes | 31,933 | 16,051 | ||||
Total current assets | 445,351 | 398,492 | ||||
PROPERTY AND EQUIPMENT - NET | 306,195 | 349,301 | ||||
TOTAL ASSETS | $ | 751,546 | $ | 747,793 | ||
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
| March 31, 2007 | June 30, 2006 | |||||||
| (Unaudited) | ||||||||
CURRENT LIABILITIES | ||||||||
Current maturities of forgivable loan - bank | $ | 5,000 | $ | 5,000 | ||||
Accounts payable | 108,096 | 61,515 | ||||||
Accrued expenses | 18,668 | 17,070 | ||||||
Deferred income | 1,299 | 1,299 | ||||||
Total current liabilities | 133,063 | 84,884 | ||||||
LONG-TERM LIABILITIES | ||||||||
Deferred income | 7,078 | 3,052 | ||||||
Deferred income taxes | 16,747 | 18,953 | ||||||
Forgivable loan - bank, less current maturities | 10,000 | 15,000 | ||||||
Total long-term liabilities | 33,825 | 37,005 | ||||||
Total liabilities | 166,888 | 121,889 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Capital stock issued and outstanding: | ||||||||
Prior cumulative preferred stock, $5 par value: | ||||||||
Series A (liquidation preference $1,972,500 and $1,950,000 respectively) | 500,000 | 500,000 | ||||||
Series B (liquidation preference $1,927,500 and $1,905,000 respectively) | 500,000 | 500,000 | ||||||
Cumulative preferred stock, $20 par value | ||||||||
Series A (liquidation preference $4,536,304 and $4,492,405 respectively) | 1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $739,276 and $732,121 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 | (5,881,338 | ) | (5,840,092 | ) | ||||
Total stockholders’ equity | 584,658 | 625,904 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 751,546 | $ | 747,793 | ||||
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 March 31 | ||||||||
| 2007 | 2006 | |||||||
NET SALES | $ | 285,440 | $ | 319,365 | ||||
COST OF SALES | 300,872 | 322,403 | ||||||
Gross profit (loss) on sales | (15,432 | ) | (3,038 | ) | ||||
OPERATING EXPENSES | ||||||||
Selling expense | 51,685 | 49,512 | ||||||
General and administrative expenses | 92,832 | 66,011 | ||||||
Total operating expenses | 144,517 | 115,523 | ||||||
Loss from operations | (159,949 | ) | (118,561 | ) | ||||
OTHER INCOME (EXPENSE) | 918 | 1,016 | ||||||
Net loss before income taxes | (159,031 | ) | (117,545 | ) | ||||
PROVISION FOR INCOME TAXES (BENEFITS) | (43,043 | ) | (28,451 | ) | ||||
NET LOSS | (115,988 | ) | (89,094 | ) | ||||
Preferred dividends | (32,018 | ) | (32,018 | ) | ||||
Net loss applicable to common stockholders | $ | (148,006 | ) | $ | (121,112 | ) | ||
NET LOSS PER SHARE OF COMMON STOCK - BASIC | $ | (.15 | ) | $ | (0.12 | ) | ||
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)
| Nine Months Ended March 31 | ||||||||
| 2007 | 2006 | |||||||
NET SALES | $ | 1,932,342 | $ | 2,001,494 | ||||
COST OF SALES | 1,474,375 | 1,571,578 | ||||||
Gross profit on sales | 457,967 | 429,916 | ||||||
OPERATING EXPENSES | ||||||||
Selling expense | 216,498 | 217,424 | ||||||
General and administrative expenses | 299,258 | 214,068 | ||||||
Total operating expenses | 515,756 | 431,492 | ||||||
Loss from operations | (57,789 | ) | (1,576 | ) | ||||
OTHER INCOME (EXPENSE) | (1,545 | ) | (2,124 | ) | ||||
Net loss before income taxes | (59,334 | ) | (3,700 | ) | ||||
PROVISION FOR INCOME TAXES (BENEFITS) | (18,088 | ) | (1,184 | ) | ||||
NET LOSS | (41,246 | ) | (2,516 | ) | ||||
Preferred dividends | (96,054 | ) | (96,054 | ) | ||||
Net loss applicable to common stockholders | $ | (137,300 | ) | $ | (98,570 | ) | ||
NET LOSS PER SHARE OF COMMON STOCK - BASIC | $ | (.14 | ) | $ | (.10 | ) | ||
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)
| Nine Months Ended March 31 | ||||||||
| 2007 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (41,246 | ) | $ | (2,516 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 43,106 | 46,001 | ||||||
Provision for bad debts | 900 | 1,584 | ||||||
Deferred income amortization | (974 | ) | (325 | ) | ||||
Deferred income taxes | (18,088 | ) | 1,725 | |||||
Effects of changes in operating assets and liabilities: | ||||||||
Trade receivables | (551 | ) | 63,519 | |||||
Income tax refund claims receivable | 29,197 | 15,516 | ||||||
Inventories | (47,838 | ) | 56,926 | |||||
Prepaid expenses | 4,792 | (5,178 | ) | |||||
Accounts payable | 46,581 | (83,088 | ) | |||||
Accrued expenses | 1,598 | (12,980 | ) | |||||
Net cash provided by operating activities | 17,477 | 81,184 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Decrease (increase) in advance to officer | 9,000 | (20,317 | ) | |||||
Purchases of equipment | — | (21,557 | ) | |||||
Net cash provided by (used in) investing activities | 9,000 | (41,874 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 26,477 | 39,310 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 26,558 | 60,805 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 53,035 | $ | 100,115 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash payments for: | ||||||||
Income taxes, net of (refunds) | $ | (29,197 | ) | $ | (18,425 | ) | ||
Interest | $ | 3,502 | $ | 3,216 | ||||
Non-cash transaction: | ||||||||
Reclass of forgivable loan to deferred income | $ | 5,000 | $ | 5,000 | ||||
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, 2006 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 nine months ended March 31, 2007 and for the three months and nine months ended March 31, 2006 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, 2006. The results of operations for the three months and nine months ended March 31, 2007 and cash flows for the nine months ended March 31, 2007 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2007. Where appropriate, items within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation.
NOTE 2—NET LOSS PER SHARE
The basic loss per share was computed on the weighted average of outstanding common shares as follows:
| Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net loss | $ | (115,988 | ) | $ | (89,094 | ) | $ | (41,246 | ) | $ | (2,516 | ) | ||||
Preferred dividend requirements: | ||||||||||||||||
6% Prior Cumulative Preferred, $5 par value | 15,000 | 15,000 | 45,000 | 45,000 | ||||||||||||
5% Convertible Cumulative Preferred, $20 par value | 17,018 | 17,018 | 51,054 | 51,054 | ||||||||||||
Total dividend requirements | 32,018 | 32,018 | 96,054 | 96,054 | ||||||||||||
Net loss common stockholders | $ | (148,006 | ) | $ | (121,112 | ) | $ | (137,300 | ) | $ | (98,570 | ) | ||||
Weighted average of outstanding common shares | 969,834 | 969,834 | 969,834 | 969,834 | ||||||||||||
Net loss per share—basic | $ | (.15 | ) | $ | (.12 | ) | (.14 | ) | $ | (.10 | ) | |||||
No computation was made on common stock equivalents outstanding because loss per share would be anti-dilutive.
8
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTE 2—NET INCOME PER SHARE(CONTINUED)
Cumulative Preferred Stock dividends in arrears at March 31, 2007 and 2006, totaled $6,764,140 and $6,636,068, respectively. Total dividends in arrears, on a per share basis, consist of the following at March 31:
| Nine Months Ended March 31 | ||||||
| 2007 | 2006 | |||||
6% Convertible | ||||||
Series A | $ | 14 | $ | 14 | ||
Series B | 14 | 14 | ||||
5% Convertible | ||||||
Series A | 58 | 57 | ||||
Series B | 58 | 57 | ||||
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 AND DEFERRED INCOME
During 2004, the Company received a $25,000 economic development incentive from Buchanan County, which is a five year forgivable loan at a rate of $5,000 per year. The Nodaway Valley Bank has established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of December 31, 2009. The Company has met the criteria of occupying a 20,000 square foot building and the criteria of creating a minimum of two new full-time equivalent jobs during the first year of operation in the new facility. In addition, the Company maintained 19 existing jobs for two years thereafter and will be required to do so until the five year term has expired. Once the Company is no longer legally obligated to return the monies, the liability will be reclassified as deferred revenue and amortized into income over the life on the lease term of the new facility. At March 31, 2007, $10,000 has been reclassified to deferred revenue. During the nine months ended March 31, 2007 and 2006, $974 and $325, respectively, has been amortized into income.
9
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR 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 6 of the Annual Report on Form 10-KSB for the year ended June 30, 2006.
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 products and seasonal candy products, which share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two divisions is not maintained by Management.
RESULTS OF OPERATIONS
The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:
| Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
Net sales | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Cost of sales | 105 | 101 | 76 | 78 | ||||||||
Gross profit (loss) | (5 | ) | (1 | ) | 24 | 22 | ||||||
Operating expenses | 51 | 36 | 27 | 22 | ||||||||
Loss from operations | (56 | ) | (37 | ) | (3 | ) | — | |||||
Net loss before income taxes | (56 | ) | (37 | ) | (3 | ) | — | |||||
Benefit for income taxes | (15 | ) | (9 | ) | (1 | ) | — | |||||
Net loss | (41 | )% | (28 | )% | (2 | )% | — | % | ||||
10
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
NET SALES
Net sales decreased $33,925 or 11% for the three months ended March 31, 2007 to $285,440 compared to $319,365 for the three months ended March 31, 2006. Gross sales for Chase Candy decreased $46,445 to $283,590 for the three months ended March 31, 2007 compared to $330,035 for 2006. Gross sales for seasonal candy increased $10,064 to $14,179 for the three months ended March 31, 2007 compared to $4,115 for 2006.
Net sales decreased $69,152 or 3% for the nine months ended March 31, 2007 to $1,932,342 compared to $2,001,494 for the nine months ended March 31, 2006. Gross sales for Chase Candy decreased $121,708 to $1,036,066 for the nine months ended March 31, 2007 compared to $1,157,774 for 2006. Gross sales for seasonal candy increased $39,398 to $925,362 for the nine months ended March 31, 2007 compared to $885,424 for 2006.
The 11% decrease in net sales of $33,925 for the three month period ended March 31, 2007, over the same period ended March 31, 2006, is primarily due to a customer purchasing less this year that accounted for 15% of total Chase Candy sales, where as, in the prior year this same customer accounted for 24% of the Chase Candy sales. This customer in the prior year changed the standard order from a 24 count packaging bag to a 12 count packaging bag. While this year the customer has reduced their orders of 12 count packaging. Year to date net sales had a slight decrease of 3% without any loss of significant customers.
COST OF SALES
The cost of sales decreased $21,531 to $300,872 increasing to 105% of related revenues for the three months ended March 31, 2007, compared to $322,403 or 101% of related revenues for the three months ended March 31, 2006. The cost of sales decreased $97,203 to $1,474,375 decreasing to 76% of related revenues for the nine months ended March 31, 2007, compared to $1,571,578 or 78% of related revenues for the nine months ended March 31, 2006.
This dollar decrease in cost of sales included 15% or $4,392 in freight out costs for the three months ended March 31, 2007 to $25,081 as compared to $29,473 for the three months ended March 31, 2006 along with 18% or $13,893 in labor costs for the three months ended March 31, 2007 to $64,372 as compared to $78,265 for the three months ended March 31, 2006.
The dollar decrease in cost of sales for the nine months ended March 31, 2007 included 37% or $7,695 in freight-in costs of $13,146 as compared to $20,841 for the nine months ended March 31, 2006; 6% or $6,875 in freight-out costs of $117,554 as compared to $124,429 as of March 31, 2006; and 8% or $23,203 in labor costs of $260,716 as compared to $283,919 as of March 31, 2006. The year to date gross margin of 24% for the nine months ended March 31, 2007 improved from 22% as of March 31, 2006 as a result of these decreased costs.
11
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
COST OF SALES(CONTINUED)
Finished goods inventory for the three months ended March 31, 2007 of $62,831, decreased $8,800 or 12% of the June 30, 2006 finished goods inventory of $71,631. The decrease reflects the Company not having to build and store inventory to meet delivery deadlines, but has the capacity to produce inventory just in time for delivery. Raw material inventory of $48,207 and packaging materials inventory of $124,026 is 46% higher than the June 30, 2006 inventories of $37,202 and $80,675, respectively, as a result of purchasing inventory at competitive prices, but not all of this inventory was used during the third quarter ending March 31, 2007.
SELLING EXPENSES
Selling expenses for the three months ended March 31, 2007 increased $2,173 to $51,685, which is 18% of sales, compared to $49,512 or 16% of sales for the three months ended March 31, 2006. Selling expenses for the nine months ended March 31, 2007 decreased $926 to $216,498, which is 11% of sales, compared to $217,424 or 11% of sales for the nine months ended March 31, 2006. No significant change in selling expenses was expected due to the fact that there have been no significant changes in the nature of operations and management’s efforts to control these costs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ended March 31, 2007 increased $26,821 to $92,832, and increased to 33% of sales, compared to $66,011 or 21% of sales for the three months ended March 31, 2006. General and administrative expenses for the nine months ended March 31, 2007 increased $85,190 to $299,258, and increased to 15% of sales, compared to $214,068 or 11% of sales for the nine months ended March 31, 2006. The increase in costs is due to increased professional fees of $85,921, of which $60,000 is in connection with legal proceedings which was settled in January 2007.
OTHER INCOME (EXPENSE)
Other income and expense decreased by $98 for the three months ended March 31, 2007 to $918, compared to $1,016 for the three months ended March 31, 2006. Other income and expense increased by $(579) for the nine months ended March 31, 2007 to $(1,545), compared to $(2,124) for the nine months ended March 31, 2006. This was primarily due to an increase in miscellaneous income of $1,476 during the nine month period.
PROVISION FOR INCOME TAXES (BENEFITS)
The Company recorded a tax (benefit) for the three months ended March 31, 2007 of $(43,043) as compared to $(28,451) for the three months ended March 31, 2006. The Company recorded a tax (benefit) for the nine months ended March 31, 2007 of $(18,088) as compared to a tax (benefit) of $(1,184) for the nine months ended March 31, 2006. The (benefit) recorded for the nine months ended March 31, 2007 is primarily due to recognizing deferred taxes related to the operating loss.
12
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)
NET LOSS
The Company reported a net loss for the quarter ended March 31, 2007 of $(115,988), compared to a net loss of $(89,094) for the quarter ended March 31, 2006. This increase in net loss of $26,894 is explained above.
The Company reported a net loss for the nine months ended March 31, 2007 of $(41,246), compared to a net loss of $(2,516) for the nine months ended March 31, 2006. This increase of $38,730 is explained above.
PREFERRED DIVIDENDS
These amounts reflect additional preferred stock dividends in arrears for the three and nine months ended March 31, 2007 and 2006, 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.
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
Net loss applicable to common stockholders for the three months ended March 31, 2007 was $(148,006) which is an increase of $26,894 as compared to the three months ended March 31, 2006 of $(121,112).
Net loss applicable to common stockholders for the nine months ended March 31, 2007 was $(137,300) which is an increase of $38,730 as compared to the nine months ended March 31, 2006 of $(98,570). These items are explained above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $26,477 to $53,035 at March 31, 2007 from $26,558 at June 30, 2006. To date, there are no material commitments by the Company for capital expenditures. At March 31, 2007, the Company’s accumulated deficit was $5,881,338, compared to accumulated deficit of $5,840,092 as of June 30, 2006. Working capital as of March 31, 2007 decreased 0.4% to $312,288 from $313,608 as of June 30, 2006.
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.
13
CHASE GENERAL CORPORATION AND SUBSIDIARY
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.
14
| ITEM 1. | LEGAL PROCEEDINGS |
a. None
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
a. None
b. The total cumulative preferred stock dividends contingency at March 31, 2007 is $6,764,140.
| ITEM 6. | EXHIBITS |
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. |
15
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: May 8, 2007 | By: | /s/ Barry M. Yantis | ||||
| Barry M. Yantis | ||||||
| President, Chief Executive Officer, | ||||||
| Treasurer and Chairman of the Board |
16
