Chase General (CSGN) 10-Q 2024 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐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 registrant 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

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
None	Not Applicable	Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ⌧ No ◻

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

Large accelerated filer ◻	Accelerated filer ◻
Nonaccelerated filer ⌧	Smaller reporting company ☒
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ◻ No ⌧

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 ⌧

As of May 8, 2024, there were 969,834 shares of common stock, $1.00 par value, outstanding.

CHASE GENERAL CORPORATION AND SUBSIDIARY

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

FOR THE Nine months ENDED March 31, 2024

PART I	FINANCIAL INFORMATION
	ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS AS OF March 31, 2024 AND JUNE 30, 2023 (UNAUDITED)	1
		CONDENSED CONSOLIDATED STATEMENTS OF oPerations FOR THE THREE MONTHS ENDED March 31, 2024 AND 2023 (UNAUDITED)	3
		CONDENSED CONSOLIDATED STATEMENTS OF oPerations FOR THE nine months ENDED March 31, 2024 AND 2023 (UNAUDITED)	4
		CONDENSED CONSOLIDATED STATEMENTS OF stockholders’ Equity FOR THE Three and nine months ENDED March 31, 2024 AND 2023 (UNAUDITED)	5
		CONDENSED CONSOLIDATED STATEMENTS OF Cash flows FOR THE nine months ENDED March 31, 2024 AND 2023 (UNAUDITED)	6
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	7
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	18
	ITEM 4.	CONTROLS AND PROCEDURES	18
PART II	OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS	19
	ITEM 1A.	RISK FACTORS	19
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	19
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	19
	ITEM 4.	MINE SAFETY DISCLOSURES	19
	ITEM 5.	OTHER INFORMATION	19
	ITEM 6.	EXHIBITS	19
	SIGNATURES		20

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,		June 30,
	2024		2023
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	84,193	$	11,295
Trade Receivables, Net of Allowance for Credit Losses of $1,896		168,952		253,900
Inventories:
Finished Goods		155,470		393,898
Goods in Process		30,811		9,156
Raw Materials		121,259		131,549
Packaging Materials		203,508		269,028
Prepaid Expenses		19,188		21,884
Total Current Assets		783,381		1,090,710
LONG-TERM ASSETS
PROPERTY AND EQUIPMENT
Land		35,000		35,000
Buildings		77,348		77,348
Machinery and Equipment		866,976		886,341
Trucks and Autos		170,378		170,378
Office Equipment		33,025		33,025
Leasehold Improvements		72,068		72,068
Total		1,254,795		1,274,160
Less: Accumulated Depreciation		(1,089,075)		(1,076,030)
Total Property and Equipment, Net		165,720		198,130
Right of Use Assets		377,772		413,595
Deferred Tax Asset		11,526		—
Total Long-Term Assets		555,018		611,725
Total Assets	$	1,338,399	$	1,702,435

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(1)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(UNAUDITED)

	March 31,		June 30,
	2024		2023
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable	$	46,566	$	100,754
Current Maturities of Notes Payable		12,672		222,400
Current Maturities of Lease Liability		51,043		41,724
Accrued Expenses		30,288		31,996
Refund Liability Owed to Customers		13,000		10,000
Deferred Income		1,299		1,299
Total Current Liabilities		154,868		408,173
LONG-TERM LIABILITIES
Notes Payable, Less Current Maturities		21,939		31,491
Lease Liability, Less Current Maturities		326,729		365,371
Deferred Income		—		972
Total Long-Term Liabilities		348,668		397,834
Total Liabilities		503,536		806,007
COMMITMENTS AND CONTINGENCIES (NOTE 7)
STOCKHOLDERS’ EQUITY
Capital Stock Issued and Outstanding:
Prior Cumulative Preferred Stock, $5 Par Value:
Series A (Liquidation Preference $2,482,500 and $2,460,000, Respectively)		500,000		500,000
Series B (Liquidation Preference $2,437,500 and $2,415,000, Respectively)		500,000		500,000
Cumulative Preferred Stock, $20 Par Value:
Series A (Liquidation Preference $5,531,361 and $5,487,461, Respectively)		1,170,660		1,170,660
Series B (Liquidation Preference $901,443 and $894,289, 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		(5,631,133)		(5,569,568)
Total Stockholders’ Equity		834,863		896,428
Total Liabilities and Stockholders’ Equity	$	1,338,399	$	1,702,435

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(2)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31,
	2024		2023
SALES	$	414,595		507,918
COST OF SALES		343,657		413,581
Gross Profit on Sales		70,938		94,337
OPERATING EXPENSES
Selling		67,319		69,973
General and Administrative		143,689		107,592
Total Operating Expenses		211,008		177,565
Loss from Operations		(140,070)		(83,228)
OTHER INCOME (EXPENSE)
Miscellaneous Income		702		559
Interest Expense		(265)		(355)
Total Other Income		437		204
LOSS BEFORE INCOME TAXES		(139,633)		(83,024)
INCOME TAX BENEFIT (PROVISION)		33,736		—
NET LOSS	$	(105,897)	$	(83,024)
LOSS PER SHARE
Basic and diluted	$	(0.14)	$	(0.12)

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(3)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Nine Months Ended
	March 31,
	2024		2023
SALES	$	2,863,886		2,950,139
COST OF SALES		2,139,868		1,982,663
Gross Profit on Sales		724,018		967,476
OPERATING EXPENSES
Selling		274,414		278,509
General and Administrative		508,559		454,128
Total Operating Expenses		782,973		732,637
Income (Loss) from Operations		(58,955)		234,839
OTHER INCOME (EXPENSE)
Miscellaneous Income		1,505		1,333
Interest Expense		(14,049)		(7,348)
Total Other Expense		(12,544)		(6,015)
INCOME (LOSS) BEFORE INCOME TAXES		(71,499)		228,824
INCOME TAX BENEFIT (PROVISION)		9,934		—
NET INCOME (LOSS)	$	(61,565)	$	228,824
EARNINGS (LOSS) PER SHARE
Basic	$	(0.16)	$	0.14
Diluted	$	(0.16)	$	0.11

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(4)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, December 31, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,414,887)	$	1,051,109
Net loss, three months ended March 31, 2023		—		—		—		—		—		—		(83,024)		(83,024)
BALANCE, March 31, 2023	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,497,911)	$	968,085
	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, December 31, 2023	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,525,236)	$	940,760
Net loss, three months ended March 31, 2024		—		—		—		—		—		—		(105,897)		(105,897)
BALANCE, March 31, 2024	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,631,133)	$	834,863
	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, June 30, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,726,735)	$	739,261
Net Income, nine months ended March 31, 2023		—		—		—		—		—		—		228,824		228,824
BALANCE, March 31, 2023	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,497,911)	$	968,085
	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, June 30, 2023	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,569,568)	$	896,428
Net loss, nine months ended March 31, 2024		—		—		—		—		—		—		(61,565)		(61,565)
BALANCE, March 31, 2024	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,631,133)	$	834,863

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(5)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(61,565)	$	228,824
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation and Amortization		32,410		30,897
Provision for credit losses on accounts receivable		—		711
Deferred Income Amortization		(972)		(974)
Noncash Operating Lease Expense		6,500		—
Gain on Sale of Property and Equipment		—		(43,681)
Deferred Tax Asset		(11,526)		—
Effects of Changes in Operating Assets and Liabilities:
Trade Receivables		84,948		(112,033)
Inventories		292,583		315,222
Prepaid Expenses		2,696		(24,270)
Accounts Payable		(54,188)		(80,086)
Refund Liability Owed to Customers		3,000		2,791
Accrued Expenses		(1,708)		1,828
Net Cash Provided by Operating Activities		292,178		319,229
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment		—		(60,688)
Proceeds from disposal of property and equipment		—		28,000
Net Cash Used in Investing Activities		—		(32,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line-of-Credit		290,000		330,000
Principal Payments on Line-of-Credit		(500,000)		(450,000)
Proceeds from Note Payable - Stockholder		100,000		—
Principal Payments on Note Payable - Stockholder		(100,000)		—
Principal Payments on Note Payable		(9,280)		(3,964)
Net Cash Used in Financing Activities		(219,280)		(123,964)
INCREASE IN CASH AND CASH EQUIVALENTS		72,898		162,577
Cash and Cash Equivalents - Beginning of Period		11,295		13,511
					��
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	84,193	$	176,088

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(6)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 1       SIGNIFICANT ACCOUNTING POLICIES

General

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as Chase, the Company, we, our, and us) at June 30, 2023 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 nine months ended March 31, 2024 and for the three and nine months ended March 31, 2023 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, 2023. The results of operations for the three and nine months ended March 31, 2024 and cash flows for the nine months ended March 31, 2024 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2024. 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.

Revenue Recognition

The majority of our revenue is derived by fulfilling customer orders for the purchase of our products, including 1) a candy bar marketed under the trade name “Cherry Mash” and 2) coconut, peanut, chocolate, and fudge confectioneries. The Company recognizes revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is typically upon shipment to the customer. Shipping and handling costs incurred to ship product to the customer are recorded within cost of sales. Amounts billed and due from our customers are classified as trade receivables on the consolidated balance sheet and require payment on a short-term basis. Generally, individual orders from customers are accounted for as a single performance obligation.

Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. Sales, value added, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. The amount of consideration the Company expects to receive and revenue the Company recognizes includes estimates of variable consideration, including costs for trade promotional programs, customer incentives, and allowances and discounts associated with aged or potentially unsaleable products. These estimates are based upon our analysis of the programs offered, historical trends, and expectations regarding customer and consumer participation, sales and payment trends and our experience with payment patterns associated with similar programs offered in the past. The Company reviews and updates these estimates regularly and the impact of any adjustments are recognized in the period the adjustments are identified.

(7)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 1       SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue Recognition (cont.)

The majority of the Company’s products are confectionery and confectionery-based and, therefore, exhibit similar economic characteristics, such that they are based on similar ingredients and are marketed and sold through the same channels to the same customers. The Company operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name “Cherry Mash”. The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. Both divisions share a common labor force and utilize the same basic equipment and raw materials. Management considers these two divisions as one reportable segment. The various divisions of revenue are as follows:

For the three months ended March 31,

	2024		2023
Sales - Chase Candy	$	406,561	$	496,012
Sales - Seasonal Candy		8,034		11,906
Sales	$	414,595	$	507,918

For the nine months ended March 31,

	2024		2023
Sales - Chase Candy	$	1,359,896	$	1,465,662
Sales - Seasonal Candy		1,503,990		1,484,477
Sales	$	2,863,886	$	2,950,139

Recently Issued Pronouncements

Effective July 1, 2023, the Company adopted ASU 2016-13, Financial Instrument – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments related to the impairment of financial instruments using the modified retrospective approach, which applies Topic 326 at the beginning of the earliest period presented.  This guidance, commonly referred to as Current Expected Credit Loss (“CECL”), changes impairment recognition to a model that is based on expected losses rather than incurred losses.  The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade receivables.  The Company evaluated and determined the amendment did not have a material affect on the condensed consolidated financial statement.  

Subsequent Events

No events have occurred subsequent to March 31, 2024, 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 nine month period ended March 31, 2024.

(8)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 2       EARNINGS (LOSS) PER SHARE

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
Net Income (Loss)	$	(105,897)	$	(83,024)	$	(61,565)	$	228,824
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 Income (Loss) - Common Stockholders	$	(137,915)	$	(115,042)	$	(157,619)	$	132,770
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 (Loss) per Share	$	(0.14)	$	(0.12)	$	(0.16)	$	0.14
Diluted Earnings (Loss) per Share	$	(0.14)	$	(0.12)	$	(0.16)	$	0.11

The Company excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive.  All of the preferred stock, which is convertible into 1,033,334 shares of common stock, was excluded at March 31, 2024 and 2023, as its conversion would have an anti-dilutive effect.  Cumulative Preferred Stock dividends in arrears at March 31, 2024 and 2023 totaled $8,941,364 and $8,813,292, respectively. Total dividends in arrears, on a per share basis, consist of the following:

	Nine Months Ended
	March 31,
	2024		2023
6% Convertible:
Series A	$	20	$	19
Series B	$	19	$	19
5% Convertible:
Series A	$	75	$	74
Series B	$	75	$	74

(9)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 2       EARNINGS PER SHARE (cont.)

The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 per 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 four 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 per share plus unpaid accrued dividends. In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20 per 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 5% convertible preferred stock.

NOTE 3       NOTES PAYABLE AND LINE-OF-CREDIT

The Company’s debt consists of:

		March 31,		June 30,
Payee	Terms	2024		2023
Nodaway Valley Bank	$500,000 line-of-credit agreement expiring on January 4, 2025, with a variable interest rate at prime but not less than 5% (8.5% as of March 31, 2024). The line of credit is collateralized by substantially all assets of the Company.	$	—	$	210,000
Ford Motor Credit Company, LLC	$1,125.75 monthly payments, interest of 2.90%; final payment due November 2026, secured by a vehicle		34,611		43,891
	Total		34,611		253,891
	Less Current Portion		12,672		222,400
	Long-Term Portion	$	21,939	$	31,491

Future minimum payments for the twelve months ending March 31 are:

March 31,	Amount
2025	$	12,672
2026		13,045
2027		8,894
Total	$	34,611

(10)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

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 recorded an income tax benefit of $33,736 for the three months ended March 31, 2024 and $9,934 for the nine months ended March 31, 2024.  The income tax benefit is a result of additional net operating losses generated during these periods.  As such, there is no current income tax liability.  As of March 31, 2024, the Company has net operating loss carryovers of $130,875, none of which expire.    

The Company recognized a net deferred tax asset for unrecognized tax benefits at March 31, 2024.  The Company has no material tax positions at March 31, 2024, 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 March 31, 2024.  The Company’s federal income tax returns for the fiscal years ended 2021, 2022, and 2023 are subject to examination by the Internal Revenue Service taxing authority.

NOTE 5       SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Nine Months Ended
	March 31,
	2024		2023
Supplemental Cash Flows Information
Interest paid	$	14,327	$	7,348
Right-of-use asset obtained in exchange for modification of operating lease liability	$	—	$	279,072
Notes Payable obligation incurred for equipment	$	—	$	50,900

NOTE 6      DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist principally of cash and cash equivalents, trade receivables and payables, and line-of-credit. There are no significant differences between the carrying value and fair value of any of these financial instruments.

NOTE 7       COMMITMENT, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS

The Company leases its office and manufacturing facility located in St. Joseph, Missouri under an operating lease from an entity that is partially owned by the son of the Chief Executive Officer of the Company. The lease term is from February 1, 2005 through March 31, 2025 with an option to extend for an additional term of five years.  During the year ended June 30, 2023, the Company determined the exercise of the renewal option is reasonably assured and has therefore remeasured the right-of-use asset and lease liability to include the additional five years at the current rate so that the new term expires on March 31, 2030. The lease currently requires payments of $6,500 per month, as noted the Company does not believe the payments in the renewal period will vary significantly from this current amount.

(11)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I.     FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 7       COMMITMENT, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS (cont.)

An operating lease right-of-use asset and lease liability was recognized based on the present value of minimum lease payments over the remaining lease term. The Company’s operating lease has a remaining term of 6 years and the present value of the lease payments is calculated using the Company’s estimated incremental borrowing rate of 7.6% as of the remeasurement date. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease agreement does not contain any residual value guarantees. The Company has made a policy election to combine lease and non-lease components, and a policy election to not recognize right-of-use assets or lease liabilities for leases that are less than twelve months. Cash paid for operating lease liabilities was $52,000 and operating lease expense was $58,500 for the nine months ended March 31, 2024, of which, $53,673 is included in cost of sales and $4,827 is included in general and administrative expenses.

Minimum annual payments required under existing operating lease liabilities that have initial or remaining noncancelable terms in excess of one year as of March 31, 2024 are as follows:

Twelve Months Ending March 31,		Amount
2025	$	78,000
2026		78,000
2027		78,000
2028		78,000
2029		78,000
Thereafter		78,000
Total Lease Payments		468,000
Less: Imputed Interest		90,228
Total Lease Liabilities	$	377,772

On September 28, 2023, the Chief Executive Officer of the Company advanced the Company $100,000 under a standard promissory note agreement with interest at a rate of 8.5% per annum, due December 30, 2023. On November 30, 2023, the Company paid the note in full including interest of $1,446.

(12)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I     financial INFORMATION

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 sales and earnings in the second fiscal quarter, which includes the majority of the holiday shopping season, than in any other fiscal quarter.

RESULTS OF OPERATIONS - Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023, and Nine months Ended March 31, 2024 Compared to Nine months Ended March 31, 2023

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 sales for the periods presented:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
Sales	100	%	100	%	100	%	100	%
Cost of Sales	83	%	81	%	75	%	67	%
Gross Profit on Sales	17	%	19	%	25	%	33	%
Operating Expenses	51	%	35	%	27	%	25	%
Income (Loss) from Operations	(34)	%	(16)	%	(2)	%	8	%
Other Income, Net	—	%	—	%	—	%	—	%
Net Income (Loss) before Income Taxes	(34)	%	(16)	%	(2)	%	8	%
Income Tax Benefit (Provision)	8	%	—	%	—	%	—	%
Net Income (Loss)	(26)	%	(16)	%	(2)	%	8	%

SALES

Sales decreased $93,323 or 18% for the three months ended March 31, 2024 to $414,595 compared to $507,918 for the three months ended March 31, 2023. Sales for Chase Candy decreased $89,451 to $406,561 for the three months ended March 31, 2024, compared to $496,012 for the three months ended March 31, 2023. Sales for Seasonal Candy decreased $3,872 to $8,034 for the three months ended March 31, 2024, compared to $11,906 for the three months ended March 31, 2023.

(13)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I     financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

SALES (cont.)

The 18% decrease in sales of Chase Candy of $89,451 for the three months ended March 31, 2024 over the same period ended March 31, 2023, is primarily due to the effect of the following: 1) decreased net sales of approximately $120,000 for the Cherry Mash L276 segment, primarily due to delay in shipping for a large, recurring order, which shipped in the same period a year ago; 2) decreased sales to existing customers of the Cherry Mash Merchandisers L200 segment of approximately $6,000 versus the same period a year ago; 3) increase in sales allowances and discounts by approximately $3,000 primarily related to returns from a large customer; offset by 4) increased sales of the L278 Mini Mash segment by approximately $17,000 versus the same period a year ago primarily due to increased orders from existing customers; 5) increased sales of the L212 Mini Mash segment by approximately $24,000 versus the same period a year ago primarily due to increased orders from an existing customer.  All decreases noted above are due to decline in quantities sold as management has not implemented a price increase since December 2022.  Management did increase prices on all Chase

Candy products in March 2024 by approximately 14%, however, the majority of revenue increases will not be seen until the fourth quarter.  The Company’s largest customer continues to have price increases at lower negotiated rates.

The 33% decrease in sales of Seasonal Candy of $3,872 for the three months ended March 31, 2024 over the same period ended March 31, 2023, is primarily due to the decline in orders from existing customers, specifically a decline in quantities sold as no specific price increases have been implemented in this category since July 2022.  Management intends to increase prices between 14-20% during the first half of fiscal year 2025.

Sales decreased $86,253 or 3% for the nine months ended March 31, 2024 to $2,863,886 compared to $2,950,139 for the nine months ended March 31, 2023. Sales for Chase Candy decreased $105,766 to $1,359,896 for the nine months ended March 31, 2024, compared to $1,465,662 for the nine months ended March 31, 2023. Sales for Seasonal Candy increased $19,513 to $1,503,990 for the nine months ended March 31, 2024, compared to $1,484,477 for the nine months ended March 31, 2023.

The 7% decrease in sales of Chase Candy of $105,766 for the nine months ended
March 31, 2024 over the same period ended March 31, 2023, is primarily due to the effect of the following: 1) decreased net sales of the Cherry Mash Bar L276/L277 segment of approximately $99,000 to existing customers; 2) increase in sales allowances and discounts by approximately $16,000 primarily related to returns from a large customer offset; offset by 3) increased net sales of the Cherry Mash Merchandisers L200/L100 segment of approximately $15,000 to existing customers.  All decreases noted above are due to decline in quantities sold as management has not implemented a price increase since December 2022.  Management did increase prices on all Chase Candy products in March 2024 by approximately 14%, however, the majority of revenue increases will not be seen until the fourth quarter.  The Company’s largest customer continues to have price increases at lower negotiated rates.

The 1% increase in sales of Seasonal Candy of $19,513 for the nine months ended March 31, 2024 over the same period ended March 31, 2023, is primarily due decreases in orders in the first and third quarters offset by increases realized in the second quarter.  The overall increase is due to increase in quantities sold as no specific price increases have been implemented in this category since July 2022.  Management intends to increase prices between 14-20% during the first half of fiscal year 2025.

COST OF SALES

The cost of sales decreased $69,924 to $343,657 but increased to 83% of related sales for the three months ended March 31, 2024, compared to $413,581 or 81% of related sales for the three months ended March 31, 2023.

The cost of sales increased $157,205 to $2,139,868 and increased to 75% of related sales for the nine months ended March 31, 2024, compared to $1,982,663 or 67% of related sales for the nine months ended March 31, 2023.

(14)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I     financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

COST OF SALES (cont.)

The increase in cost of sales as a percentage of sales is related to increases in prices of raw materials and increased labor rates.  Due to volatility in the regions where raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand.  Additionally, all employees were given a 5-10% raise at the end of January 2023.  While the Company was able to implement a price increase in December 2022 for the majority of the customers for Chase Candy products, the cost increases noted above continue to outpace the revenue improvements.  Management did increase prices on all Chase Candy products in March 2024 by approximately 14%, however, the majority of revenue increases will not be seen until the fourth quarter.  The Company’s largest customer continues to have price increases at lower negotiated rates.  Management intends to increase prices on seasonal candy between 14-20% during the first half of fiscal year 2025.

SELLING EXPENSES

Selling expenses for the three months ended March 31, 2024, decreased $2,654 to $67,319, which is 16% of sales, compared to $69,973, or 14% of sales for the three months ended March 31, 2023.

Selling expenses for the nine months ended March 31, 2024, decreased $4,095 to $274,414, which is 10% of sales, compared to $278,509, or 9% of sales for the nine months ended March 31, 2023.

The decrease in selling expenses for both the quarter and the nine months ended March 31, 2024, is primarily due to efforts to minimize selling expenses in an attempt to recover costs not passed along with price increases, specifically in the commission expense line item for approximately $7,000 for both the quarter and nine months ended March 31, 2024.  However, these savings were further offset by certain freight costs included in this category which have fluctuated throughout the nine months ended March 31, 2024.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended March 31, 2024, increased $36,097 to $143,689 and 35% of sales, compared to $107,592 or 21% of sales for the three months ended March 31, 2023.

The increase of $36,097 in general and administrative expenses for the three months ended March 31, 2024, is primarily due to gain on sale of property and equipment of approximately $26,000 recorded in same period last year, that did not reoccur in 2024 plus increases in dues and subscriptions, professional, insurance, postage and office salaries expenses totaling approximately $13,000. The increase in dues and subscriptions is related to a new subscription fee charge from one of the Company’s largest customers that began in the previous quarter.  These increases were offset by decreases in other miscellaneous general and administrative expenses.

General and administrative expenses for the nine months ended March 31, 2024, increased $54,431 to $508,559 and 18% of sales, compared to $454,128 or 15% of sales for the nine months ended March 31, 2023.

The increase of $54,431 in general and administrative expenses for the nine months ended March 31, 2024, is primarily due to a gain on sale of property and equipment of approximately $44,000 recorded in same period last year, that did not reoccur in 2024 plus increases in dues and subscriptions and office salaries expenses. Expense for dues and subscriptions increased approximately $13,000 and salaries expense increased approximately $10,000 from the same period last year. These amounts were offset by decreases in other miscellaneous general and administrative expense in addition to decreases in professional fees of approximately $12,000 and decrease in website expense of approximately $4,500.  

(15)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I     financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

OTHER INCOME (EXPENSE)

Other income (expense) increased by $233 for the three months ended March 31, 2024 to $437, compared to $204 for the three months ended March 31, 2023.  

Other income (expense) decreased by $6,529 for the nine months ended March 31, 2024 to $(12,544), compared to $(6,015) for the nine months ended March 31, 2023.

The majority of this change can be attributed to an increase in interest expense due to line of credit borrowings that occurred in the first six months of the fiscal year.  During the three months ended March 31, 2024, the Company had no activity on the line of credit.

.

BENEFIT (PROVISION) FOR INCOME TAXES

Due to the net loss for the quarter ending March 31, 2024, the Company recorded an income tax benefit of approximately $34,000.  Due to the net loss for the nine months ended March 31, 2024, the Company recorded an income tax benefit of approximately $10,000.  

NET INCOME (LOSS)

The Company reported a net loss for the three months ended March 31, 2024 of $(105,897), compared to a net loss of $(83,024) for the three months ended March 31, 2023. This decrease of $22,873 is explained above.  The Company reported a net loss for the nine months ended March 31, 2024 of $(61,565), compared to a net income of $228,824 for the nine months ended March 31, 2023. This decrease of $290,389 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended March 31, 2024 and March 31, 2023, 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 $96,054 for the nine months ended March 31, 2024 and March 31, 2023, 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 INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended March 31, 2024 was $(137,915) which is a decrease of $22,873 as compared to the net loss applicable to common stockholders for the three months ended March 31, 2023 of $(115,042).

Net loss applicable to common stockholders for the nine months ended March 31, 2024 was $(157,619) which is a decrease of $290,389 as compared to the net income applicable to common stockholders for the nine months ended March 31, 2023 of $132,770.

(16)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I     financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

LIQUIDITY AND CAPITAL RESOURCES

The table below presents the summary of cash flows for the fiscal period indicated.

	Nine Months Ended
	March 31,
	2024		2023
Net Cash Provided by Operating Activities	$	292,178	$	319,229
Net Cash Used in Investing Activities	$	—	$	(32,688)
Net Cash Used in Financing Activities	$	(219,280)	$	(123,964)

Management has made no material commitments for capital expenditures during the remainder of fiscal year 2024. The $292,178 of cash provided by operating activities for the nine months ended March 31, 2024 is fully detailed in the condensed consolidated statement of cash flows. The $219,280 of cash used in financing activities for the nine months ended March 31, 2024 is fully detailed in the condensed consolidated statement of cash flows.

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 existing customers. Management also intends to continue tight control on all expenditures. 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. Management has implemented a sales price increase at the end of the third quarter to correspond with changes in raw material prices. Management believes that the projected cash flow from operations combined with the availability on the line of credit and the Company’s ability to generate positive working capital will be sufficient to meet its funding requirements for the foreseeable future.

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 estimation process for the retail inventory method of accounting, 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.

(17)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I Financial information

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, such officer has concluded that the Company’s disclosure controls and procedures are not effective as a result of a weakness in the design of internal control over financial reporting identified below.

Disclosure controls and procedures include controls and procedures designed 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.

A material weakness was identified in our internal control over financial reporting due to a lack of accounting personnel with the appropriate level of knowledge, experience and training to perform an assessment of its internal controls. This has also resulted in a failure to maintain appropriate segregation of duties over system access. Management believes that this material weakness did not have an adverse effect on the Company’s financial results reported herein.  

(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 management’s estimates are reasonably likely to materially affect Chase’s internal control over financial reporting subsequent to the date of evaluation.

(18)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART Ii other information

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 March 31, 2024 is $8,941,364.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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 March 31, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023, (ii) Condensed Consolidated Statements of Operations for the Three months Ended March 31, 2024 and 2023, (iii) Condensed Consolidated Statements of Operations for the Nine months Ended March 31, 2024 and 2023, (iv) Condensed Consolidated Statements of Cash Flows for the Nine months Ended March 31, 2024 and 2023, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

Exhibit 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(19)

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART Ii other information

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)
May 8, 2024	/s/ Barry M. Yantis
Date	Barry M. Yantis
	Chairman of the Board, Chief Executive Officer and
	Chief Financial Officer, President, and Treasurer

(20)