x
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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)
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(816) 279-1625 | ||
(Issuer’s telephone number, including area code)
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Large accelerated filer o |
Accelerated filer o |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company x |
PART I FINANCIAL INFORMATION | |||
3
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6
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7
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8
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13
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20
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20
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PART II OTHER INFORMATION | |||
21
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Risk Factors |
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21
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21
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21
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21
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22
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23
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ASSETS
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December 31,
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June 30,
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2013
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2013
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(Unaudited)
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 438,648 | $ | 28,564 | ||||
Trade receivables, net of allowance for doubtful accounts of $16,796 and $16,196, respectively
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242,793 | 166,585 | ||||||
Inventories:
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Finished goods
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40,741 | 258,392 | ||||||
Goods in process
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9,891 | 10,942 | ||||||
Raw materials
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96,354 | 81,515 | ||||||
Packaging materials
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94,097 | 158,283 | ||||||
Prepaid expenses
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26,424 | 5,414 | ||||||
Deferred income taxes
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6,518 | 6,863 | ||||||
Total current assets
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955,466 | 716,558 | ||||||
PROPERTY AND EQUIPMENT
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Land
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35,000 | 35,000 | ||||||
Buildings
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77,348 | 77,348 | ||||||
Machinery and equipment
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732,999 | 717,985 | ||||||
Trucks and autos
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188,594 | 188,594 | ||||||
Office equipment
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31,094 | 30,826 | ||||||
Leasehold improvements
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72,068 | 72,068 | ||||||
Total
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1,137,103 | 1,121,821 | ||||||
Less accumulated depreciation
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797,533 | 759,996 | ||||||
Total property and equipment, net
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339,570 | 361,825 | ||||||
TOTAL ASSETS
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$ | 1,295,036 | $ | 1,078,383 |
3 |
LIABILITIES AND STOCKHOLDERS’ EQUITY
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December 31,
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June 30,
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2013
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2013
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(Unaudited)
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CURRENT LIABILITIES
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Accounts payable
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$ | 109,666 | $ | 66,598 | ||||
Current maturities of notes payable
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48,634 | 54,172 | ||||||
Accrued expenses
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15,863 | 27,466 | ||||||
Income taxes payable
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87,846 | 3,711 | ||||||
Deferred income
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1,299 | 1,299 | ||||||
Total current liabilities
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263,308 | 153,246 | ||||||
LONG-TERM LIABILITIES
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Deferred income
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13,311 | 13,960 | ||||||
Notes payable, less current maturities
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10,922 | 39,787 | ||||||
Deferred income taxes
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83,109 | 93,973 | ||||||
Total long-term liabilities
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107,342 | 147,720 | ||||||
Total liabilities
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370,650 | 300,966 | ||||||
COMMITMENTS AND CONTENGENCIES
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STOCKHOLDERS’ EQUITY
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Capital stock issued and outstanding:
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Prior cumulative preferred stock, $5 par value:
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Series A (liquidation preference $2,175,000 and $2,160,000, respectively)
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500,000 | 500,000 | ||||||
Series B (liquidation preference $2,130,000 and $2,115,000, respectively)
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500,000 | 500,000 | ||||||
Cumulative preferred stock, $20 par value:
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Series A (liquidation preference $4,931,398 and $4,902,131, respectively)
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1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $803,668 and $798,899, respectively)
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190,780 | 190,780 | ||||||
Common stock, $1 par value
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969,834 | 969,834 | ||||||
Paid-in capital in excess of par
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3,134,722 | 3,134,722 | ||||||
Accumulated deficit
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(5,541,610 | ) | (5,688,579 | ) | ||||
Total stockholders’ equity
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924,386 | 777,417 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 1,295,036 | $ | 1,078,383 |
4 |
Three Months Ended
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December 31
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2013
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2012
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NET SALES
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$ | 1,402,545 | $ | 1,475,203 | ||||
COST OF SALES
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938,247 | 986,482 | ||||||
Gross profit on sales
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464,298 | 488,721 | ||||||
OPERATING EXPENSES
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Selling
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161,115 | 164,742 | ||||||
General and administrative
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95,111 | 91,803 | ||||||
Loss on sale of equipment
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93 | 246 | ||||||
Total operating expenses
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256,319 | 256,791 | ||||||
Income from operations
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207,979 | 231,930 | ||||||
OTHER INCOME (EXPENSE)
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Miscellaneous income
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1,972 | 397 | ||||||
Interest expense
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(555 | ) | (1,296 | ) | ||||
Total other income (expense), net
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1,417 | (899 | ) | |||||
Net income before income taxes
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209,396 | 231,031 | ||||||
PROVISION FOR INCOME TAXES
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73,564 | 90,454 | ||||||
NET INCOME
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$ | 135,832 | $ | 140,577 | ||||
NET INCOME PER SHARE OF COMMON STOCK
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- BASIC
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$ | 0.11 | $ | 0.11 | ||||
- DILUTED
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$ | 0.05 | $ | 0.05 |
5 |
Six Months Ended
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December 31
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2013
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2012
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NET SALES
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$ | 2,313,805 | $ | 2,272,795 | ||||
COST OF SALES
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1,596,601 | 1,570,127 | ||||||
Gross profit on sales
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717,204 | 702,668 | ||||||
OPERATING EXPENSES
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Selling
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258,037 | 257,116 | ||||||
General and administrative
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233,501 | 217,105 | ||||||
Loss (gain) on sale of equipment
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93 | (22,254 | ) | |||||
Total operating expenses
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491,631 | 451,967 | ||||||
Income from operations
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225,573 | 250,701 | ||||||
OTHER INCOME (EXPENSE)
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Miscellaneous income
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2,336 | 762 | ||||||
Interest expense
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(3,141 | ) | (5,030 | ) | ||||
Total other income (expense), net
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(805 | ) | (4,268 | ) | ||||
Net income before income taxes
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224,768 | 246,433 | ||||||
PROVISION FOR INCOME TAXES
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77,799 | 95,305 | ||||||
NET INCOME
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$ | 146,969 | $ | 151,128 | ||||
NET INCOME PER SHARE OF COMMON STOCK
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- BASIC
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$ | 0.09 | $ | 0.09 | ||||
- DILUTED
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$ | 0.04 | $ | 0.04 | ||||
6 |
Six Months Ended
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December 31
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2013
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2012
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 146,969 | $ | 151,128 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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43,294 | 45,560 | ||||||
Allowance for bad debts
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600 | 600 | ||||||
Deferred income amortization
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(649 | ) | (649 | ) | ||||
Deferred income taxes
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(10,519 | ) | 55,034 | |||||
Loss (gain) on sale of equipment
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93 | (22,254 | ) | |||||
Effects of changes in operating assets and liabilities:
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Trade receivables
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(76,808 | ) | (113,798 | ) | ||||
Inventories
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268,049 | 191,078 | ||||||
Prepaid expenses
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(21,010 | ) | (15,475 | ) | ||||
Accounts payable
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43,068 | 54,064 | ||||||
Accrued expenses
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(11,603 | ) | (10,146 | ) | ||||
Income taxes payable
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84,135 | 40,271 | ||||||
Net cash provided by operating activities
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465,619 | 375,413 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
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Proceeds from sale of equipment
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- | 22,500 | ||||||
Purchases of property and equipment
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(21,132 | ) | (2,225 | ) | ||||
Net cash (used in) provided by investing activities
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(21,132 | ) | 20,275 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from line-of-credit
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290,000 | 310,050 | ||||||
Principal payments on line-of-credit
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(290,000 | ) | (350,050 | ) | ||||
Principal payments on notes payable
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(34,403 | ) | (30,488 | ) | ||||
Net cash used in financing activities
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(34,403 | ) | (70,488 | ) | ||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
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410,084 | 325,200 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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28,564 | 17,949 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 438,648 | $ | 343,149 | ||||
7 |
8 |
Three Months Ended
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Six Months Ended
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December 31
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December 31
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2013
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2012
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2013
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2012
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Net income
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$ | 135,832 | $ | 140,577 | $ | 146,969 | $ | 151,128 | ||||||||
Preferred dividend requirements:
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6% Prior Cumulative Preferred, $5 par value
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15,000 | 15,000 | 30,000 | 30,000 | ||||||||||||
5% Convertible Cumulative Preferred, $20 par value
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17,018 | 17,018 | 34,036 | 34,036 | ||||||||||||
Total dividend requirements
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32,018 | 32,018 | 64,036 | 64,036 | ||||||||||||
Net income - common stockholders
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$ | 103,814 | $ | 108,559 | $ | 82,933 | $ | 87,092 | ||||||||
Weighted average shares - basic
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969,834 | 969,834 | 969,834 | 969,834 | ||||||||||||
Dilutive effect of contingently issuable shares
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1,033,334 | 1,033,334 | 1,033,334 | 1,033,334 | ||||||||||||
Weighted average shares - diluted
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2,003,168 | 2,003,168 | 2,003,168 | 2,003,168 | ||||||||||||
Basic earnings per share
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$ | 0.11 | $ | 0.11 | $ | 0.09 | $ | 0.09 | ||||||||
Diluted earnings per share
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$ | 0.05 | $ | 0.05 | $ | 0.04 | $ | 0.04 | ||||||||
9 |
Six Months Ended
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December 31
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2013
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2012
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6% Convertible
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Series A
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$ | 17 | $ | 16 | ||||
Series B
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$ | 16 | $ | 16 | ||||
5% Convertible
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Series A
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$ | 64 | $ | 63 | ||||
Series B
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$ | 64 | $ | 63 | ||||
10 |
December 31,
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June 30,
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Payee
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Terms
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2013
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2013
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Nodaway Valley Bank
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$350,000 line-of-credit agreement expiring on January 3, 2014, with a variable interest rate at prime but not less than 5%. The line-of-credit agreement replaced two existing line-of-credit agreements that expired on January 3, 2013. The line-of-credit is collateralized by substantially all assets of the Company.
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$ | - | $ | - | |||||
Ford Credit
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$679 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
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10,338 | 22,413 | |||||||
Ford Credit
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$517 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
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13,950 | 17,050 | |||||||
Nodaway Valley Bank
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$3,192, including interest of 5.75%; final payment due June 2015, secured by equipment.
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30,703 | 48,698 | |||||||
Toyota Financial Services
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$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.
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4,565 | 5,798 | |||||||
Total
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59,556 | 93,959 | ||||||||
Less current portion
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48,634 | 54,172 | ||||||||
Long-term portion
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$ | 10,922 | $ | 39,787 |
11 |
2014
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$ | 48,634 | ||
2015
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9,372 | |||
2016
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1,550 | |||
Total
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$ | 59,556 |
Six Months Ended
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December 31
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2013
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2012
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Cash paid for:
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Interest
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$ | 3,141 | $ | 5,030 | ||||
Income taxes
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4,105 | - |
12 |
Three Months Ended
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Six Months Ended
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December 31
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December 31
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2013
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2012
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2013
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2012
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Net sales
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100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Cost of sales
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67 | 67 | 69 | 69 | ||||||||||||
Gross profit on sales
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33 | 33 | 31 | 31 | ||||||||||||
Operating expenses
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18 | 17 | 21 | 20 | ||||||||||||
Income from operations
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15 | 16 | 10 | 11 | ||||||||||||
Other income (expense), net
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1 | - | - | - | ||||||||||||
Income before income taxes
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16 | 16 | 10 | 11 | ||||||||||||
Provision for income taxes
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5 | 6 | 3 | 4 | ||||||||||||
Net income
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11 | % | 10 | % | 7 | % | 7 | % |
13 |
14 |
15 |
16 |
17 |
Six Months Ended
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December 31
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2013
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2012
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Net cash provided by operating activities
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$ | 465,619 | $ | 375,413 | ||||
Net cash (used in) provided by investing activities
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$ | (21,132 | ) | $ | 20,275 | |||
Net cash used in financing activities
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$ | (34,403 | ) | $ | (70,488 | ) |
18 |
19 |
20 |
a.
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None
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b.
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The total cumulative preferred stock dividends contingency at December 31, 2013 is $7,628,626.
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a.
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None
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21 |
a.
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Exhibits.
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Exhibit 31.1
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Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
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Exhibit 32.1
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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.
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Exhibit 101
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The following financial statements for the quarter ended December 31, 2013, formatted in XBRL: (i) Condensed Consolidated Balance Sheets as of December 31, 2013 and June 30, 2013, (ii) Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2013 and 2012, (iii) Condensed Consolidated Statements of Income for the Six Months Ended December 31, 2013 and 2012, (iv) Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2013 and 2012, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
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22 |
Chase General Corporation and Subsidiary
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(Registrant)
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February 7, 2014 | /s/ Barry M. Yantis | ||
Date | Barry M. Yantis | ||
Chairman of the Board, Chief Executive Officer and
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|||
Chief Financial Officer, President and Treasurer
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23 |
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1.
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I have reviewed this quarterly report on Form 10-Q of Chase General Corporation.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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I am the certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
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5.
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I am the certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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February 7, 2014
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/s/ Barry M. Yantis | |
Date
|
Barry M. Yantis | ||
Chief Executive Officer and Chief Financial Officer, | |||
President and Treasurer |
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(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
|
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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February 7, 2014
|
/s/ Barry M. Yantis | ||
Date
|
Barry M. Yantis | ||
Chairman of the Board, Chief Executive Officer and | |||
Chief Financial Officer, President and Treasurer |
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