-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J5kSLGgv+9NJ8cihEdBWCT37383bbUMo1LvEflSQCyUfg4PFIyJ0jpcmQg7hb8ah 7qPX7tSjTFTMMODgiaLYDw== 0000927025-99-000078.txt : 19991227 0000927025-99-000078.hdr.sgml : 19991227 ACCESSION NUMBER: 0000927025-99-000078 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE GENERAL CORP CENTRAL INDEX KEY: 0000015357 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 362667734 STATE OF INCORPORATION: MO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 002-05916 FILM NUMBER: 99718595 BUSINESS ADDRESS: STREET 1: 3600 LEONARD RD CITY: ST JOSEPH STATE: MO ZIP: 64503 BUSINESS PHONE: 8162791625 MAIL ADDRESS: STREET 1: 3600 LEONARD RD CITY: ST JOSEPH STATE: MO ZIP: 64503 FORMER COMPANY: FORMER CONFORMED NAME: CHASE CANDY CO DATE OF NAME CHANGE: 19660911 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 Commission File Number 2-5916 CHASE GENERAL CORPORATION (Exact name of registrant as specified in its charter) Missouri 36-2667734 (State of Incorporation) (I.R.S. Employer (Identification Number) 3600 Leonard Road, St. Joseph, Missouri 64503 (Address of principal executive offices) Registrants' telephone number, including area code: (816) 279-1625 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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. x Yes ____ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X State the aggregate market value of the voting stock held by non-affiliates of registrant: Voting stock not actively traded. Therefore, market value of stock unknown as of 60 days prior to the date of this filing. Indicate the number of shares outstanding of each of the registrants' classes of common stock as of the latest practicable date: 969,834 (one class with $1 par value) as of August 24, 1999. Location in this filing where exhibit index is located : 32 Total number of pages included in this filing: 40 PART I ITEM 1 BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS (1) NARRATIVE HISTORY OF BUSINESS Chase General Corporation was incorporated November 6, 1944 for the purpose of manufacturing confectionery products. In 1970 Chase General Corporation acquired a 100% interest in its wholly-owned subsidiary, Dye Candy Company. (Chase General Corporation and Dye Candy Company are sometimes referred herein as "the Company"). This subsidiary is the main operating company for the reporting entity. There were no material acquisitions, dispositions, new developments, or changes in conducting business during the past five fiscal years. However, as of June 30, 1987, the working capital of the Company became impaired due to the maturity of $696,000 of notes payable. During the fiscal year end 1991 a portion of the notes were paid in full and the remaining notes were extended to December 20, 1994. Negotiation of a second extension of the notes began during fiscal year ended 1995. An extension to December 20, 2002 was unanimously accepted December 20, 1995 with the agreement that this will be the final extension. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Part II of this filing for further information. (2) Not applicable. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Company and Poe Candy Company. Operations in Chase Candy Company involve production and sale of a candy bar marketed under the trade name "Cherry Mash". Operations in Poe Candy Company involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. Division products are sold to the same type of customers in the same geographical areas. In addition, both divisions share a common labor force and utilize the same basic equipment and raw materials. Due to the similarities in the products manufactured, segment reporting for the two divisions is not maintained by Management and, accordingly, is not available for inclusion in this filing. (c) NARRATIVE DESCRIPTION OF BUSINESSES (1) DESCRIPTION OF BUSINESS DONE AND INTENDED TO BE DONE BY DOMINANT SINGLE INDUSTRY (i) The principal products produced and methods of distribution are as follows: ITEM 1 BUSINESS (CONTINUED) CHASE CANDY DIVISION OF DYE CANDY COMPANY produces a candy bar under the trade name of "Cherry Mash". The bar is distributed in four case sizes: (1) 60 count pack (2) 12 boxes of 24 bars per box (3) 192 count shipper box (4) 96 count shipper box In addition to the regular size bar, a "mini-mash" is distributed in four case sizes: (1) 24 - 12 oz. bags (2) 6 jars - 60 bars per jar (3) 23 # wrapped bars (4) 22 # unwrapped bars The bars are sold primarily to wholesale candy and tobacco jobbing houses, grocery accounts, and vendors. "Cherry Mash" bars are marketed in the Midwest region of the United States. For the years ended June 30, 1999, 1998, and 1997, this division accounted for 56%, 55%, and 54%, respectively, of the consolidated revenue of Dye Candy Company. POE CANDY DIVISION OF DYE CANDY COMPANY produces coconut, peanut, chocolate, and fudge confectioneries. These products are distributed in bulk or packaged. Principal products include: (1) Coconut Bon-Bons (6) Peanut brittle (2) Coconut Stacks (7) Coconut cubes (3) Home Style Poe Fudge (8) Peanut clusters (4) Peco Flake (9) Champion Creme Drops (5) Peanut Squares (10) Jelly Candies The Poe line is sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For the years ended June 30, 1999, 1998, and 1997, this division accounted for 44%, 45%, and 46%, respectively, of the consolidated revenue of Dye Candy Company. (ii) Not applicable. (iii) Raw materials and packaging materials are produced on a national basis with products coming from most of the states of the United States. Raw materials and packaging materials are generally widely available, depending, of course, on common market influences. ITEM 1 BUSINESS (CONTINUED) (iv) The largest single revenue producing product, the "Cherry MashR" bar, is protected by a trademark registered with the United States Government Patents Office. Management considers this trademark very important to the Company. The trademark was renewed during the fiscal year ended June 30, 1985. This trademark expires in the year 2002. Management and its legal representatives do not expect any impediment to renewing this trademark prior to its expiration. (v) The Company is a seasonal business whereby the largest volume of sales occur in the spring and fall of each year. The net income per quarter of the Company varies in direct proportion to the seasonal sales volume. (vi) Due to the seasonal nature of the business, there is a heavier demand on working capital in the summer and winter months of the year when the Company is building its inventories in anticipation of fall and spring sales. The fluctuation of demand on working capital due to the seasonal nature of the business is common to the confectionery industry. If necessary, the Company has the ability to borrow short term funds in early fall to finance operations prior to receiving cash collections from fall sales. The Company occasionally offers extended payment terms of up to sixty days. Since this practice is infrequent, the effect on working capital is minimal. (vii) For the years ending June 30, 1999, 1998, and 1997, Associated Wholesale Grocers, accounted for 19.64%, 18.87% and 19.67% of gross sales, respectively. For the year ending June 30, 1999, Wal-Mart and its affiliates accounted for 12.06% of gross sales. The loss of Associated Wholesale Grocers would not have an adverse effect on the Company as customer purchases and distributes to retail outlets and these outlets would continue to demand products offered by Dye Candy Company. However, due to the affiliation certain outlets have with Wal-Mart, a loss of this customer would reduce gross sales. The Company continues to seek additional markets for its products. (viii) Prompt, efficient service are traits demanded in the confectionery industry, which results in a continual low volume of back-orders. Therefore, at no time during the year does the Company have a significant amount of back-orders. (ix) Not applicable. ITEM 1 BUSINESS (CONTINUED) (x) The confectionery market for the type of product produced by the divisions of Dye Candy Company is very competitive and quality minded. The confectionery (candy) industry in which the divisions operate is highly competitive with many small companies and, within certain specialized areas, a few competitors dominate. In the United States, the dominant competitors in the coconut candy industry are Bradley Candy Company, Crown Candy Company, Vermico Candy Company, and the Poe Division of Dye Candy Company with approximately 70% of the market share among them. In the United States, Sophie Mae and Old Dominion have approximately 80% of the market share of the peanut candy business in which the Poe Division operates. Dye Candy Company sells approximately 90% of its products in the Midwest region with seasonal orders being shipped to the Southern and Eastern regions of the United States. Except for the coconut candy industry, Dye Candy Company is not a dominant competitor in any of the candy industries in which it competes. Dye Candy Company's Shares in the coconut industry approximates 15% to 20% annually. This does not vary significantly from year to year. Principal methods of competition the Company uses include quality of product, price, reduced transportation costs due to central location, and service. The Company's competitive position is positively influenced by labor costs being lower than industry average. Chase General Corporation is firmly established in the confectionery market and through its operating divisions has many years' experience associated with its name. (xi) Not applicable. (xii) To the best of management's knowledge, the Company is presently in compliance with all environmental laws and regulations and does not anticipate any future expenditures in this regard. (xiii) The Company employs approximately 25 full time personnel year round. This expands to approximately 50 full time personnel during the two busy production seasons in spring and fall. (d) FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Company has no foreign operations or export sales. In addition, all domestic sales are primarily in the Midwest region of the United States. ITEM 2 PROPERTIES The registrant operates out of two buildings consisting of the following: CHASE AND POE WAREHOUSE - This building located in St. Joseph, Missouri is owned by Dye Candy Company, a wholly-owned subsidiary of the registrant. The facilities are currently devoted entirely to the storage of supplies, and the warehousing and shipping of candy products. This warehouse consists of a sixty-seven year old building which is in fair condition and is adequate to meet present requirements. The warehouse has approximately 15,000 square feet and it is not encumbered. CHASE GENERAL OFFICE AND DYE CANDY COMPANY OPERATING PLANT - The building housing the office and plant is located in St. Joseph, Missouri, and was originally owned by Chase Building Corporation, a wholly-owned subsidiary of Dye Candy Company. In March, 1975, the subsidiary was liquidated by Dye Candy Company. Subsequently, the Company sold this facility. The property was leased from the purchaser in March, 1975. Refer to Note 3, "Notes to Financial Statements," for terms of the lease. The building contains the general offices of Chase General Corporation, Dye Candy Company, and its divisions. The production plant of Dye Candy Company occupies the remainder of the building. The building was acquired new in 1964 and was specifically designed for the type of operations conducted by the registrant. The facility is adequate to meet present requirements. The operating plant is approximately 20,000 square feet and the office is approximately 2,000 square feet. The Company renegotiated the original lease on this building which expired March 31, 1995. The terms of the new lease began April 1, 1995 and continues for ten years. ITEM 3 LEGAL PROCEEDINGS The Company is not, and has not been, a party in any material pending legal proceedings, other than ordinary litigation incidental to its business, during the fiscal year ended June 30, 1999, nor are any such proceedings contemplated. ITEM 4 RESULTS OF VOTES OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the registrant during the fourth quarter of the fiscal year ended June 30, 1999. PART II ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (a) MARKET INFORMATION There is no established public trading market for the common stock (par value $1 per share) of the Company. (b) APPROXIMATE NUMBER OF SECURITY HOLDERS As of August 24, 1999, the latest practicable date, the approximate number of record holders of common stock was 1,439, including individual participants in security listings. (c) DIVIDENDS (1) DIVIDEND HISTORY AND RESTRICTIONS No dividends have been paid during the past three fiscal years. Refer to Note 1, "Notes to Financial Statements" for dividend restrictions. (2) DIVIDEND POLICY There is no set policy on the payment of dividends due to the financial condition of the Company and other factors. It is not anticipated that cash dividends will be paid in the foreseeable future. ITEM 6 SELECTED FINANCIAL DATA (a) LAST FIVE YEARS
06-30-99 06-30-98 06-30-97 06-30-96 06-30-95 (i) NET SALES OR OPERATING REVENUE $2,134,920 $2,113,777 $2,317,501 $2,316,031 $2,235,656 (ii) INCOME (LOSS) FROM CONTINUING OPERATIONS $ 49,262 $ (33,502) $ 50,174 $ 63,703 $ 60,146 (iii) INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE $ (.09) $ (.17) $ (.08) $ (.07) $ (.07) (iv) TOTAL ASSETS $ 798,961 $ 770,998 $ 837,871 $ 815,954 $ 797,909 (v) LONG-TERM DEBT $ 162,672 $ 185,305 $ 207,659 $ 242,980 $ -- (vi) CASH DIVIDEND DECLARED PER COMMON SHARE $ -- $ -- $ -- $ -- $ -- (b) No additional years are necessary to keep the summary from being misleading. Refer to Note 6, "Notes to Financial Statements" for computation of income (loss) from continuing operations per common share.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a & b) LIQUIDITY AND CAPITAL RESOURCES Positive cash flows from operating activities were generated for fiscal years ended June 30, 1999, 1998, and 1997 in the amounts of $99,294, $93,720, and $8,940, respectively. At various times during the years, and in anticipation of heavier cash demands due to seasonal production, plant improvements, and/or major promotional programs, it is the Company's practice to invest in short term U.S. Treasury obligations or financial institution certificates of deposit. At June 30, 1999, 1998, and 1997 the Company had $150,000, $100,000, and $90,000, respectively invested in short term certificates of deposit to meet the 1999, 1998, and 1997 fall production season. The Company continually monitors raw material pricing, and when a price increase/decrease is anticipated adjustments to inventory levels are made accordingly. Raw material inventory decreased slightly when comparing 1998 to 1997. In late spring 1997, predicted weather conditions dictated a future increase in peanut costs. Therefore, the Company purchased additional peanut inventory for its 1997 fall production season. With stable weather conditions being predicted for 1998, the additional purchase of peanut inventory was not necessary. Purchase commitments for peanuts as of June 30, 1998 were comparable to those at June 30, 1997. Raw materials decreased approximately $28,000 from June 30, 1998 to June 30, 1999. The Company had approximately $23,000 less chocolate, peanuts and coconut in inventory than at June 30, 1998. Purchase commitments for chocolate, peanuts and coconut were $113,000 less than at June 30, 1998. The Company watches markets for these commodities and purchases are made accordingly. There were $198,900 in purchase commitments for peanuts at June 30, 1998 and of this total, there still remained a commitment to purchase peanuts in the amount of approximately $80,000. The market price at June 30, 1998 for this product is higher than the cost of the commitment. Packaging inventory significantly decreased in 1998 compared to 1997 due to usage of existing supplies. Packaging materials are purchased in large volumes and carried for several years due to the high cost from suppliers to cut dies and print materials. Therefore, when supplier pricing remains consistent over the years and is not predicted to increase, the Company utilizes its present inventory supply without making additional purchases necessary to lock in pricing. Package inventory at June 30, 1999 was comparable to inventory at June 30, 1998. Finished goods inventory increased in 1997 over 1996 and decreased in 1998 to a level comparable to 1996 due to timing of production to prepare for the fall sales. The main component wich made up these fluctuations were the "Cherry Mash bars". Finished goods increased from June 30, 1998 from June 30, 1999 due to an increase in the Champion Creme Drops and Jelly Candies. The items are purchased by the Company in large lots and resold to customers under the Poe name. Purchases are normally made closer to the peak selling season, however, the Company believed that the price was right for getting the product into their inventory. Finished goods are produced when it is most advantageous from a labor stand point and stored in the warehouse. Goods in process remained comparable to prior years. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company continues to write off equipment that is no longer useful to the operations of the Company. These write offs have been immaterial over the past three years. The Company also continues to replace old equipment on a yearly basis in order to streamline operations. However, due to cash flow needs in other areas, the Company has not been able to update the equipment at any significant level. Expenditures of $5,113 were made during fiscal year ended June 30, 1997 to update existing equipment. The Company spent an additional $59,783 during 1997 to update transportation equipment, add to leasehold improvements, and replace outdated equipment. The Company spent $23,921 during 1998 to make major improvements to existing equipment. In addition, $21,715 was expended on buildings and transportation equipment. During the year ending June 30, 1999, $16,041 was spent to upgrade production equipment. Also, during 1999, $21,087 was used to add to transportation and office equipment. Depending on results of operations and cash flows, the Company is hoping to replace their antiquated brittle cookers in the next several years with no set target date. For the past eight years, the Company has not been indebted except for the series B notes. Of the original $630,000 Series B notes payable, $162,672 remain outstanding at June 30, 1999. On December 20, 1995, the Company received approval to extend the notes to December 20, 2002 at the current 6% rate of interest, with the agreement that this was the final note extension. The entire $162,672 outstanding at June 30, 1999, is classified as long-term. Realizing the minimum yearly principal payment required by the note indenture will not satisfy the notes on December 20, 2002, the Company has accelerated the principal payments on the notes during the past three fiscal years. It is anticipated that acceleration of principal payments will continue if cash is not required for operations and equipment replacement. The Company's lease on its manufacturing facility expired March 31, 1995. The lease was renewed effective April 1, 1995 for a period of 10 years at $2,955 per month. (c) RESULTS OF OPERATIONS 1998 was the first year in over ten years that the Company has realized an operating loss. Increased cost of sales and general and administrative expenses were the primary sources for the loss. In comparing 1998 to 1997, net sales decreased 9% while cost of sales only decreased 5%. Company management realized sales were declining during the current year due to broker turnover. However, in anticipation of future increased sales, management decided to retain their current labor force during the slower productive times. This decision was made due to the excellent quality of the current labor force as well as the tight job market. Management redirected certain job functions to concentrate more on internal improvements of the plant; however, the overall production per hour declined for those whose job functions could not be redirected. It was the intention of the Company to re-evaluate the quantity of the labor force as well as their efficiencies for the upcoming year. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The company realized success due to this evaluation, and for the year ending June 30, 1999 net sales increased by 1% and the cost of sales decreased by 1%. Operating expenses were closely monitored during 1999 and were decreased by 13% for the year. This was accomplished by decreasing selling expenses by 12%, and general and administrative by 15%. During 1998 general and administrative expenses increased $18,745 compared to 1997. While the majority of general and administrative expenses remain stable regardless of sales volume, the Company experienced an increase in legal fees regarding the dividend arrearage as well as an increase in the allowance for doubtful accounts for the year. Selling expenses were reduced by targeting advertising and promotion expenditures to their most profitable areas. The decrease in these areas realized $16,500 less costs. In addition, the Company decreased their allowance for doubtful accounts by a net amount of $19,300 for the year. A more aggressive collections effort was made during the year which reduced current year write offs and also realized the collections of some prior year write-offs. Under the leadership of the CEO and his sales staff, the Company has stabilized its customer base. Certainly some customers were lost during 1999, but those have been replaced. The Company continues to look for new markets but only when the addition of a new market is profitable. 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 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 and revenues or on income from continuing operations for the last three fiscal years. The Company does not feel that any accounting changes, as proposed by the Financial Accounting Standards Board, with effective dates after the date of this report, will have a material effect on future financial statements of the Company. The Company's only computer application, run on SBT software, involves the payroll processing accounting function. Company management is aware of the Year 2000 (Y2K) technology issue and is in the process of obtaining written confirmation from SBT, that their programs are Y2K compliant. Should it be necessary to change software for non-compliance, the cost is projected to be less than $1,000. In addition, management will require that any future investment in technology will be Y2K compliant before purchasing. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. Refer to Note 7, "Notes to Financial Statements" for fair value of financial instruments as of June 30, 1998. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements meeting the requirements of Regulation S-X are contained on pages 12 through 26 of the filing. (a) SELECTED QUARTERLY FINANCIAL DATA Exempt from requirements per second major condition for smaller companies. (b) INFORMATION ABOUT OIL AND GAS PRODUCING ACTIVITIES Registrant is not engaged in any oil and gas producing activities. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. There has been no change in accountants for approximately twenty-four years and no disagreements on accounting or financial disclosure. INDEPENDENT AUDITOR'S REPORT Board of Directors Chase General Corporation St. Joseph, Missouri We have audited the accompanying consolidated balance sheets of Chase General Corporation and Subsidiary as of June 30, 1999 and 1998 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended June 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chase General Corporation and Subsidiary as of June 30, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1999, in conformity with generally accepted accounting principles. St. Joseph, Missouri August 11, 1999 CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS JUNE 30, 1999 AND 1998 ASSETS 1999 1998 CURRENT ASSETS Cash and cash equivalents $ 206,609 $ 161,093 Receivables: Trade, less allowance for doubtful accounts of $11,516 in 1999 and $11,604 in 1998 138,959 94,514 Income tax -- 24,710 Inventories: Finished goods 73,106 47,397 Goods in process 3,243 3,633 Raw materials 52,930 81,377 Packaging materials 70,878 79,006 Prepaid expense 35,469 35,549 Prepaid income taxes -- 1,000 Total current assets 581,194 528,279 PROPERTY AND EQUIPMENT Land 35,000 35,000 Buildings 85,738 85,738 Machinery and equipment 663,341 648,360 Trucks and autos 99,113 94,639 Office equipment 31,909 31,706 Leasehold improvements 121,356 121,356 Total, at cost 1,036,457 1,016,799 Less accumulated depreciation 818,690 774,080 Total property and equipment 217,767 242,719 TOTAL ASSETS $ 798,961 $ 770,998 LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 CURRENT LIABILITIES Accounts payable $ 48,383 $ 59,194 Series B notes payable, related parties, current maturities 2,305 -- Series B notes payable, unrelated parties, current maturities 3,761 -- Accrued expense: Interest 10,440 11,978 Income taxes 8,855 -- Other 27,778 22,950 Total current liabilities 101,522 94,122 LONG-TERM LIABILITIES Series B notes payable, related parties 59,219 68,331 Series B notes payable, unrelated parties 97,387 116,974 Total long-term liabilities 156,606 185,305 Total liabilities 258,128 279,427 STOCKHOLDERS' EQUITY Capital stock issued and outstanding: Prior cumulative preferred stock, $5 par value: Series A (liquidation preference $1,215,000 and $1,185,000 respectively) 500,000 500,000 Series B (liquidation preference $1,170,000 and $1,140,000 respectively) 500,000 500,000 Cumulative preferred stock, $20 par value: Series A (liquidation preference $2,912,017 and $2,853,484 respectively) 1,170,660 1,170,660 Series B (liquidation preference $474,565 and $465,026 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 (5,925,163) (5,974,425) Total stockholders' equity 540,833 491,571 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 798,961 $ 770,998 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1999, 1998 AND 1997 1999 1998 1997 NET SALES $ 2,134,920 $ 2,113,777 $ 2,317,501 COST OF SALES 1,677,258 1,696,845 1,787,350 Gross profit 457,662 416,932 530,151 OPERATING EXPENSES Selling expenses 246,592 280,764 302,871 General and administrative expenses 148,838 175,442 156,697 Total operating expenses 395,430 456,206 459,568 Income (loss) from operations 62,232 (39,274) 70,583 OTHER INCOME (EXPENSE) Interest income 6,498 5,896 7,388 Miscellaneous income 1,758 691 1,272 Interest expense (10,571) (12,077) (13,998) Total other income (expense) (2,315) (5,490) (5,338) Income (loss) before income taxes 59,917 (44,764) 65,245 PROVISION (CREDIT) FOR INCOME TAXES 10,655 (11,262) 15,071 NET INCOME (LOSS) $ 49,262 $ (33,502) $ 50,174 (LOSS) PER SHARE OF COMMON STOCK $ (.09) $ .(.17) $ (.08) These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JUNE 30, 1999, 1998 AND 1997
PRIOR CUMULATIVE CUMULATIVE PREFERRED STOCK PREFERRED STOCK SERIES A SERIES B SERIES A SERIES B BALANCE (DEFICIT), JUNE 30, 1996 $ 500,000 $ 500,000 $ 1,170,660 $ 190,780 Net income -- -- -- -- BALANCE (DEFICIT), JUNE 30, 1997 500,000 500,000 1,170,660 190,780 Net loss -- -- -- -- BALANCE (DEFICIT), JUNE 30, 1998 500,000 500,000 1,170,660 190,780 Net income -- -- -- -- BALANCE (DEFICIT), JUNE 30, 1999 $ 500,000 $ 500,000 $ 1,170,660 $ 190,780
COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT TOTAL BALANCE (DEFICIT), JUNE 30, 1996 $ 969,834 $ 3,134,722 $ (5,991,097) $ 474,899 Net income -- -- 50,174 50,174 BALANCE (DEFICIT), JUNE 30, 1997 969,834 3,134,722 (5,940,923) 525,073 Net loss -- -- (33,502) (33,502) BALANCE (DEFICIT), JUNE 30, 1998 969,834 3,134,722 (5,974,425) 491,571 Net income -- -- 49,262 49,262 BALANCE (DEFICIT), JUNE 30, 1999 $ 969,834 $ 3,134,722 $ (5,925,163) $ 540,833 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1999, 1998 AND 1997 1999 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Collections from customers $ 2,094,487 $ 2,087,531 $ 2,305,349 Interest received 6,498 5,896 7,388 Other income 2,042 1,926 1,272 Income tax refunds 24,710 2,384 -- Cost of sales, selling, general and administrative expenses paid (2,015,534) (1,979,084) (2,265,624) Interest paid (12,109) (14,097) (16,214) Income tax paid (800) (10,836) (23,231) Net cash provided by operating activities 99,294 93,720 8,940 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (31,145) (45,636) (64,896) Net cash used in investing activities (31,145) (45,636) (64,896) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes payable, Series B (22,633) (28,648) (38,703) Net cash used in financing activities (22,633) (28,648) (38,703) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,516 19,436 (94,659) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 161,093 141,657 236,316 CASH AND CASH EQUIVALENTS, END OF YEAR $ 206,609 $ 161,093 $ 141,657 1999 1998 1997 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income (loss) $ 49,262 $(33,502) $ 50,174 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 55,813 66,019 62,802 Loss on disposal of equipment 284 1,235 -- Provision for doubtful accounts (4,012) 15,311 3,327 Effects of changes in operating assets and liabilities: Trade accounts receivable (40,433) (26,246) (12,152) Income tax receivable 24,710 (24,710) -- Inventories 11,256 90,098 (101,529) Prepaid expense 80 4,242 2,868 Prepaid income taxes 1,000 4,996 (5,996) Accounts payable (10,811) 32 12,219 Income tax payable 8,855 -- (2,164) Accrued liabilities 3,290 (3,755) (609) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 99,294 $ 93,720 $ 8,940 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Chase General Corporation was incorporated on November 6, 1944 in the State of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States. The Company's fiscal year ends June 30. Significant accounting policies followed by the Company are presented below: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions and balances have been eliminated in consolidation. ACCOUNTING METHOD The Company and its subsidiary use the accrual method of accounting. Under this method, revenue is recognized when earned and expense is recognized when the obligation is incurred. SEGMENT REPORTING OF THE BUSINESS The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Company and Poe Candy Company. Operations in Chase Candy Company involve production and sale of a candy bar marketed under the trade name "Cherry Mash". Operations in Poe Candy Company involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. Division products are sold to the same type of customers in the same geographical areas. In addition, both divisions share a common labor force and utilize the same basic equipment and raw materials. Therefore, due to the similarities in the products manufactured, segment reporting for the two divisions has not been disclosed in these financial statements. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CHASE GENERAL CORPORATION AND SUBSIDIARY SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Finished goods and goods in process include a provision for manufacturing overhead. INVENTORIES Inventories are carried at the "lower of cost or market value," cost being determined on the "first-in, first-out" basis of accounting. PROPERTY AND EQUIPMENT Depreciation is computed by the straight-line method for additions prior to 1981, and by the declining balance methods for assets acquired after 1980. The Company's property and equipment are being depreciated on straight-line and accelerated methods over the following estimated useful lives: Buildings 25 years Machinery and equipment 3 - 10 years Trucks and autos 3 - 5 years Office equipment 5 - 10 years Leasehold improvements 8 - 31.5 years This information is an integral part of the accompanying consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NOTES PAYABLE, SERIES B On December 1, 1967, the Company issued Collateral Sinking Fund 6% Income Registered Notes in the amount of $680,000. These notes were issued to extend and consolidate notes and certificates of indebtedness then held by F. S. Yantis & Co., Inc. (Yantis & Co.), aggregating approximately $569,000 together with unpaid accrued interest of $111,000. Interest is payable from "surplus net earnings" on the 20th day of December following the fiscal year end. Pursuant to a supplemental indenture, dated April 1, 1968 and executed in compliance with a request by Yantis & Co. in furtherance of the winding-up of its affairs, the original notes aggregating $680,000 were reissued in two series designated as A and B, respectively. The Series A notes aggregating $50,000 had priority and were retired during the year ended June 30, 1984. The Series B notes totaling $630,000 are held by the former shareholders of Yantis & Co. During the years ended June 30, 1999 and 1998, $22,633 and $24,648 principal was paid on the Series B notes, respectively. As of June 30, 1999 and 1998, the outstanding Series B notes total $162,672 and $185,305, respectively. Of these amounts $61,524 and $68,331 are owed to officers and directors of the Company. The Company has agreed to secure the payment of principal and interest on the notes by the pledge of the capital stock of Dye Candy Company under an indenture dated December 1, 1967, and supplemental indenture dated June 30, 1970. The indenture provides for a sinking fund deposit to be made by the Company each year of not less than one-fourth of the Company's fiscal year "surplus net earnings," which exceeds the amount of interest required to be paid on the outstanding notes. If at any time the sinking fund deposits aggregate $10,000 or more, the same will be applied to prepayment of the notes outstanding. At June 30, 1998 and 1997, all sinking fund deposits had been disbursed to the noteholders. The "surplus net earnings" is the amount by which the consolidated net income, after adding back the current year's interest on the outstanding notes, exceeds a $25,000 working capital reserve. See Note 2 for computation of "surplus net earnings" and sinking fund requirements for years ended June 30, 1999, 1998, and 1997. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NOTES PAYABLE, SERIES B (CONTINUED) Principal payments are made by the trustee under terms of the indenture and may be prepaid at the option of the Company. During the year ended June 30, 1991, the notes were extended to December 20, 1994. Effective December 20, 1995, the notes were extended to December 20, 2002 at the same 6% interest rate and with the agreement that this will be the final note extension. Due to the nature of sinking fund requirements, it is not practicable to include a schedule of future principal payments. Dividends, other than stock dividends, may not be paid on capital stock at any time interest on the notes is not current. NOTE 2 - "SURPLUS NET EARNINGS" AND SINKING FUND REQUIREMENTS The following is an analysis of the computation of the "surplus net earnings" and sinking fund requirements for years ended June 30: 1999 1998 1997 NET INCOME (LOSS) Chase General Corporation $ (11,829) $ (12,410) $ (14,737) Dye Candy Company 61,091 (21,092) 64,911 Consolidated net income (loss) 49,262 (33,502) 50,174 NON-ALLOWANCE EXPENSE DEDUCTION Interest on indebtedness 10,571 12,077 13,998 Net income (loss) basis for "surplus net earnings" 59,833 (21,425) 64,172 DEDUCTIONS FROM INCOME BASIS Set aside as reserve for accumulation of working capital 25,000 25,000 25,000 "Surplus net earnings" (loss) 34,833 (46,425) 39,172 INTEREST PAYMENT REQUIRED 10,571 12,077 13,998 EXCESS "SURPLUS NET EARNINGS" (LOSS) OVER INTEREST PAYMENT REQUIRED $ 24,262 $ (34,348) $ 25,174 SINKING FUND REQUIREMENT $ 6,066 $ -- $ 6,294 CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - COMMITMENTS Dye Candy Company leases its manufacturing facilities located at 3600 Leonard Road, St. Joseph, Missouri. The period of the lease is from April 1, 1995 through March 31, 2005, and requires payments of $2,955 per month. Rental expense for the years ended June 30, 1999, 1998 and 1997 totaled $35,460, $35,460 and $35,460, respectively, and is included in cost of sales. Future minimum lease payments under this lease are as follows: Year ending June 30, 2000 $ 35,460 Year ending June 30, 2001 35,460 Year ending June 30, 2002 35,460 Year ending June 30, 2003 35,460 Year ending June 30, 2004 35,460 Later years 29,550 Total $ 206,850 The manufacturing facilities referred to above were owned by Dye Candy Company prior to March 31, 1975. When the building was sold on March 31, 1975, the gain on the sale of the building was included in the income of Dye Candy Company in the year of sale. Financial Accounting Standards Board Statement 13, Accounting for leases, calls for the amortization of any profit or loss on a sale-leaseback transaction to be amortized in proportion to the amortization of the leased asset. However, the effective date of FASB 13 was for transactions entered into after January 1, 1977. As of June 30, 1999, the Company had purchase commitments with four vendors for approximately $161,324. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - CAPITAL STOCK Capital stock authorized, issued and outstanding as of June 30, 1999 and 1998 is as follows: SHARES ISSUED AND AUTHORIZED OUTSTANDING Prior Cumulative Preferred Stock, $5 par value: 6% Convertible 240,000 Series A 100,000 Series B 100,000 Cumulative Preferred Stock, $20 par value: 5% Convertible 150,000 Series A 58,533 Series B 9,539 Common Stock, $1 par value Reserved for conversion of Preferred Stock - 1,033,333 shares 2,000,000 969,834 Cumulative Preferred Stock dividends in arrears at June 30, 1999 and 1998, totaled $5,771,582 and $5,643,510, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30: 1999 1998 6% Convertible Series A $12 $12 Series B 12 11 5% Convertible Series A 50 49 Series B 50 49 CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - CAPITAL STOCK (CONTINUED) 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 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 $21.00 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 5 - PROVISION (CREDIT) FOR INCOME TAXES The provision (credit) for income taxes consists of the following as of June 30: 1999 1998 1997 Federal income tax $ 7,551 $ (8,817) $ 11,257 State income tax 3,104 (2,445) 3,814 Total provision (credit) for income taxes $ 10,655 $ (11,262) $ 15,071 The Company's provision (credit) for income taxes differs from the tax that would result from applying statutory federal and state income tax rates primarily because of nondeductible expenses. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - (LOSS) PER SHARE OF COMMON STOCK The loss per share was computed on the weighted average of outstanding common shares during the years as follows: 1999 1998 1997 Net income (loss) $ 49,262 $ (33,502) $ 50,174 Preferred dividend requirements: 6% Prior Cumulative Preferred, $5 par value 60,000 60,000 60,000 5% Convertible Cumulative Preferred, $20 par value 68,072 68,072 68,072 Total dividend requirements 128,072 128,072 128,072 Net loss - common stockholders $ (78,810) $ (161,574) $ (77,898) Weighted average of outstanding common shares 969,834 969,834 969,834 Loss per share $ (.09) $ (.17) $ (.08) No computation was made on common stock equivalents outstanding at year-end because earnings per share would be anti-dilutive. NOTE 7 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist principally of cash and cash equivalents, trade receivables and payables, and notes payable. There are no significant differences between the carrying value and fair value of any of these financial instruments. NOTE 8 - CONCENTRATION OF CREDIT RISK For the years ending June 30, 1998 and June 30, 1997 one customer accounted for 18.87%, and 19.67%, of the gross sales, respectively. For the year ending June 30, 1999, two customers accounted for 31.70% of the gross sales. This information is an integral part of the accompanying consolidated financial statements. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) DIRECTORS PERIODS OF SERVICE NAME AGE AS DIRECTOR TERMS W.A. Yantis, III 56 1980 to January 21, 1999 -- Barry M. Yantis 54 1980 to present One year Brian A. Yantis 53 07-16-86 to present One year Brett A. Yantis 31 January 21, 1999 to present One year An insufficient number of proxies were returned by the shareholders for the January 21, 1999 annual stockholder meeting. Therefore, the Directors noted above are continuing for an additional one year term except for W.A. Yantis, III whose resignation was accepted by the Directors. To fill the vacated position, Brett A. Yantis was elected for the remainder of the term. See Item 10(b) for offices held by Barry M. Yantis and Brian A. Yantis. W.A. Yantis, III has never held an office with the Company. (b) EXECUTIVE OFFICERS YEARS OF SERVICE AS NAME AGE POSITION AN OFFICER TERM Barry M. Yantis 53 President and 19 Until Treasurer successor elected Brian A. Yantis 50 Vice-President 8 Until and Secretary successor elected (c) CERTAIN SIGNIFICANT EMPLOYEES There are no significant employees other than above. (d) FAMILY RELATIONSHIPS W. A. Yantis, III, Barry M. Yantis, and Brian A. Yantis are brothers. (e) BUSINESS EXPERIENCE (1) Barry M. Yantis, president and treasurer has been an officer of the Company for eighteen years, thirteen years as vice-president and seven years as president. He has been on the board of directors for eighteen years and has been associated with the candy business for twenty-three years. Brian A. Yantis, vice-president and secretary has been an officer of the Company for seven years as vice-president and since May, 1992 as secretary. He has been associated with the insurance business for twenty-six years and has been a Vice-President of Aon Risk Services in Chicago, Illinois during the past eleven years. ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) (e) BUSINESS EXPERIENCE (Continued) W.A. Yantis III, has served as a board member of Chase General Corporation for eighteen years. He has held the position of account manager for Prudential Insurance Company Asset Management Group in Newark, New Jersey during the past three years and in Chicago, Illinois during the prior seven years. Brett A. Yantis was elected to the position of director for the remaining part of W.A. Yantis' term. Brett has been associated with the Company for six years. (2) The directors and executive officers listed above are also the directors and executive officers of Dye Candy Company. (f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS Not applicable (g) PROMOTERS AND CONTROL PERSONS Not applicable ITEM 11 - EXECUTIVE COMPENSATION (a) GENERAL Executive officers are compensated for their services as set forth in the Summary Compensation Table. These salaries are approved yearly by the Board of Directors. (b) SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION OTHER NAME AND FISCAL ANNUAL PRINCIPAL POSITION YEAR END SALARY BONUS COMPENSATION BARRY M. YANTIS 1) 06-30-99 $ 112,950 $ 8,000 $ 2,240 BARRY M. YANTIS 1) 06-30-98 $ 100,000 $ 15,750 $ 2,240 BARRY M. YANTIS 1) 06-30-97 $ 103,025 $ 11,250 $ 2,240
LONG TERM COMPENSATION AWARDS PAYOUTS RESTRICTED NAME AND FISCAL STOCK OPTION/ LTIP ALL OTHER PRINCIPAL POSITION YEAR END AWARD(S) SARS (#) PAYOUTS COMPENSATION BARRY M. YANTIS 1) 06-30-99 -- -- -- -- BARRY M. YANTIS 1) 06-30-98 -- -- -- -- BARRY M. YANTIS 1) 06-30-97 -- -- -- -- 1) CEO 2) NO OTHER COMPENSATION OTHER THAN THAT WHICH IS LISTED IN COMPENSATION TABLE. 3) NO OTHER OFFICERS ARE COMPENSATED FOR THEIR SERVICES THAN THOSE LISTED IN THIS COMPENSATION TABLE.
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED) (c) OPTION/SAR GRANTS TABLE Not applicable (d) AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE Not applicable (e) LONG-TERM INCENTIVE AWARDS TABLE Not applicable (f) DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE Not applicable (g) COMPENSATION OF DIRECTORS Directors are not compensated for services on the board. The directors are reimbursed for travel expenses incurred in attending board meetings. During the fiscal year 1999, $693, $74 and $-0- of travel expenses were reimbursed to board members, W.A. Yantis III, Brian A. Yantis, and Barry M. Yantis, respectively. (h) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS No employment contracts exist with any executive officers. In addition, there are no contracts currently in place regarding termination of employment or change in control arrangements. (i) REPORT ON REPRICING OF OPTION/SARs Not applicable (j) ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS The registrant has no formal compensation committee. The board of directors, W.A. Yantis III, Brian A. Yantis, and Barry M. Yantis, who are brothers, annually approve the compensation of Barry M. Yantis, CEO. Brett A. Yantis, newly elected to the board is the son of Barry M. Yantis. (k) BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The board bases the annual salary of the CEO on the Company's prior year performance. The criteria is based upon, but is not limited to, market area expansion, gross profit improvement, control of operating expenses, generation of positive cash flow, and hours devoted to the business during the previous fiscal year. ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED) (l) PERFORMANCE GRAPH Not applicable as there are no dividends available to distribute to common stockholders after preferred dividends are met. In addition, there is no market value price for the common stock (par value $1 per share) as there is no public trading market for the Company's stock. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AMOUNTS AND NATURE OF BENE- FICIAL % OF TITLE OF CLASS NAME AND ADDRESS OWNERSHIP CLASS (a) Security ownership of certain beneficial owners Common; par value $1 per share Barry Yantis 194,385(1) 16.8%(2) 5605 Osage Drive St. Joseph, Mo. 64503 Brian Yantis 97,192 (1) 8.4%(2) 1210 E. Clarendon Arlington Heights, IL. 60004 (b) Security ownership of management Common; par value All directors 110,856 11.4% $1 per share and officers as a group Prior Cumulative All directors 21,533 21.5% Preferred, and officers $5 par value: as a group Series A, 6% convertible Prior Cumulative All directors 21,533 21.5% Preferred $5 par and officers value: Series B, as a group 6% convertible Cumulative All directors 3,017 5.2% Preferred, and officers $20 par value: as a group Series A, $5 convertible ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED) AMOUNTS AND NATURE OF BENE- FICIAL % OF TITLE OF CLASS NAME AND ADDRESS OWNERSHIP CLASS Cumulative Preferred, All directors 630 6.6% $20 par value: and officers Series B, as a group $5 convertible (1) Includes 180,721 shares which could be received within 30 days upon conversion of preferred stock. (2) Reflects the percentage 291,577 shares would represent if the 180,721 shares above were converted to common stock. (c) No known change of control is anticipated. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) TRANSACTIONS WITH MANAGEMENT AND OTHERS No reportable transactions with management and others, to which the registrant or its subsidiary was a party, have occurred since the registrant's last fiscal year. In addition, there are no such currently proposed transactions. (b) CERTAIN BUSINESS RELATIONSHIPS Not applicable (c) INDEBTEDNESS OF MANAGEMENT Not applicable ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED) (d) TRANSACTIONS WITH PROMOTERS Not applicable PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THE FORM 10-K (1) The following are included in Part II of this report: PAGE NUMBER Independent Auditor's Report 12 Consolidated Balance Sheets - June 30, 1999 and 1998 13 - 14 Consolidated Statements of Operations for the years ended June 30, 1999, 1998, and 1997 15 Consolidated Statements of Stockholders' Equity for the years ended June 30, 1999, 1998, and 1997 16 Consolidated Statements of Cash Flows for the years ended June 30, 1999, 1998, and 1997 17 - 18 Summary of Significant Accounting Policies 19 - 20 Notes to Consolidated Financial Statements 21 - 26 (2) The following are included in Part IV of this report: PAGE NUMBER Independent Auditor's Report on Supplemental Schedules 34 Schedule I: Condensed Financial Information of the Registrant 35 - 38 Schedule II: Valuation and Qualifying Accounts, June 30, 1999, 1998, and 1997 39 (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the fourth quarter of the year ended June 30, 1999. ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K The following have been previously filed and are incorporated by reference to prior years' Forms 10-K filed by the Registrant: (3) Articles of Incorporation and By-Laws The following explanations are included in "Notes to Financial Statements" in Part II of this report: (4) Rights of security holders including indentures - Refer to Notes 1 and 4. (11) Computation of per share earnings - Refer to Note 6. (21) Subsidiaries of registrant - Refer to "Summary of Significant Accounting Policies". (d) FINANCIAL STATEMENT SCHEDULES REQUIRED BY REGULATION S-X Schedules required by Regulation S-X contained on page 34 through 38 have been excluded from the annual report to the shareholders. SUPPLEMENTAL INFORMATION TO BE FURNISHED, FILED PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934. (1) With this filing, the Registrant is furnishing to the Commission four (4) copies of the Proxy Statement regarding the January 21, 1999 annual meeting mailed to security holders during the 1999 fiscal year. (2) For the 1999 fiscal year, the Registrant will furnish a copy of the annual report and any Proxy information to the Commission at time the aforementioned are mailed to security holders. INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES In connection with the audit of the consolidated financial statements of Chase General Corporation and Subsidiary, we have also audited supplemental schedules I and II. In our opinion, these schedules present fairly the financial position as set forth therein, in conformity with generally accepted accounting principles. St. Joseph, Missouri August 11, 1999 SCHEDULE I CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (REGISTRANT ONLY) CONDENSED BALANCE SHEETS JUNE 30, 1999 AND 1998 ASSETS 1999 1998 Income tax refund receivable $ -- $ 4,392 Investment in subsidiary - at equity 713,945 684,462 TOTAL ASSETS $ 713,945 $ 688,854 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Series B notes payable and accrued interest, unrelated parties $ 107,693 $ 124,578 Series B notes payable and accrued interest, related parties 65,419 72,705 Total liabilities 173,112 197,283 Capital stock 3,331,274 3,331,274 Paid in capital in excess of par 3,134,722 3,134,722 Accumulated (deficit) (5,925,163) (5,974,425) Total stockholders' equity 540,833 491,571 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 713,945 $ 688,854 (1) The restricted assets of 100% consolidated subsidiary, Dye Candy Company, are $798,961 and $770,998 as of June 30, 1999 and 1998, respectively. See "Notes to Financial Statements" in Part II of this report for restrictions. (2) No cash dividends have been paid by the registrants' wholly- owned subsidiary, Dye Candy Company, during the past three fiscal years. SCHEDULE I (Continued) CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (REGISTRANT ONLY) CONDENSED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1999, 1998 AND 1997 1999 1998 1997 REVENUE Equity in net income (loss) of subsidiary $ 61,091 $ (21,092) $ 64,911 Total revenue 61,091 (21,092) 64,911 EXPENSE General and administrative 4,204 4,726 4,892 Interest 10,571 12,076 13,998 Total expense 14,775 16,802 18,890 Income (loss) before income taxes 46,316 (37,894) 46,021 PROVISION (CREDIT) FOR INCOME TAXES 2,946 (4,392) (4,153) NET INCOME (LOSS) $ 49,262 $ (33,502) $ 50,174 SCHEDULE I (Continued) CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (REGISTRANT ONLY) CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1999, 1998 AND 1997 1999 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES General and administrative expenses paid $ (4,204) $ (4,726) $ (4,892) Interest paid (12,109) (14,097) (16,214) Income tax refund received 4,392 4,153 5,853 Net cash used in operating activities (11,921) (14,670) (15,253) CASH FLOWS FROM INVESTING ACTIVITIES Advances received from wholly owned subsidiary 34,554 43,318 53,956 CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on Series B notes payable (22,633) (28,648) (38,703) NET DECREASE IN CASH AND CASH EQUIVALENTS -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR -- -- -- CASH AND CASH EQUIVALENTS, END OF YEAR $ -- $ -- $ -- SCHEDULE I (Continued) CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (REGISTRANT ONLY) CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1999, 1998 AND 1997 1999 1998 1997 RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES Net income (loss) $ 49,262 $ (33,502) $ 50,174 Adjustments to reconcile net income (loss)to net cash used in operating activities: Net income (loss) from wholly owned subsidiary (61,091) 21,092 (64,911) Effects of changes in operating assets and liabilities: Accrued interest (1,538) (2,021) (2,216) Income tax refund receivable 1,446 (239) 1,700 NET CASH USED IN OPERATING ACTIVITIES $ (11,921) $ (14,670) $ (15,253) This information should be read only in connection with the accompanying independent auditor's report on supplemental schedules. SCHEDULE II CHASE GENERAL CORPORATION AND ITS SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS JUNE 30, 1999, 1998, AND 1997 COLUMN C COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AT END DESCRIPTION OF PERIOD AND EXPENSES DEDUCTIONS OF PERIOD Valuation accounts deducted from assets to which they apply for doubtful accounts receivable: June 30, 1999 $ 11,604 $ (4,012) $ 3,924 $ 11,516 June 30, 1998 12,714 15,311 16,421 11,604 June 30, 1997 12,216 3,327 3,370 12,714 Represents accounts written off, net of (recoveries), for the respective years. This information should be read only in connection with the accompanying independent auditor's report on supplemental schedules. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) Date: September 28, 1999 By: /s/ Barry M. Yantis Barry M. Yantis, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated below. President, Treasurer (Principal Executive Officer and Chief Financial and /s/ Barry M. Yantis Accounting Officer) and Director September 28, 1999 Barry M. Yantis Date Vice-President, Secretary /s/ Brian A. Yantis and Director September 28, 1999 Brian A. Yantis Date EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CHASE GENERAL CORPORATION CONTAINED IS ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1999 JUN-30-1999 206,609 0 150,475 11,516 200,157 581,194 1,036,457 818,690 798,961 101,522 156,606 0 2,361,440 969,834 (2,790,441) 798,961 2,134,920 2,143,176 1,677,258 399,442 0 (4,012) 10,571 59,917 10,655 0 0 0 0 49,262 (.09) 0
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