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, 2001
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 September 5, 2001.
Location in this filing where exhibit index is located: 32
--
Total number of pages included in this filing: 39
--
1
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:
(Continued)
2
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) 200 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,
2001, 2000, and 1999, this division accounted for 57%,
61%, and 56%, 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) Peanut clusters
(3) Home Style Poe Fudge (8) Champion Creme Drops
(4) Peco Flake (9) Jelly Candies
(5) Peanut Squares (10) Coconut Cubes
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, 2001,
2000, and 1999, this division accounted for 43%, 39%,
and 44%, respectively, of the consolidated revenue of
Dye Candy Company. The Company discontinued the coconut
cubes during the year ended June 30, 2000.
(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.
(Continued)
3
ITEM 1 BUSINESS (CONTINUED)
--------
(iv) The largest single revenue producing product, the
"Cherry Mash" 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, 2001, 2000, and 1999,
Associated Wholesale Grocers, accounted for 25.64%,
20.01% and 19.64% of gross sales, respectively. For
the years ending June 30, 2001, 2000, and 1999, Wal-
Mart and its affiliates accounted for 28.54%, 20.08%
and 12.06% of gross sales, respectively. The loss of
Associated Wholesale Grocers would not have an
adverse effect on the Company as the 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.
(Continued)
4
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.
5
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-eight 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, 2001, 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,
2001.
6
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 September 5, 2001, 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
---------------
06-30-2001 06-30-2000 06-30-99 06-30-98 06-30-97
---------- ---------- -------- -------- --------
(i) Net sales or operating revenue $ 1,981,030 $ 2,129,785 $2,134,920 $2,113,777 $2,317,501
(ii) Income (loss) from continuing
operations $ (27,191) $ 42,284 $ 49,262 $ (33,502) $ 50,174
(iii) Income (loss) from continuing
operations per common share * $ (.16) $ (.09) $ (.09) $ (.17) $ (.08)
(iv) Total assets $ 714,901 $ 800,691 $ 798,961 $ 770,998 $ 837,871
(v) Long-term debt $ 77,672 $ 127,672 $ 162,672 $ 185,305 $ 207,659
(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.
7
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, 2001, 2000, and 1999 in the amounts of
$74,261, $28,797, and $99,294, 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, 2001, 2000, and 1999 the Company had $50,000,
$100,000, and $150,000, respectively invested in short term
certificates of deposit to meet the 2001, 2000, and 1999 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 materials increased approximately $27,000
from June 30, 2000 to June 30, 2001. Raw materials at June 30, 2000
were comparable to prior year. Purchase commitments at June 30, 2001
were approximately $286,000 lower than at June 30, 2000. The decrease
was due to the Company evaluating pricing and the market and having an
adequate raw materials supply for current production. Purchase
commitments at June 30, 2000 were approximately $125,000 higher than
at June 30, 1999. This increase was due to $26,000 in peanut contracts
over prior year and approximately $102,000 additional purchase
commitments of chocolate over prior year. The Company's contracts for
these products has been fulfilled and new contracts established. The
Company watches markets for these commodities and purchases are made
accordingly.
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. Packaging inventory decreased
approximately $59,000 from June 30, 2000 to June 30, 2001. The
decrease was due to the higher than normal purchase in 2000. Packaging
materials inventory increased $35,000 from June 30, 1999 to June 30,
2000. These inventory items were purchased during the year ending June
30, 2000 to replenish inventory used in the current and prior years
production. These items were purchased in quantities large enough to
fulfill the Company's packaging needs for several seasons.
Finished goods inventory did not significantly change from June 30,
2000 to June 30, 2001. The slight decrease was due to timing of
customer purchases of the Cherry Mash products.
Finished goods inventory did not significantly change from June 30,
1999 to June 30, 2000. The slight increase as due to timing of
customer purchases of the Cherry Mash products. Goods in process
remained comparable to prior years.
(Continued)
8
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. During the year ending June 30, 1999, $16,041 was spent to
upgrade production equipment. Also, during 1999, $15,104 was used to
add to transportation and office equipment. Expenditures of $13,574
were made to upgrade existing production equipment, in addition,
$40,053 was made to update transportation and office equipment during
the year ending June 30, 2000. Expenditures of $53,626 were made to
upgrade and replace transportation and office equipment during the
year-end June 30, 2001. 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 nine years, the Company has not been indebted except for
the series B notes. Of the original $630,000 Series B notes payable,
$127,672 remain outstanding at June 30, 2000. 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. Of the outstanding amount at June 30, 2001,
$77,672 is classified long-term and $-0- is classified as current.
Realizing that 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 four fiscal years. It is anticipated that acceleration of
principal payments will continue as cash flow has been adequate 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.
The Company realized success in 1999, and for the year ending June 30,
1999 net sales increased by 1% and the cost of sales decreased by 1%
from the prior year. Operating expenses were closely monitored during
1999 and decreased by 13% for the year. This was accomplished by
decreasing selling expenses by 12%, and general and administrative by
15%. During the year ending June 30, 2000, net sales and the cost of
sales remained comparable to prior year.
(Continued)
9
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------
Operating expenses increased by 2.9% from June 30, 1999 through June
30, 2000. This increase was due to increased general and
administration expenses. While most general and administration
expenses remained constant, insurance expense increased by $9,981 and
bad debt expense increased by $24,615. Insurance increased as rates
for general and liability insurance continue to go up. During the year
ending June 30, 2000 the Company had several large customer accounts
which had to be written off. Of the current year write off of $20,813,
$9,240 was from one customer that purchased product and immediately
declared bankruptcy. During the year ending June 30, 1999 the Company
netted $4,012 more from collections of prior write-off than were
ultimately written off. The Company continues a very aggressive
collection effort. The aging of accounts receivable is reviewed on a
regular basis and accounts which become overdue are pursued for
collection.
Selling expenses decreased by $28,381 during the year ending June 30,
2000. This was due to the Company change in policy on brokers fees or
commissions to customers. The Company discontinued allowing these fees
as a reduction of selling price.
During the year ending June 30, 2001, net sales decreased 7% from
June 30, 2000 through June 30, 2001. The decrease was due to
promotions with customers in the prior year which were discontinued.
Additionally, in the prior year receivables from certain customers
were written off. The Company did not do business with these customers
in the current year. Cost of sales decreased by 5% from June 30, 2000
through June 30, 2001 due to the decrease in net sales.
Operating expenses increased by 5.8% from June 30, 2000 through
June 30, 2001. This increase was due to increased selling expenses.
Selling expenses increased from the prior year by $15,252 due to
commissions and bonuses given to employees during the year. While most
general administration expenses remained constant, insurance expense
increased by $9,265 as rates for general and liability insurance
continues to go up. The Company was aggressive in their collection
efforts and write offs decreased by $17,865 from June 30, 2000 through
June 30, 2001. The aging of accounts receivable is reviewed on a
regular basis and accounts which become overdue are pursued for
collection.
Under the leadership of the CEO and his sales staff, the Company has
stabilized its customer base. Certainly some customers were lost
during 2001, but the Company is working to replace those customers.
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.
(Continued)
10
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------
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, SBT software, involves the
payroll processing accounting function.
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, 2001.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Financial statements meeting the requirements of Regulation S-X are
contained on pages 13 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-five years and no disagreements on accounting or
financial disclosure.
11
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, 2001 and 2000 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, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial position of Chase
General Corporation and subsidiary as of June 30, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 30, 2001, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Clifton Gunderson LLP
Clifton Gunderson LLP
St. Joseph, Missouri
September 5, 2001
12
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2001 and 2000
ASSETS
2001 2000
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 117,114 $ 146,779
Receivables:
Trade, less allowance for doubtful
accounts of $10,669 in 2001 and $11,393 in 2000 100,494 129,018
Other receivables -- 3,239
Income tax receivables 7,053 --
Inventories:
Finished goods 73,138 85,147
Goods in process 1,943 4,872
Raw materials 80,592 53,232
Packaging materials 64,536 123,938
Prepaid expense 34,606 34,960
Prepaid income taxes 11,220 1,158
---------- ----------
Total current assets 490,696 582,343
---------- ----------
PROPERTY AND EQUIPMENT
Land 35,000 35,000
Buildings 85,738 85,738
Machinery and equipment 677,358 676,914
Trucks and autos 148,527 104,513
Office equipment 49,660 49,123
Leasehold improvements 121,356 121,356
---------- ----------
Total, at cost 1,117,639 1,072,644
Less accumulated depreciation 893,434 854,296
---------- ----------
Total property and equipment 224,205 218,348
---------- ----------
TOTAL ASSETS $ 714,901 $ 800,691
========== ==========
13
LIABILITIES AND STOCKHOLDERS' EQUITY
2001 2000
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 46,002 $ 54,718
Notes payable, Series B, current maturities -- 4,321
Accrued expense:
Interest 6,161 8,711
Other 29,140 26,473
----------- -----------
Total current liabilities 81,303 94,223
LONG-TERM LIABILITIES
Notes payable, Series B, less current maturities above 77,672 123,351
----------- -----------
Total liabilities 158,975 217,574
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $1,275,000 and
$1,245,000 respectively) 500,000 500,000
Series B (liquidation preference $1,230,000 and
$1,200,000 respectively) 500,000 500,000
Cumulative preferred stock, $20 par value:
Series A (liquidation preference $3,029,083 and
$2,970,550 respectively) 1,170,660 1,170,660
Series B (liquidation preference $493,643 and
$484,104 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 (5,910,070) (5,882,879)
----------- -----------
Total stockholders' equity 555,926 583,117
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 714,901 $ 800,691
=========== ===========
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
14
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2001, 2000, and 1999
2001 2000 1999
---------- ---------- ----------
NET SALES $1,981,030 $2,129,785 $2,134,920
COST OF SALES 1,587,058 1,665,882 1,677,258
---------- ---------- ----------
Gross Profit 393,972 463,903 457,662
---------- ---------- ----------
OPERATING EXPENSES
Selling expenses 232,750 218,211 246,592
General and administrative expenses 197,650 188,660 148,838
---------- ---------- ----------
Total operating expenses 430,400 406,871 395,430
---------- ---------- ----------
Income (loss) from operations (36,428) 57,032 62,232
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income 6,922 6,323 6,498
Miscellaneous income 1,690 347 1,758
Interest expense (6,160) (8,842) (10,571)
Other expense -- (173) --
---------- ---------- ----------
Total other income (expense) 2,452 (2,345) (2,315)
---------- ---------- ----------
Income (loss) before income taxes (33,976) 54,687 59,917
PROVISION FOR INCOME TAXES (6,785) 12,403 10,655
---------- ---------- ----------
NET INCOME (LOSS) $ (27,191) $ 42,284 $ 49,262
========== ========== ==========
(LOSS) PER SHARE OF COMMON STOCK $ (.16) $ (.09) $ (.09)
========== ========== ==========
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
15
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 2001, 2000, and 1999
Prior Cumulative Cumulative
Preferred Stock Preferred Stock
------------------ -------------------- Common Paid-in Accumulated
Series A Series B Series A Series B Stock Capital Deficit Total
-------- -------- ---------- -------- -------- ---------- ----------- --------
BALANCE (DEFICIT), JUNE 30, 1998 $500,000 $500,000 $1,170,660 $190,780 $969,834 $3,134,722 $(5,974,425) $491,571
Net income -- -- -- -- -- -- 49,262 49,262
-------- -------- ---------- -------- -------- ---------- ----------- --------
BALANCE (DEFICIT), JULY 1, 1999 500,000 500,000 1,170,660 190,780 969,834 3,134,722 (5,925,163) 540,833
Net income -- -- -- -- -- -- 42,284 42,284
-------- -------- ---------- -------- -------- ---------- ----------- --------
BALANCE (DEFICIT), JUNE 30, 2000 500,000 500,000 1,170,660 190,780 969,834 3,134,722 (5,882,879) 583,117
Net loss -- -- -- -- -- -- (27,191) (27,191)
-------- -------- ---------- -------- -------- ---------- ----------- --------
BALANCE (DEFICIT), JUNE 30, 2001 $500,000 $500,000 $1,170,660 $190,780 $969,834 $3,134,722 $(5,910,070) $555,926
======== ======== ========== ======== ======== ========== =========== ========
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
16
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2001, 2000, and 1999
2001 2000 1999
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers $ 2,010,278 $ 2,119,123 $ 2,094,487
Interest received 6,922 6,323 6,498
Other income 1,689 1,182 2,042
Income tax refunds -- -- 24,710
Cost of sales, selling, general and
administrative expenses paid (1,924,698) (2,075,152) (2,015,534)
Interest paid (8,710) (10,571) (12,109)
Income tax paid (11,220) (12,108) (800)
----------- ----------- -----------
Net cash provided by operating activities 74,261 28,797 99,294
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (53,626) (53,627) (31,145)
----------- ----------- -----------
Net cash used in investing activities (53,626) (53,627) (31,145)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable, Series B (50,000) (35,000) (22,633)
----------- ----------- -----------
Net cash used in financing activities (50,000) (35,000) (22,633)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (29,365) (59,830) 45,516
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 146,779 206,609 161,093
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 117,414 $ 146,779 $ 206,609
=========== =========== ===========
17
2001 2000 1999
-------- -------- --------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $(27,191) $ 42,284 $ 49,262
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 48,069 52,211 55,813
Loss on disposal of equipment -- 835 284
Provision for doubtful accounts 2,225 20,603 (4,012)
Effects of changes in operating assets and liabilities:
Trade receivable 26,299 (10,662) (40,433)
Other receivable 3,239 (3,239) --
Income tax receivable (7,054) -- 24,710
Inventories 46,980 (67,032) 11,256
Prepaid expense 354 509 80
Prepaid income taxes (10,063) (1,158) 1,000
Accounts payable (8,716) 6,335 (10,811)
Income taxes payable -- (8,855) 8,855
Accrued liabilities 119 (3,034) 3,290
-------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 74,261 $ 28,797 $ 99,294
======== ======== ========
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
18
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.
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. Due to the
similarities in the products manufactured, segment reporting for the two
divisions is not maintained by Management and, accordingly, 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.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
19
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are carried at the "lower of cost or market value," with cost being
determined on the "first-in, first-out" basis of accounting. Finished goods and
goods in process include a provision for manufacturing overhead.
PROPERTY AND EQUIPMENT
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
INCOME TAXES
The Company has no significant timing differences that would give rise to
deferred tax items.
This information is an integral part of
the accompanying consolidated financial statements.
20
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 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, 2001 and 2000, $50,000 and $35,000 principal was
paid on the Series B notes, respectively.
As of June 30, 2001 and 2000, the outstanding Series B notes total $77,672 and
$127,672, respectively. Of these amounts $29,376 and $48,286 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, 2001, there was no sinking fund requirement, and in 2000, 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, 2001, 2000, and 1999.
21
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
(loss)" and sinking fund requirements for years ended June 30:
2001 2000 1999
-------- -------- --------
NET INCOME (LOSS)
Chase General Corporation $(11,446) $(10,798) $(11,829)
Dye Candy Company (15,745) 53,082 61,091
-------- -------- --------
Consolidated net income (loss) (27,191) 42,284 49,262
NON-ALLOWANCE EXPENSE DEDUCTION
Interest on indebtedness 6,160 8,842 10,571
-------- -------- --------
Net income (loss) basis for "surplus net earnings" (21,031) 51,126 59,833
DEDUCTIONS FROM INCOME BASIS
Set aside as reserve for accumulation of working capital 25,000 25,000 25,000
-------- -------- --------
"Surplus net earnings (loss)" (46,031) 26,126 34,833
INTEREST PAYMENT REQUIRED 6,160 8,842 10,571
-------- -------- --------
EXCESS "SURPLUS NET EARNINGS (LOSS)"
OVER INTEREST PAYMENT REQUIRED $(52,191) $ 17,284 $ 24,262
======== ======== ========
SINKING FUND REQUIREMENT $ -- $ 4,321 $ 6,066
======== ======== ========
22
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 was $35,460 for the years ended June 30, 2001, 2000, and 1999. The
amounts are included in cost of sales.
Future minimum lease payments under this lease are as follows:
Year ending June 30, 2002 $ 35,460
Year ending June 30, 2003 35,460
Year ending June 30, 2004 35,460
Year ending June 30, 2005 29,550
--------
Total $135,930
========
NOTE 4 - CAPITAL STOCK
Capital stock authorized, issued and outstanding as of June 30, 2001 and 2000 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
23
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
Cumulative Preferred Stock dividends in arrears at June 30, 2001 and 2000,
totaled $6,027,726 and $5,899,654, respectively. Total dividends in arrears, on
a per share basis, consist of the following at June 30:
2001 2000
-------- --------
6% Convertible
Series A $ 12 $ 12
Series B 12 12
5% Convertible
Series A 51 50
Series B 51 50
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 FOR INCOME TAXES
The provision for income taxes consists of the following as of June 30:
2001 2000 1999
------- ------- -------
Federal income tax $(4,898) $ 9,213 $ 7,551
State income tax (1,887) 3,190 3,104
------- ------- -------
Total provision for income taxes $(6,785) $12,403 $10,655
======= ======= =======
The Company's provision for income taxes differs from the tax that would result
from applying statutory federal and state income tax rates primarily because of
nondeductible expenses.
24
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The loss per share was computed on the weighted average of outstanding common
shares during the years as follows:
2001 2000 1999
--------- -------- --------
Net income (loss) $ (27,191) $ 42,284 $ 49,262
--------- -------- --------
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 $(155,263) $(85,788) $(78,810)
========= ======== ========
Weighted average of outstanding common shares 969,384 969,834 969,834
========= ======== ========
Loss per share $ (.16) $ (.09) $ (.09)
========= ======== ========
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, 2001 and 2000, two customers accounted for 54.18%
and 40.09%, respectively, of the gross sales. For the year ending June 30, 2001
one customer accounted for 38.89% of accounts receivable and for the year ending
June 30, 2000 two customers accounted for 53.01% of accounts receivable.
This information is an integral part of
the accompanying consolidated financial statements.
25
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a) Directors
---------
Name Age Periods of Service as Director Terms
--------------- ----- -------------------------------- ---------
Barry M. Yantis 56 1980 to present One year
Brian A. Yantis 55 July 16, 1986 One year
Brett A. Yantis 33 January 21, 1999 to present One year
An insufficient number of proxies were returned by the
shareholders for the January 19, 2001 annual stockholder meeting.
Therefore, the Directors noted above are continuing for an
additional one-year term.
See Item 10(b) for offices held by Barry M. Yantis and Brian A.
Yantis.
(b) Executive Officers
------------------
Years of
Service as
Name Age Position an Officer Term
--------------- ------ ------------- ------------ ---------------
Barry M. Yantis 56 President and 21 Until successor
Treasurer elected
Brian A. Yantis 55 Vice-President 10 Until successor
and Secretary elected
(c) Certain Significant Employees
-----------------------------
There are no significant employees other than above.
(d) Family Relationships
--------------------
Barry M. Yantis, and Brian A. Yantis are brothers. Brett A.
Yantis is the Son of Barry M. Yantis.
(e) Business Experience
-------------------
(1) Barry M. Yantis, president and treasurer has been an officer
of the Company for twenty-two years, fourteen years as vice-
president and eight years as president. He has been on the
board of directors for twenty-two years and has been
associated with the candy business for twenty-six years.
Brian A. Yantis, vice-president and secretary has been an
officer of the Company for eight years as vice-president and
since May, 1992 as secretary. He has been associated with
the insurance business for twenty-seven years and has been a
vice-president of Aon Risk Services in Chicago, Illinois
during the past twelve years.
Brett A. Yantis was elected to the position of director
during the year ending June 30, 1999. Brett has been
associated with the Company for seven years.
(Continued)
26
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
--------------------------------------------------
(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
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
------------------------------- -------------------- -------
Other Restricted
Name and Fiscal Annual Stock Option/ LTIP All other
Principal Position Year End Salary Bonus Compensation Award ($) SARs (#) Payouts Compensation
------------------ ----------- -------- ------- ------------ ---------- -------- ------- ------------
Barry M. Yantis 1) 06-30-01 $115,800 $10,000 $2,240 -- -- -- --
Barry M. Yantis 1) 06-30-00 $112,800 $10,000 $2,240 -- -- -- --
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 -- -- -- --
1) CEO
2) No other compensation than that which is listed in compensation
table.
3) No other officers are compensated for their services besides those
listed in this compensation table.
(c) Option/SAR grants table
-----------------------
Not applicable
(d) Aggregated option/SAR exercises and fiscal year-end option/SAR
--------------------------------------------------------------
value table
-----------
Not applicable
(Continued)
27
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED)
--------------------------------
(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 2001, $83 of
travel expenses were reimbursed to board members, 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, Brian A. Yantis, Barry M. Yantis, and Brett A. Yantis
annually approve the compensation of Barry M. Yantis, CEO.
(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.
(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.
(Continued)
28
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
Amounts
and
Nature
of
Beneficial
Title of Class Name and Address Ownership % of 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 $1 per share All directors and officers 110,856 11.4%
as a group
Prior Cumulative Preferred, All directors and officers 21,533 21.5%
$5 par value: Series A, as a group
6% convertible
Prior Cumulative Preferred All directors and officers 21,533 21.5%
$5 par value: Series B, as a group
6% convertible
Cumulative Preferred, $20 par All directors and officers 3,017 5.2%
value: Series A, $5 convertible as a group
Amounts
and
Nature
of
Beneficial
Title of Class Name and Address Ownership % of Class
-------------------------- ---------------- ---------- ----------
Cumulative Preferred, $20 par All directors and officers 630 6.6%
value: Series B, $5 convertible as a group
(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.
(Continued)
29
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
(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 13
Consolidated Balance Sheets - June 30, 2001 and 2000 14 - 15
Consolidated Statements of Operations for the years
ended June 30, 2001, 2000, and 1999 16
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 2001, 2000, and 1999 17
Consolidated Statements of Cash Flows for the years
ended June 30, 2001, 2000, and 1999 18 - 19
Summary of Significant Accounting Policies 20 - 21
Notes to Consolidated Financial Statements 22 - 26
(Continued)
30
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K (CONTINUED)
-----------
(2) The following are included in Part IV of this report:
Page Number
-----------
Independent Auditor's Report on Supplemental Schedules 33
Schedule I: Condensed Financial Information of the Registrant 34 - 37
Schedule II: Valuation and Qualifying Accounts, June 30, 2001,
2000, and 1999 38
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth quarter of
the year ended June 30, 2001.
(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 19, 2001 annual meeting mailed to security
holders during the 2001 fiscal year.
(2) For the 2001 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.
31
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES
In connection with the audits 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, in all material
respects, in relation to the consolidated financial statements taken as a whole,
the information required to be stated therein.
Clifton Gunderson LLP
St. Joseph, Missouri
September 5, 2001
32
SCHEDULE I
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED BALANCE SHEETS
June 30, 2001 and 2000
ASSETS
2001 2000
----------- -----------
Investment in subsidiary - at equity $ 639,759 $ 719,500
----------- -----------
TOTAL ASSETS $ 639,759 $ 719,500
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Series B notes payable and accrued
interest, unrelated parties $ 52,127 $ 84,802
Series B notes payable and accrued
interest, related parties 31,706 51,581
----------- -----------
Total liabilities 83,833 136,383
----------- -----------
Capital stock 3,331,274 3,331,274
Paid in capital in excess of par 3,134,722 3,134,722
Accumulated (deficit) (5,910,070) (5,882,879)
----------- -----------
Total stockholders' equity 555,926 583,117
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 639,759 $ 719,500
=========== ===========
(1) The restricted assets of 100% consolidated subsidiary, Dye Candy Company,
are $714,901 and $800,691 as of June 30, 2001 and 2000, 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.
(Continued)
33
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, 2001, 2000 and 1999
2001 2000 1999
-------- ------- -------
REVENUE
Equity in net income (loss) of subsidiary $(15,745) $53,082 $61,091
-------- ------- -------
Total revenue (15,745) 53,082 61,091
-------- ------- -------
EXPENSE
General and administrative 8,399 4,645 4,204
Interest 6,160 8,842 10,571
-------- ------- -------
Total expense 14,559 13,487 14,775
-------- ------- -------
Income (loss) before income taxes (30,304) 39,595 46,316
PROVISION (CREDIT) FOR
INCOME TAXES (3,113) 2,689 2,946
-------- ------- -------
NET INCOME (LOSS) $(27,191) $42,284 $49,262
======== ======= =======
(Continued)
34
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, 2001, 2000 and 1999
2001 2000 1999
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
General and administrative expenses paid $ (8,399) $ (4,645) $ (4,204)
Interest paid (8,842) (10,571) (12,109)
Income tax refund received 2,689 2,946 4,392
-------- -------- --------
Net cash used in operating activities (14,552) (12,270) (11,921)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances received from wholly owned subsidiary 64,552 47,270 34,554
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on Series B notes payable (50,000) (35,000) (22,633)
-------- -------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS -- -- --
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- -- --
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ -- $ -- $ --
======== ======== ========
(Continued)
35
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, 2001, 2000 and 1999
2001 2000 1999
-------- -------- --------
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES
Net income (loss) $(27,191) $ 42,284 $ 49,262
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Net (income) loss from wholly owned subsidiary 15,745 (53,082) (61,091)
Effects of changes in operating assets and liabilities:
Accrued interest (2,550) (1,729) (1,538)
Income tax refund receivable (556) 257 1,446
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES $(14,552) $(12,270) $(11,921)
======== ======== ========
This information should be read only in connection with the
accompanying independent auditor's report on supplemental schedules.
36
SCHEDULE II
CHASE GENERAL CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
June 30, 2001, 2000, and 1999
Column A Column B Column C 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, 2001 $11,393 $ 2,225 $ 2,949 $10,669
June 30, 2000 11,516 20,603 20,726 11,393
June 30, 1999 11,604 (4,012) 3,924 11,516
----------------
* 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.
37
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: 9-26-01 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 Accounting
/s/ Barry M. Yantis Officer) and Director 9-26-01
--------------------------- -------
Barry M. Yantis Date
/s/ Brian A. Yantis Vice-President, Secretary and Director 9-25-01
--------------------------- -------
Brian A. Yantis Date