UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: |
For the fiscal year ended June 30, 2000
2003
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: |
For the transition period fromto.
Commission File Numberfile number 2-5916
CHASE GENERAL CORPORATION
(Exact
(Exact name of registrant as specified in its charter)
Missouri 36-2667734
(State of Incorporation) (I.R.S. Employer
(Identification Number)
| Missouri | 36-2667734 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
3600 Leonard Road, St. Joseph, Missouri 64503
(Address
(Address of principal executive offices)
Registrants'
Registrants’ telephone number, including area code:(816)279-1625
Securities registered pursuant to Section 12(b) of the Act: NONE
None
Securities registered pursuant to Section 12(g) of the Act: NONE
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 xNo ¨
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'sregistrant’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
Statex
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ Nox
As of December 31, 2002 there were 969,834 shares of the registrant’s common stock, par value, which is the only outstanding class of common or voting stock of the registrant. The aggregate market value of the votingshares of common stock held by non-
affiliatesnon-affiliates of registrant: Voting stockregistrant is not actively traded. Therefore, market value of the stock is 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,
2000.
Location in this filing where exhibit index is located : 31
Total number of pages included in this filing: 39
PART I
ITEM
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 manufacturingManufacturing confectionery products. In 1970 Chase General Corporation acquired a 100% interest in its wholly-
ownedwholly-owned subsidiary, Dye Candy Company. (Chase General Corporation and Dye Candy Company are sometimes referred herein as "the Company"“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, 19951995. The notes were extended again on December 20, 2002 to December 20, 2004, with the agreement that this will be the final extension. Refer to "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"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,division, 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"“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
INDUSTRY 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) 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,
2000, 1999, and 1998, this division accounted for 61%,
56%, and 55%, 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, 2000,
1999, and 1998, this division accounted for 39%, 44%,
and 45%, 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.
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) MARKET TRENDS
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 termshort-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)
(Continued)
INDUSTRY AND MARKET TRENDS(CONTINUED)
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.
BUSINESS STRATEGY AND OVERVIEW
Under the leadership of the CEO and his sales staff, the Company has stabilized its customer base. Certainly some customers were lost during 2003, but the Company is working to replace those customers. However, no major customers were lost during 2003. The Company continues to look for new markets but only when the addition of a new market is profitable.
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.
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, 2003. This trademark expires in the year 2013. Management and its legal representatives do not expect any impediment to renewing this trademark prior to its expiration.
The principal products produced are as follows:
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
(Continued)
BUSINESS STRATEGY AND OVERVIEW (CONTINUED)
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 Crème Drops | |||
(4) | Peco Flake | (9) | Jelly Candies | |||
(5) | Peanut Squares |
NEW PRODUCT DEVELOPMENT
At the present time there are no specific products that the Company is currently developing, although the Company continues to test various new products for distribution.
SALES AND MARKETING
The Chase Candy Division 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, 2003, 2002, and 2001, this division accounted for 63%, 62%, and 57%, respectively, of the consolidated revenue of Dye Candy Company.
The Poe Division is sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For the years ended June 30, 2003, 2002, and 2001, the division accounted for 37%, 38%, and 43%, respectively, of the consolidated revenue of Dye Candy Company.
The Company has no government contracts, foreign operations or export sales. In addition, all domestic sales are primarily in the Midwest region of the United States.
CUSTOMER SUPPORT
For the years ending June 30, 2000, 1999,2003, 2002, and 1998,2001, Associated Wholesale Grocers, accounted for 20.01%22.28%, 19.64%20.43%, and 18.87%25.64% of gross sales, respectively. For the years ending June 30, 20002003, 2002, and June 30, 1999,2001, Wal-Mart and its affiliates accounted for 20.08%22.79%, 16.12%, and 12.06%28.54% 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.
ITEM 1 BUSINESS (CONTINUED)
(x)
(Continued)
COMPETITION
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 SharesCompany’s market share 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'sCompany’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'years’ experience associated with its name.
(xi) Not applicable.
(xii)
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
To the best of management'smanagement’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)
EMPLOYEE AND LABOR RELATIONS
The Company employs approximately 2520 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
REPORTS TO SECURITY HOLDERS
The Company has no foreign operations or export sales.
In addition, all domestic salesregistrant is not required to send the annual audit report, annual 10-K report and quarterly 10-Q reports to security holders since the stock is not actively traded. These reports are primarily inavailable at the Midwest region of the United States.
ITEMRegistrant’s registered office.
Item 2PROPERTIES
The registrant operates out offrom two buildings consisting of
the following:
CHASE AND POE WAREHOUSEas follows:
Chase and Poe Warehouse - This building located in St. Joseph, Missouri is owned by Dye Candy Company, a wholly-
ownedwholly-owned subsidiary of the registrant. The facilities arefacility is currently devoted entirely to the storage of supplies, and the warehousing and shipping of candy products. This warehouse consists of a sixty-eight yearis sixty-nine years old building
whichand 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
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 propertyfacility, which then was leased from the purchaser in March, 1975. Refer to Note 3, "Notes7, “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 facilityregistrant and is adequate to meet present requirements. The operatingproduction plant is approximately 20,000 square feet and the office is approximately 2,000 square feet. The Company
renegotiated the originalCompany’s lease on this building which
expiredexpires March 31, 1995. The terms of the new lease began
April 1, 1995 and continues for ten years.
ITEM2005.
Item 3LEGAL 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, 2000,2003, nor are any such proceedings contemplated.
ITEM
Item 4 RESULTSSUBMISSION OF VOTESMATTERS TO A VOTE 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, 2000.
PART II
ITEM2003.
Item 5MARKET FOR THE REGISTRANT'SREGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
| (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
| (b) | Security holders |
As of September 5, 2000,15, 2003, the latest practicable date, the approximate number of record holders of common stock was 1,439,1,869, including individual participants in security listings.
(c) DIVIDENDS
(1) DIVIDEND HISTORY AND RESTRICTIONS
PART II
| Item 5 | MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (CONTINUED) |
| (c) | Dividends |
| (1) | Dividend history and restrictions |
No dividends have been paid during the past three fiscal years. Refer to Note 1, "Notes“Notes to Financial Statements"Statements” for dividend restrictions.
(2) DIVIDEND POLICY
| (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.
| (d) | Securities authorized for issuance under equity compensation plans |
The Company does not have any equity compensation plans.
Item 6SELECTED FINANCIAL DATA
| 6-30-2003 | 06-30-2002 | 06-30-2001 | 06-30-2000 | 06-30-1999 | |||||||||||||||
(i) | Net sales or operating revenue | $ | 1,894,049 | $ | 1,843,484 | $ | 1,981,030 | $ | 2,129,785 | $ | 2,134,920 | ||||||||
(ii) | Net income (loss) | $ | (13,665 | ) | $ | 1,390 | $ | (27,191 | ) | $ | 42,284 | $ | 49,262 | ||||||
(iii) | Loss from continuing operations per common share * | $ | (.15 | ) | $ | .13 | $ | (.16 | ) | $ | .09 | $ | .09 | ||||||
(iv) | Total assets | $ | 645,583 | $ | 711,416 | $ | 714,901 | $ | 800,691 | $ | 798,961 | ||||||||
(v) | Long-term debt | $ | 22,032 | $ | 51,010 | $ | 77,672 | $ | 127,672 | $ | 162,672 | ||||||||
(vi) | Cash dividend declared per common share | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
| (b) | No additional years are necessary to keep the summary from being misleading. |
| * | Refer to Note 6, |
| Item 7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
FORWARD-LOOKING STATEMENTS
This form 10-K contains statements that plan for or anticipate the future. Forward-looking statements may include statements about the future of our products and the industry, statements about our future business plans and strategies, and other statements that are necessarynot historical in nature. In this form 10-K, forward-looking statements are generally identified by the words “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. Readers should carefully review these cautionary statements as they identify certain important factors that could cause actual results to keepdiffer materially from those in the summaryforward-looking statements and from being
misleading.
* Referhistorical trends. These forward-looking statements are based on the information available to, Note 6, "Notesand the expectations and assumptions deemed reasonable by, the Company at the time the statements are made. These expectations, assumptions and uncertainties include: the Company’s expectation of heavier demand on working capital in the summer and winter months in anticipation of fall and spring sales; management’s belief that the Company has stabilized its customer base; the Company’s expectation to Financial Statements"continue its efforts to expand the existing market area and increase sales to its customers; and management’s intent to maintain tight control of all expenditures.
| (1) | LIQUIDITY AND SOURCES OF CAPITAL |
Negative cash flows from operating activities were generated for computationfiscal year ended 2003 in the amount of income
(loss) from continuing operations per common share.
sf
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a & b) LIQUIDITY AND CAPITAL RESOURCES$10,990. Positive cash flows from operating activities were generated for fiscal years ended June 30, 2000, 1999,2002 and 19982001 in the amounts of $28,797, $99,294,$126,472 and $93,720,$74,261, 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'sCompany’s practice to invest in short term U.S. Treasury obligations or financial institution certificates of deposit. At June 30, 2000, 1999,2003, 2002, and 19982001, the Company had $115,000, $100,000, $150,000, and $100,000,$50,000, respectively, invested in short term certificates of deposit to meet the 2000, 1999,2003, 2002, and 19982001 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 atmaterial increased approximately $23,127 from June 30, 2000 were comparable2002 to prior
year.June 30, 2003. Raw materials decreased approximately $28,000$57,000 from June 30, 19982001 to June 30, 1999.2002. The Company hadcurrent year increase can be attributed to the fact that purchase commitments at June 30, 2003 were approximately $23,000 less chocolate, peanuts and
coconut in inventory$67,000 lower than at June 30, 1998. Purchase
commitments at June 30, 20002002. Therefore, goods which had not been received in the prior year were approximately
$125,000 higher than at June 30, 1999.already received in the current year. This increasedecrease was due to $26,000approximately $15,000 in peanut contracts overunder prior year, approximately $16,000 decrease in coconut commitments, and approximately $102,000 additional$36,000 decrease in purchase commitments of chocolate over prior year. The
Company's contracts for these products has been
fulfilled and new contracts established. Purchase
commitments for chocolate, peanuts and coconut were
$113,000 less at June 30, 1999 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 was higher than the cost of the commitment.
(Continued)
LIQUIDITY AND SOURCES OF CAPITAL(CONTINUED)
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
inventoryPackaging materials were comparable from June 30, 2001 to June 30, 2002. The increase at June 30, 1999 was comparable to inventory
at June 30, 1998. Packaging materials inventory
increased $53,000 from June 30, 19992003 of $40,085 compared to June 30, 2000.2002 was due to the higher than normal purchases in 2003. These inventory items were purchased during the year ending June 30, 20002003 to replenish inventory used in the current and priorfuture years production. Additionally, new packaging of a clam shell was introduced during the current year. These items were purchased in quantities large enough to fulfill the Company'sCompany’s packaging needs for several seasons.
Finished goods inventory did not significantly changedecreased $28,448 from June 30, 19992002 to June 30, 2000. The slight
increase as2003. This decrease was due to timing of customer purchases of the Cherry Mash products. 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)
Finished goods inventory did not significantly change from June 30, 2001 to June 30, 2002. The slight increase was due to timing of customer purchases of the Cherry Mash products.
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. The Company spent
$23,921Expenditures of $15,254 were made during 1998 to make major improvements to
existing equipment. In addition, $21,715 was expended
on buildings and transportation equipment. During the year endingended June 30, 1999, $16,041 was spent2003 to upgrade and update existing production, equipment. Also, during 1999, $15,104 was
used to add to transportation, and office equipment. Expenditures of $13,574$28,396 were made to upgrade existing
production equipment, in addition, $40,053 was made to
updateand replace transportation and office equipment during the year endingended June 30, 2000.2002. 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. The anticipated cost of a new brittle cooker is approximately $8,000. The Company believes it needs two of these.
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
remainThe entire outstanding amount at June 30, 2000.2003, $22,032 is classified as long-term. On December 20, 1995 the notes were extended to December 20, 2002. On December 20, 2002, the Company received approval to extend the notes to December 20, 20022004 at the current 6% rate of interest, with the agreement that this waswill be the final note extension. Of theThe remaining balance is related party notes payable. The outstanding amount of $51,010 at June 30, 2000, $123,351 is classified long-term and $4,3212002, 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'snote is expected to be paid by December 20, 2004.
The Company’s lease on its manufacturingoffice and plant facility expiredis effective through March 31, 1995. The lease was renewed
effective April 1, 1995 for a period of 10 years2005 at $2,955 per month.
(c) RESULTS OF OPERATIONS
1998 was the first year in over ten years that the
Company realized an operating loss. Increased cost of
sales and general and administrative expenses were the
primary sources for the loss. Company management
realized sales were declining during the 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 year ending June 30, 1999.
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 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.
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 $30,381 during the year
ending June 30, 2000. This decrease 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.
Under the leadership of the CEO and his sales staff,
the Company has stabilized its customer base.
Certainly some customers were lost during 2000, 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.
(Continued)
LIQUIDITY AND SOURCES OF CAPITAL(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.
| (2) | RESULTS OF OPERATIONS |
The following table sets forth for the years indicated, the percentage of net sales of certain items in the Company’s consolidated statements of operations.
| 2003 | 2002 | 2001 | |||||||
Net sales | 100.00 | % | 100.00 | % | 100.00 | % | |||
Cost of sales | 77.10 | 75.38 | 80.11 | ||||||
Gross profit | 22.90 | 24.62 | 19.89 | ||||||
Selling expense | 11.76 | 13.38 | 11.75 | ||||||
General and administrative expense | 12.19 | 11.11 | 9.98 | ||||||
Income (loss) from operations | (1.05 | ) | .13 | (1.84 | ) | ||||
Interest income | .08 | .13 | .35 | ||||||
Miscellaneous income | .36 | .09 | .09 | ||||||
Interest expense | (.07 | ) | (.21 | ) | (.32 | ) | |||
Income (loss) before income taxes | (0.68 | ) | .14 | (1.72 | ) | ||||
Provision (credit) for income taxes | .04 | .06 | (.15 | ) | |||||
Net income (loss) | (0.72 | )% | .08 | % | (1.57 | )% | |||
NET SALES
During the year ended June 30, 2003, net sales increased 2.7% from June 30, 2002 though June 30, 2003. The increase was due to promotions with customers and expansion of the sales market. Additionally, the Company continued to expand its sales through its website.
During the year ended June 30, 2002, net sales decreased 7% from June 30, 2001 through June 30, 2002. The decrease was due to fewer sales to customers as these customers’ number of operating facilities continued to decrease. In addition, sales decreased due to the uncertainty of the economy and terrorism activities on 9/11.
COST OF SALES
Cost of sales increased by 5.1% from June 30, 2002 through June 30, 2003 due to revamping packaging to a clam shell and manufacturing labor rate increases. The clam shell packaging is more universally accepted by confectionary brokers and improves shelf life of the candy.
Cost of sales decreased 12% from June 30, 2001 through June 30, 2002 due to the decrease in net sales, as well as, more efficient production, a reduction in payroll due to fewer employees needed for the operation of the company facilities.
GROSS PROFIT
Gross profit for the year ended June 30, 2003 decreased 4.4% as compared to the year ended June 30, 2002. This was due to revamping packaging to a clam shell and manufacturing labor rate increases that were greater than the increase in sales for the year.
Gross profit for the year ended June 30, 2002 increased 15.2% as compared to the year ended June 30, 2001 due to more efficient production and reducing the number of employees as discussed above.
SELLING EXPENSES
Selling expenses for the year ended June 30, 2003 decreased 9.7% as compared to the year ended June 30, 2002. The majority of this decrease is due to a decrease in salaries and sales commissions. Sales salaries decreased due to the fact that the National Sales manager position was vacant several months during the year. Sales commissions decreased despite increased sales because much of the Company’s sales are to “house accounts” for which commissions are not paid.
Selling expenses for the year ended June 30, 2002 increased 6.0% as compared to the year ended June 30, 2001. This increase was due to an increase in promotions and bill backs in an attempt to increase sales.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 12.7% for the year ended June 30, 2003 as compared to the year ended June 30, 2002. Insurance expense increased $5,367 and the Company had losses of $24,994 on sales of equipment.
General and administrative expenses increased 3.6% for the year ended June 30, 2002 as compared to the year ended June 30, 2001. The main reason for this increase was an increase in insurance expense.
TOTAL OPERATING EXPENSES
Operating expenses increased 0.5% for the year ended June 30, 2003 as compared to the year ended June 30, 2002 for reasons described above.
Operating expenses increased 4.9% for the year ended June 30, 2002 as compared to the year ended June 30, 2001 for reasons described above.
OTHER INCOME (EXPENSE)
Other income and expense increased by $6,785 for the year ended June 30, 2003 as compared to the year ended June 30, 2002. This was due to an increase in miscellaneous income of $5,029 and a decrease in interest expense due to a portion of Notes Payable, Series B being paid off in the current year.
OTHER INCOME (EXPENSE)(CONTINUED)
Other income and expense decreased by $2,152 for the year ended June 30, 2002 as compared to the year ended June 30, 2001. This decrease was due to a decrease in interest income due to decreasing interest rates which were partially offset by a decrease in interest expense due to paying down a portion of Notes Payable, Series B.
INCOME (LOSS) BEFORE INCOME TAXES
Income (loss) before income taxes was $(12,847) for the year ended June 30, 2003. This decreased by $15,421 for the year ended June 30, 2003 as compared to the year ended June 30, 2002. Income (loss) before income taxes was $2,574 for the year ended June 30, 2002. This was a $36,550 increase as compare to the year ended June 30, 2001. The reason for the increase and decrease, respectively, are discussed above.
PROVISION (CREDIT) FOR INCOME TAXES
Provisions (credit) for income taxes was $818 for the year ended June 30, 2003. This was a decrease of $366 as compare to the year ended June 30, 2001. The decrease was due to lower pre-tax income offset by an increase in permanent nondeductible expenses for income taxes.
Provision (credit) for income taxes was $1,184 for the year ended June 30, 2002. This was an increase of $7,969 as compared to the year ended June 30, 2001. This increase was due to an increase in taxable income.
NET INCOME (LOSS)
Net income (loss) for the year ended June 30, 2003 was $(13,665) which is a decrease of $15,055 as compared to the year ended June 30, 2002. Net income (loss) for the year ended June 30, 2002 was $1,390 which is an increase of $28,581 as compared to the year ended June 30, 2001. The decrease and increase, respectively, are explained above.
| (3) | OFF-BALANCE SHEET ARRANGEMENTS |
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 has no off-balance sheet arrangements.
| (4) | DISCLOSURE OF CONTRACTUAL OBLIGATIONS |
Payments Due By Period
Contractual Obligations | Total | Less Than 1 Year | 1 – 3 Years | 3 - 5 Years | More Than 5 Years | ||||||||||
Notes payable, Series B | $ | 22,032 | $ | — | $ | 22,032 | $ | — | $ | — | |||||
Operating lease obligations | $ | 62,055 | $ | 35,460 | $ | 26,595 | $ | — | $ | — | |||||
Total | $ | 84,087 | $ | 35,460 | $ | 48,627 | $ | — | $ | — | |||||
Item 7aQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Refer to Note 7, "Notes8, “Notes to Financial Statements"Statements” for fair value of financial instruments as of June 30, 2000.
ITEM2003.
Item 8FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X are contained on pages 1214 through 2630 of the filing.
(a) SELECTED QUARTERLY
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED 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.
| PAGE | ||
| 15 | ||
Financial Statements | ||
| 17 | ||
| 19 | ||
| 20 | ||
| 21 | ||
| 23 | ||
[GRAPHIC APPEARS HERE]
INDEPENDENT AUDITOR'SAUDITOR’S REPORT
To the Board of Directors
Chase General Corporation and Subsidiary
St. Joseph, Missouri
We have audited the accompanying consolidated balance sheetssheet of Chase General Corporation and Subsidiary as of June 30, 2000 and
19992003, and the related consolidated statements of operations,
stockholders' equity,income, and cash flows for each of the years in the
three-year period ended June 30, 2000.year then ended. These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 2003 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, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
[GRAPHIC APPEARS HERE]
Kansas City, Missouri
August 28, 2003
McGladrey & Pullen, LLP is a member firm of RSM International -
an affiliation of separate and independent legal entitles.
INDEPENDENT AUDITOR’S REPORT
Board of Directors
Chase General Corporation
St. Joseph, Missouri
We have audited the accompanying consolidated balance sheet of Chase General Corporation and subsidiary as of June 30, 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended June 30, 2002 and 2001. 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 auditing standards generally accepted auditing standards.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 Subsidiarysubsidiary as of June 30, 2000 and 1999,2002, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2000,2002 and 2001, in conformity with accounting principles generally accepted accounting
principles.
in the United States of America.
[GRAPHIC APPEARS HERE]
Clifton Gunderson L.L.C.
LLP
St. Joseph, Missouri
August 17, 2000
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE
June 30, 2000 AND 1999
ASSETS
2000 1999
CURRENT ASSETS
Cash2003 and cash equivalents $ 146,779 $ 206,609
Receivables:
Trade, less allowance for doubtful
accounts of $11,393 in 2000 and
$11,516 in 1999 129,018 138,959
Other receivables 3,239 --
Inventories:
Finished goods 85,147 73,106
Goods in process 4,872 3,243
Raw materials 53,232 52,930
Packaging materials 123,938 70,878
Prepaid expense 34,960 35,469
Prepaid income taxes 1,158 --
Total current assets 582,343 581,194
PROPERTY AND EQUIPMENT
Land 35,000 35,000
Buildings 85,738 85,738
Machinery and equipment 676,914 663,341
Trucks and autos 104,513 99,113
Office equipment 49,123 31,909
Leasehold improvements 121,356 121,356
Total, at cost 1,072,644 1,036,457
Less accumulated depreciation 854,296 818,690
Total property and equipment 218,348 217,767
TOTAL 2002
ASSETS $ 800,691 $ 798,961
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
CURRENT LIABILITIES
Accounts payable $ 54,718 $ 48,383
Series B notes payable, related
parties, current maturities 1,642 2,305
Series B notes payable, unrelated
parties, current maturities 2,679 3,761
Accrued expense:
Interest 8,711 10,440
Income taxes -- 8,855
Other 26,473 27,778
Total current liabilities 94,223 101,522
LONG-TERM LIABILITIES
Series B notes payable,
related parties 46,644 59,219
Series B notes payable,
unrelated parties 76,707 97,387
Total long-term liabilities 123,351 156,606
Total liabilities 217,574 258,128
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation
preference $1,245,000
and $1,215,000 respectively) 500,000 500,000
Series B (liquidation
preference $1,200,000
and $1,170,000 respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation
preference $2,970,550
and $2,912,017 respectively) 1,170,660 1,170,660
Series B (liquidation
preference $484,104
and $474,565 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 (5,882,879) (5,925,163)
Total stockholders' equity 583,117 540,833
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 800,691 $ 798,961
| 2003 | 2002 | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 138,806 | $ | 188,528 | ||||
Receivables: | ||||||||
Trade, less allowance for doubtful accounts of $10,050 in 2003 and $9,834 in 2002 | 146,691 | 121,918 | ||||||
Income tax refund claims | — | 8,369 | ||||||
Inventories: | ||||||||
Finished goods | 50,934 | 79,382 | ||||||
Goods in process | 4,337 | 2,557 | ||||||
Raw materials | 46,504 | 23,377 | ||||||
Packaging materials | 100,720 | 60,635 | ||||||
Prepaid expenses | 17,801 | 22,110 | ||||||
Total current assets | 505,793 | 506,876 | ||||||
PROPERTY AND EQUIPMENT | ||||||||
Land | 35,000 | 35,000 | ||||||
Buildings | 85,738 | 85,738 | ||||||
Machinery and equipment | 684,791 | 680,995 | ||||||
Trucks and autos | 89,747 | 172,709 | ||||||
Office equipment | 51,081 | 50,237 | ||||||
Leasehold improvements | 121,356 | 121,356 | ||||||
Total, at cost | 1,067,713 | 1,146,035 | ||||||
Less accumulated depreciation | (927,923 | ) | (941,495 | ) | ||||
Total property and equipment | 139,790 | 204,540 | ||||||
TOTAL ASSETS | $ | 645,583 | $ | 711,416 | ||||
These consolidated financial statements should be read
only in connection with the accompanying summary of significant
accounting policies independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNEBALANCE SHEETS
June 30, 2000, 19992003 and 2002
LIABILITIES AND 1998
2000 1999 1998
NET SALES $2,129,785 $2,134,920 $2,113,777
COST OF SALES 1,665,882 1,677,258 1,696,845
Gross profit 463,903 457,662 416,932
OPERATING EXPENSES
Selling expenses 218,211 246,592 280,764
General and
administrative
expenses 188,660 148,838 175,442
Total operating
expenses 406,871 395,430 456,206
Income
(loss)
from
operations 57,032 62,232 (39,274)
OTHER INCOME (EXPENSE)
Interest income 6,323 6,498 5,896
Miscellaneous income 347 1,758 691
Interest expense (8,842) (10,571) (12,077)
Other expense (173) -- --
Total other
income
(expense) (2,345) (2,315) (5,490)
Income
(loss)
before
income
taxes 54,687 59,917 (44,764)
PROVISION (CREDIT)
FOR INCOME TAXES 12,403 10,655 (11,262)
NET INCOME (LOSS) $ 42,284 $ 49,262 $ (33,502)
(LOSS) PER SHARE
OF COMMON STOCK $ (.09) $ (.09) $ (.17)
STOCKHOLDERS’ EQUITY
| 2003 | 2002 | |||||||
CURRENT LIABILITIES | ||||||||
Current maturities of notes payable, Series B (Note 2) | $ | — | $ | 51,010 | ||||
Accounts payable | 48,717 | 66,600 | ||||||
Accrued expenses | 30,215 | 36,490 | ||||||
Income taxes payable | 968 | — | ||||||
Total current liabilities | 79,900 | 154,100 | ||||||
LONG-TERM LIABILITIES | ||||||||
Notes payable, Series B, less current maturities (Note 2) | 22,032 | — | ||||||
Total liabilities | 101,932 | 154,100 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Capital stock issued and outstanding: (Note 4) | ||||||||
Prior cumulative preferred stock, $5 par value: | ||||||||
Series A (liquidation preference $1,860,000 and $1,830,000 respectively) | 500,000 | 500,000 | ||||||
Series B (liquidation preference $1,815,000 and $1,785,000 respectively) | 500,000 | 500,000 | ||||||
Cumulative preferred stock, $20 par value: | ||||||||
Series A (liquidation preference $4,316,809 and $4,258,276 respectively) | 1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $703,501 and $693,962 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 | (5,922,345 | ) | (5,908,680 | ) | ||||
Total stockholders’ equity | 543,651 | 557,316 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 645,583 | $ | 711,416 | ||||
These consolidated financial statements should be read
only in connection with the accompanying summary of significant
accounting policies independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNEOPERATIONS
Years Ended June 30, 2000, 1999 AND 1998
PRIOR CUMULATIVE CUMULATIVE
PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES A SERIES B
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
Net income -- -- -- --
BALANCE (DEFICIT), JUNE 30, 2000 $500,000 $500,000 $1,170,660 $190,780
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(CONTINUED)
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
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
Net income -- -- 42,284 42,284
BALANCE (DEFICIT), JUNE 30, 2000 $969,834 $3,134,722 $(5,882,879) $583,117
2003, 2002, and 2001
| 2003 | 2002 | 2001 | ||||||||||
NET SALES | $ | 1,894,049 | $ | 1,843,484 | $ | 1,981,030 | ||||||
COST OF SALES | 1,460,386 | 1,389,708 | 1,587,058 | |||||||||
Gross Profit | 433,663 | 453,776 | 393,972 | |||||||||
OPERATING EXPENSES | ||||||||||||
Selling expenses | 222,710 | 246,639 | 232,750 | |||||||||
General and administrative expenses | 230,855 | 204,833 | 197,650 | |||||||||
Total operating expenses | 453,565 | 451,472 | 430,400 | |||||||||
Income (loss) from operations | (19,902 | ) | 2,304 | (36,428 | ) | |||||||
OTHER INCOME (EXPENSE) | ||||||||||||
Interest income | 1,622 | 2,405 | 6,922 | |||||||||
Miscellaneous income | 6,755 | 1,726 | 1,690 | |||||||||
Interest (expense) (Note 2) | (1,322 | ) | (3,861 | ) | (6,160 | ) | ||||||
Total other income (expense) | 7,055 | 270 | 2,452 | |||||||||
Income (loss) before income taxes | (12,847 | ) | 2,574 | (33,976 | ) | |||||||
PROVISION (CREDIT) FOR INCOME TAXES (NOTE 5) | 818 | 1,184 | (6,785 | ) | ||||||||
NET INCOME (LOSS) | (13,665 | ) | 1,390 | (27,191 | ) | |||||||
Preferred dividends | (128,072 | ) | (128,072 | ) | (128,072 | ) | ||||||
Net loss applicable to common stockholders | $ | (141,737 | ) | $ | (126,682 | ) | $ | (155,263 | ) | |||
NET LOSS PER SHARE OF COMMON STOCK - BASIC AND DILUTED | $ | (.15 | ) | $ | (.13 | ) | $ | (.16 | ) | |||
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING | $ | 969,834 | $ | 969,834 | $ | 969,834 | ||||||
These consolidated financial statements should be read
only in connection with the accompanying summary of significant accounting policies independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNESTOCKHOLDERS’ EQUITY
Years Ended June 30, 2000, 1999 AND 1998
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers $2,119,123 $2,094,487 $2,087,531
Interest received 6,323 6,498 5,896
Other income 1,182 2,042 1,926
Income tax refunds -- 24,710 2,384
Cost of sales, selling,
general2003, 2002, and administrative
expenses paid (2,075,152) (2,015,534) (1,979,084)
Interest paid (10,571) (12,109) (14,097)
Income tax paid (12,108) (800) (10,836)
Net cash provided by
operating activities 28,797 99,294 93,720
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (53,627) (31,145) (45,636)
Net cash used in investing
activities (53,627) (31,145) (45,636)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes
payable, Series B (35,000) (22,633) (28,648)
Net cash used in financing
activities (35,000) (22,633) (28,648)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (59,830) 45,516 19,436
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 206,609 161,093 141,657
CASH AND CASH EQUIVALENTS,
END OF YEAR $146,779 $206,609 $161,093
2000 1999 1998
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ 42,284 $ 49,262 $(33,502)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 52,211 55,813 66,019
Loss on disposal of equipment 835 284 1,235
Provision for doubtful accounts 20,603 (4,012) 15,311
Effects of changes in operating
assets and liabilities:
Trade accounts receivable (10,662) (40,433) (26,246)
Other receivables (3,239) -- --
Income tax receivable -- 24,710 (24,710)
Inventories (67,032) 11,256 90,098
Prepaid expense 509 80 4,242
Prepaid income taxes (1,158) 1,000 4,996
Accounts payable 6,335 (10,811) 32
Income tax payable (8,855) 8,855 --
Accrued liabilities (3,034) 3,290 (3,755)
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 28,797 $ 99,294 $ 93,720
2001
| Prior Cumulative Preferred Stock | Cumulative Preferred Stock | Common Stock | Paid-in Capital | Accumulated Deficit | Total | |||||||||||||||||||||
| Series A | Series B | Series A | Series B | |||||||||||||||||||||||
BALANCE (DEFICIT), JULY 1, 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 | |||||||||||||||||
Net income | — | — | — | — | — | — | 1,390 | 1,390 | ||||||||||||||||||
BALANCE (DEFICIT), JUNE 30, 2002 | 500,000 | 500,000 | 1,170,660 | 190,780 | 969,834 | 3,134,722 | (5,908,680 | ) | 557,316 | |||||||||||||||||
Net loss | — | — | — | — | — | — | (13,665 | ) | (13,665 | ) | ||||||||||||||||
BALANCE (DEFICIT), JUNE 30, 2003 | $ | 500,000 | $ | 500,000 | $ | 1,170,660 | $ | 190,780 | $ | 969,834 | $ | 3,134,722 | $ | (5,922,345 | ) | $ | 543,651 | |||||||||
These consolidated financial statements should be read
only in connection with the accompanying summary of significant
accounting policies independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2003, 2002, and 2001
| 2003 | 2002 | 2001 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Collections from customers | $ | 1,869,492 | $ | 1,874,065 | $ | 2,010,278 | ||||||
Interest received | 1,622 | 2,405 | 6,922 | |||||||||
Other income | 6,755 | 1,726 | 1,689 | |||||||||
Cost of sales, selling, general and administrative expenses paid | (1,876,478 | ) | (1,745,563 | ) | (1,924,698 | ) | ||||||
Interest paid | (3,862 | ) | (6,161 | ) | (8,710 | ) | ||||||
Income tax refund received | (8,519 | ) | — | (11,220 | ) | |||||||
Net cash provided by (used in) operating activities | (10,990 | ) | 126,472 | 74,261 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Purchases of property and equipment | (15,254 | ) | (28,396 | ) | (53,926 | ) | ||||||
Proceeds from sale of property and equipment | 5,500 | — | — | |||||||||
Net cash (used in) investing activities | (9,754 | ) | (28,396 | ) | (53,926 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Principal payments on notes payable, Series B | (28,978 | ) | (26,662 | ) | (50,000 | ) | ||||||
Net cash (used in) financing activities | (28,978 | ) | (26,662 | ) | (50,000 | ) | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (49,722 | ) | 71,414 | (29,665 | ) | |||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 188,528 | 117,114 | 146,779 | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 138,806 | $ | 188,528 | $ | 117,114 | ||||||
These consolidated financial statements should be read
only in connection with the accompanying independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2003, 2002, and 2001
| 2003 | 2002 | 2001 | ||||||||||
RECONCILIATION OF NET INCOME TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | ||||||||||||
Net income (loss) | $ | (13,665 | ) | $ | 1,390 | $ | (27,191 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation | 49,510 | 48,061 | 48,069 | |||||||||
Loss on sale of equipment | 24,994 | — | — | |||||||||
Provision for doubtful accounts | 216 | 1,333 | 2,225 | |||||||||
Effects of changes in operating assets and liabilities: | ||||||||||||
Trade receivable | (24,989 | ) | (22,757 | ) | 26,299 | |||||||
Other receivable | — | — | 3,239 | |||||||||
Income tax refund claims receivable | 8,369 | 9,904 | (17,117 | ) | ||||||||
Inventories | (36,544 | ) | 54,258 | 46,980 | ||||||||
Prepaid expenses | 4,309 | 12,496 | 354 | |||||||||
Income taxes payable | 968 | — | — | |||||||||
Accounts payable | (17,883 | ) | 20,598 | (8,716 | ) | |||||||
Accrued expenses | (6,275 | ) | 1,189 | 119 | ||||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | (10,990 | ) | $ | 126,472 | $ | 74,261 | |||||
These consolidated financial statements should be read
only in connection with the accompanying independent auditor’s report
and notes to consolidated financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Chase General Corporation (the Company) 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:
as follows:
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"“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 consolidated financial statements.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting principles generally accepted accounting principlesin the United States of America 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.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUE RECOGNITION
The Company recognizes revenues as product is shipped to the customers. Net sales are comprised of the total sales billed during the period less the estimated returns, customer allowances, freight paid on these shipped goods, and customer discounts. Freight expense on goods shipped for the years ended June 30, 2003, 2002 and 2001 were $103,764, $105,039 and $127,843, respectively.
RECEIVABLES
Accounts receivable are uncollateralized customer obligation which generally require payment within thirty days from the invoice date. Accounts receivable are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectibility of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.
INVENTORIES
Inventories are carried at the "lower“lower of cost or market value,"” with cost being determined on the "first-in, first-out"“first-in, first-out” basis of accounting. Finished goods and goods in process include a provision for manufacturing overhead.
PROPERTY AND EQUIPMENT
Depreciation
Property and equipment is computed by the straight-line method for
additions prior to 1981, and by the declining balance methods for
assets acquired after 1980.recorded at cost. The Company'sCompany’s property and equipment are being depreciated on straight-line and accelerated methods over the following estimated useful lives:
Buildings 25 years
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 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and equipment 3 - 10 years
Trucks and autos 3 - 5 years
Office equipment 5 - 10 years
Leasehold improvements 8 - 31.5 years
used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.
INCOME TAXES
The Company has no significant timing differences that would give rise to deferred tax items.
This information
EARNINGS PER SHARE
Basic Earnings Per Common Share is an integral partcomputed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted Earnings Per Common Share shall be computed by including contingently issuable shares with the weighted average shares outstanding during the period. When inclusion of the accompanying
consolidatedcontingently issuable shares would have an antidilutive effect upon earnings per share, no diluted earnings per share shall be presented.
The following contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share:
| 2003 | 2002 | 2001 | ||||
Shares issuable upon conversion of Series A Prior Cumulative Preferred Stock | 400,000 | 400,000 | 400,000 | |||
Shares issuable upon conversion of Series B Prior Cumulative Preferred Stock | 375,000 | 375,000 | 375,000 | |||
Shares issuable upon conversion of Series A Cumulative Preferred Stock | 222,133 | 222,133 | 222,133 | |||
Shares issuable upon conversion of Series B Cumulative Preferred Stock | 36,200 | 36,200 | 36,200 |
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 143 (SFAS 143),Accounting for Asset Retirement Obligations, which will be effective for us beginning July 1, 2003. SFAS 143 addresses the financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In May 2003, the FASB issued SFAS No. 150 (SFAS 150)Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity. This will be effective for us beginning July 1, 2003.
We have assessed the impact of SFAS No. 143 and SFAS No. 150, and estimate that the impact of these standards will not be material to our financial condition, results of operations or liquidity.
NOTE 12 - 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,
2000 and 1999, $35,000 and $22,633 principal was paid on the
Series B notes, respectively.
As of June 30, 20002003 and 1999,2002, the outstanding Series B notes total $127,672$22,032 and $162,672,$51,010, respectively. Of these amounts $48,286 and $61,524$22,032 are owed to officers and directors of the Company.
Company for each year. Effective December 20, 2002 (maturity date of the outstanding Series B notes), the notes were extended to December 20, 2004 at 6% interest rate, with the agreement that this will be the final note extension.
Related party interest expense was $1,322, $1,542 and $2,330 for the years ended June 30, 2003, 2002 and 2001, respectively.
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'sCompany’s fiscal year "surplus“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, all2003 and 2002, there was no sinking fund deposits had
been disbursed to the noteholders.requirement. The "surplus“surplus net earnings"earnings” is the amount by which the consolidated net income, after adding back the current year'syear’s interest on the outstanding notes, exceeds a $25,000 working capital reserve.
See Note 23 for computation of "surplus“surplus net earnings"earnings” and sinking fund requirements for years ended June 30, 2000, 1999,2003, 2002, and 1998.
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.
2001.
Dividends, other than stock dividends, may not be paid on capital stock at any time interest on the notes is not current.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 - "SURPLUS“SURPLUS NET EARNINGS"EARNINGS” AND SINKING FUND REQUIREMENTS
The following is an analysis of the computation of the "surplus“surplus net earnings"earnings (loss)” and sinking fund requirements for years ended June 30:
2000 1999 1998
NET INCOME (LOSS)
Chase General Corporation $(10,798) $(11,829) $(12,410)
Dye Candy Company 53,082 61,091 (21,092)
Consolidated net income (loss) 42,284 49,262 (33,502)
NON-ALLOWANCE EXPENSE DEDUCTION
Interest on indebtedness 8,842 10,571 12,077
Net income (loss) basis
for "surplus net earnings" 51,126 59,833 (21,425)
DEDUCTIONS FROM INCOME BASIS
Set aside as reserve for
accumulation of working capital 25,000 25,000 25,000
"Surplus net earnings"
(loss) 26,126 34,833 (46,425)
INTEREST PAYMENT REQUIRED 8,842 10,571 12,077
EXCESS "SURPLUS NET EARNINGS" (LOSS)
OVER INTEREST PAYMENT REQUIRED $ 17,284 $ 24,262 $(58,502)
SINKING FUND REQUIREMENT $ 4,321 $ 6,066 $ --
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, 2000, 1999 and 1998 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, 2001 $ 35,460
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 $ 171,390
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, 2000, the Company had raw materials purchase
commitments with four vendors totaling $286,289.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2003 | 2002 | 2001 | ||||||||||
NET INCOME (LOSS) | ||||||||||||
Chase General Corporation | $ | (8,986 | ) | $ | (12,612 | ) | $ | (11,446 | ) | |||
Dye Candy Company | (4,679 | ) | 14,002 | (15,745 | ) | |||||||
Consolidated net income (loss) | (13,665 | ) | 1,390 | (27,191 | ) | |||||||
NON-ALLOWANCE EXPENSE DEDUCTION | ||||||||||||
Interest on indebtedness | 1,322 | 3,861 | 6,160 | |||||||||
Net income (loss) basis for “surplus net earnings” | (12,343 | ) | 5,251 | (21,031 | ) | |||||||
DEDUCTIONS FROM INCOME BASIS | ||||||||||||
Set aside as reserve for accumulation of working capital | 25,000 | 25,000 | 25,000 | |||||||||
“Surplus net earnings (loss)” | (37,343 | ) | (19,749 | ) | (46,031 | ) | ||||||
INTEREST PAYMENT REQUIRED | 1,322 | 3,861 | 6,160 | |||||||||
EXCESS “SURPLUS NET EARNINGS (LOSS)” OVER INTEREST PAYMENT REQUIRED | $ | (38,665 | ) | $ | (23,610 | ) | $ | (52,191 | ) | |||
SINKING FUND REQUIREMENT | $ | — | $ | — | $ | — | ||||||
NOTE 4 - CAPITAL STOCK
Capital stock authorized, issued and outstanding as of June 30, 20002003 and 19992002 is as follows:
SHARES
ISSUED
| Shares | ||||
| Authorized | Issued and Outstanding | |||
Prior Cumulative Preferred Stock, $5 par value: | ||||
6% Convertible | 240,000 | |||
Series A | 100,000 | |||
Series B | 100,000 | |||
CHASE GENERAL CORPORATION 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 StockSUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - 1,033,333 shares 2,000,000 969,834
CAPITAL STOCK (CONTINUED)
| Shares | ||||
| Authorized | Issued and Outstanding | |||
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 - 1,030,166 shares | 2,000,000 | 969,834 | ||
Cumulative Preferred Stock dividends in arrears at June 30, 20002003 and 1999,2002, totaled $5,899,654$6,283,870 and $5,771,582,$6,155,798, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30:
2000 1999
6% Convertible
Series A $12 $12
Series B 12 12
5% Convertible
Series A 51 50
Series B 51 50
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
| 2003 | 2002 | |||||
6% Convertible | ||||||
Series A | $ | 13 | $ | 13 | ||
Series B | 13 | 13 | ||||
5% Convertible | ||||||
Series A | 54 | 53 | ||||
Series B | 54 | 53 | ||||
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 four4 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:
2000 1999 1998
Federal income tax $ 9,213 $ 7,551 $(8,817)
State income tax 3,190 3,104 (2,445)
Total provision for
income taxes $12,403 $10,655 $(11,262)
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.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PROVISION (CREDIT) FOR INCOME TAXES
The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax income (loss) for the years ended June 30, 2003, 2002 and 2001 due to the following:
| 2003 | 2002 | 2001 | |||||||||
Computed “expected” tax (benefit) | $ | (1,927 | ) | $ | 386 | $ | (5,096 | ) | |||
Increase (decrease) in income taxes (benefits) resulting from: | |||||||||||
State income taxes | (770 | ) | 345 | (1,887 | ) | ||||||
Nondeductible expenses | 206 | 453 | 198 | ||||||||
Other | 3,309 | — | — | ||||||||
| $ | 818 | $ | 1,184 | $ | (6,785 | ) | |||||
NOTE 6 - (LOSS)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:
2000 1999 1998
Net income (loss) $ 42,284 $ 49,262 $ (33,502)
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 $(85,788) $(78,810) $(161,574)
Weighted average of
outstanding common shares 969,834 969,834 969,834
Loss per share $ (.09) $ (.09) $ (.17)
| 2003 | 2002 | 2001 | ||||||||||
Net income (loss) | $ | (13,665 | ) | $ | 1,390 | $ | (27,191 | ) | ||||
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 | $ | (141,737 | ) | $ | (126,682 | ) | $ | (155,263 | ) | |||
Weighted average of outstanding common shares | 969,834 | 969,834 | 969,384 | |||||||||
Loss per share | $ | (.15 | ) | $ | (.13 | ) | $ | (.16 | ) | |||
No computation was made on common stock equivalents outstanding at year-end because earnings per share would be anti-dilutive.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS
Dye Candy Company leases its manufacturing facility 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, 2003, 2002, and 2001. The amounts are included in cost of sales.
Future minimum lease payments under this lease are as follows:
Year ending June 30, 2004 | $ | 35,460 | |
Year ending June 30, 2005 | 26,595 | ||
Total | $ | 62,055 | |
As of June 30, 2003, the Company had raw materials purchase commitments with three vendors totaling $34,073.
NOTE 8 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company'sCompany’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 89 - CONCENTRATION OF CREDIT RISK
For the yearyears ending June 30, 1998 one customer2003, 2002 and 2001, two customers accounted for 18.87%45.07%, 36.56% and 54.18%, respectively, of the gross sales. For the years ending June 30, 20002003 and 1999, two customers accounted for 40.09% and 31.70%,
respectively, of the gross sales.
For the year ending June 30, 2000, two customers accounted for
53.01% of accounts receivable and for the year ending June 30,
19992002 one customer accounted for 32.79%43.5% and 30.42%, respectively, of net accounts receivable.
For
| Item 9 | CHANGE IN AND DISAGREEMENTS WITH ACCCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
On June 30, 2003, we engaged McGladrey & Pullen, LLP as our independent auditors for the year endingended June 30, 1998, four customers accounted for
47.58%2003 and dismissed our former independent auditors, Clifton Gunderson LLP as of accounts receivable.
This information is an integral partJune 20, 2003 which received Board approval. None of the accompanying
consolidatedreports of our former auditors in respect of our financial statements.
During our two most recent fiscal years and to the date of their dismissal, there have been no disagreements between us and our former auditors on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to the satisfaction of the former auditors, would have caused it to make reference to the subject matter of the disagreement in connection with its report.
We did not consult with McGladrey & Pullen, LLP on any issues prior to us engaging McGladrey & Pullen, LLP on June 30, 2003.
PART III
ITEM
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) DIRECTORS
Name Age Periods of Service as Director Terms
Barry M. Yantis 55 1980 to present One year
Brian A. Yantis 54 July 16, 1986 One year
Brett A. Yantis 32 January 21, 1999 to present One year
| (a) | Directors |
Name | Age | Periods of Service as Director | Terms | |||
Barry M. Yantis | 58 | 1980 to present | One year | |||
Brett A. Yantis | 35 | January 21, 1999 to present | One year | |||
Brian A. Yantis | 57 | July 16, 1986 to present | One year |
An insufficient number of proxies were returned by the shareholders for the January 21, 200014, 2003 annual stockholder meeting. Therefore, the Directors noted above are continuing for an additional one yearone-year term.
See Item 10(b) for offices held by Barry M. Yantis, Brett A. Yantis, and Brian A. Yantis.
| (b) | Executive Officers |
Name | Age | Position | Years of Service as an Officer | Term | ||||
Barry M. Yantis | 58 | President, CEO and Treasurer | 24 | Until successor elected | ||||
Brett A. Yantis | 35 | Vice President | 1 | Until successor elected | ||||
Brian A. Yantis | 57 | Secretary | 12 | Until successor elected |
Item 10DIRECTORS AND EXECUTIVE OFFICERS Years of
Service as
Name Age Position an Officer Term
Barry M. Yantis 55 President and 20 Until successor elected
Treasurer
Brian A. Yantis 54 Vice-President 9 Until successor elected
and Secretary
(c) CERTAIN SIGNIFICANT EMPLOYEES
OF THE REGISTRANT (CONTINUED)
| (c) | Certain Significant Employees |
There are no significant employees other than above.
(d) FAMILY RELATIONSHIPS
| (d) | Family Relationships |
Barry M. Yantis and Brian A. Yantis are brothers. Brett A. Yantis is the Sonson 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.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(CONTINUED)
| (e) | Business Experience |
| (1) | Barry M. Yantis, president and treasurer has been an officer of the Company for twenty-four years, fourteen years as vice-president and ten years as president. He has been on the board of directors for twenty-four years and has been associated with the candy business for twenty-eight years. |
Brett A. Yantis was elected to the position of director during the year ending June 30, 1999. Brett was elected Vice President in January, 2003. Brett has been associated with the Company for sevennine years.
(2) The directors
Brian A. Yantis, secretary has been an officer of the Company since May 1992. He has been associated with the insurance business for twenty-nine years and executive officers listed above
are alsohas been a vice-president of Aon Risk Services in Chicago, Illinois during the directors and executive officers of
Dye Candy Company.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
past fourteen 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
| (g) | Promoters and Control Persons |
Not applicable
ITEM
| (h) | Audit Committee Financial Expert |
Registrant is not required to have an audit committee since the stock is not actively traded. The Board of Directors effectively operates as the audit committee.
Item 11 - EXECUTIVE COMPENSATION
(a) GENERAL
| (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)
| (b) |
Summary Compensation Table
| Long Term Compensation | |||||||||||||||||||
| Annual Compensation | Awards | Payouts | |||||||||||||||||
Name and Principal Position | Fiscal Year End | Salary | Bonus | Other Annual | Restricted Stock Award (s) | Option/ SARs (#) | LTIP Payouts | All other Compensation | |||||||||||
Barry M. Yantis | 1) 06-30-03 | $ | 106,000 | $ | 6,667 | $ | — | — | — | — | — | ||||||||
Barry M. Yantis | 1) 06-30-02 | $ | 106,000 | $ | — | $ | 5,000 | — | — | — | — | ||||||||
Barry M. Yantis | 1) 06-30-01 | $ | 115,800 | $ | 10,000 | $ | 2,240 | — | — | — | — | ||||||||
| 1) | CEO, |
| 2) | No other compensation than that which is listed in compensation table. |
| (c) | Option/SAR grants table |
Not applicable
(d) AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-
END OPTION/SAR VALUE TABLE
| (d) | Aggregated option/SAR exercises and fiscal year-end option/SAR value table |
Not applicable
(e) LONG-TERM INCENTIVE AWARDS TABLE
| (e) | Long-term incentive awards table |
Not applicable
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED)
(f) DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
| (f) | Defined benefit or actuarial plan disclosure |
Not applicable
(g) COMPENSATION OF DIRECTORS
| (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 2000, $1202003, $137 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
| (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
Item 11EXECUTIVE COMPENSATION (CONTINUED)
| (i) | Report on repricing of option/SARs |
Not applicable
(j) ADDITIONAL INFORMATION WITH RESPECT TO
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS
| (j) | Additional information with respect to compensation committee interlocks and insider participation in compensation decisions |
The registrant has no formal compensation committee. The boardBoard of directors,Directors, Brian A. Yantis, Barry M. Yantis, and Brett A. Yantis (all current officers of the Company) annually approve the compensation of Barry M. Yantis, CEO.
(k) BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
CEO, President and Treasurer.
| (k) | Board compensation committee report on executive compensation |
The board bases the annual salary of the CEO on the Company'sCompany’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
| (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'sCompany’s stock.
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 Barry Yantis 194,385/1/ 16.8% /2/
$1 per share 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 and officers
$5 par value: as a group
Series B,
6% convertible
Cumulative All directors 3,017 5.2%
Preferred, and officers
$20 par as a group
value:
Series A,
$5 convertible
AMOUNTS
AND
NATURE
OF
BENEFICIAL
TITLE OF CLASS NAME AND ADDRESS OWNERSHIP % OF CLASS
Cumulative All directors 630 6.6%
Preferred, and officers
$20 par as a group
value:
Series B,
$5 convertible
/1/
| Item 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Title of Class | Name and Address | Amounts of | % of Class | |||||
(a) Security ownership of certain beneficial owners | ||||||||
Common; par value $1 per share | Barry Yantis, CEO & Director | 194,385 | (1) | 16.8 | %(2) | |||
| 5605 Osage Drive | ||||||||
| St. Joseph, Mo. | ||||||||
| 64503 | ||||||||
| Brian Yantis, Officer & Director | 97,192 | (3) | 8.4 | %(4) | ||||
| 1210 E. Clarendon | ||||||||
| Arlington Heights, IL. | ||||||||
| 60004 | ||||||||
| Item 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Title of Class | Name and Address | Amounts and Nature of Beneficial Ownership | % of Class | ||||
(b) Security ownership of management | |||||||
Common; par value $1 per share | Two directors and CEO as a group | 110,856 | 11.4 | % | |||
Prior Cumulative Preferred, $5 par value: Series A, 6% convertible | Two directors and CEO as a group | 21,533 | 21.5 | % | |||
Prior Cumulative Preferred $5 par value: Series B, 6% convertible | Two directors and CEO as a group | 21,533 | 21.5 | % | |||
Cumulative Preferred, $20 par value: Series A, $5 convertible | Two directors and CEO as a group | 3,017 | 5.2 | % | |||
Cumulative Preferred, $20 par value: Series B, $5 convertible | Two directors and CEO as a group | 630 | 6.6 | % | |||
(1) Includes 180,721120,477 shares which could be received within 30 days upon conversion of preferred stock.
/2/
(2) Reflects the percentage 291,577194,385 shares would represent if the 180,721120,477 shares above were converted to common stock.
(c) No known change
(3) Includes $60,244 shares which could be received within 30 days upon conversion of control is anticipated.
ITEMpreferred stock.
(4) Reflects the percentage 97,192 shares would represent if the 60,244 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
| (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'sregistrant’s last fiscal year. In addition, there are no such currently proposed transactions.
(b) CERTAIN BUSINESS RELATIONSHIPS
| (b) | Certain business relationships |
Not applicable
(c) INDEBTEDNESS OF MANAGEMENT
Item 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
| (c) | Indebtedness of management |
Not applicable
(d) TRANSACTIONS WITH PROMOTERS
| (d) | Transactions with promoters |
Not applicable
Item 14CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART IV
ITEM 14 -
Item 15EXHIBITS, 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
| (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 | 15 | |
Consolidated Balance Sheets - June 30, 2003 and 2002 | 17 - 18 | |
Consolidated Statements of Operations for the years ended June 30, 2003, 2002, and 2001 | 19 | |
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2003, 2002, and 2001 | 20 | |
Consolidated Statements of Cash Flows for the years ended June 30, 2003, 2002, and 2001 | 21 - 22 | |
Notes to Consolidated Financial Statements | 23 - 30 |
| Item | 15EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) |
| (2) | The following are included in Part IV of this report: |
Independent Auditor’s Report | 38 - 39 | |
Schedule I: Condensed Financial Information of the Registrant | 40 - 42 | |
Schedule II: Valuation and Qualifying Accounts, June 30, 2003, 2002, and 2001 | 43 | |
| (b) | Reports on Form 8-K |
Form 8-K werewas filed during the fourth
quarteron June 23, 2003 of the year ended June 30, 2000.
(c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
2003 to report the resignation of auditors, Clifton Gunderson LLP.
| (c) | Exhibits required by Item 601 of Regulation S-K |
The following have been previously filed and are incorporated by reference to prior years'years’ Forms 10-
K10-K filed by the Registrant:
(3) Articles of Incorporation and By-Laws
| (3) | Articles of Incorporation and By-Laws |
The following explanations are included in "Notes“Notes to Financial Statements"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
| (4) | Rights of security holders including indentures - Refer to Notes 2 and 4. |
| (11) | Computation of per share earnings - Refer to Note 6. |
| (21) | Subsidiaries of registrant - Refer to Note 1. |
| (31) | Certification |
| (32) | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 |
| (d) | Financial statement schedules required by Regulation S-X |
Schedules required by Regulation S-X contained on page 3439 through 3843 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)
| (1) | With this filing, the Registrant is furnishing to the Commission four (4) copies of the Proxy Statement regarding the January 14, 2003 annual meeting mailed to security holders during the 2004 fiscal year. |
| (2) | For the 2004 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. |
[GRAPHIC APPEARS HERE]
INDEPENDENT AUDITOR’S REPORT
ON THE SUPPLEMENTAL SCHEDULES
To the Registrant is furnishing toBoard of Directors
Chase General Corporation
St. Joseph, Missouri
Our audits were made for the Commission four (4) copiespurpose of forming an opinion on the Proxy
Statement regarding the January 21, 2000 annual
meeting mailed to security holders during the 2000
fiscal year.
(2) For the 2000 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 thebasic consolidated financial statements of Chase General Corporation and Subsidiary, we have
also auditedtaken as a whole. The consolidated supplemental schedules I and II. InII are presented for purposes of complying with the Securities and Exchange Commission’s rules and are not a part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, these schedules presentare fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole, the information required to be stated therein.
Clifton Gunderson L.L.C.
St. Joseph,whole.
[GRAPHIC APPEARS HERE]
Kansas City, Missouri
August 17, 2000
McGladrey & Pullen, LLP is a member firm of RSM International -
an affiliation of separate and independent legal entitles.
SCHEDULE I
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(REGISTRANT ONLY)
(Registrant Only)
CONDENSED BALANCE SHEETS
JUNE 30, 2000 AND 1999
ASSETS
2000 1999
Investment in subsidiary - at equity $ 719,500 $ 713,945
TOTAL ASSETS $ 719,500 $ 713,945
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Series B notes payable and accrued interest,
unrelated parties $ 84,802 $ 107,693
Series B notes payable and accrued interest,
related parties 51,581 65,419
Total liabilities 136,383 173,112
Capital stock 3,331,274 3,331,274
Paid in capital in excess of par 3,134,722 3,134,722
Accumulated (deficit) (5,882,879) (5,925,163)
Total stockholders' equity 583,117 540,833
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 719,500 $ 713,945
(1)The restricted assets of 100% consolidated subsidiary, Dye
Candy Company, are $800,691 and $798,961 as of
June 30, 20002003 and 1999, 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.
| 2003 | 2002 | |||||||
| ASSETS | ||||||||
Investment in subsidiary - at equity | $ | 567,005 | $ | 612,188 | ||||
TOTAL ASSETS | $ | 567,005 | $ | 612,188 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Series B notes payable and accrued interest, unrelated parties | $ | — | $ | 23,576 | ||||
Series B notes payable and accrued interest, related parties | 23,354 | 31,296 | ||||||
Total liabilities | 23,354 | 54,872 | ||||||
Capital stock | 3,331,274 | 3,331,274 | ||||||
Paid in capital in excess of par | 3,134,722 | 3,134,722 | ||||||
Accumulated (deficit) | (5,922,345 | ) | (5,908,680 | ) | ||||
Total stockholders’ equity | 543,651 | 557,316 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 567,005 | $ | 612,188 | ||||
| (1) | The restricted assets of 100% consolidated subsidiary, Dye Candy Company, are $645,583 and $711,416 as of June 30, 2003 and 2002, 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)
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(REGISTRANT ONLY)
(Registrant Only)
CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE
Years Ended June 30, 2000, 1999 AND 1998
2000 1999 1998
REVENUE
Equity in net income (loss) of subsidiary $ 53,082 $ 61,091 $ (21,092)
Total revenue 53,082 61,091 (21,092)
EXPENSE
General2003, 2002 and administrative 4,645 4,204 4,726
Interest 8,842 10,571 12,076
Total expense 13,487 14,775 16,802
Income (loss) before income taxes 39,595 46,316 (37,894)
PROVISION (CREDIT) FOR
INCOME TAXES 2,689 2,946 (4,392)
NET INCOME (LOSS) $ 42,284 $ 49,262 $ (33,502)
| 2003 | 2002 | 2001 | ||||||||||
REVENUE | ||||||||||||
Equity in net income (loss) of subsidiary | $ | (4,679 | ) | $ | 14,000 | $ | (15,745 | ) | ||||
Total revenue | (4,679 | ) | 14,000 | (15,745 | ) | |||||||
EXPENSE | ||||||||||||
General and administrative | 11,582 | 11,546 | 8,399 | |||||||||
Interest | 1,322 | 3,861 | 6,160 | |||||||||
Total expense | 12,904 | 15,407 | 14,559 | |||||||||
Income (loss) before income taxes | (17,583 | ) | (1,407 | ) | (30,304 | ) | ||||||
CREDIT FOR INCOME TAXES | (3,918 | ) | (2,797 | ) | (3,113 | ) | ||||||
NET INCOME (LOSS) | $ | (13,665 | ) | $ | 1,390 | $ | (27,191 | ) | ||||
(Continued)
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(REGISTRANT ONLY)
(Registrant Only)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE
Years Ended June 30, 2000, 1999 AND 1998
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
General2003, 2002 and administrative expenses paid $(4,645) $(4,204) $(4,726)
Interest paid (10,571) (12,109) (14,097)
Income tax refund received 2,946 4,392 4,153
Net cash used in operating activities (12,270) (11,921) (14,670)
CASH FLOWS FROM INVESTING ACTIVITIES
Advances received from wholly owned
subsidiary 47,270 34,554 43,318
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on Series B notes
payable (35,000) (22,633) (28,648)
NET DECREASE IN CASH AND
CASH EQUIVALENTS -- -- --
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- -- --
CASH AND CASH EQUIVALENTS,
END OF YEAR $ -- $ -- $ --
| 2003 | 2002 | 2001 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
General and administrative expenses paid | $ | (11,582 | ) | $ | (11,546 | ) | $ | (8,399 | ) | |||
Interest paid | (3,862 | ) | (6,160 | ) | (8,842 | ) | ||||||
Income tax refund received | (2,797 | ) | (3,113 | ) | 2,689 | |||||||
Net cash used in operating activities | (18,241 | ) | (20,819 | ) | (14,552 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Advances received from wholly owned subsidiary | 47,219 | 47,481 | 64,552 | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Principal payments on Series B notes payable | (28,978 | ) | (26,662 | ) | (50,000 | ) | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | — | — | — | |||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | — | — | — | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | — | $ | — | $ | — | ||||||
(Continued)
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(REGISTRANT ONLY)
(Registrant Only)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE
Years Ended June 30, 2000, 1999 AND 1998
2000 1999 1998
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES
Net income (loss) $42,284 $ 49,262 $(33,502)
Adjustments to reconcile net income
(loss)to net cash used in operating
activities:
Net income (loss) from wholly owned
subsidiary (53,082) (61,091) 21,092
Effects of changes in operating assets2003, 2002 and liabilities:
Accrued interest (1,729) (1,538) (2,021)
Income tax refund receivable 257 1,446 (239)
NET CASH USED IN OPERATING ACTIVITIES $(12,270) $(11,921) $(14,670)
This information should be read only in connection with the
accompanying independent auditor's report on supplemental
schedules.
| 2003 | 2002 | 2001 | ||||||||||
RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES | ||||||||||||
Net income (loss) | $ | (13,665 | ) | $ | 1,390 | $ | (27,191 | ) | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
Net (income) loss from wholly owned subsidiary | 4,679 | (14,000 | ) | 15,745 | ||||||||
Effects of changes in operating assets and liabilities: | ||||||||||||
Accrued interest | (2,539 | ) | (2,299 | ) | (2,550 | ) | ||||||
Income tax refund claims receivable | (6,715 | ) | (5,910 | ) | (556 | ) | ||||||
NET CASH USED IN OPERATING ACTIVITIES | $ | (18,240 | ) | $ | (20,819 | ) | $ | (14,552 | ) | |||
SCHEDULE II
CHASE GENERAL CORPORATION AND ITS SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
JUNE 30, 2000, 1999, AND 1998
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, 2000 $11,516 $20,603 $20,726 $11,393
June 30, 1999 11,604 (4,012) 3,924 11,516
June 30, 1998 12,714 15,311 16,421 11,604
* 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.
Column A | Column B | Column C Additions | Column D | Column E | ||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Deductions * | Balance at end of Period | ||||||||
Valuation accounts deducted from assets to which they apply for doubtful accounts receivable: | ||||||||||||
June 30, 2003 | $ | 9,834 | $ | 216 | $ | — | $ | 10,050 | ||||
June 30, 2002 | 10,669 | 1,333 | 2,168 | 9,834 | ||||||||
June 30, 2001 | 11,393 | 2,225 | 2,949 | 10,669 | ||||||||
| * | Represents accounts written off, net of (recoveries), for the respective years. |
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: By: /s/ Barry M. Yantis
Barry M. Yantis, President
| CHASE GENERAL CORPORATION | ||||||
| (Registrant) | ||||||
Date: | 9-25-03 | 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 9/25/2000
Barry M. Yantis Date
/s/ Brian A. Yantis Vice-President, Secretary and Director 9/25/2000
Brian A. Yantis Date
/S/ BARRY M. YANTIS Barry M. Yantis | President, Treasurer (Principal Executive Officer and Chief Financial and Accounting Officer) and Director | 9-25-03 Date | ||
/S/ BRETT YANTIS Brett Yantis | Vice-President and Director | 9-25-03 Date | ||
/S/ BRIAN A. YANTIS Brian A. Yantis | Secretary and Director | 9-23-03 Date | ||
44