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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002
Commission File Number 2-5916
CHASE GENERAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 36-2667734
- --------------------------------- -----------------------------
(State of Incorporation) (I.R.S. Employer
(Identification Number)
3600 Leonard Road, St. Joseph, Missouri 64503
---------------------------------------------
(Address of principal executive offices)
Registrants' telephone number, including area code: (816) 279-1625
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x Yes No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-
State the aggregate market value of the voting stock held by non-affiliates of
registrant: Voting stock not actively traded. Therefore, market value of stock
unknown as of 60 days prior to the date of this filing.
Indicate the number of shares outstanding of each of the registrants' classes of
common stock as of the latest practicable date: 969,834 (one class with $1 par
-------
value) as of September 5, 2002.
Location in this filing where exhibit index is located: 30
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Total number of pages included in this filing: 38
--
1
PART I
ITEM 1 BUSINESS
(a) General development of business
(1) Narrative history of business
Chase General Corporation was incorporated November 6, 1944 for
the purpose of manufacturing confectionery products. In 1970
Chase General Corporation acquired a 100% interest in its
wholly-owned subsidiary, Dye Candy Company. (Chase General
Corporation and Dye Candy Company are sometimes referred herein
as "the Company"). This subsidiary is the main operating company
for the reporting entity. There were no material acquisitions,
dispositions, new developments, or changes in conducting business
during the past five fiscal years. However, as of June 30, 1987,
the working capital of the Company became impaired due to the
maturity of $696,000 of notes payable. During the fiscal year end
1991 a portion of the notes were paid in full and the remaining
notes were extended to December 20, 1994. Negotiation of a second
extension of the notes began during fiscal year ended 1995. An
extension to December 20, 2002 was unanimously accepted December
20, 1995 with the agreement that this will be the final
extension. Refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Part
II of this filing for further information.
(2) Not applicable.
(b) Financial information about industry segments
The subsidiary, Dye Candy Company, operates two divisions, Chase
Candy Company and Poe Candy Company. Operations in Chase Candy
Company involve production and sale of a candy bar marketed under the
trade name "Cherry Mash". Operations in Poe Candy Company involve
production and sale of coconut, peanut, chocolate, and fudge
confectioneries. Division products are sold to the same type of
customers in the same geographical areas. In addition, both divisions
share a common labor force and utilize the same basic equipment and
raw materials. Due to the similarities in the products manufactured,
segment reporting for the two divisions is not maintained by
Management and, accordingly, is not available for inclusion in this
filing.
(c) Narrative description of businesses
(1) Description of business done and intended to be done by dominant
single industry
(i) The principal products produced and methods of distribution
are as follows:
(Continued)
2
ITEM 1 BUSINESS (CONTINUED)
Chase Candy Division of Dye Candy Company produces a candy bar
under the trade name of "Cherry Mash". The bar is distributed
in four case sizes:
(1) 60 count pack
(2) 12 boxes of 24 bars per box
(3) 200 count shipper box
(4) 96 count shipper box
In addition to the regular size bar, a "mini-mash" is
distributed in four case sizes:
(1) 24 - 12 oz. bags
(2) 6 jars - 60 bars per jar
(3) 23 # wrapped bars
(4) 22 # unwrapped bars
The bars are sold primarily to wholesale candy and tobacco
jobbing houses, grocery accounts, and vendors. "Cherry Mash"
bars are marketed in the Midwest region of the United States.
For the years ended June 30, 2002, 2001, and 2000, this
division accounted for 62%, 57%, and 61%, 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, 2002, 2001, and 2000, this
division accounted for 38%, 43%, and 39%, respectively, of the
consolidated revenue of Dye Candy Company. The Company
discontinued the coconut cubes during the year ended June 30,
2000.
(ii) Not applicable.
(iii) Raw materials and packaging materials are produced on a
national basis with products coming from most of the states of
the United States. Raw materials and packaging materials are
generally widely available, depending, of course, on common
market influences.
(Continued)
3
ITEM 1 BUSINESS (CONTINUED)
(iv) The largest single revenue producing product, the "Cherry Mash"
bar, is protected by a trademark registered with the United
States Government Patents Office. Management considers this
trademark very important to the Company. The trademark was
renewed during the fiscal year ended June 30, 1985. This
trademark expires in the year 2003. Management and its legal
representatives do not expect any impediment to renewing this
trademark prior to its expiration.
(v) The Company is a seasonal business whereby the largest volume
of sales occur in the spring and fall of each year. The net
income per quarter of the Company varies in direct proportion
to the seasonal sales volume.
(vi) Due to the seasonal nature of the business, there is a heavier
demand on working capital in the summer and winter months of
the year when the Company is building its inventories in
anticipation of fall and spring sales. The fluctuation of
demand on working capital due to the seasonal nature of the
business is common to the confectionery industry. If necessary,
the Company has the ability to borrow short-term funds in early
fall to finance operations prior to receiving cash collections
from fall sales. The Company occasionally offers extended
payment terms of up to sixty days. Since this practice is
infrequent, the effect on working capital is minimal.
(vii) For the years ending June 30, 2002, 2001, and 2000, Associated
Wholesale Grocers, accounted for 20.43%, 25.64%, and 20.01% of
gross sales, respectively. For the years ending June 30, 2002,
2001, and 2000, Wal-Mart and its affiliates accounted for
16.12%, 28.54%, and 20.08% of gross sales, respectively. The
loss of Associated Wholesale Grocers would not have an adverse
effect on the Company as the customer purchases and distributes
to retail outlets and these outlets would continue to demand
products offered by Dye Candy Company. However, due to the
affiliation certain outlets have with Wal-Mart, a loss of this
customer would reduce gross sales. The Company continues to
seek additional markets for its products.
(viii) Prompt, efficient service are traits demanded in the
confectionery industry, which results in a continual low volume
of back-orders. Therefore, at no time during the year does the
Company have a significant amount of back-orders.
(ix) Not applicable.
(Continued)
4
ITEM 1 BUSINESS (CONTINUED)
(x) The confectionery market for the type of product produced by
the divisions of Dye Candy Company is very competitive and
quality minded. The confectionery (candy) industry in which
the divisions operate is highly competitive with many small
companies and, within certain specialized areas, a few
competitors dominate. In the United States, the dominant
competitors in the coconut candy industry are Bradley Candy
Company, Crown Candy Company, Vermico Candy Company, and the
Poe Division of Dye Candy Company with approximately 70% of
the market share among them. In the United States, Sophie
Mae and Old Dominion have approximately 80% of the market
share of the peanut candy business in which the Poe Division
operates. Dye Candy Company sells approximately 90% of its
products in the Midwest region with seasonal orders being
shipped to the Southern and Eastern regions of the United
States. Except for the coconut candy industry, Dye Candy
Company is not a dominant competitor in any of the candy
industries in which it competes. Dye Candy Company's 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's
competitive position is positively influenced by labor costs
being lower than industry average. Chase General Corporation
is firmly established in the confectionery market and
through its operating divisions has many years' experience
associated with its name.
(xi) Not applicable.
(xii) To the best of management's knowledge, the Company is
presently in compliance with all environmental laws and
regulations and does not anticipate any future expenditures
in this regard.
(xiii) The Company employs approximately 20 full time personnel
year round. This expands to approximately 50 full time
personnel during the two busy production seasons in spring
and fall.
(d) Foreign and domestic operations and export sales
The Company has no foreign operations or export sales. In addition,
all domestic sales are primarily in the Midwest region of the United
States.
5
ITEM 2 PROPERTIES
The registrant operates out of two buildings consisting of the following:
Chase and Poe Warehouse - This building located in St. Joseph, Missouri
is owned by Dye Candy Company, a wholly-owned subsidiary of the
registrant. The facilities are currently devoted entirely to the storage
of supplies, and the warehousing and shipping of candy products. This
warehouse consists of a sixty-nine year old building which is in fair
condition and is adequate to meet present requirements. The warehouse has
approximately 15,000 square feet and it is not encumbered.
Chase General Office and Dye Candy Company Operating Plant - The building
housing the office and plant is located in St. Joseph, Missouri, and was
originally owned by Chase Building Corporation, a wholly-owned subsidiary
of Dye Candy Company. In March, 1975, the subsidiary was liquidated by
Dye Candy Company. Subsequently, the Company sold this facility. The
property was leased from the purchaser in March, 1975. Refer to Note 3,
"Notes to Financial Statements," for terms of the lease. The building
contains the general offices of Chase General Corporation, Dye Candy
Company, and its divisions. The production plant of Dye Candy Company
occupies the remainder of the building. The building was acquired new in
1964 and was specifically designed for the type of operations conducted
by the registrant. The facility is adequate to meet present requirements.
The operating plant is approximately 20,000 square feet and the office is
approximately 2,000 square feet. The Company renegotiated the original
lease on this building which expired March 31, 1995. The terms of the new
lease began April 1, 1995 and continues for ten years.
ITEM 3 LEGAL PROCEEDINGS
The Company is not, and has not been, a party in any material pending
legal proceedings, other than ordinary litigation incidental to its
business, during the fiscal year ended June 30, 2002, nor are any such
proceedings contemplated.
ITEM 4 RESULTS OF VOTES OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the registrant
during the fourth quarter of the fiscal year ended June 30, 2002.
6
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
(a) Market information
There is no established public trading market for the common stock
(par value $1 per share) of the Company.
(b) Approximate number of security holders
As of September 5, 2001, the latest practicable date, the
approximate number of record holders of common stock was 1,439,
including individual participants in security listings.
(c) Dividends
(1) Dividend history and restrictions
No dividends have been paid during the past three fiscal
years. Refer to Note 1, "Notes to Financial Statements" for
dividend restrictions.
(2) Dividend policy
There is no set policy on the payment of dividends due to the
financial condition of the Company and other factors. It is
not anticipated that cash dividends will be paid in the
foreseeable future.
ITEM 6 SELECTED FINANCIAL DATA
(a) Last five years
6-30-2002 06-30-2001 06-30-2000 06-30-1999 06-30-1998
--------- ---------- ---------- ---------- ----------
(i) Net sales or operating revenue $ 1,843,484 $ 1,981,030 $ 2,129,785 $ 2,134,920 $2,113,777
(ii) Income (loss) from continuing
operations $ 1,390 $ (27,191) $ 42,284 $ 49,262 $ (33,502)
(iii) Income (loss) from continuing
operations per common share * $ (.13) $ (.16) $ (.09) $ (.09) $ (.17)
(iv) Total assets $ 711,416 $ 714,901 $ 800,691 $ 798,961 $ 770,998
(v) Long-term debt $ 51,010 $ 77,672 $ 127,672 $ 162,672 $ 185,305
(vi) Cash dividend declared
per common share $ -- $ -- $ -- $ -- $ --
(b) No additional years are necessary to keep the summary from being
misleading.
* Refer to Note 6, "Notes to Financial Statements" for computation of income
(loss) from continuing operations per common share.
7
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a & b) Liquidity and capital resources
Positive cash flows from operating activities were generated for
fiscal years ended June 30, 2002, 2001, and 2000 in the amounts of
$126,472, $74,261, and $28,797, respectively.
At various times during the years, and in anticipation of heavier
cash demands due to seasonal production, plant improvements, and/or
major promotional programs, it is the Company's practice to invest
in short term U.S. Treasury obligations or financial institution
certificates of deposit. At June 30, 2002, 2001, and 2000 the
Company had $100,000, $50,000, and $100,000, respectively, invested
in short term certificates of deposit to meet the 2002, 2001, and
2000 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 decreased approximately
$57,000 from June 30, 2001 to June 30, 2002. Raw materials increased
approximately $27,000 from June 30, 2000 to June 30, 2001. Raw
materials at June 30, 2000 were comparable to prior year. Purchase
commitments at June 30, 2002 were approximately $101,000 higher than
at June 30, 2001. This increase was due to approximately $49,000 in
peanut contracts over prior year, approximately $16,000 increase in
coconut commitments, and approximately $36,000 additional purchase
commitments of chocolate over prior year. The Company watches
markets for these commodities and purchases are made accordingly.
Packaging materials are purchased in large volumes and carried for
several years due to the high cost from suppliers to cut dies and
print materials. Therefore, when supplier pricing remains consistent
over the years and is not predicted to increase, the Company
utilizes its present inventory supply without making additional
purchases necessary to lock in pricing. Packaging materials were
comparable from June 30, 2001 to June 30, 2002. Packaging inventory
decreased approximately $59,000 from June 30, 2000 to June 30, 2001.
The decrease was due to the higher than normal purchase in 2000.
These inventory items were purchased during the year ending June 30,
2000 to replenish inventory used in the current and prior years
production. These items were purchased in quantities large enough to
fulfill the Company's packaging needs for several seasons.
Finished goods inventory did not significantly change from June 30,
2001 to June 30, 2002. The slight increase was due to timing of
customer purchases of the Cherry Mash products.
Finished goods inventory did not significantly change from June 30,
2000 to June 30, 2001. The slight decrease was due to timing of
customer purchases of the Cherry Mash products. Goods in process
remained comparable to prior years.
(Continued)
8
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company continues to write off equipment that is no longer useful
to the operations of the Company. These write offs have been
immaterial over the past three years. The Company also continues to
replace old equipment on a yearly basis in order to streamline
operations. However, due to cash flow needs in other areas, the
Company has not been able to update the equipment at any significant
level. Expenditures of $13,574 were made during the year ended June
30, 2000 to upgrade existing production equipment, in addition to
$40,053 of expenditures made to update transportation and office
equipment. Expenditures of $53,626 were made to upgrade and replace
transportation and office equipment during the year ended June 30,
2001. Expenditures of $3,637 were made during the year ended June 30,
2002 to upgrade existing production equipment. In addition, $24,759
was expended to update transportation and office equipment. Depending
on results of operations and cash flows, the Company is hoping to
replace their antiquated brittle cookers in the next several years
with no set target date.
For the past nine years, the Company has not been indebted except for
the series B notes. Of the outstanding amount at June 30, 2001,
$77,672 is classified long-term and $-0- is classified as current. On
December 20, 1995, the Company received approval to extend the notes
to December 20, 2002 at the current 6% rate of interest, with the
agreement that this will be the final note extension. Of the
outstanding amount at June 30, 2002, $51,010 is classified as current
and $-0- is classified as long-term. 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
and the balance is expected to be paid by December 20, 2002.
The Company's lease on its manufacturing facility expired March 31,
1995. The lease was renewed effective April 1, 1995 for a period of 10
years at $2,955 per month.
During the year ended June 30, 2001, net sales decreased 7% from June
30, 2000 through June 30, 2001. The decrease was due to promotions
with customers in the prior year which were discontinued.
Additionally, in the prior year receivables from certain customers
were written off. The Company did not do business with these customers
in the current year. Cost of sales decreased by 5% from June 30, 2000
through June 30, 2001 due to the decrease in net sales.
Operating expenses increased by 5.8% from June 30, 2000 through June
30, 2001. This increase was due to increased selling expenses. Selling
expenses increased from the prior year by $15,252 due to commissions
and bonuses given to employees during the year. While most general and
administration expenses remained constant, insurance expense increased
by $9,265 as rates for general and liability insurance continues to go
up. The Company was aggressive in their collection efforts and write
offs decreased by $17,865 from June 30, 2000 through June 30, 2001.
The aging of accounts receivable is reviewed on a regular basis and
accounts which become overdue are pursued for collection.
(Continued)
9
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 decreased
12% from June 30, 2001 through June 30, 2002 due to the decrease in
net sales, as well as, more efficient production, and a reduction in
payroll due to fewer employees needed for the operation of the company
facilities.
Operating expenses increased by 5% from June 30, 2001 through June 30,
2002. This increase was due to increased selling expenses. Selling
expenses increased from the prior year by $13,889 due to promotions,
bill backs, etc. as the Company continued to attempt to expand its
business. While most general and administration expenses remained
constant, insurance expense increased by $5,860 as rates for general
and liability insurance continues to go up. The Company continued to
be aggressive in their collection efforts. The aging of accounts
receivable is reviewed on a regular basis and accounts which become
overdue are pursued for collection.
Under the leadership of the CEO and his sales staff, the Company has
stabilized its customer base. Certainly some customers were lost
during 2002, but the Company is working to replace those customers.
The Company continues to look for new markets but only when the
addition of a new market is profitable.
In order to maintain funds to finance operations and meet debt
obligations, it is the intention of management to continue its efforts
to expand the present market area and increase sales to its customers.
Management also intends to continue tight control on all expenditures.
There has been no material impact from inflation and changing prices
on net sales and revenues or on income from continuing operations for
the last three fiscal years. The Company does not feel that any
accounting changes, as proposed by the Financial Accounting Standards
Board, with effective dates after the date of this report, will have a
material effect on future financial statements of the Company.
The Company's only computer application, SBT software, involves the
payroll processing accounting function.
(Continued)
10
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable. Refer to Note 7, "Notes to Financial Statements" for
fair value of financial instruments as of June 30, 2002.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X are
contained on pages 13 through 25 of the filing.
(a) Selected quarterly financial data
Exempt from requirements per second major condition for smaller
companies.
(b) Information about oil and gas producing activities
Registrant is not engaged in any oil and gas producing activities.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable. There has been no change in accountants for approximately
twenty-five years and no disagreements on accounting or financial
disclosure.
11
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Chase General Corporation
St. Joseph, Missouri
We have audited the accompanying consolidated balance sheets of Chase General
Corporation and subsidiary as of June 30, 2002 and 2001 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Chase
General Corporation and subsidiary as of June 30, 2002 and 2001, and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 30, 2002, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Clifton Gunderson LLP
Clifton Gunderson LLP
St. Joseph, Missouri
August 22, 2002
12
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2002 and 2001
ASSETS
2002 2001
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 188,528 $ 117,114
Receivables:
Trade, less allowance for doubtful
accounts of $9,834 in 2002 and $10,669 in 2001 121,918 100,494
Income tax receivables 7,053 7,053
Inventories:
Finished goods 79,382 73,138
Goods in process 2,557 1,943
Raw materials 23,377 80,592
Packaging materials 60,635 64,536
Prepaid expense 22,110 34,606
Prepaid income taxes 1,316 11,220
---------- ----------
Total current assets 506,876 490,696
---------- ----------
PROPERTY AND EQUIPMENT
Land 35,000 35,000
Buildings 85,738 85,738
Machinery and equipment 680,995 677,358
Trucks and autos 172,709 148,527
Office equipment 50,237 49,660
Leasehold improvements 121,356 121,356
---------- ----------
Total, at cost 1,146,035 1,117,639
Less accumulated depreciation 941,495 893,434
---------- ----------
Total property and equipment 204,540 224,205
---------- ----------
TOTAL ASSETS $ 711,416 $ 714,901
========== ==========
13
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2001
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 66,600 $ 46,002
Notes payable, Series B, current maturities 51,010 --
Accrued expense:
Interest 3,862 6,161
Other 32,628 29,140
----------- -----------
Total current liabilities 154,100 81,303
LONG-TERM LIABILITIES
Notes payable, Series B, less current maturities above -- 77,672
----------- -----------
Total liabilities 154,100 158,975
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $1,305,000 and
$1,275,000 respectively) 500,000 500,000
Series B (liquidation preference $1,260,000 and
$1,230,000 respectively) 500,000 500,000
Cumulative preferred stock, $20 par value:
Series A (liquidation preference $3,087,616 and
$3,029,083 respectively) 1,170,660 1,170,660
Series B (liquidation preference $503,182 and
$493,643 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 (5,908,680) (5,910,070)
----------- -----------
Total stockholders' equity 557,316 555,926
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 711,416 $ 714,901
=========== ===========
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
14
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2002, 2001, and 2000
2002 2001 2000
---------------- --------------- ---------------
NET SALES $ 1,843,484 $ 1,981,030 $ 2,129,785
COST OF SALES 1,389,708 1,587,058 1,665,882
---------------- --------------- ---------------
Gross Profit 453,776 393,972 463,903
---------------- --------------- ---------------
OPERATING EXPENSES
Selling expenses 246,639 232,750 218,211
General and administrative expenses 204,833 197,650 188,660
---------------- --------------- ---------------
Total operating expenses 451,472 430,400 406,871
---------------- --------------- ---------------
Income (loss) from operations 2,304 (36,428) 57,032
---------------- --------------- ---------------
OTHER INCOME (EXPENSE)
Interest income 2,405 6,922 6,323
Miscellaneous income 1,726 1,690 347
Interest expense (3,861) (6,160) (8,842)
Other expense -- -- (173)
---------------- --------------- ---------------
Total other income (expense) 270 2,452 (2,345)
---------------- --------------- ---------------
Income (loss) before income taxes 2,574 (33,976) 54,687
PROVISION (CREDIT) FOR INCOME TAXES 1,184 (6,785) 12,403
---------------- --------------- ---------------
NET INCOME (LOSS) 1,390 (27,191) 42,284
Preferred dividends (128,072) (128,072) (128,072)
---------------- --------------- ---------------
Net loss applicable to common stockholders $ (126,682) $ (155,263) $ (85,788)
================ =============== ===============
(LOSS) PER SHARE OF COMMON STOCK $ (.13) $ (.16) $ (.09)
================ =============== ===============
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
15
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 2002, 2001, and 2000
Prior Cumulative Cumulative Common
Preferred Stock Preferred Stock Stock
------------------------------- ----------------------------- ------------
Series A Series B Series A Series B
------------ ------------- ------------ ------------
BALANCE (DEFICIT), JULY 1, 1999 $ 500,000 $ 500,000 $ 1,170,660 $ 190,780 $ 969,834
Net income -- -- -- -- --
------------ ------------- ------------ ------------ ------------
BALANCE (DEFICIT), JUNE 30, 2000 500,000 500,000 1,170,660 190,780 969,834
Net loss -- -- -- -- --
------------ ------------- ------------ ------------ ------------
BALANCE (DEFICIT), JUNE 30, 2001 500,000 500,000 1,170,660 190,780 969,834
Net income -- -- -- -- --
------------ ------------- ------------ ------------ ------------
BALANCE (DEFICIT), JUNE 30, 2002 $ 500,000 $ 500,000 $ 1,170,660 $ 190,780 $ 969,834
============ ============= ============ ============ ============
Paid-in Accumulated
Capital Deficit Total
------------ ------------- ------------
BALANCE (DEFICIT), JULY 1, 1999 $ 3,134,722 $ (5,925,163) $ 540,833
Net income -- 42,284 42,284
------------ ------------- ------------
BALANCE (DEFICIT), JUNE 30, 2000 3,134,722 (5,882,879) 583,117
Net loss -- (27,191) (27,191)
------------ ------------- ------------
BALANCE (DEFICIT), JUNE 30, 2001 3,134,722 (5,910,070) 555,926
Net income -- 1,390 1,390
------------ ------------- ------------
BALANCE (DEFICIT), JUNE 30, 2002 $ 3,134,722 $ (5,908,680) $ 557,316
============ ============= ============
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
16
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2002, 2001, and 2000
2002 2001 2000
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers $ 1,874,065 $ 2,010,278 $ 2,119,123
Interest received 2,405 6,922 6,323
Other income 1,726 1,689 1,182
Cost of sales, selling, general and
administrative expenses paid (1,745,563) (1,924,698) (2,075,152)
Interest paid (6,161) (8,710) (10,571)
Income tax paid -- (11,220) (12,108)
------------- ------------- -------------
Net cash provided by operating activities 126,472 74,261 28,797
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (28,396) (53,926) (53,627)
------------- ------------- -------------
Net cash used in investing activities (28,396) (53,926) (53,627)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable, Series B (26,662) (50,000) (35,000)
------------- -------------- -------------
Net cash used in financing activities (26,662) (50,000) (35,000)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 71,414 (29,665) (59,830)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 117,114 146,779 206,609
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 188,528 $ 117,114 $ 146,779
============= ============= =============
17
2002 2001 2000
------------- ------------- -------------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ 1,390 $ (27,191) $ 42,284
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 48,061 48,069 52,211
Loss on disposal of equipment -- -- 835
Provision for doubtful accounts 1,333 2,225 20,603
Effects of changes in operating assets and liabilities:
Trade receivable (22,757) 26,299 (10,662)
Other receivable -- 3,239 (3,239)
Income tax receivable -- (7,054) --
Inventories 54,258 46,980 (67,032)
Prepaid expense 12,496 354 509
Prepaid income taxes 9,904 (10,063) (1,158)
Accounts payable 20,598 (8,716) 6,335
Income taxes payable -- -- (8,855)
Accrued liabilities 1,189 119 (3,034)
------------- ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 126,472 $ 74,261 $ 28,797
============= ============= =============
These consolidated financial statements should be read only in connection
with the accompanying summary of significant
accounting policies and notes to consolidated financial statements.
18
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Chase General Corporation was incorporated on November 6, 1944 in the State of
Missouri for the purpose of manufacturing confectionery products. The Company
grants credit terms to substantially all customers, consisting of repackers,
grocery accounts, and national syndicate accounts, who are primarily located in
the Midwest region of the United States. The Company's fiscal year ends June 30.
Significant accounting policies followed by the Company are presented below:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions
and balances have been eliminated in consolidation.
SEGMENT REPORTING OF THE BUSINESS
The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Company
and Poe Candy Company. Operations in Chase Candy Company involve production and
sale of a candy bar marketed under the trade name "Cherry Mash". Operations in
Poe Candy Company involve production and sale of coconut, peanut, chocolate, and
fudge confectioneries. Division products are sold to the same type of customers
in the same geographical areas. In addition, both divisions share a common labor
force and utilize the same basic equipment and raw materials. Due to the
similarities in the products manufactured, segment reporting for the two
divisions is not maintained by Management and, accordingly, has not been
disclosed in these consolidated financial statements.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
19
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are carried at the "lower of cost or market value," with cost being
determined on the "first-in, first-out" basis of accounting. Finished goods and
goods in process include a provision for manufacturing overhead.
PROPERTY AND EQUIPMENT
The Company's property and equipment are being depreciated on straight-line and
accelerated methods over the following estimated useful lives:
Buildings 25 years
Machinery and equipment 3 - 10 years
Trucks and autos 3 - 5 years
Office Equipment 5 - 10 years
Leasehold improvements 8 - 31.5 years
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.
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 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 is an integral part of
the accompanying consolidated financial statements.
20
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NOTES PAYABLE, SERIES B
On December 1, 1967, the Company issued Collateral Sinking Fund 6% Income
Registered Notes in the amount of $680,000. These notes were issued to extend
and consolidate notes and certificates of indebtedness then held by F. S. Yantis
& Co., Inc. (Yantis & Co.), aggregating approximately $569,000 together with
unpaid accrued interest of $111,000. Interest is payable from "surplus net
earnings" on the 20th day of December following the year-end.
Pursuant to a supplemental indenture, dated April 1, 1968 and executed in
compliance with a request by Yantis & Co. in furtherance of the winding-up of
its affairs, the original notes aggregating $680,000 were reissued in two series
designated as A and B, respectively. The Series A notes aggregating $50,000 had
priority and were retired during the year ended June 30, 1984. The Series B
notes totaling $630,000 are held by the former shareholders of Yantis & Co.
During the years ended June 30, 2002 and 2001, $26,662 and $50,000 principal was
paid on the Series B notes, respectively.
As of June 30, 2002 and 2001, the outstanding Series B notes total $51,010 and
$77,672, respectively. Of these amounts $22,032 and $29,376, respectively are
owed to officers and directors of the Company.
The Company has agreed to secure the payment of principal and interest on the
notes by the pledge of the capital stock of Dye Candy Company under an indenture
dated December 1, 1967, and supplemental indenture dated June 30, 1970.
The indenture provides for a sinking fund deposit to be made by the Company each
year of not less than one-fourth of the Company's fiscal year "surplus net
earnings," which exceeds the amount of interest required to be paid on the
outstanding notes. If at any time the sinking fund deposits aggregate $10,000 or
more, the same will be applied to prepayment of the notes outstanding. At June
30, 2002 and 2001, there was no sinking fund requirement. The "surplus net
earnings" is the amount by which the consolidated net income, after adding back
the current year's interest on the outstanding notes, exceeds a $25,000 working
capital reserve.
See Note 2 for computation of "surplus net earnings" and sinking fund
requirements for years ended June 30, 2002, 2001, and 2000.
21
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NOTES PAYABLE, SERIES B (CONTINUED)
Principal payments are made by the trustee under terms of the indenture and may
be prepaid at the option of the Company. During the year ended June 30, 1991,
the notes were extended to December 20, 1994. Effective December 20, 1995, the
notes were extended to December 20, 2002 at the same 6% interest rate and with
the agreement that this will be the final note extension.
Dividends, other than stock dividends, may not be paid on capital stock at any
time interest on the notes is not current.
NOTE 2 - "SURPLUS NET EARNINGS" AND SINKING FUND REQUIREMENTS
The following is an analysis of the computation of the "surplus net earnings
(loss)" and sinking fund requirements for years ended June 30:
2002 2001 2000
-------- -------- --------
NET INCOME (LOSS)
Chase General Corporation $(12,612) $(11,446) $(10,798)
Dye Candy Company 14,002 (15,745) 53,082
-------- -------- --------
Consolidated net income (loss) 1,390 (27,191) 42,284
NON-ALLOWANCE EXPENSE DEDUCTION
Interest on indebtedness 3,861 6,160 8,842
-------- -------- --------
Net income (loss) basis for
"surplus net earnings" 5,251 (21,031) 51,126
DEDUCTIONS FROM INCOME BASIS
Set aside as reserve for accumulation
of working capital 25,000 25,000 25,000
-------- -------- --------
"Surplus net earnings (loss)" (19,749) (46,031) 26,126
INTEREST PAYMENT REQUIRED 3,861 6,160 8,842
-------- -------- --------
EXCESS "SURPLUS NET EARNINGS (LOSS)"
OVER INTEREST PAYMENT REQUIRED $(23,610) $(52,191) $ 17,284
======== ======== ========
SINKING FUND REQUIREMENT $ -- $ -- $ 4,321
======== ======== ========
22
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - COMMITMENTS
Dye Candy Company leases its manufacturing facilities located at 3600 Leonard
Road, St. Joseph, Missouri. The period of the lease is from April 1, 1995
through March 31, 2005, and requires payments of $2,955 per month. Rental
expense was $35,460 for the years ended June 30, 2002, 2001, and 2000. The
amounts are included in cost of sales.
Future minimum lease payments under this lease are as follows:
Year ending June 30, 2003 $ 35,460
Year ending June 30, 2004 35,460
Year ending June 30, 2005 29,550
-----------
Total $ 100,470
===========
As of June 30, 2002, the Company had raw materials purchase commitments with
three vendors totaling $100,527.
NOTE 4 - CAPITAL STOCK
Capital stock authorized, issued and outstanding as of June 30, 2002 and 2001 is
as follows:
Shares
----------------------------
Issued and
Authorized Outstanding
------------ -------------
Prior Cumulative Preferred Stock, $5 par value:
6% Convertible 240,000
Series A 100,000
Series B 100,000
Cumulative Preferred Stock, $20 par value:
5% Convertible 150,000
Series A 58,533
Series B 9,539
Common Stock, $1 par value:
Reserved for conversion of
Preferred Stock - 1,030,166 shares 2,000,000 969,834
23
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
Cumulative Preferred Stock dividends in arrears at June 30, 2002 and 2001,
totaled $6,155,798 and $6,027,726, respectively. Total dividends in arrears, on
a per share basis, consist of the following at June 30:
2002 2001
---------- ----------
6% Convertible
Series A $ 13 $ 13
Series B 13 12
5% Convertible
Series A 53 52
Series B 53 52
Six percent convertible prior cumulative preferred stock may, upon thirty days
prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid
accrued dividends to date of redemption. In the event of voluntary liquidation,
holders of this stock are entitled to receive $5.25 per share plus accrued
dividends. It may be exchanged for common stock at the option of the
shareholders in the ratio of four common shares for one share of Series A and
3.75 common shares for one share of Series B.
The Company has the privilege of redemption of 5% convertible cumulative
preferred stock at $21.00 a share plus unpaid accrued dividends. In the event of
voluntary or involuntary liquidation, holders of this stock are entitled to
receive $20.00 a share plus unpaid accrued dividends. It may be exchanged for
common stock at the option of the shareholders, in the ratio of 3.795 common
shares for one of preferred.
NOTE 5 - PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following as of June 30:
2002 2001 2000
---------- ---------- ----------
Federal income tax $ 839 $ (4,898) $ 9,213
State income tax 345 (1,887) 3,190
---------- ---------- ----------
Total provision for income taxes $ 1,184 $ (6,785) $ 12,403
========== ========== ==========
The Company's provision for income taxes differs from the tax that would result
from applying statutory federal and state income tax rates primarily because of
nondeductible expenses.
24
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The loss per share was computed on the weighted average of outstanding common
shares during the years as follows:
2002 2001 2000
---------- ---------- ----------
Net income (loss) $ 1,390 $ (27,191) $ 42,284
---------- ---------- ----------
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 $ 126,682 $ (155,263) $ (85,788)
========== ========== ==========
Weighted average of outstanding common shares 969,834 969,384 969,834
========== ========== ==========
Loss per share $ (.13) $ (.16) $ (.09)
========== ========== ==========
No computation was made on common stock equivalents outstanding at year-end
because earnings per share would be anti-dilutive.
NOTE 7 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash and cash
equivalents, trade receivables and payables, and notes payable. There are no
significant differences between the carrying value and fair value of any of
these financial instruments.
NOTE 8 - CONCENTRATION OF CREDIT RISK
For the years ending June 30, 2002 and 2001, two customers accounted for 36.56%
and 54.18%, respectively, of the gross sales. For the year ending June 30, 2002
one customer accounted for 30.42% of accounts receivable and for the year ending
June 30, 2001 one customer accounted for 38.89% of accounts receivable.
This information is an integral part of
the accompanying consolidated financial statements.
25
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
Name Age Periods of Service as Director Terms
-------------------- ------- ------------------------------------ --------------
Barry M. Yantis 57 1980 to present One year
Brian A. Yantis 56 July 16, 1986 to present One year
Brett A. Yantis 34 January 21, 1999 to present One year
An insufficient number of proxies were returned by the
shareholders for the January 19, 2002 annual stockholder meeting.
Therefore, the Directors noted above are continuing for an
additional one-year term.
See Item 10(b) for offices held by Barry M. Yantis and Brian A.
Yantis.
(b) Executive Officers
Years of
Service as
Name Age Position an Officer Term
-------------------- ------- -------------------- --------------- -----------------------------
Barry M. Yantis 57 President and 23 Until successor elected
Treasurer
Brian A. Yantis 56 Vice-President 11 Until successor elected
and Secretary
(c) Certain Significant Employees
There are no significant employees other than above.
(d) Family Relationships
Barry M. Yantis, and Brian A. Yantis are brothers. Brett A.
Yantis is the Son of Barry M. Yantis.
(e) Business Experience
(1) Barry M. Yantis, president and treasurer has been an officer
of the Company for twenty-three years, fourteen years as
vice-president and nine years as president. He has been on the
board of directors for twenty-three years and has been associated
with the candy business for twenty-seven years.
Brian A. Yantis, vice-president and secretary has been an officer
of the Company for nine years as vice-president and since May
1992 as secretary. He has been associated with the insurance
business for twenty-eight years and has been a vice-president of
Aon Risk Services in Chicago, Illinois during the past thirteen
years.
Brett A. Yantis was elected to the position of director during
the year ending June 30, 1999. Brett has been associated with the
Company for eight years.
(Continued)
26
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(CONTINUED)
(2) The directors and executive officers listed above are
Candy Company.
(f) Involvement in Certain Legal Proceedings
Not applicable
(g) Promoters and Control Persons
Not applicable
ITEM 11 - EXECUTIVE COMPENSATION
(a) General
Executive officers are compensated for their services as set
forth in the Summary Compensation Table. These salaries are
approved yearly by the Board of Directors.
(b)
Summary Compensation Table
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
-------------------------------------- ---------------------- ----------
Other Restricted
Name and Fiscal Annual Stock Option/ LTIP All other
Principal Position Year End Salary Bonus Compensation Award (s) SARs (#) Payouts Compensation
------------------ ----------- ---------- --------- -------------- ---------- -------- ---------- ------------
Barry M. Yantis 1) 06-30-02 $ 106,000 $ -- $ 5,000 -- -- -- --
Barry M. Yantis 1) 06-30-01 $ 115,800 $ 10,000 $ 2,240 -- -- -- --
Barry M. Yantis 1) 06-30-00 $ 112,800 $ 10,000 $ 2,240 -- -- -- --
Barry M. Yantis 1) 06-30-99 $ 112,950 $ 8,000 $ 2,240 -- -- -- --
1) CEO
2) No other compensation than that which is listed in compensation
table.
3) No other officers are compensated for their services besides those
listed in this compensation table.
(c) Option/SAR grants table
Not applicable
(d) Aggregated option/SAR exercises and fiscal year-end option/SAR
value table
Not applicable
(Continued)
27
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED)
(e) Long-term incentive awards table
Not applicable
(f) Defined benefit or actuarial plan disclosure
Not applicable
(g) Compensation of Directors
Directors are not compensated for services on the board. The
directors are reimbursed for travel expenses incurred in
attending board meetings. During the fiscal year 2002, $247 of
travel expenses were reimbursed to board members, Brian A.
Yantis, and Barry M. Yantis, respectively.
(h) Employment contracts and termination of employment and change in
control arrangements
No employment contracts exist with any executive officers. In
addition, there are no contracts currently in place regarding
termination of employment or change in control arrangements.
(i) Report on repricing of option/SARs
Not applicable
(j) Additional information with respect to compensation committee
interlocks and insider participation in compensation decisions
The registrant has no formal compensation committee. The board
of directors, Brian A. Yantis, Barry M. Yantis, and Brett A.
Yantis annually approve the compensation of Barry M. Yantis,
CEO.
(k) Board compensation committee report on executive compensation
The board bases the annual salary of the CEO on the Company's
prior year performance. The criteria is based upon, but is not
limited to, market area expansion, gross profit improvement,
control of operating expenses, generation of positive cash flow,
and hours devoted to the business during the previous fiscal
year.
(l) Performance graph
Not applicable as there are no dividends available to distribute
to common stockholders after preferred dividends are met. In
addition, there is no market value price for the common stock
(par value $1 per share) as there is no public trading market
for the Company's stock.
(Continued)
28
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Amounts
and
Nature
of
Beneficial
Title of Class Name and Address Ownership % of Class
--------------------------------- -------------------------- ------------ ------------
(a) Security ownership of certain beneficial owners
Common; par value $1 per share Barry Yantis 194,385 (1) 16.8% (2)
5605 Osage Drive
St. Joseph, Mo.
64503
Brian Yantis 97,192 (1) 8.4% (2)
1210 E. Clarendon
Arlington Heights, IL.
60004
(b) Security ownership of management
Common; par value $1 per share All directors and officers 110,856 11.4%
as a group
Prior Cumulative Preferred, All directors and officers 21,533 21.5%
$5 par value: Series A, as a group
6% convertible
Prior Cumulative Preferred All directors and officers 21,533 21.5%
$5 par value: Series B, as a group
6% convertible
Cumulative Preferred, $20 par All directors and officers 3,017 5.2%
value: Series A, $5 convertible as a group
Amounts
and
Nature
of
Beneficial
Title of Class Name and Address Ownership % of Class
--------------------------------- -------------------------- ------------ ------------
Cumulative Preferred, $20 par All directors and officers 630 6.6%
value: Series B, $5 convertible as a group
(1) Includes 180,721 shares which could be received within 30 days upon conversion of preferred
stock.
(2) Reflects the percentage 291,577 shares would represent if the 180,721 shares above were
converted to common stock.
(c) No known change of control is anticipated.
(Continued)
29
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others
No reportable transactions with management and others, to which
the registrant or its subsidiary was a party, have occurred since
the registrant's last fiscal year. In addition, there are no such
currently proposed transactions.
(b) Certain business relationships
Not applicable
(c) Indebtedness of management
Not applicable
(d) Transactions with promoters
Not applicable
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of the Form 10-K
(1) The following are included in Part II of this report:
Page Number
-----------
Independent Auditor's Report 12
Consolidated Balance Sheets - June 30, 2002 and 2001 13 - 14
Consolidated Statements of Operations for the years
ended June 30, 2002, 2001, and 2000 15
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 2002, 2001, and 2000 16
Consolidated Statements of Cash Flows for the years
ended June 30, 2002, 2001, and 2000 17 - 18
Summary of Significant Accounting Policies 19 - 20
Notes to Consolidated Financial Statements 21 - 25
(Continued)
30
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (CONTINUED)
(2) The following are included in Part IV of this report:
Page Number
-----------
Independent Auditor's Report on Supplemental Schedules 32
Schedule I: Condensed Financial Information of the Registrant 33 - 36
Schedule II: Valuation and Qualifying Accounts,
June 30, 2002, 2001, and 2000 37
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
the year ended June 30, 2002.
(c) Exhibits required by Item 601 of Regulation S-K
The following have been previously filed and are incorporated by
reference to prior years' Forms 10-K filed by the Registrant:
(3) Articles of Incorporation and By-Laws
The following explanations are included in "Notes to Financial
Statements" in Part II of this report:
(4) Rights of security holders including indentures - Refer to
Notes 1 and 4.
(11) Computation of per share earnings - Refer to Note 6.
(21) Subsidiaries of registrant - Refer to "Summary of
Significant Accounting Policies" on page 19.
(d) Financial statement schedules required by Regulation S-X
Schedules required by Regulation S-X contained on page 33 through
37 have been excluded from the annual report to the shareholders.
SUPPLEMENTAL INFORMATION TO BE FURNISHED, FILED PURSUANT TO
SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934.
(1) With this filing, the Registrant is furnishing to the
Commission four (4) copies of the Proxy Statement
regarding the January 14, 2002 annual meeting mailed to
security holders during the 2002 fiscal year.
(2) For the 2002 fiscal year, the Registrant will furnish a
copy of the annual report and any Proxy information to the
Commission at time the aforementioned are mailed to security
holders.
31
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES
In connection with the audits of the consolidated financial statements of Chase
General Corporation and subsidiary, we have also audited supplemental schedules
I and II. In our opinion, these schedules present fairly, in all material
respects, in relation to the consolidated financial statements taken as a whole,
the information required to be stated therein.
/s/ Clifton Gunderson LLP
Clifton Gunderson LLP
St. Joseph, Missouri
August 22, 2002
32
SCHEDULE I
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED BALANCE SHEETS
June 30, 2002 and 2001
ASSETS
2002 2001
----------- -----------
Investment in subsidiary - at equity $ 612,188 $ 639,759
----------- -----------
TOTAL ASSETS $ 612,188 $ 639,759
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Series B notes payable and accrued interest, unrelated parties $ 23,576 $ 52,127
Series B notes payable and accrued interest, related parties 31,296 31,706
----------- -----------
Total liabilities 54,872 83,833
----------- -----------
Capital stock 3,331,274 3,331,274
Paid in capital in excess of par 3,134,722 3,134,722
Accumulated (deficit) (5,908,680) (5,910,070)
----------- -----------
Total stockholders' equity 557,316 555,926
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 612,188 $ 639,759
=========== ===========
(1) The restricted assets of 100% consolidated subsidiary, Dye Candy Company,
are $711,416 and $714,901 as of June 30, 2002 and 2001, respectively. See
"Notes to Financial Statements" in Part II of this report for restrictions.
(2) No cash dividends have been paid by the registrants' wholly-owned
subsidiary, Dye Candy Company, during the past three fiscal years.
(Continued)
33
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED STATEMENTS OF OPERATIONS
Years Ended June 30, 2002, 2001 and 2000
2002 2001 2000
-------------- -------------- --------------
REVENUE
Equity in net income (loss) of subsidiary $ 14,000 $ (15,745) $ 53,082
-------------- -------------- --------------
Total revenue 14,000 (15,745) 53,082
-------------- -------------- --------------
EXPENSE
General and administrative 11,546 8,399 4,645
Interest 3,861 6,160 8,842
-------------- -------------- --------------
Total expense 15,407 14,559 13,487
-------------- -------------- --------------
Income (loss) before income taxes (1,407) (30,304) 39,595
PROVISION (CREDIT) FOR
INCOME TAXES (2,797) (3,113) 2,689
-------------- -------------- --------------
NET INCOME (LOSS) $ 1,390 $ (27,191) $ 42,284
============== ============== ==============
(Continued)
34
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2002, 2001 and 2000
2002 2001 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
General and administrative expenses paid $ (11,546) $ (8,399) $ (4,645)
Interest paid (6,160) (8,842) (10,571)
Income tax refund received (3,113) 2,689 2,946
----------- ----------- -----------
Net cash used in operating activities (20,819) (14,552) (12,270)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances received from wholly owned subsidiary 47,481 64,552 47,270
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on Series B notes payable (26,662) (50,000) (35,000)
----------- ----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS -- -- --
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- -- --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ -- $ -- $ --
=========== =========== ===========
(Continued)
35
SCHEDULE I
(Continued)
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2002, 2001 and 2000
2002 2001 2000
----------- ----------- -----------
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES
Net income (loss) $ 1,390 $ (27,191) $ 42,284
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Net (income) loss from wholly owned subsidiary (14,000) 15,745 (53,082)
Effects of changes in operating assets and liabilities:
Accrued interest (2,299) (2,550) (1,729)
Income tax refund receivable (5,910) (556) 257
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $ (20,819) $ (14,552) $ (12,270)
=========== =========== ===========
This information should be read only in connection with the
accompanying independent auditor's report on supplemental schedules.
36
SCHEDULE II
CHASE GENERAL CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
June 30, 2002, 2001, and 2000
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, 2002 $10,669 $ 1,333 $ 2,168 $ 9,834
June 30, 2001 11,393 2,225 2,949 10,669
June 30, 2000 11,516 20,603 20,726 11,393
* Represents accounts written off, net of (recoveries), for the respective
years.
This information should be read only in connection
with the accompanying independent auditor's
report on supplemental schedules.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CHASE GENERAL CORPORATION
(Registrant)
Date: 9/24/02 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 9/24/02
- ----------------------------------- -------
Barry M. Yantis Date
/s/ Brian M. Yantis Vice-President, Secretary and Director 9/24/02
- ----------------------------------- --------
Brian A. Yantis Date
38