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, 1998
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 June 30, 1998.
Location in this filing where exhibit index is located : 31
Total number of pages included in this filing: 39
<PAGE>
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
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 this 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 products of the Chase Candy Division and the Poe
Candy Division of Dye Candy Company are sold to the
same types 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
in production. Therefore, due to the similarity in the
marketing and manufacturing of the products, segment
reporting for these divisions is not required to be
disclosed in accordance with FASB 14.
(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:
<PAGE>
ITEM 1 BUSINESS (CONTINUED)
Chase Candy Division of Dye Candy Company produces a candy
bar under the trade name of "Cherry Mash". The bar is
distributed in four case sizes:
(1) 60 count pack
(2) 12 boxes of 24 bars per box
(3) 192 count shipper box
(4) 96 count shipper box
In addition to the regular size bar, a "mini-mash" is
distributed in four case sizes:
(1) 24 - 12 oz. bags
(2) 6 jars - 60 bars per jar
(3) 28 # 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, 1998, 1997, and 1996,
this division accounted for 55%, 54%, and 52%, respectively,
of the consolidated revenue of Dye Candy Company.
Poe Candy Division of Dye Candy Company produces coconut,
peanut, chocolate, and fudge confectioneries. These
products are distributed in bulk or packaged. Principal
products include:
(1) Coconut Bon-Bons (6) Peanut brittle
(2) Coconut Stacks (7) Coconut cubes
(3) Home Style Poe Fudge (8) Peanut clusters
(4) Peco Flake (9) Champion Creme Drops
(5) Peanut Squares (10) Jelly Candies
The Poe line is sold primarily on a Midwest regional basis
to national syndicate accounts, repackers, and grocery
accounts. For the years ended June 30, 1998, 1997, and
1996, this division accounted for 45%, 46%, and 48%,
respectively, of the consolidated revenue of Dye Candy
Company.
(ii) Not applicable.
(iii) Raw materials and packaging materials are produced
on a national basis with products coming from most
of the states of the United States. Raw materials
and packaging materials are generally widely
available, depending, of course, on common market
influences.
<PAGE>
ITEM 1 BUSINESS (CONTINUED)
(iv) The largest single revenue producing product, the
"Cherry Mash [Registered Trademark]" 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.
(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 year ending June 30, 1998 and 1997 and
1996, Associated Wholesale Grocers, accounted for
18.87%, 19.67% and 16.27% of gross sales, respectively.
The loss of this customer would not have an adverse
effect on the Company as customer purchases and
distributes to retail outlets and these outlets
would continue to demand products offered by Dye
Candy Company.
(viii) Prompt, efficient service are traits demanded in
the confectionery industry resulting 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.
<PAGE>
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.
Principal methods of competition the Company uses
include quality of product, price, reduced
transportation costs due to central location, and
service. The Company's competitive position is
positively influenced by labor costs being lower than
industry average. Chase General Corporation is firmly
established in the confectionery market and through its
operating divisions has many years' experience
associated with its name.
(xi) Not applicable.
(xii) To the best of management's knowledge, the Company
is presently in compliance with all environmental
laws and regulations and does not anticipate any
future expenditures in this regard.
(xiii) The Company employs approximately 25 full time
personnel year round which expands to
approximately 50 full time personnel during the
two busy production seasons.
(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.
<PAGE>
ITEM 2 PROPERTIES
The registrant operates out of two buildings consisting of
the following:
Chase and Poe Warehouse - This building located in St.
Joseph, Missouri is owned by Dye Candy Company, a wholly-
owned subsidiary of the registrant. The facilities are
currently devoted entirely to the storage of supplies, and
the warehousing and shipping of candy products. This
warehouse consists of a sixty-seven year old building which
is in fair condition and is adequate to meet present
requirements. The warehouse has approximately 15,000 square
feet.
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, 1998, 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, 1998.
<PAGE>
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 June 30, 1998, the latest practicable date, the
approximate number of record holders of common stock was
1,439, including individual participants in security
listings.
(c) Dividends
(1) Dividend history and restrictions
No dividends have been paid during the past three fiscal
years. Refer to Note 1, "Notes to Financial Statements" for
dividend restrictions.
(2) Dividend policy
There is no set policy on the payment of dividends due to
the financial condition of the Company and other factors.
It is not anticipated that cash dividends will be paid in
the foreseeable future.
ITEM 6 SELECTED FINANCIAL DATA
(a) Last five years
06-30-98 06-30-97 06-30-96
(i) Net sales or
operating revenue $2,113,777 $2,317,501 $2,316,031
(ii) Income (loss) from
continuing operations $ (33,502) $ 50,174 $ 63,703
(iii) Income (loss) from
continuing operations
per common share * $ (.17) $ (.08) $ (.07)
(iv) Total assets $ 770,998 $ 836,871 $ 815,954
(v) Long-term debt $ 185,305 $ 207,659 $ 242,980
(vi) Cash dividend declared
per common share $ - $ - $ -
06-30-95 06-30-94
(i) Net sales or operating revenue $2,235,656 $2,476,259
(ii) Income (loss) from continuing
operations $ 60,146 $ 25,421
(iii) Income (loss) from continuing
operations per common share * $ (.07) $ (.11)
(iv) Total assets $ 797,909 $ 784,506
(v) Long-term debt $ - $ -
(vi) Cash dividend declared
per common share $ - $ -
(b) No additional years 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.
<PAGE>
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, 1998, 1997, and 1996 in the
amounts of $93,720, $8,940, and $104,944, 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, 1998 and 1997 the Company had $100,000
and $90,000, respectively invested in short term
certificates of deposit to meet the 1998 and 1997 fall
production season. No funds were invested in temporary
investments at June 30, 1996.
The Company continually monitors raw material pricing, and
when a price increase/decrease is anticipated adjustments to
inventory levels are made accordingly. Raw material
inventory decreased slightly when comparing 1998 to 1997.
In late spring 1997, predicted weather conditions dictated a
future increase in peanut costs. Therefore, the Company
purchased additional peanut inventory for its 1997 fall
production season. With stable weather conditions being
predicted for 1998, the additional purchase of peanut
inventory was not necessary. Purchase commitments for
peanuts as of June 30, 1998 were comparable to those at June
30, 1997. Packaging inventory significantly decreased in
1998 compared to 1997 due to usage of existing supplies.
Packaging materials are purchased in large volumes and
carried for several years due to the high cost from
suppliers to cut dies and print materials. Therefore, when
supplier pricing remains consistent over the years and is
not predicted to increase, the Company utilizes its present
inventory supply without making additional purchases
necessary to lock in pricing. Finished goods inventory
increased in 1997 over 1996 and decreased in 1998 to a level
comparable to 1996 due to timing of production to prepare
for the fall sales. The main component which made up these
fluctuations were the "Cherry Mash bars". 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.
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. In
June 1996, the Company purchased $69,443 of new equipment.
The equipment was not in operation at June 30, 1996 but was
ready for production in early fall of 1996. The equipment
consisted of a wrapper machine and metal detector.
Additional expenditures of $5,113 were made during fiscal
year ended June 30, 1997 to make the equipment completely
operational. The Company spent an additional $59,783 during
1997 to update transportation equipment, add to leasehold
improvements, and replace outdated equipment. The Company
spent $23,921 during 1998 to make major improvements to
existing equipment. In addition, $21,715 was expended on
buildings and transportation equipment. 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.
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the past seven years, the Company has not been indebted
except for the series B notes. Of the original $630,000
Series B notes payable, $185,305 remain outstanding at June
30, 1998. On December 20, 1995, the Company received
approval to extend the notes to December 20, 2002 at the
current 6% rate of interest, with the agreement that this
was the final note extension. The entire $185,305
outstanding at June 30, 1998, is classified as long-term.
Realizing the minimum yearly principal payment required by
the note indenture will not satisfy the notes on December
20, 2002, the Company has accelerated the principal payments
on the notes during the past three fiscal years. It is
anticipated that acceleration of principal payments will
continue if cash is not required for operations and
equipment replacement.
The Company's lease on its manufacturing facility expired
March 31, 1995. The lease was renewed effective April 1,
1995 for a period of 10 years at $2,955 per month.
(c) Results of Operations
1998 is the first year in over ten years that the
Company has realized an operating loss. Increased cost
of sales and general and administrative expenses were
the primary sources for the loss.
In comparing 1998 to 1997, net sales decreased 9% while
cost of sales only decreased 5%. Company management
realized sales were declining during the current year
due to broker turnover. However, in anticipation of
future increased sales, management decided to retain
their current labor force during the slower productive
times. This decision was made due to the excellent
quality of the current labor force as well as the tight
job market. Management redirected certain job
functions to concentrate more on internal improvements
of the plant; however, the overall production per hour
declined for those whose job functions could not be
redirected. It is the intention of the Company to re-
evaluate the quantity of the labor force as well as
their efficiencies in the upcoming year.
The 1998 general and administrative expenses increased
$18,745 compared to 1997. While the majority of
general and administrative expenses remain stable
regardless of sales volume, the Company experienced
current year increases in legal fees regarding the
dividend arrearage as well as an increase in the
allowance for doubtful accounts.
Under the leadership of the CEO and his sales staff,
the Company has stabilized its customer base.
Certainly some customers were lost during 1998, 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.
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
There has been no material impact from inflation and
changing prices on net sales and revenues or on income from
continuing operations for the last three fiscal years. The
Company does not feel that any accounting changes, as
proposed by the Financial Accounting Standards Board, with
effective dates after the date of this report, will have a
material effect on future financial statements of the
Company.
The Company's only computer application, run on SBT
software, involves the payroll processing accounting
function. Company management is aware of the Year 2000
(Y2K) technology issue and is in the process of obtaining
written confirmation from SBT, that their programs are Y2K
compliant. Should it be necessary to change software for
non-compliance, the cost is projected to be less than
$1,000. In addition, management will require that any
future investment in technology will be Y2K compliant before
purchasing.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable. Refer to Note 7, "Notes to Financial
Statements" for fair value of financial instruments as of
June 30, 1998.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation
S-X are contained on pages 11 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-three years and no disagreements on
accounting or financial disclosure.
<PAGE>
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, 1998 and
1997 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, 1998. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Chase General Corporation and Subsidiary as of June
30, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended
June 30, 1998, in conformity with generally accepted accounting
principles.
St. Joseph, Missouri
August 14, 1998
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash and cash equivalents 161,093 $141,657
Receivables:
Trade, less allowance for
doubtful accounts of $11,604
in 1998 and $12,714 in 1997 94,514 83,579
Income tax 24,710 --
Inventories:
Finished goods 47,397 89,725
Goods in process 3,633 3,560
Raw materials 81,377 92,975
Packaging materials 79,006 115,251
Prepaid expense 35,549 39,791
Prepaid income taxes 1,000 5,996
Total current assets 528,279 572,534
PROPERTY AND EQUIPMENT
Land 35,000 35,000
Buildings 85,738 76,273
Machinery and equipment 648,360 628,844
Trucks and autos 94,639 91,824
Office equipment 31,706 32,100
Leasehold improvements 121,356 121,356
Total, at cost 1,016,799 985,397
Less accumulated depreciation 774,080 721,060
Total property and equipment 242,719 264,337
TOTAL ASSETS $ 770,998 $836,871
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
CURRENT LIABILITIES
Accounts payable $ 59,194 $ 59,162
Series B notes payable,
related parties current
maturities -- 2,266
Series B notes payable,
unrelated parties current
maturities -- 4,028
Accrued expense:
Interest 11,978 13,998
Other 22,950 24,685
Total current liabilities 94,122 104,139
LONG-TERM LIABILITIES
Series B notes payable,
related parties less current
maturities above 68,331 75,177
Series B notes payable,
unrelated parties less
current maturities above 116,974 132,482
Total long-term liabilities 185,305 207,659
Total liabilities 279,427 311,798
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred
stock, $5 par value:
Series A (liquidation
preference $1,185,000
and $1,155,000 respectively) 500,000 500,000
Series B (liquidation
preference $ 1,140,000
and $1,110,000 respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation
preference $2,853,484
and $2,794,951 respectively) 1,170,660 1,170,660
Series B (liquidation
preference $465,026
and $455,487 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 (5,974,425) (5,940,923)
Total stockholders' equity 491,571 525,073
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 770,998 $ 836,871
These consolidated financial statements should be read only in
connection with the accompanying summary of significant
accounting policies and notes to consolidated financial
statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
1998 1997 1996
NET SALES $2,113,777 $2,317,501 $2,316,031
COST OF SALES 1,696,845 1,787,350 1,771,381
Gross profit 416,932 530,151 544,650
OPERATING EXPENSES
Selling expenses 280,764 302,871 295,561
General and
administrative
expenses 175,442 156,697 156,875
Total operating
expenses 456,206 459,568 452,436
Income (loss)
from operations (39,274) 70,583 92,214
OTHER INCOME (EXPENSE)
Interest income 5,896 7,388 6,362
Miscellaneous income 691 1,272 1,643
Loss on disposal of
equipment -- -- (69)
Interest expense (12,077) (13,998) (16,214)
Total other income
(expense) (5,490) (5,338) (8,278)
Income (loss) before
income taxes (44,764) 65,245 83,936
PROVISION (CREDIT) FOR
INCOME TAXES (11,262) 15,071 20,233
NET INCOME (LOSS) $ (33,502) $ 50,174 $ 63,703
(LOSS) PER SHARE OF
COMMON STOCK $ (.17) $ (.08) $ (.07)
These consolidated financial statements should be read only in
connection with the accompanying summary of significant
accounting policies and notes to consolidated financial
statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
PRIOR CUMULATIVE CUMULATIVE
PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES A SERIES B
BALANCE (DEFICIT),
JUNE 30, 1995 $500,000 $500,000 $1,170,660 $190,780
Net income -- -- -- --
BALANCE (DEFICIT),
JUNE 30, 1996 500,000 500,000 1,170,660 190,780
Net income -- -- -- --
BALANCE (DEFICIT),
JUNE 30, 1997 500,000 500,000 1,170,660 190,780
Net loss -- -- -- --
BALANCE (DEFICIT),
JUNE 30, 1998 $500,000 $500,000 $1,170,660 $190,780
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
BALANCE (DEFICIT),
JUNE 30, 1995 $969,834 $3,134,722 $(6,054,800) $411,196
Net income -- -- 63,703 63,703
BALANCE (DEFICIT),
JUNE 30, 1996 969,834 3,134,722 (5,991,097) 474,899
Net income -- -- 50,174 50,174
BALANCE (DEFICIT),
JUNE 30, 1997 969,834 3,134,722 (5,940,923) 525,073
Net loss -- -- (33,502) (33,502)
BALANCE (DEFICIT),
JUNE 30, 1998 $969,834 $3,134,722 $(5,974,425) $491,571
These consolidated financial statements should be read only in connection with
the accompanying summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 198, 1997 AND 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers $2,087,531 $2,305,349 $2,305,712
Interest received 5,896 7,388 6,362
Other income 1,926 1,272 1,643
Income tax refunds 2,384 -- --
Cost of sales, selling, general and
administrative expenses paid (1,979,084) (2,265,624) (2,161,733)
Interest paid (14,097) (16,214) (17,718)
Income tax paid (10,836) (23,231) (29,322)
Net cash provided by operating
activities 93,720 8,940 104,944
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of U.S. Treasury obligation -- -- (99,308)
Purchase of certificate of deposit -- -- (100,000)
Purchases of property and equipment (45,636) (64,896) (134,052)
Proceeds on redemption of U.S.
Treasury obligation -- -- 99,308
Proceeds on redemption of
certificate of deposit -- -- 100,000
Net cash used in
investing activities (45,636) (64,896) (134,052)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable,
Series B (28,648) (38,703) (35,146)
Net cash used in financing
activities (28,648) (38,703) (35,146)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 19,436 (94,659) (64,254)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 141,657 236,316 300,570
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 161,093 $ 141,657 $236,316
<PAGE>
1998 1997 1996
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ (33,502) $ 50,174 $63,703
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 66,019 62,802 41,670
Loss on disposal of equipment 1,235 -- 69
Provision for doubtful accounts 15,311 3,327 6,416
Effects of changes in operating
assets and liabilities:
Trade accounts receivable (26,246) (12,152) (10,319)
Income tax receivable (24,710) -- --
Inventories 90,098 (101,529) 10,321
Prepaid expense 4,242 2,868 3,596
Prepaid income taxes 4,996 (5,996) --
Accounts payable 32 12,219 1,180
Income tax payable -- (2,164) (9,089)
Accrued liabilities (3,755) (609) (2,603)
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 93,720 $ 8,940 $ 104,944
These consolidated financial statements should be read only in connection with
the accompanying summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Chase General Corporation was incorporated on November 6, 1944 in
the State of Missouri for the purpose of manufacturing
confectionery products. The Company grants credit terms to
substantially all customers, consisting of repackers, grocery
accounts, and national syndicate accounts, who are primarily
located in the Midwest region of the United States. The
Company's fiscal year ends June 30. Significant accounting
policies followed by the Company are presented below:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Dye Candy Company. All
intercompany transactions and balances have been eliminated in
consolidation.
ACCOUNTING METHOD
The Company and its subsidiary use the accrual method of
accounting. Under this method, revenue is recognized when earned
and expense is recognized when the obligation is incurred.
SEGMENT REPORTING OF THE BUSINESS
The subsidiary, Dye Candy Company, operates two divisions, Chase
Candy Company and Poe Candy Company. Operations in Chase Candy
Company involve production and sale of a candy bar marketed under
the trade name "Cherry Mash". Operations in Poe Candy Company
involve production and sale of coconut, peanut, chocolate, and
fudge confectioneries. Division products are sold to the same
type of customers in the same geographical areas. In addition,
both divisions share a common labor force and utilize the same
basic equipment and raw materials. Therefore, due to the
similarities in the products manufactured, segment reporting for
the two divisions has not been disclosed in these financial
statements.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Finished goods and goods in process include a provision for
manufacturing overhead.
INVENTORIES
Inventories are carried at the "lower of cost or market value,"
cost being determined on the "first-in, first-out" basis of
accounting.
PROPERTY AND EQUIPMENT
Depreciation is computed by the straight-line method for
additions prior to 1981, and by the declining balance methods for
assets acquired after 1980.
The Company's property and equipment are being depreciated on
straight-line and accelerated methods over the following
estimated useful lives:
Buildings 25 years
Machinery and equipment 3 - 10 years
Trucks and autos 3 - 5 years
Office equipment 5 - 10 years
Leasehold improvements 8 - 31.5 years
This information is an integral part of the accompanying
consolidated financial statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NOTES PAYABLE, SERIES B
On December 1, 1967, the Company issued Collateral Sinking Fund
6% Income Registered Notes in the amount of $680,000. These
notes were issued to extend and consolidate notes and
certificates of indebtedness then held by F. S. Yantis & Co.,
Inc. (Yantis & Co.), aggregating approximately $569,000 together
with unpaid accrued interest of $111,000. Interest is payable
from "surplus net earnings" on the 20th day of December following
the fiscal year end.
Pursuant to a supplemental indenture, dated April 1, 1968 and
executed in compliance with a request by Yantis & Co. in
furtherance of the winding-up of its affairs, the original notes
aggregating $680,000 were reissued in two series designated as A
and B, respectively. The Series A notes aggregating $50,000 had
priority and were retired during the year ended June 30, 1984.
The Series B notes totaling $630,000 are held by the former
shareholders of Yantis & Co. During the years ended June 30,
1998 and 1997, $28,648 and $38,703 principal was paid on the
Series B notes, respectively.
As of June 30, 1998 and 1997, the outstanding Series B notes
total $185,305 and $213,953, respectively. Of these amounts
$68,331and $77,443 are owed to officers and directors of the
Company.
The Company has agreed to secure the payment of principal and
interest on the notes by the pledge of the capital stock of Dye
Candy Company under an indenture dated December 1, 1967, and
supplemental indenture dated June 30, 1970.
The indenture provides for a sinking fund deposit to be made by
the Company each year of not less than one-fourth of the
Company's fiscal year "surplus net earnings," which exceeds the
amount of interest required to be paid on the outstanding notes.
If at any time the sinking fund deposits aggregate $10,000 or
more, the same will be applied to prepayment of the notes
outstanding. At June 30, 1998 and 1997, all sinking fund
deposits had been disbursed to the noteholders. The "surplus net
earnings" is the amount by which the consolidated net income,
after adding back the current year's interest on the outstanding
notes, exceeds a $25,000 working capital reserve.
See Note 2 for computation of "surplus net earnings" and sinking
fund requirements for years ended June 30, 1998, 1997, and 1996.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NOTES PAYABLE, SERIES B (CONTINUED)
Principal payments are made by the trustee under terms of the
indenture and may be prepaid at the option of the Company.
During the year ended June 30, 1991, the notes were extended to
December 20, 1994. Effective December 20, 1995, the notes were
extended to December 20, 2002 at the same 6% interest rate and
with the agreement that this will be the final note extension.
Due to the nature of sinking fund requirements, it is not
practicable to include a schedule of future principal payments.
Dividends, other than stock dividends, may not be paid on capital
stock at any time interest on the notes is not current.
NOTE 2 - "SURPLUS NET EARNINGS" AND SINKING FUND REQUIREMENTS
The following is an analysis of the computation of the "surplus
net earnings" and sinking fund requirements for years ended June
30:
1998 1997 1996
NET INCOME (LOSS)
Chase General Corporation $(12,410) $(14,737) $(18,655)
Dye Candy Company (21,092) 64,911 82,358
Consolidated net income
(loss) (33,502) 50,174 63,703
NON-ALLOWANCE EXPENSE DEDUCTION
Interest on indebtedness 12,077 13,998 16,214
Net income (loss) basis for
"surplus net earnings" (21,425) 64,172 79,917
DEDUCTIONS FROM INCOME BASIS
Set aside as reserve for
accumulation of working
capital 25,000 25,000 25,000
"Surplus net earnings"
(loss) (46,425) 39,172 54,917
INTEREST PAYMENT REQUIRED 12,077 13,998 16,214
EXCESS "SURPLUS NET EARNINGS"
(LOSS) OVER INTEREST PAYMENT
REQUIRED $(34,348) $25,174 $38,703
SINKING FUND REQUIREMENT $ -- $ 6,294 $ 9,676
<PAGE>
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, 1998, 1997 and 1996 totaled $35,460, $35,460 and
$37,723, respectively, and is included in cost of sales.
Future minimum lease payments under this lease are as follows:
Year ending June 30, 1999 $ 35,460
Year ending June 30, 2000 35,460
Year ending June 30, 2001 35,460
Year ending June 30, 2002 35,460
Year ending June 30, 2003 35,460
Later years 65,010
Total $ 242,310
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, 1998, the Company had purchase commitments with
three vendors for approximately $274,938.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK
Capital stock authorized, issued and outstanding as of June 30,
1998 and 1997 is as follows:
SHARES
ISSUED AND
AUTHORIZED OUTSTANDING
Prior Cumulative
Preferred Stock, $5
par value: 240,000
6% Convertible
Series A 100,000
Series B 100,000
Cumulative Preferred
Stock, $20 par value: 150,000
5% Convertible
Series A 58,533
Series B 9,539
Common Stock, $1 par value 2,000,000 969,834
Reserved for conversion of
Preferred Stock -
1,033,333 shares
Cumulative Preferred Stock dividends in arrears at June 30, 1998
and 1997, totaled $5,643,510 and $5,515,438, respectively. Total
dividends in arrears, on a per share basis, consist of the
following at June 30:
1998 1997
6% Convertible
Series A $12 $12
Series B 11 11
5% Convertible
Series A 49 48
Series B 49 48
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
Six Percent Convertible Prior Cumulative Preferred Stock may,
upon thirty days prior notice, be redeemed by the Corporation at
$5.25 a share plus unpaid accrued dividends to date of
redemption. In the event of voluntary liquidation, holders of
this stock are entitled to receive $5.25 per share plus accrued
dividends. It may be exchanged for common stock at the option of
the shareholders in the ratio of four common shares for one share
of Series A and 3.75 common shares for one share of Series B.
The Company has the privilege of redemption of 5% convertible
cumulative preferred stock at $21.00 a share plus unpaid accrued
dividends. In the event of voluntary or involuntary liquidation,
holders of this stock are entitled to receive $20.00 a share plus
unpaid accrued dividends. It may be exchanged for common stock
at the option of the shareholders, in the ratio of 3.795 common
shares for one of preferred.
NOTE 5 - PROVISION (CREDIT) FOR INCOME TAXES
The provision (credit) for income taxes consists of the following
as of June 30:
1998 1997 1996
Federal income tax $(8,817) $11,257 $15,420
State income tax (2,445) 3,814 4,813
Total provision
(credit) for income
taxes $(11,262) $15,071 $20,233
The Company's provision (credit) for income taxes differs from
the tax that would result from applying statutory federal and
state income tax rates primarily because of nondeductible
expenses.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - (LOSS) PER SHARE OF COMMON STOCK
The loss per share was computed on the weighted average of
outstanding common shares during the years as follows:
1998 1997 1996
Net income (loss) $(33,502) $50,174 $63,703
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 $(161,574) $(77,898) $ (64,369)
Weighted average of
outstanding common
shares 969,834 969,834 969,834
Loss per share $ (.17) $ (.08) $ (.07)
No computation was made on common stock equivalents outstanding
at year-end because earnings per share would be anti-dilutive.
NOTE 7 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash
and cash equivalents, trade receivables and payables, and notes
payable. There are no significant differences between the
carrying value and fair value of any of these financial
instruments.
NOTE 8 -- CONCENTRATION OF CREDIT RISK
For the years ending June 30, 1998, June 30, 1997 and June 30,
1996 one customer accounted for 18.87%, 19.67%, and 16.27% of the
gross sales, respectively.
This information is an integral part of the accompanying
consolidated financial statements.
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
NAME AGE PERIODS OF SERVICE TERMS
AS DIRECTOR
W.A. Yantis, III 55 1980 to present One year
Barry M. Yantis 53 1980 to present One year
Brian A. Yantis 50 07-16-86 to present One year
An insufficient number of proxies were returned by the
shareholders for the January 16, 1998 annual stockholder
meeting. Therefore, the Directors noted above are
continuing for an additional one year term or until a
successor is elected.
See Item 10(b) for offices held by Barry M. Yantis and
Brian A. Yantis. W.A. Yantis, III has never held an office
with the Company.
(b) Executive Officers
YEARS OF
SERVICE AS
NAME AGE POSITION AN OFFICER TERM
Barry M.
Yantis 53 President and 18 Until
Treasurer successor
elected
Brian A.
Yantis 50 Vice-President 7 Until
and Secretary successor
elected
(c) Certain Significant Employees
There are no significant employees other than above.
(d) Family Relationships
W. A. Yantis, III, Barry M. Yantis, and Brian A. Yantis are
brothers.
(e) Business Experience
(1) Barry M. Yantis, president and treasurer has been an
officer of the Company for eighteen years, thirteen years
as vice-president and seven years as president. He has
been on the board of directors for eighteen years and has
been associated with the candy business for twenty-three
years.
Brian A. Yantis, vice-president and secretary has been an
officer of the Company for seven years as vice-president
and since May 1992 as secretary. He has been associated
with the insurance business for twenty-six years and has
been a Vice-President of Aon Risk Services in Chicago,
Illinois during the past eleven years.
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
(e) Business Experience (Continued)
W.A. Yantis III, has served as a board member of Chase
General Corporation for eighteen years. He has held the
position of account manager for Prudential Insurance
Company Asset Management Group in Newark, New Jersey during
the past three years and in Chicago, Illinois during the
prior seven years.
(2) The directors and executive officers listed above are
also the directors and executive officers of Dye Candy
Company.
(f) Involvement in Certain Legal Proceedings
Not applicable
(g) Promoters and Control Persons
Not applicable
ITEM 11 - EXECUTIVE COMPENSATION
(a) General
Executive officers are compensated for their services
as set forth in the Summary Compensation Table. These
salaries are approved yearly by the Board of Directors.
(b)
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER
NAME AND FISCAL ANNUAL
PRINCIPAL POSITION YEAR END SALARY BONUS COMPENSATION
Barry M. Yantis 1) 06-30-98 $100,000 $15,750 $2,240
Barry M. Yantis 1) 06-30-97 $103,025 $11,250 $2,240
Barry M. Yantis 1) 06-30-96 $ 90,950 $10,800 $2,100
LONG TERM COMPENSATION
AWARDS PAYOUTS
RESTRICTED
NAME AND STOCK OPTION/ LTIP ALL OTHER
PRINCIPAL POSITION AWARD(S) SARS (#) PAYOUTS COMPENSATION
Barry M. Yantis - - - -
Barry M. Yantis - - - -
Barry M. Yantis - - - -
1) CEO
2) No other compensation other than that which is listed in compensation
table.
3) No other officers are compensated for their services than those listed
in this compensation table.
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED)
(c) Option/SAR grants table
Not applicable
(d) Aggregated option/SAR exercises and fiscal year-end
option/SAR value table
Not applicable
(e) Long-term incentive awards table
Not applicable
(f) Defined benefit or actuarial plan disclosure
Not applicable
(g) Compensation of Directors
Directors are not compensated for services on the
board. The directors are reimbursed for travel
expenses incurred in attending board meetings. During
the fiscal year 1998, $965, $97 and $160 of travel
expenses were reimbursed to board members, W.A. Yantis
III, Brian A. Yantis, and Barry M. Yantis,
respectively.
(h) Employment contracts and termination of employment and
change in control
arrangements
No employment contracts exist with any executive
officers. In addition, there are no contracts
currently in place regarding termination of employment
or change in control arrangements.
(i) Report on repricing of option/SARs
Not applicable
(j) Additional information with respect to compensation
committee interlocks and insider participation in
compensation decisions
The registrant has no formal compensation committee.
The board of directors, W.A. Yantis III, Brian A.
Yantis, and Barry M. Yantis, who are brothers, annually
approve the compensation of Barry M. Yantis, CEO.
(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.
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION (CONTINUED)
(l) Performance graph
Not applicable as there are no dividends available to
distribute to common stockholders after preferred
dividends are met. In addition, there is no market
value price for the common stock (par value $1 per
share) as there is no public trading market for the
Company's stock.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AMOUNTS
AND
NATURE
OF
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 97,192(1) 8.4%(2)
5605 Osage Drive
St. Joseph, Mo.
64503
Brian Yantis 97,192(1) 8.4%(2)
1210 E. Clarendon
Arlington Heights, IL.
60004
W.A. Yantis III 97,193(1) 8.4%(2)
29 Calais Rd.
Mendham, N.J.
07945
(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
$5 par value: Series A, and officers 21,533 21.5%
6% convertible as a group
Prior Cumulative Preferred All directors
$5 par value: Series B, and officers 21,533 21.5%
6% convertible as a group
Cumulative Preferred, All directors
$20 par value: and officers 3,017 5.2%
Series A, $5 convertible as a group
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
AMOUNTS
AND
NATURE
OF
BENEFICIAL
TITLE OF CLASS NAME AND ADDRESS OWNERSHIP % OF CLASS
Cumulative Preferred, All directors
$20 par value: and officers 630 6.6%
Series B, $5 as a group
convertible
(1) Includes 180,721 shares which could be received within 30 days
upon conversion of preferred stock.
(2) Reflects the percentage 291,577 shares would represent if the
180,721 shares above were converted to common stock.
(c) No known change of control is anticipated.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others
No reportable transactions with management and others,
to which the registrant or its subsidiary was a party,
have occurred since the registrant's last fiscal year.
In addition, there are no such currently proposed
transactions.
(b) Certain business relationships
Not applicable
(c) Indebtedness of management
Not applicable
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(CONTINUED)
(d) Transactions with promoters
Not applicable
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of the Form 10-K
(1) The following are included in Part II of this
report:
Page Number
Independent Auditor's Report 11
Consolidated Balance Sheets -
June 30, 1998 and 1997 12 - 13
Consolidated Statements of
Operations for the years
ended June 30, 1998, 1997, and 1996 14
Consolidated Statements of Stockholders'
Equity for the years ended June 30, 1998,
1997, and 1996 15
Consolidated Statements of Cash Flows for
the years ended June 30, 1998, 1997,
and 1996 16 - 17
Summary of Significant Accounting Policies 18 - 19
Notes to Consolidated Financial Statements 20 - 25
(2) The following are included in Part IV of this report:
Page Number
Independent Auditor's Report on
Supplemental Schedules 33
Schedule I: Condensed Financial Information
of Registrant 34 - 37
Schedule II: Valuation and Qualifying
Accounts, June 30, 1998, 1997, and 1996 38
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth
quarter of the year ended June 30, 1998.
<PAGE>
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(c) Exhibits required by Item 601 of Regulation S-K
The following have been previously filed and are
incorporated by reference to prior years' Forms 10-K
filed by the Registrant:
(3) Articles of Incorporation and By-Laws
(21) Subsidiaries of registrant
The following explanations are included in "Notes to
Financial Statements" in Part II of this report:
(4) Rights of security holders including indentures -
Refer to Notes 1 and 4.
(11) Computation of per share earnings - Refer to Note
6.
(21) Subsidiaries of registrant - Refer to "Summary of
Significant Accounting Policies".
(d) Financial statement schedules required by Regulation S-X
Schedules required by Regulation S-X contained on page
34 through 38 have been excluded from the annual report
to the shareholders.
SUPPLEMENTAL INFORMATION TO BE FURNISHED, FILED
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934.
(1) With this filing, the Registrant is furnishing to
the Commission four (4) copies of the Proxy
Statement regarding the January 16, 1998 annual
meeting mailed to security holders during the 1998
fiscal year.
(2) During 1999 fiscal year, the Registrant will
furnish a copy of the annual report and any Proxy
information to the Commission at time the
aforementioned are mailed to security holders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES
In connection with the audit of the consolidated financial
statements of Chase General Corporation and Subsidiary, we have
also audited supplemental schedules I and II. In our opinion,
these schedules present fairly the financial position as set
forth therein, in conformity with generally accepted accounting
principles.
St. Joseph, Missouri
August 14, 1998
<PAGE>
SCHEDULE I
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CHASE GENERAL CORPORATION
(Registrant Only)
CONDENSED BALANCE SHEETS
June 30, 1998 and 1997
ASSETS
1998 1997
Income tax refund receivable $ 4,392 $ 4,153
Investment in subsidiary - at equity 684,462 748,871
TOTAL ASSETS $ 688,854 $ 753,024
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Series B notes payable and accrued
interest, unrelated parties $ 124,578 $ 145,441
Series B notes payable and accrued
interest, related parties 72,705 82,510
Total liabilities 197,283 227,951
Capital stock 3,331,274 3,331,274
Paid in capital in excess of par 3,134,722 3,134,722
Accumulated (deficit) (5,974,425) (5,940,923)
Total stockholders' equity 491,571 525,073
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 688,854 $ 753,024
(1) The restricted assets of 100% consolidated subsidiary, Dye
Candy Company, are $770,998 and $836,871 as of June 30, 1998
and 1997, 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.
<PAGE>
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, 1998, 1997 and 1996
1998 1997 1996
REVENUE
Equity in net income (loss)
of subsidiary $(21,092) $64,911 $82,358
Total revenue (21,092) 64,911 82,358
EXPENSE
General and administrative 4,726 4,892 8,294
Interest 12,076 13,998 16,214
Total expense 16,802 18,890 24,508
Income (loss) before
income taxes (37,894) 46,021 57,850
PROVISION (CREDIT) FOR
INCOME TAXES (4,392) (4,153) (5,853)
NET INCOME (LOSS) $(33,502) $50,174 $63,703
<PAGE>
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, 1998, 1997 and 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
General and administrative
expenses paid $ (4,726) $ (4,892) $ (8,294)
Interest paid (14,097) (16,214) (17,718)
Income tax refund received 4,153 5,853 5,413
Net cash used in
operating activities (14,670) (15,253) (20,599)
CASH FLOWS FROM INVESTING ACTIVITIES
Advances received from wholly
owned subsidiary 43,318 53,956 55,745
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on Series
B notes payable (28,648) (38,703) (35,146)
NET DECREASE IN CASH AND
CASH EQUIVALENTS -- -- --
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- -- --
CASH AND CASH EQUIVALENTS,
END OF YEAR $ -- $ -- $ --
<PAGE>
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, 1998, 1997 and 1996
1998 1997 1996
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES
Net income (loss) $(33,502) $50,174 $63,703
Adjustments to reconcile
net income (loss)to net cash
used in operating activities:
Net income (loss) from
wholly owned subsidiary 21,092 (64,911) (82,358)
Effects of changes in
operating assets and
liabilities:
Accrued interest (2,021) (2,216) (1,504)
Income tax refund
receivable (239) 1,700 (440)
NET CASH USED IN
OPERATING ACTIVITIES $(14,670) $(15,253) $(20,599)
This information should be read only in connection with the
accompanying independent auditor's report on supplemental
schedules.
<PAGE>
SCHEDULE II
CHASE GENERAL CORPORATION AND ITS SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
June 30, 1998, 1997, and 1996
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, 1998 $12,714 $15,311 $16,421 $11,604
June 30, 1997 12,757 3,327 3,370 12,714
June 30, 1996 12,216 6,416 5,875 12,757
* 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.
<PAGE>
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: October 12, 1998 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
Officer) and Director
/s/ Barry M. Yantis October 12, 1998
Barry M. Yantis Date
Vice-President, Secretary and Director
/s/ Brian A. Yantis October 12, 1998
Brian A. Yantis Date
<PAGE>
APPENDIX I
CHASE GENERAL CORPORATION
P.O. Box 698
St. Joseph, Missouri 64502
P R O X Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
shareholder(s) of CHASE GENERAL CORPORATION, a Missouri
corporation, hereby constitute(s) and appoint(s) BARRY M. YANTIS,
and BRIAN A. YANTIS or either of them to the proxies, agents and
attorneys of the undersigned, with full power of substitution,
for and in the name of the undersigned to attend the annual
meeting of the shareholders of said Corporation to be held at
3600 Leonard Road, St. Joseph, Missouri, on January 16, 1998, at
the hour of 9:00 a.m. and at any adjournment or adjournments
thereof; to vote all shares now or hereafter standing in the name
of the undersigned as fully as the undersigned might or could do
were the undersigned personally present at said meeting, or at
any adjournment or adjournments thereof; on the election of
directors and all other matters that may come before the said
meeting, hereby ratifying and confirming all that said proxies or
either of them, or their duly appointed substitute or
substitutes, may do at said meeting or at any adjournment or
adjournments thereof; hereby revoking any and all proxies
heretofore given for said meeting, and expressly waiving all
notice required by statute or otherwise, to be given for said
meeting.
If only one of said agents, attorneys and proxies should be
present and acting at the meeting, he shall have and may exercise
all of the powers of all of said agents, attorneys and proxies
hereunder.
Dated __________ day of __________________, 199________
___________________________________ Signature of shareholder(s) (SEAL)
IMPORTANT: The signature should correspond with name of the
shareholder as it appears hereon. If stock is held in the name
of two or more persons, all should sign the proxy. When signing
as attorney, executor, administrator, trustee or guardian, the
full title should be given.
PLEASE COMPLETE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 161,093
<SECURITIES> 0
<RECEIVABLES> 130,828
<ALLOWANCES> 11,604
<INVENTORY> 211,413
<CURRENT-ASSETS> 528,279
<PP&E> 1,016,799
<DEPRECIATION> 774,080
<TOTAL-ASSETS> 770,998
<CURRENT-LIABILITIES> 94,122
<BONDS> 185,305
0
2,361,440
<COMMON> 969,834
<OTHER-SE> (2,839,703)
<TOTAL-LIABILITY-AND-EQUITY> 770,998
<SALES> 2,113,777
<TOTAL-REVENUES> 2,120,364
<CGS> 1,696,845
<TOTAL-COSTS> 2,137,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,311
<INTEREST-EXPENSE> 12,077
<INCOME-PRETAX> (44,764)
<INCOME-TAX> (11,262)
<INCOME-CONTINUING> (33,502)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,502)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
