-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VLyO36fI4voz+BcclzKzgFe6dcwtR37IK1ghsOsXtM9eJc8fM28x27S5YTQ6ZJ3i tP+vdWHJ33mV3iR9ANcXSA== 0000927025-97-000158.txt : 19971015 0000927025-97-000158.hdr.sgml : 19971015 ACCESSION NUMBER: 0000927025-97-000158 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE GENERAL CORP CENTRAL INDEX KEY: 0000015357 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 362667734 STATE OF INCORPORATION: MO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 002-05916 FILM NUMBER: 97694705 BUSINESS ADDRESS: STREET 1: 3600 LEONARD RD CITY: ST JOSEPH STATE: MO ZIP: 64503 BUSINESS PHONE: 8162791625 MAIL ADDRESS: STREET 1: 3600 LEONARD RD CITY: ST JOSEPH STATE: MO ZIP: 64503 FORMER COMPANY: FORMER CONFORMED NAME: CHASE CANDY CO DATE OF NAME CHANGE: 19660911 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1997 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, 1997. Location in this filing where exhibit index is located : 31 Total number of pages included in this filing: 39 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: (Continued) ITEM 1 BUSINESS (CONTINUED) Chase Candy Division of Dye Candy Company produces a candy bar under the trade name of "Cherry Mash [Registered Trademark]". 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 (5) 18 - 12 oz. Collector's Tin The bars are sold primarily to wholesale candy and tobacco jobbing houses, grocery accounts, and vendors. "Cherry Mash [Registered Trademark]" bars are marketed in the Midwest region of the United States. For the years ended June 30, 1997, 1996, and 1995, this division accounted for 54%, 52%, and 51%, 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, 1997, 1996, and 1995, this division accounted for 46%, 48%, and 49%, 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. (Continued) 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, 1997 and 1996 and 1995, Associated Wholesale Grocers of Springfield, Mo, accounted for 13.08%, 10.79% and 11.88% 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. (Continued) 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. 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- six 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, 1997, 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, 1997. 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, 1997, 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 06-30-97 06-30-96 06-30-95 (i) Net sales or operating revenue $2,317,501 $2,316,031 $2,235,656 (ii) Income from continuing operations $ 50,174 $ 63,703 $ 60,146 (iii) Income (loss) from continuing operations per common share * $ (.08) $ (.07) $ (.07) (iv) Total assets $ 836,871 $ 815,954 $ 797,909 (v) Long-term debt $ 207,659 $ 242,980 $ - (vi) Cash dividend declared per common share $ - $ - $ - 06-30-94 06-30-93 (i) Net sales or operating revenue $2,476,259 $2,531,740 (ii) Income from continuing operations $ 25,421 $ 95,015 (iii) Income (loss) from continuing operations per common share * $ (.11) $ (.03) (iv) Total assets $ 784,506 $ 737,169 (v) Long-term debt $ - $ 302,802 (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. 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, 1997, 1996 and 1995 in the amounts of $8,940, $104,944 and $116,893, 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, 1997, the Company had $90,000 invested in short term certificates of deposit to meet the 1997 fall production season. No funds were invested in temporary investments at June 30, 1996 and 1995. The Company continually monitors raw material pricing, and when a price increase/decrease is anticipated adjustments to inventory levels are made accordingly. In late spring 1997, predicted weather conditions dictated a future increase in peanut costs. Therefore, the Company purchased additional peanut inventory for its fall production season. In addition, the Company had $215,189 of outstanding raw material purchase commitments at June 30, 1997 compared to $269,000 at June 30, 1996. The above two factors increased raw material inventory at June 30, 1997. At June 30, 1996, raw material costs were declining, and accordingly, June 30, 1996 raw material inventory was lower than June 30, 1995. Packaging inventory is consistently maintained at a relatively higher balance than other inventories since packaging materials are continually purchased in large volumes and carried for several years due to the high cost from suppliers to cut dies and print materials. The modest increase in packaging supplies at June 30, 1997 is due to the purchase of a new packaging display case for distribution to convenience stores. Finished goods inventory increased from prior years due to timing of production to prepare for the fall sales. 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 consists 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. 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. (Continued) ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the past six years, the Company has not been indebted except for the series B notes. Of the original $630,000 Series B notes payable, $213,953 remain outstanding at June 30, 1997. The Company received approval effective December 20, 1995 to extend the notes to December 20, 2002 at the current 6% rate of interest. Of the $213,953 amount outstanding at June 30, 1997, $6,294 has been classified as a current liability and $207,659 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 two 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 Under the leadership of the CEO and his sales staff, the Company has now stabilized its customer base as well as the cost of sales, selling, and general and administrative expenses. Consequently there are no significant fluctuations in the above expense categories in the past three years. Certainly some customers have been lost, but those have been replaced. The Company continues to look for new markets but only when the addition of a new market is profitable. In order to maintain funds to finance operations and meet debt obligations, it is the intention of management to continue its efforts to expand the present market area and increase sales to its customers. Management also intends to continue tight control on all expenditures. There has been no material impact from inflation and changing prices on net sales and revenues or on income from continuing operations for the last three fiscal years. The effects of the Tax Reform Act of 1986 on the Company's liquidity and results of operations for the years ending June 30, 1995 through 1997 were immaterial and therefore the Company did not feel it necessary to record any deferred taxes as the result of the Tax Reform Act. As of the date of this filing, the Company does not feel that future years' liquidity and operations will be adversely affected by the Taxpayer Relief Act of 1997. In addition, 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. (Continued) 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, 1997. 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-two years and no disagreements on accounting or financial disclosure. INDEPENDENT AUDITOR'S REPORT Board of Directors Chase General Corporation St. Joseph, Missouri We have audited the accompanying consolidated balance sheets of Chase General Corporation and Subsidiary as of June 30, 1997 and 1996 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, 1997. 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, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1997, in conformity with generally accepted accounting principles. St. Joseph, Missouri August 21, 1997 CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS June 30, 1997 and 1996 ASSETS 1997 1996 CURRENT ASSETS Cash and cash equivalents $ 141,657 $236,316 Trade receivables, less allowance for doubtful accounts of $12,714 in 1997 and $12,757 in 1996 83,579 74,754 Inventories: Finished goods 89,725 51,204 Goods in process 3,560 2,024 Raw materials 92,975 42,189 Packaging materials 115,251 104,565 Prepaid expense 39,791 42,659 Prepaid income taxes 5,996 - Total current assets 572,534 553,711 PROPERTY AND EQUIPMENT Land 35,000 35,000 Buildings 76,273 76,273 Machinery and equipment 628,844 593,754 Trucks and autos 91,824 87,683 Office equipment 32,100 30,155 Leasehold improvements 121,356 119,146 Total, at cost 985,397 942,011 Less accumulated depreciation 721,060 679,768 Total property and equipment 264,337 262,243 TOTAL ASSETS $836,871 $815,954 LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 CURRENT LIABILITIES Accounts payable $ 59,162 $ 46,943 Series B notes payable, related parties current maturities 2,266 3,483 Series B notes payable, unrelated parties current maturities 4,028 6,193 Income tax payable - 2,164 Accrued expense: Interest 13,998 16,214 Other 24,685 23,078 * Total current liabilities 104,139 98,075 LONG-TERM LIABILITIES Series B notes payable, related parties less current maturities above 75,177 87,969 Series B notes payable, unrelated parties less current maturities above 132,482 155,011 Total long-term liabilities 207,659 242,980 Total liabilities 311,798 341,055 STOCKHOLDERS' EQUITY Capital stock issued and outstanding: Prior cumulative preferred stock, $5 par value: Series A (liquidation preference $1,155,000 and $1,125,000 respectively) 500,000 500,000 Series B (liquidation preference $ 1,110,000 and $1,080,000 respectively) 500,000 500,000 Cumulative preferred stock, $20 par value: Series A (liquidation preference $2,794,951 and $2,736,418 respectively) 1,170,660 1,170,660 Series B (liquidation preference $455,487 and $445,948 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 (5,940,923) (5,991,097) Total stockholders' equity 525,073 474,899 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 836,871 $ 815,954 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30, 1997, 1996 and 1995 1997 1996 1995 NET SALES $2,317,501 $2,316,031 $2,235,656 COST OF SALES 1,787,350 1,771,381 1,715,729 Gross profit 530,151 544,650 519,927 OPERATING EXPENSES Selling expense 302,871 295,561 277,540 General and administrative expense 156,697 156,875 155,567 Total operating expenses 459,568 452,436 433,107 Income from operations 70,583 92,214 86,820 OTHER INCOME (EXPENSE) Interest income 7,388 6,362 7,011 Miscellaneous income 1,272 1,643 1,407 Loss on disposal of equipment - (69) (128) Interest expense (13,998) (16,214) (17,718) Total other income (expense) (5,338) (8,278) (9,428) Income before income taxes 65,245 83,936 77,392 PROVISION FOR INCOME TAXES 15,071 20,233 17,246 NET INCOME $50,174 $63,703 $60,146 (LOSS) PER SHARE OF COMMON STOCK $ (.08) $ (.07) $ (.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. CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended June 30, 1997, 1996 and 1995 Prior Cumulative Cumulative Preferred Stock Preferred Stock Series A Series B Series A Series B BALANCE (DEFICIT), JULY 1, 1994 $500,000 $500,000 $1,170,660 $190,780 Net income - - - - 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 Common Paid-in Accumulated Stock Capital Deficit Total BALANCE (DEFICIT), JULY 1, 1994 $969,834 $3,134,722 $(6,114,946) $351,050 Net income - - 60,146 60,146 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 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30, 1997, 1996 and 1995 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Collections from customers $2,305,349 $2,305,712 $2,239,899 Interest received 7,388 6,362 7,011 Other income 1,272 1,643 1,407 Income tax refunds - - 33,435 Cost of sales, selling, general and administrative expenses paid (2,265,624)(2,161,733) (2,141,693) Interest paid (16,214) (17,718) (18,693) Income tax paid (23,231) (29,322) (4,473) Net cash provided by operating activities 8,940 104,944 116,893 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of U.S. Treasury obligation - (99,308) (100,827) Purchase of certificate of deposit - (100,000) - Purchases of property and equipment (64,896) (134,052) (10,161) Proceeds on redemption of U.S. Treasury obligation - 99,308 200,020 Proceeds on redemption of certificate of deposit - 100,000 - Net cash provided by (used in) investing activities (64,896) (134,052) 89,032 CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes payable, Series B (38,703) (35,146) (15,000) Net cash used in financing activities (38,703) (35,146) (15,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (94,659) (64,254) 190,925 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 236,316 300,570 109,645 CASH AND CASH EQUIVALENTS, END OF YEAR $141,657 $236,316 $300,570 1997 1996 1995 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 50,174 $ 63,703 $ 60,146 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 62,802 41,670 42,903 Loss on disposal of equipment - 69 128 Provision for doubtful accounts 3,327 6,416 10,033 Effects of changes in operating assets and liabilities: Trade accounts receivable (12,152) (10,319) 4,243 Inventories (101,529) 10,321 (7,709) Prepaid expense 2,868 3,596 3,937 Prepaid income taxes (5,996) - 34,955 Accounts payable 12,219 1,180 (41,904) Income tax payable (2,164) (9,089) 11,253 Accrued liabilities (609) (2,603) (1,092) NET CASH PROVIDED BY OPERATING ACTIVITIES $8,940 $104,944 $116,893 These consolidated financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Chase General Corporation was incorporated on November 6, 1944 in the State of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States. The Company's fiscal year ends June 30. Significant accounting policies followed by the Company are presented below: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions and balances have been eliminated in consolidation. ACCOUNTING METHOD The Company and its subsidiary use the accrual method of accounting. Under this method, revenue is recognized when earned and expense is recognized when the obligation is incurred. SEGMENT REPORTING OF THE BUSINESS The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Company and Poe Candy Company. Operations in Chase Candy Company involve production and sale of a candy bar marketed under the trade name "Cherry Mash". Operations in Poe Candy Company involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. Division products are sold to the same type of customers in the same geographical areas. In addition, both divisions share a common labor force and utilize the same basic equipment and raw materials. Therefore, due to the similarities in the products manufactured, segment reporting for the two divisions has not been disclosed in these financial statements. For the year ending June 30, 1997, June 30, 1996 and June 30, 1995 one customer accounted for 13.08%, 10.79%, and 11.88% of the gross sales respectively. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CHASE GENERAL CORPORATION AND SUBSIDIARY SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. 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 ACRS and MACRS methods for assets acquired after 1980 for both financial reporting and income tax purposes. Any difference between the amount of depreciation determined under the ACRS and MACRS systems and that determined in accordance with generally accepted accounting principles is considered to be immaterial. 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 For the years ending June 30, 1997, 1996 and 1995, the depreciation expense was $62,802, $41,670 and $42,903, respectively. This information is an integral part of the accompanying consolidated financial statements. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NOTES PAYABLE, SERIES B On December 1, 1967, the Company issued Collateral Sinking Fund 6% Income Registered Notes in the amount of $680,000. These notes were issued to extend and consolidate notes and certificates of indebtedness then held by F. S. Yantis & Co., Inc. (Yantis & Co.), aggregating approximately $569,000 together with unpaid accrued interest of $111,000. Interest is payable from "surplus net earnings" on the 20th day of December following the fiscal year end. Pursuant to a supplemental indenture, dated April 1, 1968 and executed in compliance with a request by Yantis & Co. in furtherance of the winding-up of its affairs, the original notes aggregating $680,000 were reissued in two series designated as A and B, respectively. The Series A notes aggregating $50,000 had priority and were retired during the year ended June 30, 1984. The Series B notes totaling $630,000 are held by the former shareholders of Yantis & Co. During the years ended June 30, 1997 and 1996, $38,703 and $35,146 principal was paid on the Series B notes, respectively. As of June 30, 1997 and 1996, the outstanding Series B notes total $213,953 and $252,656, respectively. Of these amounts $77,443 and $91,452 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, 1997 and 1996, 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, 1997, 1996 and 1995. (Continued) 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: 1997 1996 1995 NET INCOME (LOSS) Chase General Corporation $(14,737) $(18,655) $(18,922) Dye Candy Company 64,911 82,358 79,068 Consolidated net income 50,174 63,703 60,146 NON-ALLOWANCE EXPENSE DEDUCTION Interest on indebtedness 13,998 16,214 17,718 Net income basis for "surplus net earnings" 64,172 79,917 77,864 DEDUCTIONS FROM INCOME BASIS Set aside as reserve for accumulation of working capital 25,000 25,000 25,000 "Surplus net earnings" 39,172 54,917 52,864 INTEREST PAYMENT REQUIRED 13,998 16,214 17,718 EXCESS "SURPLUS NET EARNINGS" OVER INTEREST PAYMENT REQUIRED $25,174 $38,703 $35,146 SINKING FUND REQUIREMENT $ 6,294 $ 9,676 $ 8,787 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 original lease, which commenced March 31, 1975, was for a twenty-year period and required a monthly rental fee of $2,263, payable on the first day of each calendar month. This lease was renegotiated effective April 1, 1995 for 10 years at $2,955 per month. Rental expense for the years ended June 30, 1997, 1996 and 1995 totaled $35,460, $37,723 and $29,232, respectively and is included in cost of sales. Future minimum lease payments under this lease are as follows: Year ending June 30, 1998 $ 35,460 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 Later years 97,515 Total $ 274,815 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, 1997, the Company had purchase commitments with two vendors for approximately $215,189. CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - CAPITAL STOCK Capital stock authorized, issued and outstanding as of June 30, 1997 and 1996 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 - 1,030,166 shares Cumulative Preferred Stock dividends in arrears at June 30, 1997 and 1996, totaled $5,515,438 and $5,387,366, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30: 1997 1996 6% Convertible Series A $12 $11 Series B 11 11 5% Convertible Series A 48 47 Series B 48 47 (Continued) 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 FOR INCOME TAXES The provision for income taxes consists of the following as of June 30: 1997 1996 1995 Federal income tax $ 10,630 $ 15,420 $ 13,204 State income tax 3,814 4,813 4,013 Correction of prior year provision 627 - 29 Total provision $ 15,071 $ 20,233 $ 17,246 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: 1997 1996 1995 Net income $ 50,174 $ 63,703 $ 60,146 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 $ (77,898) $ (64,369) $ (67,926) Weighted average of outstanding common shares 969,834 969,834 969,834 Loss per share $ (.08) $ (.07) $ (.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. This information is an integral part of the accompanying consolidated financial statements. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Directors Name Age Periods of Service Terms as Director W.A. Yantis, III 54 1980 to present One year Barry M. Yantis 52 1980 to present One year Brian A. Yantis 49 07-16-86 to present One year An insufficient number of proxies were returned by the shareholders for the January 24, 1997 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 52 President and 17 Until successor Treasurer elected Brian A. Yantis 49 Vice-President 6 Until successor and Secretary 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 seventeen years, twelve years as vice-president and six years as president. He has been on the board of directors for seventeen years and has been associated with the candy business for twenty-two years. Brian A. Yantis, vice-president and secretary has been an officer of the Company for six years as vice-president and since May 1992 as secretary. He has been associated with the insurance business for twenty-five years and has been a Vice-President of Rollins, Burdick, and Hunter in Chicago, Illinois during the past ten years. (Continued) 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 seventeen years. He has held the position of account manager for Prudential Insurance Company Asset Management Group in Newark, New Jersey during the past two years and in Chicago, Illinois during the prior eight 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 Name and Other Principal Fiscal Annual Position Year End Salary Bonus Compensation 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 Barry M. Yantis 1) 06-30-95 $91,000 $10,000 $1,840 Long Term Compensation Awards Payouts Name and Restricted Principal Stock Option/ LTIP All other 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. (Continued) 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 1997, $581, $124 and $-0- of travel expenses were reimbursed to board members, W.A. Yantis III, Brian A. Yantis, and Barry M. Yantis, respectively. (h) Employment contracts and termination of employment and change in control arrangements No employment contracts exist with any executive officers. In addition, there are no contracts currently in place regarding termination of employment or change in control arrangements. (i) Report on repricing of option/SARs Not applicable (j) Additional information with respect to compensation committee interlocks and insider participation in compensation decisions The registrant has no formal compensation committee. The board of directors, W.A. Yantis III, Brian A. Yantis, and Barry M. Yantis, who are brothers, annually approve the compensation of Barry M. Yantis, CEO. (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. (Continued) 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 110,856 11.4% officers as a group Prior Cumulative All directors and 21,533 21.5% Preferred, officers $5 par value: Series A, as a group 6% convertible Prior Cumulative All directors and 21,533 21.5% Preferred officers $5 par value: Series B, as a group 6% convertible Cumulative Preferred, All directors 3,017 5.2% $20 par value: and officers Series A, as a group $5 convertible (Continued) 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 630 6.6% $20 par value: and officers Series B, as a group $5 convertible (1) Includes 180,721 shares which could be received within 30 days upon conversion of preferred stock. (2) Reflects the percentage 291,577 shares would represent if the 180,721 shares above were converted to common stock. (c) No known change of control is anticipated. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Transactions with management and others No reportable transactions with management and others, to which the registrant or its subsidiary was a party, have occurred since the registrant's last fiscal year. In addition, there are no such currently proposed transactions. (b) Certain business relationships Not applicable (c) Indebtedness of management Not applicable (Continued) 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, 1997 and 1996 12 - 13 Consolidated Statements of Operations for the years ended June 30, 1997, 1996, and 1995 14 Consolidated Statements of Stockholders' Equity for the years ended June 30, 1997, 1996, and 1995 15 Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1996, and 1995 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, 1997, 1996, and 1995 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, 1997. (Continued) 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 24, 1997 annual meeting mailed to security holders during the 1997 fiscal year. (2) During 1998 fiscal year, the Registrant will furnish a copy of the annual report and any Proxy information to the Commission at time the aforementioned are mailed to security holders. INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES In connection with the audit of the consolidated financial statements of Chase General Corporation and Subsidiary, we have also audited supplemental schedules I and II. In our opinion, these schedules present fairly the financial position as set forth therein, in conformity with generally accepted accounting principles. St. Joseph, Missouri August 21, 1997 SCHEDULE I CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (Registrant Only) CONDENSED BALANCE SHEETS June 30, 1997 and 1996 ASSETS 1997 1996 Income tax refund receivable $ 4,153 $ 5,853 Investment in subsidiary - at equity 748,871 737,916 TOTAL ASSETS $ 753,024 $ 743,769 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Series B notes payable and accrued interest, unrelated parties $ 145,441 $ 171,549 Series B notes payable and accrued interest, related parties 82,510 97,321 Total liabilities 227,951 268,870 Capital stock 3,331,274 3,331,274 Paid in capital in excess of par 3,134,722 3,134,722 Accumulated (deficit) (5,940,923) (5,991,097) Total stockholders' equity 525,073 474,899 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 753,024 $ 743,769 (1) The restricted assets of 100% consolidated subsidiary, Dye Candy Company, are $836,871 and $815,954 as of June 30, 1997 and 1996, respectively. See "Notes to Financial Statements" in Part II of this report for restrictions. (2) No cash dividends have been paid by the registrants' wholly- owned subsidiary, Dye Candy Company, during the past three fiscal years. (Continued) SCHEDULE I (Continued) CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (Registrant Only) CONDENSED STATEMENTS OF OPERATIONS Years Ended June 30, 1997, 1996 and 1995 1997 1996 1995 REVENUE Equity in net income of subsidiary $64,911 $82,358 $79,068 Total revenue 64,911 82,358 79,068 EXPENSE General and administrative 4,892 8,294 6,617 Interest 13,998 16,214 17,718 Total expense 18,890 24,508 24,335 Income before income taxes 46,021 57,850 54,733 PROVISION (CREDIT) FOR INCOME TAXES (4,153) (5,853) (5,413) NET INCOME $50,174 $63,703 $60,146 (Continued) 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, 1997, 1996 and 1995 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES General and administrative expenses paid $(4,892) $(8,294) $(6,617) Interest paid (16,214) (17,718) (18,693) Income tax refund received 5,853 5,413 5,742 Net cash used in operating activities (15,253) (20,599) (19,568) CASH FLOWS FROM INVESTING ACTIVITIES Advances received from wholly owned subsidiary 53,956 55,745 34,568 CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on Series B notes payable (38,703) (35,146) (15,000) NET DECREASE IN CASH AND CASH EQUIVALENTS - - - CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR - - - CASH AND CASH EQUIVALENTS, END OF YEAR $ - $ - $ - (Continued) SCHEDULE I (Continued) CHASE GENERAL CORPORATION AND SUBSIDIARY CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT CHASE GENERAL CORPORATION (Registrant Only) CONDENSED STATEMENTS OF CASH FLOWS Years Ended June 30, 1997, 1996 and 1995 1997 1996 1995 RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES Net income $50,174 $63,703 $60,146 Adjustments to reconcile net income to net cash used in operating activities: Net income from wholly owned subsidiary (64,911) (82,358) (79,068) Effects of changes in operating assets and liabilities: Accrued interest (2,216) (1,504) (975) Income tax refund receivable 1,700 (440) 329 NET CASH USED IN OPERATING ACTIVITIES $(15,253) $(20,599) $(19,568) This information should be read only in connection with the accompanying independent auditor's report on supplemental schedules. SCHEDULE II CHASE GENERAL CORPORATION AND ITS SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS June 30, 1997, 1996, and 1995 Column A Column B Column C Column D Column E Additions Balance at Charged to Balance Beginning Costs and at end Description of Period Expenses Deductions* of Period Valuation accounts deducted from assets to which they apply for doubtful accounts receivable: June 30, 1997 $12,757 $3,327 $3,370 $12,714 June 30, 1996 12,216 6,416 5,875 12,757 June 30, 1995 13,496 10,033 11,313 12,216 * Represents accounts written off, net of (recoveries), for the respective years. This information should be read only in connection with the accompanying independent auditor's report on supplemental schedules. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHASE GENERAL CORPORATION (Registrant) Date: 10/3/97 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 Barry M. Yantis Date: 10/3/97 Vice-President, Secretary and Director /s/ Brian A. Yantis Brian A. Yantis Date: 10/3/97 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1997 JUN-30-1997 141,657 0 96,293 12,714 301,511 572,534 985,397 721,060 836,871 104,139 207,659 0 2,361,440 969,834 (2,806,201) 836,871 2,317,501 2,326,161 1,787,350 2,243,591 0 3,327 13,998 65,245 15,071 50,174 0 0 0 50,174 (.08) 0
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