UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2017
¨ Transaction Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For transition period from to
Commission File Number: 2-5916
Chase General Corporation
(Exact name of registrant as specified in its charter)
| MISSOURI | 36-2667734 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| Incorporation or organization |
| 1307 South 59th, St. Joseph, Missouri | 64507 |
| (Address of Principal Executive Offices) | Zip Code |
(816) 279-1625
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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. Yes x No ¨
Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
| Emerging Growth Company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the shares of common stock held by non-affiliates of the Issuer is not actively traded. Therefore, market value of the stock is unknown as of 60 days prior to the date of this filing.
As of September 26, 2017 there were 969,834 shares of Common Stock, $1.00 par value, outstanding.
Chase General Corporation AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
FOR THE YEAR ENDED JUNE 30, 2017
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| ITEM 1 | BUSINESS |
Chase General Corporation was incorporated November 6, 1944 for the purpose of manufacturing confectionery products. In 1970, Chase General Corporation acquired a 100% interest in its wholly-owned subsidiary, Dye Candy Company. (Chase General Corporation and Dye Candy Company are sometimes referred herein as “the Company”). This subsidiary is the main operating company for the reporting entity.
Principal Products and Methods of Distribution
The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name “Cherry Mash”. The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions 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. Management considers these two divisions as one reportable segment for inclusion in this filing.
The principal products produced are as follows:
Chase Candy Products of Dye Candy Company produces a candy bar under the trade name of “Cherry Mash”. The bar is distributed in the following six case sizes:
| (1) | 60 count pack |
| (2) | 12 boxes of 24 bars per box |
| (3) | 200 count shipper box |
| (4) | 100 count shipper box |
| (5) | 100 # 2 box Counter Display |
| (6) | 4 box - 36 count Counter Display |
| (1) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Principal Products and Methods of Distribution (Continued)
In addition to the regular size bar, a “mini-mash” is distributed in the following seven case sizes:
| (1) | 24 - 12 oz. bags |
| (2) | 6 jars - 60 bars per jar |
| (3) | 23 # wrapped bars |
| (4) | 22 # unwrapped bars |
| (5) | 12 - 12 oz. bags |
| (6) | 6 - 4 # jars |
| (7) | 24 - 12 oz. clamshell containers |
Seasonal Candy Products of Dye Candy Company produces coconut, peanut, chocolate, and fudge confectioneries. These products are distributed in bulk or packaged. Principal products include:
| (1) | Coconut Bon-Bons | (6) | Peanut Brittle |
| (2) | Coconut Stacks | (7) | Peanut Clusters |
| (3) | Home Style Poe Fudge | (8) | Champion Crème Drops |
| (4) | Peco Flake | (9) | Jelly Candies |
| (5) | Peanut Squares | (10) | Frosted Pretzels |
The Champion Crème Drops, Frosted Pretzels and Jelly Candies are not produced or repackaged by the Company.
All products are shipped to customers by commercial haulers.
Competition and Market Area
The Chase Candy Products division bars are sold primarily to wholesale candy and tobacco jobbing houses, grocery accounts, vendors and repackers. “Cherry Mash” bars are marketed in the Midwest region of the United States. For the years ended June 30, 2017 and 2016, this division accounted for 59% and 56%, respectively, of the consolidated sales of Dye Candy Company.
The Seasonal Candy Products division is sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For the years ended June 30, 2017 and 2016, this division accounted for 40% and 44%, respectively, of the consolidated sales of Dye Candy Company.
The Company has no government contracts, foreign operations or export sales. In addition, all domestic sales are primarily in the Midwest region of the United States.
The Company is a seasonal business whereby the largest volume of sales occur in August through December of each year. The earnings per quarter of the Company varies in direct proportion to the seasonal sales volume.
| (2) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Competition and Market Area (Continued)
Due to the seasonal nature of the business, there is a heavier demand on working capital in the fall and winter months of the year when the Company is building its inventories in anticipation of August through December 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 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.
Prompt service and efficient service are traits demanded in the confectionery industry, which results in a continual low volume of back-orders. Therefore, at no time during the year does the Company have a significant amount of back-orders.
The confectionery (candy) market for the type of product produced by the divisions of Dye Candy Company is very competitive and quality minded. The confectionery 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 Crown Candy Company, Vermico Candy Company, and the Seasonal Candy Products division of Dye Candy Company with approximately 70% of the market share among them. In the United States, Old Dominion has approximately 80% of the market share of the peanut candy business in which the Seasonal Candy Products division operates. Dye Candy Company sells approximately 95% of its products in the Midwest region with seasonal orders being shipped to the Southern and Eastern regions of the United States. Except for the coconut candy industry, Dye Candy Company is not a dominant competitor in any of the candy industries in which it competes. Dye Candy Company’s market share in the coconut industry does not vary significantly from year to year.
Principal methods of competition the Company uses include quality of product, price, reduced transportation costs due to central location, and service. The Company’s competitive position is positively influenced by labor costs being lower than industry average. Chase General Corporation is firmly established in the confectionery market and through its operating divisions has many years of experience associated with its name.
Research and Development
The Company has not developed any new products for the years ended June 30, 2017 and 2016.
Raw Materials and Principal Suppliers
Raw materials and packaging materials are produced on a national basis with products coming from locations throughout the United States. Raw materials and packaging materials are generally widely available, depending on common market influences. No suppliers accounted for more than 10% of the Company’s cost of sales for the years ended June 30, 2017 and 2016.
| (3) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Patents and Trademarks
The largest single revenue producing product, the “Cherry Mash” bar, is protected by a trademark registered with The United States Patent and Trademark Office. The Company considers this trademark significant to operations. This trademark expires in the year 2023. The Company and its legal representatives do not expect any impediment to renewing this trademark prior to its expiration.
Employees
As of June 30, 2017, the Company had 19 full time employees. This expands to approximately 30 full time personnel during the busy production months of August through December.
Customers
For the years ended June 30, 2017 and 2016, one customer accounted for 34% and 41%, respectively, of gross sales. As of June 30, 2017 and 2016, that same customer accounted for 21% and 24%, respectively, of trade receivables. For the years ended June 30, 2017 and 2016, another customer and its affiliates accounted for 20% and 17%, respectively, of gross sales. As of June 30, 2017 and 2016, that same customer and its affiliates accounted for 31% and 36%, respectively, of trade receivables. No other customer accounted for more than 10% of the Company’s sales for the years ended June 30, 2017 and 2016.
Environmental Protection and the Effect on Probable Government Regulations on the Business
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. The Company is evaluating the requirements of the Food Safety Modernization Act (FSMA). The FSMA aims to ensure the U.S. food supply is safe by shifting the focus of federal regulators from responding to contamination to preventing it. The FSMA has given the Food and Drug Administration (FDA) new authorities to regulate the way foods are grown, harvested and processed. As of the fiscal year ended June 30, 2017 and through the filing of this form, management believes the Company is compliant with all FSMA requirements. Another inspection for compliance will be conducted by a third party within 24 months of year end. Management does not anticipate any future expenditures in the next twelve months in this regard.
Need for Government Approval of Principal Products or Services
The Company is required to meet the Food and Drug Administration guidelines for proper labeling of its products and for contents of its products.
Reports to Security Holders
The Registrant is not required to send the annual audit report, annual 10-K report and quarterly 10-Q reports to security holders since the stock is not actively traded. These reports are available at the Registrant’s registered office or they are available on-line on the SEC’s EDGAR website.
| (4) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 1A | RISK FACTORS |
Not applicable to a smaller reporting company.
| ITEM 1B | UNRESOLVED STAFF COMMENTS |
The Company has no unresolved SEC staff comments at June 30, 2017.
| Item 2 | PROPERTIES |
We conduct our operations from two buildings as follows:
Chase Warehouse - This building is located in St. Joseph, Missouri and is owned by Dye Candy Company, a wholly-owned subsidiary of the registrant. The facility is currently devoted entirely to the storage of supplies, and the warehousing and shipping of candy products. This warehouse is over seventy years old, is in fair condition and adequate to meet present requirements. The warehouse has approximately 15,000 square feet and is not encumbered.
Chase General Office and Dye Candy Company Operating Plant - This building is located in St. Joseph, Missouri and contains the general offices (of approximately 2,000 square feet) for Chase General Corporation, Dye Candy Company and its divisions. The production plant of Dye Candy Company occupies the remainder of the building or 18,000 square feet. The building, specifically designed for the Company, is leased from an entity owned by the Vice-President and Director of the Company. The annual rental expense of this facility was $78,000 for each year ended June 30, 2017 and 2016.
The net book value of our premises, land and office, and production equipment totaled $265,138 and $353,647 at June 30, 2017 and 2016, respectively.
We believe both facilities are adequately covered by insurance.
| Item 3 | LEGAL PROCEEDINGS |
None.
| Item 4 | MINE SAFETY DISCLOSURES |
Not applicable.
| (5) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 5 | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market information
There is no established public trading market for the common stock (par value $1 per share) of the Company.
Security holders
As of September 26, 2017, the latest practicable date, the approximate number of record holders of common stock was 1,869, including individual participants in security listings.
Dividends
| (1) | Dividend history and restrictions |
No dividends have been paid during the past two fiscal years and there are no dividend restrictions. Preferred stock dividends in arrears are accumulated.
| (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.
Securities authorized for issuance under equity compensation plans
The Company does not have any equity compensation plans.
| Item 6 | SELECTED FINANCIAL DATA |
Not applicable to a smaller reporting company.
| (6) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 7 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This report contains statements that plan for or anticipate the future. Forward-looking statements may include statements about the future of our products and the industry, statements about our future business plans and strategies, and other statements that are not historical in nature. In this report, forward-looking statements are generally identified by the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and the like. Readers should carefully review these cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, the Company at the time the statements are made. These expectations, assumptions and uncertainties include: the Company’s expectation of heavier demand on working capital in the fall and winter months in anticipation of August through December sales; our belief that the Company has stabilized its customer base; will continue its efforts to expand the existing market area and increase sales to customers; and maintain tight control of all expenditures.
Overview
During fiscal year ended 2017, the Company’s net sales were $2,753,043, as compared to net sales of $3,304,604 for fiscal year ended June 30, 2016. This 16.7% decrease in volume and an 8.8% decrease in cost of sales and a 2.2% decrease in operating expenses resulted in decreased profitability during the year, as reflected in the loss from operations of $277,586 for fiscal year 2017 compared to income from operations of $38,936 for fiscal year 2016. Working capital decreased $135,004 to $669,446 for the current year from $804,450 for the fiscal year 2016 due primarily to a decrease in inventories, decrease in trade receivable, decrease in income taxes receivable, and an increase in accounts payable offset by an increase in deferred income taxes, increase in cash, and an increase in prepaid expenses.
The following information should be read together with the consolidated financial statements and notes thereto included elsewhere herein.
Critical Accounting Policies and Estimates
General
Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
| (7) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Critical Accounting Policies and Estimates (Continued)
General (Continued)
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
There have been no other events that have occurred subsequent to June 30, 2017, through the date of filing this form, that would require disclosure in the Form 10-K or would be required to be recognized in the consolidated financial statements as of or for the year ended June 30, 2017.
Revenue Recognition
The Company recognizes revenues as product is shipped to customers. Net sales are comprised of the total sales billed during the period less the estimated returns, customer allowances, and customer discounts.
Trade Receivables
Trade receivables are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Trade receivables are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of trade receivables are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the trade receivables. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due to the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or to require an excessive collection cost, are written off to the allowance for doubtful accounts.
Inventories
Inventories are carried at the “lower of cost or market value,” with cost being determined on the “first-in, first-out” basis of accounting. Finished goods and goods in process include a provision for manufacturing overhead.
| (8) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Critical Accounting Policies and Estimates (Continued)
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of such assets to future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.
New Accounting Guidance
See Note 11, RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, to the consolidated financial statements for a discussion of new accounting standards.
| (9) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Results of Operations
The following table sets forth for the years indicated, the percentage of net sales of certain items in the Company’s consolidated statements of operations for the years ended June 30, 2017 and 2016, respectively:
| 2017 | 2016 | |||||||
| Net Sales | 100.00 | % | 100.00 | % | ||||
| Cost of Sales | 82.09 | 74.97 | ||||||
| Gross Profit on Sales | 17.91 | 25.03 | ||||||
| Selling Expense | 13.58 | 13.22 | ||||||
| General and Administrative Expense | 14.42 | 11.28 | ||||||
| Gain on Sale of Equipment | - | (0.65 | ) | |||||
| Income (Loss) from Operations | (10.09 | ) | 1.18 | |||||
| Other Expense, Net | (0.42 | ) | (0.09 | ) | ||||
| Income (Loss) before Income Taxes | (10.51 | ) | 1.09 | |||||
| Provision for Income Taxes (Benefit) | (4.00 | ) | 0.07 | |||||
| Net Income (Loss) | (6.51 | ) | 1.02 | |||||
| Preferred Dividends | (4.65 | ) | (3.88 | ) | ||||
| Loss Applicable to Common Stockholders | (11.16 | )% | (2.86 | )% | ||||
Fiscal Year 2017 Compared to Fiscal Year 2016
Net Sales
During the year ended June 30, 2017, sales, net of returns and allowances, decreased $551,561 or 16.7% as compared to the year ended June 30, 2016. Gross sales for Chase Candy products decreased $203,051 or 10.9% to $1,666,393 for the year ended June 30, 2017 compared to $1,869,444 for 2016. Gross sales for Seasonal Candy products decreased $361,705 or 24.3% to $1,127,619 for the year ended June 30, 2017 as compared to $1,489,324 for 2016. The Company’s returns and allowances decreased $11,021 or 17.8% to $50,860 for the year ended June 30, 2017, compared to $61,881 for the year ended June 30, 2016. The Company’s other sales increased $2,174 or 28.2% to $9,891 for the year ended June 30, 2017, compared to $7,717 for the year ended June 30, 2016.
Sales for Chase Candy consisted of the following divisions: L276 Cherry Mash Distributor Pack division, Cherry Mash Merchandisers division, L260 Changemaker Jar division, L279/L299 Bulk Mini Mash division, and L278/L212 Mini Mash division. The 10.9% decrease in gross sales of Chase Candy of $203,051 for the year ended June 30, 2017 over the same period ended June 30, 2016, is primarily due to the following: 1) competitive factors and customer mergers causing a decrease in Chase Candy sales, 2) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $127,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, 3) decreased sales of the L278/L212 Mini Mash division by approximately $38,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, 4) decreased sales of the Cherry Mash Merchandisers division by approximately $33,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, 5) decreased sales of the L260 Changemaker Jar division by approximately $3,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, and 6) various other fluctuations netting to a decrease of approximately $2,000.
| (10) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Fiscal Year 2017 Compared to Fiscal Year 2016 (Continued)
Net Sales (Continued)
Sales for Seasonal Candy consisted of the following divisions: bulk seasonal division, clamshell seasonal division, and the generic seasonal division. The 24.3% decrease in gross sales of Seasonal Candy of $361,705 for the year ended June 30, 2017 over the same period ended June 30, 2016, is primarily due to the net effect of the following: 1) competitive factors causing an overall decrease in the sales of the seasonal division 2) decreased sales in the clamshell seasonal division by approximately $377,000 due to decreased orders from existing customers; 3) decreased sales in the bulk seasonal division by approximately $12,000 versus the same period a year ago, primarily due to decreased orders from existing customers; offset by 4) increased sales in the Chase clamshell seasonal division by approximately $27,000 versus the same period a year ago, primarily due to increased orders from four customers.
Cost of Sales
Cost of sales for the year ended June 30, 2017, as compared to the year ended June 30, 2016, decreased by 8.8%. The cost of sales decreased $217,527 to $2,259,952 while increasing to 82.1% of net sales for the year ended June 30, 2017, compared to $2,477,479 or 75.0% of net sales for the year ended June 30, 2016.
The 8.8% decrease in cost of sales of $217,527 is primarily due to the net impact of a 16.7% decrease in net sales of $551,561 and an 8.8% decrease in the price of corn syrup offset by an 11.2% increase in the price of peanuts. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand. Primarily due to the fluctuations in these raw material prices, gross margins have decreased due to unchanged sales prices during the period. Management intends to make sales price adjustments in the future to correspond with changes in raw material prices.
Labor costs, including wages, vacation pay and payroll taxes of $494,576 for the year ended June 30, 2017, decreased 11.8% or $66,236 as compared to $560,812 for the period ended 2016 primarily due to decreased production wages due to decreased hours, bonuses, and pay rates compared to the same period ended June 30, 2016.
Freight expense, including shipping and handling costs on goods shipped of $159,851 for the year ended June 30, 2017, decreased 12.9% or $23,605 as compared to $183,456 for the period ended 2016 due primarily to a decrease in sales.
Cost of sales outpaced net sales primarily due to outdated inventory totaling approximately $13,000 being returned during the year due to a stricter shelf life policy being implemented by the customers.
| (11) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Fiscal Year 2017 Compared to Fiscal Year 2016 (Continued)
Gross Profit on Sales
The gross profit decreased 40.4% or $334,034 to $493,091 decreasing to 17.9% of related net sales for the year ended June 30, 2017, as compared to $827,125 or 25.0% of related net sales for the year ended June 30, 2016, as a net result of the 8.8% decrease in cost of sales described above and the 16.7% decrease in net sales.
Finished goods inventory as of June 30, 2017 of $270,352 decreased $162,691 or 37.6% from the June 30, 2016 finished goods inventory of $433,043. Raw materials inventory as of June 30, 2017 of $60,655 decreased $15,906 or 20.8% from the June 30, 2016 raw materials inventory of $76,561. Packaging materials inventory as of June 30, 2017 of $135,638 decreased $94 or 0.01% from June 30, 2016 packaging materials inventory of $135,732. Goods in process inventory as of June 30, 2017 of $13,393 increased $6,853 or 104.8% from the June 30, 2016 goods in process inventory of $6,540. Inventory levels vary based primarily on sales and purchases.
Selling Expenses
Selling expenses for the year ended June 30, 2017 decreased $63,126 to $373,743, which is 13.6% of net sales, compared to $436,869 or 13.2% of net sales for the year June 30, 2016. This decrease is primarily due to lower commissions, promotions, depreciation expense, customer shows, and truck expense. Commissions decreased $24,772 to $92,522 for the year ended June 30, 2017, as compared to $117,294 for the year ended June 30, 2016, primarily due to a decrease in sales from the brokers. Promotions expense, which are paid to customers for various marketing reasons, decreased $20,081 to $48,973 for the year ended June 30, 2017, as compared to $69,774 for the year ended June 30, 2016, primarily due to decrease sales with an existing customer. Depreciation expense decreased $8,190 to $42,623 for the year ended June 30, 2017, as compared to $50,813 for the year ended June 30, 2016 primarily due to a decrease in purchases of property and equipment in the current year opposed to the twelve months ended June 30, 2016. Customer shows decreased $4,622 to $4,338 for the year ended June 30, 2017, as compared to $9,010 for the year ended June 30, 2016, primarily due to fewer customers attending trade shows in the current year compared to twelve months ended June 30, 2016. Truck expense, which does not included depreciation, decreased $4,499 to $5,599 for the year ended June 30, 2017, as compared to $10,098 for the year ended June 30, 2016, primarily because of new vehicle purchases in the twelve months ending June 30, 2016.
General and Administrative Expenses
General and administrative expenses for the year ended June 30, 2017 increased $24,250 to $396,934, which is 14.4% of net sales, compared to $372,684 or 11.3% of net sales for the year ended June 30, 2016. The increase is primarily due to an increase in insurance expense. Insurance expense increased $25,386 to $124,018 for the year ended June 30, 2017, as compared to $98,632 for the year ended June 30, 2016 primarily due to more employees on the health coverage plan.
| (12) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Fiscal Year 2017 Compared to Fiscal Year 2016 (Continued)
Income (Loss) from Operations
Loss from operations for the year ended June 30, 2017 was (10.1)% of net sales, as compared to an income from operations of 1.2% of net sales for the year ended June 30, 2016 for the reasons previously described.
Other Expense
Other expense reflects a net expense of $11,466 for the year ended June 30, 2017, as compared to net expense of $2,867 for the year ended June 30, 2016. This increase of $8,599 in other expense was primarily due to increases of $6,980 and $1,619 in miscellaneous expense and interest expense, respectively. The increase in miscellaneous expense is primarily due to a nonrecurring transition fee charged to the Company by a customer to offset the customer’s product relocation costs.
Income (Loss) before Income Taxes
Loss before income taxes was $(289,052) for the year ended June 30, 2017, as compared to an income before income taxes of $36,069 for the year ended June 30, 2016. The reasons for the decrease of $325,121 have been previously discussed.
Provision (Benefit) for Income Taxes
The Company recorded income tax benefit for the year ended June 30, 2017 of $(110,111) as compared to an income tax expense of $2,473 for the year ended June 30, 2016. The income tax benefit for the year ended June 30, 2017 is a result of operations previously discussed.
Net Income (Loss)
Net income (loss) for the year ended June 30, 2017 was $(178,941), compared to net income for the year ended June 30, 2016 of $33,596. This decrease of $212,537 is the result of those items previously discussed.
| (13) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Fiscal Year 2017 Compared to Fiscal Year 2016 (Continued)
Liquidity and Sources of Capital
The table below presents the summary of cash flow for the fiscal year indicated.
| 2017 | 2016 | |||||||
| Net Cash Provided (Used) by Operating Activities | $ | 59,628 | $ | (26,149 | ) | |||
| Net Cash Used by Investing Activities | $ | (17,245 | ) | $ | (24,671 | ) | ||
| Net Cash Used by Financing Activities | $ | (15,460 | ) | $ | (14,125 | ) | ||
Operating Activities
The positive cash flow of $59,628 generated from operations is a result of small fluctuations in net sales, increases in operating expenses and the Company continuing to monitor raw material pricing, and when a price increase or decrease is anticipated, adjustments to inventory levels are made accordingly. During the year ended June 30, 2017, sales, net of returns and allowances, decreased $551,561 or 16.7% as compared to the year ended June 30, 2016. Total inventory as of June 30, 2017 of $480,038 decreased $171,838 or 26.4% from the June 30, 2016 total inventory of $651,876. Trade receivables as of June 30, 2017 of $127,207 decreased $52,415 or 29% from the June 30, 2016 trade receivables of $179,622. The timing of inventory purchases and collections from customer trade receivables had the most significant impact on cash flow generated from operations.
Investing Activities
Machinery and equipment cash purchases of $17,245 and $24,671 were made during the years ended June 30, 2017 and 2016, respectively.
Financing Activities
The Company borrowed $325,000 and $300,000, respectively, on its line-of-credit during the fall of 2016 (fiscal 2017) and 2015 (fiscal 2016) busy seasons. Payments of $325,000 and $300,000, respectively, were paid for years ended June 30, 2017 and 2016. The Company entered into a $350,000 line-of-credit agreement expiring on January 4, 2018, with a variable interest rate at prime but not less than 5%. The line-of-credit is collateralized by substantially all assets of the Company. Management anticipates renewal of the line-of-credit agreement at similar terms upon expiration.
Loan principal payments were $15,460 and $14,125 for years ended June 30, 2017 and 2016, respectively.
Overall cash and cash equivalents increased $26,923 to $46,182 at June 30, 2017 from $19,259 at June 30, 2016.
| (14) |
Chase General Corporation
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
Fiscal Year 2017 Compared to Fiscal Year 2016 (Continued)
Liquidity and Sources of Capital (Continued)
Financing Activities (Continued)
At June 30, 2017, the Company’s accumulated deficit was $5,642,747, compared to an accumulated deficit of $5,463,806 as of June 30, 2016. Working capital as of June 30, 2017 decreased $135,004 to $669,446 from $804,450 as of June 30, 2016.
The Company’s lease on its office and plant facility is effective through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of each five year period, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor. The facility is leased from an entity owned 100% by the Vice-President and Director.
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. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand. Primarily due to the fluctuations in these raw material prices, gross margins have decreased due to unchanged sales prices during the period. Management intends to make sales price adjustments in the future to correspond with changes in raw material prices.
| Item 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable to a smaller reporting company.
| Item 8 | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The Consolidated Financial Statements meeting the requirements of Regulation S-B are contained on pages 16 through 33 of this Form 10-K.
| (15) |
Chase General Corporation AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
TABLE OF CONTENTS
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
| (16) |
Report of Independent Registered Public Accounting Firm
To the Board of Directors
CHASE GENERAL CORPORATION AND SUBSIDIARY
We have audited the accompanying consolidated balance sheets of Chase General Corporation and Subsidiary (the Company) as of June 30, 2017 and 2016, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
| /s/ Mayer Hoffman McCann P.C. | |
| Kansas City, Missouri | |
| September 27, 2017 |
| (17) |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2017 AND 2016
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and Cash Equivalents | $ | 46,182 | $ | 19,259 | ||||
| Trade Receivables, Net of Allowance for Doubtful Accounts of $13,733 and $16,549, Respectively | 127,207 | 179,622 | ||||||
| Inventories: | ||||||||
| Finished Goods | 270,352 | 433,043 | ||||||
| Goods in Process | 13,393 | 6,540 | ||||||
| Raw Materials | 60,655 | 76,561 | ||||||
| Packaging Materials | 135,638 | 135,732 | ||||||
| Prepaid Expenses | 24,689 | 5,689 | ||||||
| Income Taxes Receivable | 11,160 | 29,111 | ||||||
| Deferred Income Taxes | 90,469 | 7,533 | ||||||
| Total Current Assets | 779,745 | 893,090 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Land | 35,000 | 35,000 | ||||||
| Buildings | 77,348 | 77,348 | ||||||
| Machinery and Equipment | 838,131 | 820,885 | ||||||
| Trucks and Autos | 213,116 | 213,116 | ||||||
| Office Equipment | 31,518 | 31,518 | ||||||
| Leasehold Improvements | 72,068 | 72,068 | ||||||
| Total | 1,267,181 | 1,249,935 | ||||||
| Less Accumulated Depreciation | 1,002,043 | 896,288 | ||||||
| Total Property and Equipment, Net | 265,138 | 353,647 | ||||||
| Total Assets | $ | 1,044,883 | $ | 1,246,737 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| (18) |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30, 2017 AND 2016
| 2017 | 2016 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts Payable | $ | 63,628 | $ | 46,718 | ||||
| Current Maturities of Notes Payable | 16,133 | 15,460 | ||||||
| Accrued Expenses | 29,239 | 25,163 | ||||||
| Deferred Income | 1,299 | 1,299 | ||||||
| Total Current Liabilities | 110,299 | 88,640 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Notes Payable, Less Current Maturities | 39,264 | 55,397 | ||||||
| Deferred Income Taxes | 63,306 | 90,446 | ||||||
| Deferred Income | 8,765 | 10,064 | ||||||
| Total Long-Term Liabilities | 111,335 | 155,907 | ||||||
| Total Liabilities | 221,634 | 244,547 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Capital Stock Issued and Outstanding: | ||||||||
| Prior Cumulative Preferred Stock, $5 Par Value: | ||||||||
| Series A (Liquidation Preference $2,280,000 and $2,250,000, Respectively) | 500,000 | 500,000 | ||||||
| Series B (Liquidation Preference $2,235,000 and $2,205,000, Respectively) | 500,000 | 500,000 | ||||||
| Cumulative Preferred Stock, $20 Par Value: | ||||||||
| Series A (Liquidation Preference $5,136,263 and $5,077,730, Respectively) | 1,170,660 | 1,170,660 | ||||||
| Series B (Liquidation Preference $837,055 and $827,516, 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 | (5,642,747 | ) | (5,463,806 | ) | ||||
| Total Stockholders' Equity | 823,249 | 1,002,190 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,044,883 | $ | 1,246,737 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| (19) |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2017 AND 2016
| 2017 | 2016 | |||||||
| NET SALES | $ | 2,753,043 | $ | 3,304,604 | ||||
| COST OF SALES | 2,259,952 | 2,477,479 | ||||||
| Gross Profit on Sales | 493,091 | 827,125 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling Expenses | 373,743 | 436,869 | ||||||
| General and Administrative Expenses | 396,934 | 372,684 | ||||||
| Gain on Sale of Equipment | - | (21,364 | ) | |||||
| Total Operating Expenses | 770,677 | 788,189 | ||||||
| Income (Loss) from Operations | (277,586 | ) | 38,936 | |||||
| OTHER INCOME (EXPENSE) | ||||||||
| Miscellaneous Income (Expense) | (5,089 | ) | 1,891 | |||||
| Interest Expense | (6,377 | ) | (4,758 | ) | ||||
| Total Other Expense | (11,466 | ) | (2,867 | ) | ||||
| Income (Loss) before Income Taxes | (289,052 | ) | 36,069 | |||||
| PROVISION (BENEFIT) FOR INCOME TAXES | (110,111 | ) | 2,473 | |||||
| NET INCOME (LOSS) | $ | (178,941 | ) | $ | 33,596 | |||
| NET LOSS PER SHARE OF COMMON STOCK | ||||||||
| - BASIC | $ | (0.32 | ) | $ | (0.10 | ) | ||
| - DILUTED | $ | (0.32 | ) | $ | (0.10 | ) | ||
The accompanying notes are an integral part of the consolidated financial statements.
| (20) |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended June 30, 2017 AND 2016
| Prior Cumulative | Cumulative | |||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common | Paid-In | Accumulated | ||||||||||||||||||||||||||||
| Series A | Series B | Series A | Series B | Stock | Capital | Deficit | Total | |||||||||||||||||||||||||
| BALANCE, JUNE 30, 2015 | $ | 500,000 | $ | 500,000 | $ | 1,170,660 | $ | 190,780 | $ | 969,834 | $ | 3,134,722 | $ | (5,497,402 | ) | $ | 968,594 | |||||||||||||||
| Net Income | - | - | - | - | - | - | 33,596 | 33,596 | ||||||||||||||||||||||||
| BALANCE, JUNE 30, 2016 | 500,000 | 500,000 | 1,170,660 | 190,780 | 969,834 | 3,134,722 | (5,463,806 | ) | 1,002,190 | |||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | (178,941 | ) | (178,941 | ) | ||||||||||||||||||||||
| BALANCE, JUNE 30, 2017 | $ | 500,000 | $ | 500,000 | $ | 1,170,660 | $ | 190,780 | $ | 969,834 | $ | 3,134,722 | $ | (5,642,747 | ) | $ | 823,249 | |||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| (21) |
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2017 and 2016
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Collections from Customers | $ | 2,805,458 | $ | 3,312,589 | ||||
| Deferred Income | 1,299 | 1,298 | ||||||
| Cost of Sales, Selling, General and Administrative Expenses Paid | (2,733,995 | ) | (3,269,005 | ) | ||||
| Interest Paid | (6,377 | ) | (4,623 | ) | ||||
| Income Taxes Paid | (6,757 | ) | (66,408 | ) | ||||
| Net Cash Provided (Used) by Operating Activities | 59,628 | (26,149 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of Property and Equipment | (17,245 | ) | (24,671 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Line-of-Credit | 325,000 | 300,000 | ||||||
| Principal Payments on Line-of-Credit | (325,000 | ) | (300,000 | ) | ||||
| Principal Payments on Notes Payable | (15,460 | ) | (14,125 | ) | ||||
| Net Cash Used by Financing Activities | (15,460 | ) | (14,125 | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 26,923 | (64,945 | ) | |||||
| Cash and Cash Equivalents, Beginning of Year | 19,259 | 84,204 | ||||||
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 46,182 | $ | 19,259 | ||||
| RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | ||||||||
| Net Income (Loss) | $ | (178,941 | ) | $ | 33,596 | |||
| Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: | ||||||||
| Depreciation and Amortization | 105,754 | 115,832 | ||||||
| Allowance for Bad Debts | (2,916 | ) | 253 | |||||
| Deferred Income Amortization | (1,299 | ) | (1,298 | ) | ||||
| Deferred Income Taxes | (110,076 | ) | (8,665 | ) | ||||
| Gain on Sale of Equipment | - | (21,364 | ) | |||||
| Effects of Changes in Operating Assets and Liabilities: | ||||||||
| Trade Receivables | 55,331 | 7,732 | ||||||
| Inventories | 171,838 | (38,976 | ) | |||||
| Prepaid Expenses | (19,000 | ) | - | |||||
| Income Taxes Receivable | 17,951 | (29,111 | ) | |||||
| Accounts Payable | 16,910 | (65,226 | ) | |||||
| Accrued Expenses | 4,076 | 7,197 | ||||||
| Income Taxes Payable | - | (26,119 | ) | |||||
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | $ | 59,628 | $ | (26,149 | ) | |||
The accompanying notes are an integral part of the consolidated financial statements.
| (22) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 1 | NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business
Chase General Corporation (the Company) was incorporated on November 6, 1944 in the state of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States.
Significant accounting policies are as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions and balances have been eliminated in consolidation.
Segment Reporting of the Business
The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name "Cherry Mash". The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions 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. Management considers these two divisions as one reportable segment in these consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Revenue Recognition
The Company recognizes revenues as product is shipped to customers. Net sales are comprised of the total sales billed during the period, including shipping and handling charges to customers, less the estimated returns, customer allowances and customer discounts.
| (23) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 1 | NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Shipping and Handling Costs
Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the years ended June 30, 2017 and 2016 was $159,851 and $183,456, respectively.
Trade Receivables
Trade receivables are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Trade receivables are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of trade receivables are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the trade receivables. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due to the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or that require an excessive collection cost, are written off to the allowance for doubtful accounts.
Inventories
Inventories are carried at the "lower of cost or market value" with cost being determined on the "first-in, first-out" basis of accounting. The cost of finished goods and goods in process inventories include an estimate for manufacturing overhead.
Property and Equipment
The Company’s property and equipment is recorded at cost and is being depreciated on straight-line and accelerated methods over the following estimated useful lives:
| Buildings | 39 years |
| Machinery and equipment | 5 – 7 years |
| Trucks and autos | 5 years |
| Office equipment | 5 – 7 years |
| Leasehold improvements | Lesser of estimated useful life or the lease term |
| (24) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 1 | NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.
Income Taxes
Deferred income taxes are provided using the liability method for temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred income tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred income tax assets are only recognized if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing authority. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred income tax assets will not be realized. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of relevant information. Deferred income tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the dates of enactment.
The Company’s policy is to evaluate uncertain tax positions under the guidance as prescribed by Accounting Standards Codification (ASC) 740, Income Taxes. As of June 30, 2017 and 2016, the Company has not identified any uncertain tax positions requiring recognition in the consolidated financial statements. The Company had no accruals for interest or penalties as of June 30, 2017 and 2016.
Earnings Per Common Share
Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share shall be computed by including contingently issuable shares with the weighted average shares outstanding during the period. When inclusion of the contingently issuable shares would have an antidilutive effect upon earnings per share, diluted earnings per share will be calculated in the same manner as basic earnings per share.
| (25) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 1 | NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Earnings Per Common Share (Continued)
The following table details out the contingently issuable shares for the years ended June 30, 2017 and 2016. For 2017 and 2016, the contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share.
| 2017 | 2016 | |||||||
| Shares Issuable Upon Conversion of Series A Prior Cumulative Preferred Stock | 400,000 | 400,000 | ||||||
| Shares Issuable Upon Conversion of Series B Prior Cumulative Preferred Stock | 375,000 | 375,000 | ||||||
| Shares Issuable Upon Conversion of Series A Cumulative Preferred Stock | 222,133 | 222,133 | ||||||
| Shares Issuable Upon Conversion of Series B Cumulative Preferred Stock | 36,201 | 36,201 | ||||||
| Total Dilutive Effect of Contingently Issuable Shares | 1,033,334 | 1,033,334 | ||||||
Advertising Expense
Advertising is expensed when incurred. Advertising expense was $16,049 and $13,941 for the years ended June 30, 2017 and 2016, respectively.
Going Concern
During the year ended June 30, 2017, the Company adopted ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40)”. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. Management determined that there are no conditions or events, when considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the consolidated financial statements are available for issuance.
| (26) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 2 | FORGIVABLE LOAN AND DEFERRED INCOME |
During 2004, the Company received a $25,000 economic development incentive from Buchanan County, which is a five year forgivable loan at a rate of $5,000 per year. The Nodaway Valley Bank established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company met the criteria of occupying a 20,000 square foot building and creating a minimum of two new full-time equivalent jobs during the first year of operation in the new facility. In addition, the Company maintained 19 existing jobs during the five year term. Notice was received February 6, 2009 from the Buchanan County Commission, that the Company had fulfilled its minimum loan requirements so that the loan was forgiven in full and has no further obligations. Since the Company was no longer legally required to return the monies, the liability was reclassified as deferred revenue and amortized into income over the life of the lease term of the new facility. Deferred revenue is recognized on a straight line basis over the lease term of 20 years. During the years ended June 30, 2017 and 2016, deferred revenue of $1,299 and $1,298, respectively, was amortized into income.
| (27) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 3 | NOTES PAYABLE |
The Company’s long-term debt at June 30, 2017 and 2016 consists of:
| Payee | Terms | 2017 | 2016 | |||||||
| Nodaway Valley Bank | $350,000 line-of-credit agreement expiring on January 4, 2018, with a variable interest rate at prime but not less than 5%. The line-of-credit is collateralized by substantially all assets of the Company. Management anticipates renewal of the line-of-credit agreement at similar terms upon expiration. | $ | - | $ | - | |||||
| Ford Credit | $705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle. | 32,308 | 38,674 | |||||||
| Toyota Credit | $364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle. | 14,383 | 18,179 | |||||||
| Ford Credit | $468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle. | 8,706 | 14,004 | |||||||
| Total | 55,397 | 70,857 | ||||||||
| Less current portion | 16,133 | 15,460 | ||||||||
| Long-term portion | $ | 39,264 | $ | 55,397 | ||||||
Future minimum payments for the years ended June 30 are:
| 2018 | $ | 16,133 | ||||||||
| 2019 | 14,477 | |||||||||
| 2020 | 11,798 | |||||||||
| 2021 | 10,204 | |||||||||
| 2022 | 2,785 | |||||||||
| Total | $ | 55,397 |
| (28) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 4 | CAPITAL STOCK |
Capital stock authorized, issued, and outstanding as of June 30, 2017 is as follows:
| Shares | ||||||||
| Issued and | ||||||||
| Authorized | Outstanding | |||||||
| Prior Cumulative Preferred Stock, $5 Par Value: | ||||||||
| 6% Convertible | 240,000 | |||||||
| Series A | 100,000 | |||||||
| Series B | 100,000 | |||||||
| Cumulative Preferred Stock, $20 Par Value: | ||||||||
| 5% Convertible | 150,000 | |||||||
| Series A | 58,533 | |||||||
| Series B | 9,539 | |||||||
| Common Stock, $1 Par Value: | ||||||||
| Reserved for Conversion of Preferred Stock - 1,030,166 shares | 2,000,000 | 969,834 | ||||||
Cumulative Preferred Stock dividends in arrears at June 30, 2017 and 2016 totaled $8,076,878 and $7,948,806, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2017 and 2016:
| 2017 | 2016 | |||||||
| 6% Convertible | ||||||||
| Series A | $ | 17.55 | $ | 17.25 | ||||
| Series B | $ | 17.10 | $ | 16.80 | ||||
| 5% Convertible | ||||||||
| Series A | $ | 67.50 | $ | 66.75 | ||||
| Series B | $ | 67.50 | $ | 66.75 | ||||
The 6% 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. Cumulative preferred stock may be exchanged for common stock at the option of the shareholders in the ratio of 4 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.
| (29) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 5 | INCOME TAXes |
The income tax positions taken for open years are appropriately stated and supported for all open years. The Company’s federal tax returns for the years ended June 30, 2016, 2015, and 2014 are subject to examination by the IRS taxing authority.
The sources of deferred income tax assets and liability at June 30, 2017 and 2016 are as follows:
| 2017 | 2016 | |||||||
| Deferred Income Tax Assets: | ||||||||
| Net Operating Loss Carryover | $ | 83,694 | $ | - | ||||
| Trade Receivables | 5,251 | 6,310 | ||||||
| Deferred Income | 3,837 | 4,332 | ||||||
| Inventories | 952 | 1,223 | ||||||
| Contribution Carryover | 572 | - | ||||||
| Total Deferred Income Tax Assets | 94,306 | 11,865 | ||||||
| Deferred Income Tax Liability: | ||||||||
| Property and Equipment | (67,143 | ) | (94,778 | ) | ||||
| NET DEFERRED INCOME TAX ASSET (LIABILITY) | $ | 27,163 | $ | (82,913 | ) | |||
The net deferred income tax asset (liability) is presented in the accompanying June 30, 2017 and 2016 consolidated balance sheets as follows:
| 2017 | 2016 | |||||||
| Current Deferred Income Tax Asset | $ | 90,469 | $ | 7,533 | ||||
| Noncurrent Deferred Income Tax Liability | (63,306 | ) | (90,446 | ) | ||||
| NET DEFERRED INCOME TAX ASSET (LIABILITY) | $ | 27,163 | $ | (82,913 | ) | |||
The provision (benefit) for income taxes for the years ended June 30, 2017 and 2016 consists of the following:
| 2017 | 2016 | |||||||
| Current Income Tax Expense (Credit) | $ | (35 | ) | $ | 11,138 | |||
| Deferred Income Tax Credit | (110,076 | ) | (8,665 | ) | ||||
| $ | (110,111 | ) | $ | 2,473 | ||||
| (30) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 5 | INCOME TAXes (CONTINUED) |
The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax income for the years ended June 30, 2017 and 2016 due to the following:
| 2017 | 2016 | |||||||
| Computed at Federal Statutory Rate of 34% | $ | (98,278 | ) | $ | 12,309 | |||
| Increase (Decrease) in Income Taxes Resulting from: | ||||||||
| Non-Deductible Expenses | 111 | 630 | ||||||
| Federal Tax Adjustment Due to Actual Rate vs. Statutory Rate | - | (9,730 | ) | |||||
| Domestic Production Activities Deduction Credit | - | (1,767 | ) | |||||
| Other | (36 | ) | (27 | ) | ||||
| State Income Taxes | (11,908 | ) | 1,058 | |||||
| $ | (110,111 | ) | $ | 2,473 | ||||
The Company has available at June 30, 2017, $219,526 of unused operating loss that may be carried back two years to offset prior taxable income or carried forward and applied against future taxable income. The carryforward expires on June 30, 2038.
| NOTE 6 | LOSS PER SHARE |
The loss per share for the years ended June 30, 2017 and 2016, respectively, was computed on the weighted average of outstanding common shares during the year as follows:
| 2017 | 2016 | |||||||
| Net Income (Loss) | $ | (178,941 | ) | $ | 33,596 | |||
| Preferred Dividend Requirements: | ||||||||
| 6% Prior Cumulative Preferred, $5 Par Value | 60,000 | 60,000 | ||||||
| 5% Convertible Cumulative Preferred, $20 Par Value | 68,072 | 68,072 | ||||||
| Total Dividend Requirements | 128,072 | 128,072 | ||||||
| Net Loss - Common Stockholders | $ | (307,013 | ) | $ | (94,476 | ) | ||
| 2017 | 2016 | |||||||
| Weighted Average of Shares - Basic | 969,834 | 969,834 | ||||||
| Dilutive Effect of Contingently Issuable Shares | 1,033,334 | 1,033,334 | ||||||
| Weighted Average Shares – Diluted | 2,003,168 | 2,003,168 | ||||||
| Basic Loss per Share | $ | (0.32 | ) | $ | (0.10 | ) | ||
| Diluted Loss per Share | $ | (0.32 | ) | $ | (0.10 | ) | ||
Contingently issuable shares were not included in the 2017 and 2016 diluted earnings per common share as they would have an antidilutive effect upon earnings per share.
| (31) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 7 | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
| 2017 | 2016 | |||||||
| Cash Paid for: | ||||||||
| Interest | $ | 6,377 | $ | 4,623 | ||||
| Income Taxes | 6,757 | 66,408 | ||||||
| Non-Cash Transactions: | ||||||||
| Financing of New Vehicles | - | 62,681 | ||||||
| NOTE 8 | COMMITMENTS AND CONTINGENCIES |
Dye Candy Company leases its office and manufacturing facility, located at 1307 South 59th, St. Joseph, Missouri, from an entity owned by the Vice-President and Director of the Company. The lease term is from February 1, 2005 through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of the first five years, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor and for each additional term of five years. Rental expense was $78,000 for each year ended June 30, 2017 and 2016. The amounts are included in cost of sales.
Future minimum lease payments under this lease are as follows:
| Year ending June 30: | ||||
| 2018 | $ | 78,000 | ||
| 2019 | 78,000 | |||
| 2020 | 78,000 | |||
| 2021 | 78,000 | |||
| 2022 | 78,000 | |||
| Thereafter | 214,500 | |||
| $ | 604,500 | |||
As of June 30, 2017, the Company had raw materials purchase commitments with four vendors totaling approximately $81,000.
| NOTE 9 | 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 consolidated financial instruments. As of June 30, 2017, the amount of the Company’s long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to the Company.
| (32) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 10 | CONCENTRATION OF CREDIT RISK |
For the years ended June 30, 2017 and 2016, two customers accounted for 54% and 58%, respectively, of the gross sales. As of June 30, 2017 and 2016, two customers accounted for 52% and 60%, respectively, of trade receivables.
| NOTE 11 | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required regarding customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The guidance will initially be applied retrospectively using one of two methods. The standard will be effective for the entity for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted beginning for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” (“ASU 2015-11”). An entity using an inventory method other than last-in, first out (“LIFO”) or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of ASU 2015-11 to have a material effect on the financial position, results of operations, or cash flows.
In February 2016, the FASB issued amended guidance for the treatment of leases. The guidance requires lessees to recognize a right-of-use asset and a corresponding lease liability for all operating and finance leases with lease terms greater than one year. The guidance also requires both qualitative and quantitative disclosures regarding the nature of the entity’s leasing activities. The guidance will initially be applied using a modified retrospective approach. The amendments in the guidance are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the amended lease guidance on the its consolidated financial statements.
| (33) |
Chase General Corporation AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 2017 and 2016
| NOTE 11 | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED) |
In November 2015, the FASB issued ASC Update No. 2015-17, “Balance Sheet Classification of Deferred Taxes” as part of its simplification initiatives. This update requires deferred tax liabilities and assets to be classified as non-current on the consolidated condensed balance sheet for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. An entity can elect to adopt prospectively or retrospectively to all periods presented. The Company does not expect the adoption of ASU 2015-17 to have a material effect on our financial position, results of operations, or cash flows.
There have been no other newly issued or newly applicable accounting pronouncements that have, or are expected to have, a significant impact on the Company's consolidated financial statements.
| NOTE 12 | SUBSEQUENT EVENTS |
The Company monitors significant events occurring after June 30, 2017 and prior to the issuance of the financial statements to determine the impact, if any, of the events on the financial statements to be issued. All subsequent events of which the Company is aware were evaluated through the filing date of this Form 10-K.
| (34) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not applicable
| Item 9A | CONTROLS AND PROCEDURES |
(a) Evaluation of Disclosure Controls and Procedures
The Company’s principal executive officer, who is also the chief financial and accounting officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, such officer has concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in periodic filings under the Exchange Act is accumulated and communicated to Management, including those officers, and to members of the Board of Directors, to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Management has assessed the Company’s internal control over financial reporting in relation to criteria described in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment using those criteria, management concluded that, as of June 30, 2017, the Company’s internal control over financial reporting was effective.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
(c) Changes in Internal Controls
There were no significant changes in the Company’s internal controls over financial reporting or in other factors that in management’s estimates are reasonably likely to materially affect the Company’s internal controls over financial reporting subsequent to the date of the evaluation.
| Item 9B | OTHER INFORMATION |
None
| (35) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 10 | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
| (a) | Directors |
| Name | Age | Periods of Service as Director | Terms | |||
| Barry M. Yantis | 72 | 1980 to Present | One Year | |||
| Brett A. Yantis | 49 | January 21, 1999 to Present | One Year | |||
| Brian A. Yantis | 69 | July 16, 1986 to Present | One Year |
| Years of | ||||||
| Service as | ||||||
| Name | Age | an Officer | Term | |||
| Barry M. Yantis | 72 | 38 | Until Successor Elected | |||
| Brett A. Yantis | 49 | 15 | Until Successor Elected | |||
| Brian A. Yantis | 69 | 25 | Until Successor Elected |
| (b) | Certain Significant Employees |
There are no significant employees other than above.
| (c) | Family Relationships |
Barry M. Yantis and Brian A. Yantis are brothers. Brett A. Yantis is the son of Barry M. Yantis.
Business Experience
| (1) | Barry M. Yantis, President and Treasurer has been an officer of the Company for thirty-eight years, twelve years as Vice-President and twenty-six years as President. He has been on the board of directors for thirty-eight years and has been associated with the candy business for forty-two years. |
Brett A. Yantis was elected to the position of Director during the year ending June 30, 1999. Brett was elected Vice-President in January 2003. Brett has been associated with the Company for twenty-three years.
Brian A. Yantis, Secretary has been an officer of the Company since May 1992. Until retiring in 2011, he had been associated with the insurance business for thirty-seven years and was a Vice-President of Aon Risk Services in Chicago, Illinois for twenty-two years.
| (36) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 10 | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE (CONTINUED) |
| (2) | The directors and executive officers listed above are also the directors and executive officers of Dye Candy Company. |
| (d) | Involvement in Certain Legal Proceedings |
Not applicable
| (e) | Audit Committee Financial Expert |
Registrant is not required to have an audit committee since the stock is not actively traded. The Board of Directors are not considered audit committee financial experts, but do effectively operate as the audit committee.
| (f) | Code of Ethics |
The Company has adopted a Code of Business Conduct and Ethics that applies to all executive officers, directors and employees of the Company. The Code of Business Conduct and Ethics will be provided to any person without charge upon request.
| Item 11 | EXECUTIVE COMPENSATION |
| (a) | General |
Executive officers are compensated for their services as set forth in the Summary Compensation Table. These salaries are approved yearly by the Board of Directors.
| (b) | Summary Compensation Table |
| Long-Term Compensation | ||||||||||||||||||||||||||||||
| Annual Compensation | Awards | Payouts | ||||||||||||||||||||||||||||
| Name and | Other | Restricted | ||||||||||||||||||||||||||||
| Principal | Fiscal | Annual | Stock | Option | LTIP | All Other | ||||||||||||||||||||||||
| Position | Year End | Salary | Bonus | Compensation | Award (s) | SARs (#) | Payouts | Compensation | ||||||||||||||||||||||
| Barry M. Yantis | 1) 06-30-17 | $ | 138,600 | $ | - | $ | 4,500 | - | - | - | - | |||||||||||||||||||
| Barry M. Yantis | 1) 06-30-16 | $ | 138,600 | $ | - | $ | 2,980 | - | - | - | - | |||||||||||||||||||
| Barry M. Yantis | 1) 06-30-15 | $ | 133,650 | $ | 19,000 | $ | 2,040 | - | - | - | - | |||||||||||||||||||
| 1) | CEO, President and Treasurer |
| 2) | No other compensation than that which is listed in compensation table. |
| 3) | No other officers have compensation over $100,000 for their services besides those listed in this compensation table. |
| (c) | Option/SAR grants table |
Not applicable
| (d) | Aggregated option/SAR exercises and fiscal year-end option/SAR value table |
Not applicable
| (37) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 11 | EXECUTIVE COMPENSATION (CONTINUED) |
| (e) | Long-term incentive plan awards table |
Not applicable
| (f) | Compensation of Directors |
Directors are not compensated for services on the board. The directors are reimbursed for travel expenses incurred in attending board meetings.
| (g) | 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.
| (h) | Report on repricing of option/SARs |
Not applicable
| (i) | Additional information with respect to compensation committee interlocks and insider participation in compensation decisions |
The registrant has no formal compensation committee. The Board of Directors, Brian A. Yantis, Barry M. Yantis, and Brett A. Yantis (all current officers of the Company) annually approve the compensation of Barry M. Yantis, CEO, President and Treasurer.
| (j) | 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.
| (38) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS |
| Amounts | ||||||||||||
| and | ||||||||||||
| Nature of | ||||||||||||
| Beneficial | % of | |||||||||||
| Title of Class | Name and Address | Ownership | Class | |||||||||
| (a) | Security Ownership of Certain Beneficial Owners Common; Par Value $1 per Share | Barry Yantis, CEO & Director | 194,385 | (1) | 16.90 | %(2) | ||||||
| 5605 Osage Drive | ||||||||||||
| St. Joseph, MO 64503 | ||||||||||||
| Brian Yantis, Officer & Director | 97,192 | (1) | 8.40 | %(2) | ||||||||
| 1210 E. Clarendon | ||||||||||||
| Arlington Heights, IL 60004 | ||||||||||||
| (b) | Security Ownership of Management Common; Par Value $1 per Share | Two Directors and CEO as a Group | 110,856 | 11.40 | % | |||||||
| Prior Cumulative Preferred, $5 Par Value: Series A, 6% Convertible | Two Directors and CEO as a Group | 21,533 | 21.50 | % | ||||||||
| Prior Cumulative Preferred, $5 Par Value: Series B, 6% Convertible | Two Directors and CEO as a Group | 21,533 | 21.50 | % | ||||||||
| Cumulative Preferred, $20 Par Value: Series A, $5 Convertible | Two Directors and CEO as a Group | 3,017 | 5.20 | % | ||||||||
| Cumulative Preferred, $20 Par Value: Series B, $5 Convertible | Two Directors and CEO as a Group | 630 | 6.60 | % | ||||||||
| (1) | Includes 120,477 and 60,244 shares, respectively, which could be received within 30 days upon conversion of preferred stock. |
| (2) | Reflects the percentage assuming the preferred shares above were converted into common stock. |
| (c) | No Known Change of Control is Anticipated |
| (39) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
| (a) | Transactions with management and others |
The registrant’s subsidiary, Dye Candy Company entered into an operating lease agreement during the 2005 fiscal year to provide office and manufacturing facilities with a limited liability company that is owned 100% by Vice-President and Director, Brett A. Yantis. The annual rent is $78,000.
| (b) | Certain business relationships |
Not applicable
| (c) | Indebtedness of management |
Not applicable
| (d) | Transactions with promoters |
Not applicable
| Item 14 | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The following table shows the aggregate fees billed to the Company for professional services for the years ended June 30, 2017 and 2016:
| 2017 | 2016 | |||||||
| Audit Fees: | ||||||||
| Mayer Hoffman McCann P.C. (MHM) | $ | 61,005 | $ | 67,807 | ||||
| Audit Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
MHM leases substantially all its personnel, who work under the control of MHM shareholders, from wholly-owned subsidiaries of CBIZ, Inc., in an alternative practice structure.
| (40) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
| Item 15 | EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES |
The following documents are filed as part of this report.
| 1. | Consolidated Financial Statements: | Page |
| Index to Consolidated Financial Statements | 16 | |
| Consolidated Balance Sheets | 18 - 19 | |
| Consolidated Statements of Operations | 20 | |
| Consolidated Statements of Stockholders’ Equity | 21 | |
| Consolidated Statements of Cash Flows | 22 | |
| Notes to Consolidated Financial Statements | 23 - 34 |
| 2. | Consolidated Financial Statement Schedules: |
None
| 3. | Exhibits: |
The exhibits listed below are filed with or incorporated by reference in this report.
The following have been previously filed and are incorporated by reference to prior years' Forms 10-K filed by the Registrant:
| 3.1 | Articles of Incorporation of Chase General Corporation | |
| 3.2 | Bylaws |
The following are Exhibits attached or explanations included in "Notes to Consolidated Financial Statements" in Part II of this report:
| (41) |
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2017
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: | September 27, 2017 | By: | /s/ Barry M. Yantis |
| Barry M. Yantis | |||
| Chairman of the Board, Chief Executive Officer, | |||
| President and Treasurer |
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.
| Signatures | Title | Date | ||
| /s/ Barry M. Yantis | September 27, 2017 | |||
| Barry M. Yantis | Chairman of the Board, Chief Executive | |||
| Officer and Chief Financial Officer, | ||||
| President, Treasurer and Director | ||||
| /s/ Brett Yantis | September 27, 2017 | |||
| Brett Yantis | Vice-President and Director | |||
| /s/ Brian A. Yantis | September 27, 2017 | |||
| Brian A. Yantis | Secretary and Director |
| (42) |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICER REQUIRED BY RULE 13a-14(a)/15d-14(a)
CERTIFICATION
I Barry Yantis, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Chase General Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
| 3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this annual report; |
| 4. | I am the small business issuer’s certifying officer and am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) ) for Chase General Corporation and we have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to Chase General Corporation, including its consolidated subsidiary, is made known to me by others within that entity, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of Chase General Corporation’s disclosure controls and procedures and presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
| d) | Disclosed in this report any change in Chase General Corporation’s internal control over financial reporting that occurred during Chase General Corporation’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, Chase General Corporation’s internal control over financial reporting; |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to Chase General Corporation’s auditors and our Board of Directors (acting as the audit committee): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting. |
| September 27, 2017 | /s/ Barry M. Yantis | |
| Date | Barry M. Yantis | |
| Chief Executive Officer and Chief Financial | ||
| Officer, President and Treasurer |
EXHIBIT 32.1
CHASE GENERAL CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Chase General Corporation (the “Company”) on Form 10-K for the year ending June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry Yantis, President, Chief Executive Officer, and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| September 27, 2017 | /s/ Barry M. Yantis |
| Date | Barry M. Yantis |
| Chairman of the Board, Chief Executive Officer | |
| and Chief Financial Officer, President and Treasurer |
Document and Entity Information - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Jun. 30, 2017 |
Sep. 26, 2017 |
Dec. 31, 2016 |
|
| Document and Entity Information [Abstract] | |||
| Entity Registrant Name | CHASE GENERAL CORP | ||
| Entity Central Index Key | 0000015357 | ||
| Entity Current Reporting Status | Yes | ||
| Entity Voluntary Filers | No | ||
| Current Fiscal Year End Date | --06-30 | ||
| Entity Filer Category | Smaller Reporting Company | ||
| Entity Well-Known Seasoned Issuer | No | ||
| Entity Common Stock, Shares Outstanding | 969,834 | ||
| Entity Public Float | $ 0 | ||
| Document Type | 10-K | ||
| Document Period End Date | Jun. 30, 2017 | ||
| Amendment Flag | false | ||
| Document Fiscal Year Focus | 2017 | ||
| Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| Allowance for doubtful accounts on trade receivables (in dollars) | $ 13,733 | $ 16,549 |
| Common stock, par value (in dollars per share) | $ 1 | $ 1 |
| Prior Cumulative Preferred Stock, $5 Par Value: | Series A | ||
| Preferred stock, par value (in dollars per share) | $ 5 | $ 5 |
| Preferred stock, liquidation preference (in dollars) | $ 2,280,000 | $ 2,250,000 |
| Prior Cumulative Preferred Stock, $5 Par Value: | Series B | ||
| Preferred stock, par value (in dollars per share) | $ 5 | $ 5 |
| Preferred stock, liquidation preference (in dollars) | $ 2,235,000 | $ 2,205,000 |
| Cumulative Preferred Stock, $20 Par Value: | Series A | ||
| Preferred stock, par value (in dollars per share) | $ 20 | $ 20 |
| Preferred stock, liquidation preference (in dollars) | $ 5,136,263 | $ 5,077,730 |
| Cumulative Preferred Stock, $20 Par Value: | Series B | ||
| Preferred stock, par value (in dollars per share) | $ 20 | $ 20 |
| Preferred stock, liquidation preference (in dollars) | $ 837,055 | $ 827,516 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
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| Income Statement [Abstract] | ||
| NET SALES | $ 2,753,043 | $ 3,304,604 |
| COST OF SALES | 2,259,952 | 2,477,479 |
| Gross Profit on Sales | 493,091 | 827,125 |
| OPERATING EXPENSES | ||
| Selling Expenses | 373,743 | 436,869 |
| General and Administrative Expenses | 396,934 | 372,684 |
| Gain on Sale of Equipment | (21,364) | |
| Total Operating Expenses | 770,677 | 788,189 |
| Income (Loss) from Operations | (277,586) | 38,936 |
| OTHER INCOME (EXPENSE) | ||
| Miscellaneous Income (Expense) | (5,089) | 1,891 |
| Interest Expense | (6,377) | (4,758) |
| Total Other Expense | (11,466) | (2,867) |
| Income (Loss) before Income Taxes | (289,052) | 36,069 |
| PROVISION (BENEFIT) FOR INCOME TAXES | (110,111) | 2,473 |
| NET INCOME (LOSS) | $ (178,941) | $ 33,596 |
| NET LOSS PER SHARE OF COMMON STOCK | ||
| - BASIC (in dollars per share) | $ (0.32) | $ (0.10) |
| - DILUTED (in dollars per share) | $ (0.32) | $ (0.10) |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) |
Preferred Stock
Prior Cumulative Preferred Stock - Series A
|
Preferred Stock
Prior Cumulative Preferred Stock - Series B
|
Preferred Stock
Cumulative Preferred Stock - Series A
|
Preferred Stock
Cumulative Preferred Stock - Series B
|
Common Stock |
Paid-In Capital |
Accumulated Deficit |
Total |
|---|---|---|---|---|---|---|---|---|
| BALANCE at Jun. 30, 2015 | $ 500,000 | $ 500,000 | $ 1,170,660 | $ 190,780 | $ 969,834 | $ 3,134,722 | $ (5,497,402) | $ 968,594 |
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
| Net Income (Loss) | 33,596 | 33,596 | ||||||
| BALANCE at Jun. 30, 2016 | 500,000 | 500,000 | 1,170,660 | 190,780 | 969,834 | 3,134,722 | (5,463,806) | 1,002,190 |
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
| Net Income (Loss) | (178,941) | (178,941) | ||||||
| BALANCE at Jun. 30, 2017 | $ 500,000 | $ 500,000 | $ 1,170,660 | $ 190,780 | $ 969,834 | $ 3,134,722 | $ (5,642,747) | $ 823,249 |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
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| Nature Of Business and Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business Chase General Corporation (the Company) was incorporated on November 6, 1944 in the state of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States.
Significant accounting policies are as follows:
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions and balances have been eliminated in consolidation.
Segment Reporting of the Business The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name "Cherry Mash". The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions 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. Management considers these two divisions as one reportable segment in these consolidated financial statements.
Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Revenue Recognition The Company recognizes revenues as product is shipped to customers. Net sales are comprised of the total sales billed during the period, including shipping and handling charges to customers, less the estimated returns, customer allowances and customer discounts.
Shipping and Handling Costs Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the years ended June 30, 2017 and 2016 was $159,851 and $183,456, respectively.
Trade Receivables Trade receivables are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Trade receivables are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of trade receivables are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the trade receivables. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due to the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or that require an excessive collection cost, are written off to the allowance for doubtful accounts.
Inventories Inventories are carried at the "lower of cost or market value" with cost being determined on the "first-in, first-out" basis of accounting. The cost of finished goods and goods in process inventories include an estimate for manufacturing overhead.
Property and Equipment The Company’s property and equipment is recorded at cost and is being depreciated on straight-line and accelerated methods over the following estimated useful lives:
Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.
Income Taxes Deferred income taxes are provided using the liability method for temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred income tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred income tax assets are only recognized if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing authority. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred income tax assets will not be realized. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of relevant information. Deferred income tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the dates of enactment.
The Company’s policy is to evaluate uncertain tax positions under the guidance as prescribed by Accounting Standards Codification (ASC) 740, Income Taxes. As of June 30, 2017 and 2016, the Company has not identified any uncertain tax positions requiring recognition in the consolidated financial statements. The Company had no accruals for interest or penalties as of June 30, 2017 and 2016.
Earnings Per Common Share Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share shall be computed by including contingently issuable shares with the weighted average shares outstanding during the period. When inclusion of the contingently issuable shares would have an antidilutive effect upon earnings per share, diluted earnings per share will be calculated in the same manner as basic earnings per share.
Earnings Per Common Share (Continued) The following table details out the contingently issuable shares for the years ended June 30, 2017 and 2016. For 2017 and 2016, the contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share.
Advertising Expense Advertising is expensed when incurred. Advertising expense was $16,049 and $13,941 for the years ended June 30, 2017 and 2016, respectively.
Going Concern During the year ended June 30, 2017, the Company adopted ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40)”. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. Management determined that there are no conditions or events, when considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the consolidated financial statements are available for issuance. |
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FORGIVABLE LOAN AND DEFERRED INCOME |
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|---|---|---|---|---|
Jun. 30, 2017 | ||||
| Forgivable Loan and Deferred Income [Abstract] | ||||
| FORGIVABLE LOAN AND DEFERRED INCOME |
During 2004, the Company received a $25,000 economic development incentive from Buchanan County, which is a five year forgivable loan at a rate of $5,000 per year. The Nodaway Valley Bank established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company met the criteria of occupying a 20,000 square foot building and creating a minimum of two new full-time equivalent jobs during the first year of operation in the new facility. In addition, the Company maintained 19 existing jobs during the five year term. Notice was received February 6, 2009 from the Buchanan County Commission, that the Company had fulfilled its minimum loan requirements so that the loan was forgiven in full and has no further obligations. Since the Company was no longer legally required to return the monies, the liability was reclassified as deferred revenue and amortized into income over the life of the lease term of the new facility. Deferred revenue is recognized on a straight line basis over the lease term of 20 years. During the years ended June 30, 2017 and 2016, deferred revenue of $1,299 and $1,298, respectively, was amortized into income. |
NOTES PAYABLE |
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| NOTES PAYABLE |
The Company’s long-term debt at June 30, 2017 and 2016 consists of:
Future minimum payments for the years ended June 30 are:
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CAPITAL STOCK |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAPITAL STOCK |
Capital stock authorized, issued, and outstanding as of June 30, 2017 is as follows:
Cumulative Preferred Stock dividends in arrears at June 30, 2017 and 2016 totaled $8,076,878 and $7,948,806, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2017 and 2016:
The 6% 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. Cumulative preferred stock may be exchanged for common stock at the option of the shareholders in the ratio of 4 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. |
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INCOME TAX |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAX |
The income tax positions taken for open years are appropriately stated and supported for all open years. The Company’s federal tax returns for the years ended June 30, 2016, 2015, and 2014 are subject to examination by the IRS taxing authority.
The sources of deferred income tax assets and liability at June 30, 2017 and 2016 are as follows:
The net deferred income tax asset (liability) is presented in the accompanying June 30, 2017 and 2016 consolidated balance sheets as follows:
The provision (benefit) for income taxes for the years ended June 30, 2017 and 2016 consists of the following:
The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax income for the years ended June 30, 2017 and 2016 due to the following:
The Company has available at June 30, 2017, $219,526 of unused operating loss that may be carried back two years to offset prior taxable income or carried forward and applied against future taxable income. The carryforward expires on June 30, 2038. |
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INCOME (LOSS) PER SHARE |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE |
The loss per share for the years ended June 30, 2017 and 2016, respectively, was computed on the weighted average of outstanding common shares during the year as follows:
Contingently issuable shares were not included in the 2017 and 2016 diluted earnings per common share as they would have an antidilutive effect upon earnings per share. |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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| Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES |
Dye Candy Company leases its office and manufacturing facility, located at 1307 South 59th, St. Joseph, Missouri, from an entity owned by the Vice-President and Director of the Company. The lease term is from February 1, 2005 through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of the first five years, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor and for each additional term of five years. Rental expense was $78,000 for each year ended June 30, 2017 and 2016. The amounts are included in cost of sales.
Future minimum lease payments under this lease are as follows:
As of June 30, 2017, the Company had raw materials purchase commitments with four vendors totaling approximately $81,000. |
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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Jun. 30, 2017 | ||||
| Fair Value Disclosures [Abstract] | ||||
| 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 consolidated financial instruments. As of June 30, 2017, the amount of the Company’s long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to the Company. |
CONCENTRATION OF CREDIT RISK |
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| Risks and Uncertainties [Abstract] | ||||
| CONCENTRATION OF CREDIT RISK |
For the years ended June 30, 2017 and 2016, two customers accounted for 54% and 58%, respectively, of the gross sales. As of June 30, 2017 and 2016, two customers accounted for 52% and 60%, respectively, of trade receivables. |
RECENTLY ISSUED ACCOUNTING PRONOUONCEMENTS |
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Jun. 30, 2017 | ||||
| Accounting Changes and Error Corrections [Abstract] | ||||
| RECENTLY ISSUED ACCOUNTING PRONOUONCEMENTS |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required regarding customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The guidance will initially be applied retrospectively using one of two methods. The standard will be effective for the entity for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted beginning for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” (“ASU 2015-11”). An entity using an inventory method other than last-in, first out (“LIFO”) or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of ASU 2015-11 to have a material effect on the financial position, results of operations, or cash flows.
In February 2016, the FASB issued amended guidance for the treatment of leases. The guidance requires lessees to recognize a right-of-use asset and a corresponding lease liability for all operating and finance leases with lease terms greater than one year. The guidance also requires both qualitative and quantitative disclosures regarding the nature of the entity’s leasing activities. The guidance will initially be applied using a modified retrospective approach. The amendments in the guidance are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the amended lease guidance on the its consolidated financial statements.
In November 2015, the FASB issued ASC Update No. 2015-17, “Balance Sheet Classification of Deferred Taxes” as part of its simplification initiatives. This update requires deferred tax liabilities and assets to be classified as non-current on the consolidated condensed balance sheet for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. An entity can elect to adopt prospectively or retrospectively to all periods presented. The Company does not expect the adoption of ASU 2015-17 to have a material effect on our financial position, results of operations, or cash flows.
There have been no other newly issued or newly applicable accounting pronouncements that have, or are expected to have, a significant impact on the Company's consolidated financial statements. |
SUBSEQUENT EVENTS |
12 Months Ended | |||
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Jun. 30, 2017 | ||||
| Subsequent Events [Abstract] | ||||
| SUBSEQUENT EVENTS |
The Company monitors significant events occurring after June 30, 2017 and prior to the issuance of the financial statements to determine the impact, if any, of the events on the financial statements to be issued. All subsequent events of which the Company is aware were evaluated through the filing date of this Form 10-K. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nature Of Business and Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation | 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. |
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| Segment Reporting of the Business | Segment Reporting of the Business The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name "Cherry Mash". The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions 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. Management considers these two divisions as one reportable segment in these consolidated financial statements. |
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| Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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| Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. |
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| Revenue Recognition | Revenue Recognition The Company recognizes revenues as product is shipped to customers. Net sales are comprised of the total sales billed during the period, including shipping and handling charges to customers, less the estimated returns, customer allowances and customer discounts. |
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| Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the years ended June 30, 2017 and 2016 was $159,851 and $183,456, respectively. |
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| Trade Receivables | Trade Receivables Trade receivables are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Trade receivables are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of trade receivables are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the trade receivables. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due to the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or that require an excessive collection cost, are written off to the allowance for doubtful accounts. |
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| Inventories | Inventories Inventories are carried at the "lower of cost or market value" with cost being determined on the "first-in, first-out" basis of accounting. The cost of finished goods and goods in process inventories include an estimate for manufacturing overhead. |
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| Property and Equipment | Property and Equipment The Company’s property and equipment is recorded at cost and is being depreciated on straight-line and accelerated methods over the following estimated useful lives:
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. |
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| Income Taxes | Income Taxes Deferred income taxes are provided using the liability method for temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred income tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred income tax assets are only recognized if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing authority. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred income tax assets will not be realized. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of relevant information. Deferred income tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the dates of enactment.
The Company’s policy is to evaluate uncertain tax positions under the guidance as prescribed by Accounting Standards Codification (ASC) 740, Income Taxes. As of June 30, 2017 and 2016, the Company has not identified any uncertain tax positions requiring recognition in the consolidated financial statements. The Company had no accruals for interest or penalties as of June 30, 2017 and 2016. |
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| Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share shall be computed by including contingently issuable shares with the weighted average shares outstanding during the period. When inclusion of the contingently issuable shares would have an antidilutive effect upon earnings per share, diluted earnings per share will be calculated in the same manner as basic earnings per share.
Earnings Per Common Share (Continued) The following table details out the contingently issuable shares for the years ended June 30, 2017 and 2016. For 2017 and 2016, the contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share.
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| Advertising Expense | Advertising Expense Advertising is expensed when incurred. Advertising expense was $16,049 and $13,941 for the years ended June 30, 2017 and 2016, respectively. |
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| Going Concern | Going Concern During the year ended June 30, 2017, the Company adopted ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40)”. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. Management determined that there are no conditions or events, when considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the consolidated financial statements are available for issuance. |
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NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Schedule of property plant and equipment depreciated over the estimated useful life |
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| Schedule of antidilutive shares excluded from computation of earnings per share |
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NOTES PAYABLE (Tables) |
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| Schedule of long-term debt |
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| Schedule of future minimum payments of long term debt |
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CAPITAL STOCK (Tables) |
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| Schedule of capital stock authorized, issued, and outstanding |
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| Schedule of preferred stock dividends in arrears on a per share basis |
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INCOME TAX (Tables) |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of sources of deferred tax assets and liability |
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| Schedule of net deferred income tax asset (liability) |
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| Schedule of provision (benefit) for income taxes |
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| Schedule of effective income tax rate reconciliation |
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INCOME (LOSS) PER SHARE (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of income per share computed on the weighted average of outstanding common shares |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Tables) |
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| Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of supplemental disclosures of cash flow information |
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COMMITMENTS AND CONTINGENCIES (Tables) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Schedule of future minimum lease payments |
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NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Estimated useful lives (Details) |
12 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Buildings | |
| Property, Plant and Equipment [Line Items] | |
| Estimated useful lives | 39 years |
| Machinery and equipment | |
| Property, Plant and Equipment [Line Items] | |
| Estimated useful lives | 5 - 7 years |
| Trucks and autos | |
| Property, Plant and Equipment [Line Items] | |
| Estimated useful lives | 5 years |
| Office equipment | |
| Property, Plant and Equipment [Line Items] | |
| Estimated useful lives | 5 - 7 years |
| Leasehold improvements | |
| Property, Plant and Equipment [Line Items] | |
| Estimated useful lives | Lesser of estimated useful life or the lease term |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals) |
12 Months Ended | |
|---|---|---|
|
Jun. 30, 2017
USD ($)
Division
Segment
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Jun. 30, 2016
USD ($)
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| Nature Of Business and Significant Accounting Policies [Abstract] | ||
| Number of product divisions | Division | 2 | |
| Number of reportable segments | Segment | 1 | |
| Freight expense on goods shipped | $ 159,851 | $ 183,456 |
| Advertising expense | $ 16,049 | $ 13,941 |
FORGIVABLE LOAN AND DEFERRED INCOME (Detail Textuals) |
12 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2017
USD ($)
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Jun. 30, 2016
USD ($)
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Jun. 30, 2004
USD ($)
ft²
|
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| Line of Credit Facility [Line Items] | |||
| Lease term of deferred revenue | 20 years | ||
| Amortized deferred revenue into income for each period | $ (1,299) | $ (1,298) | |
| Nodaway Valley Bank | Standby Letters of Credit | |||
| Line of Credit Facility [Line Items] | |||
| Economic development incentive, forgivable loan | $ 25,000 | ||
| Term of forgivable loan | 5 years | ||
| Loan rate per year | $ 5,000 | ||
| Letter of credit, collateral amount | $ 25,000 | ||
| Area of land occupying | ft² | 20,000 | ||
NOTES PAYABLE - Future minimum payments (Details 1) - USD ($) |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| Notes Payable [Abstract] | ||
| 2018 | $ 16,133 | |
| 2019 | 14,477 | |
| 2020 | 11,798 | |
| 2021 | 10,204 | |
| 2022 | 2,785 | |
| Total | $ 55,397 | $ 70,857 |
CAPITAL STOCK - Shares authorized, issued, and outstanding (Parentheticals) (Details) |
12 Months Ended |
|---|---|
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Jun. 30, 2017
$ / shares
| |
| 6% Prior Cumulative Preferred, $5 par value | |
| Class of Stock [Line Items] | |
| Preferred stock, par value (in dollars per share) | $ 5 |
| Stated percentage of preferred stock | 6.00% |
| 5% Convertible Cumulative Preferred, $20 par value | |
| Class of Stock [Line Items] | |
| Preferred stock, par value (in dollars per share) | $ 20 |
| Stated percentage of preferred stock | 5.00% |
CAPITAL STOCK - Shares authorized, issued, and outstanding (Parentheticals 1) (Details) - $ / shares |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
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| Equity [Abstract] | ||
| Common stock, par value (in dollars per share) | $ 1 | $ 1 |
| Reserved for conversion of preferred stock (in shares) | 1,030,166 |
CAPITAL STOCK - Preferred Stock dividends in arrears on a per share basis (Details 1) - $ / shares |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| 6% Prior Convertible Cumulative Preferred Stock - Series A | ||
| Class of Stock [Line Items] | ||
| Cumulative preferred stock dividends in arrears | $ 17.55 | $ 17.25 |
| 6% Prior Convertible Cumulative Preferred Stock - Series B | ||
| Class of Stock [Line Items] | ||
| Cumulative preferred stock dividends in arrears | 17.10 | 16.80 |
| 5% Convertible Cumulative Preferred Stock - Series A | ||
| Class of Stock [Line Items] | ||
| Cumulative preferred stock dividends in arrears | 67.50 | 66.75 |
| 5% Convertible Cumulative Preferred Stock - Series B | ||
| Class of Stock [Line Items] | ||
| Cumulative preferred stock dividends in arrears | $ 67.50 | $ 66.75 |
CAPITAL STOCK (Detail Textuals) - USD ($) |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| Equity [Abstract] | ||
| Total cumulative preferred stock dividends in arrears | $ 8,076,878 | $ 7,948,806 |
INCOME TAXES - Sources of deferred tax assets and liability (Details) - USD ($) |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| Deferred Income Tax Assets: | ||
| Net Operating Loss Carryover | $ 83,694 | |
| Trade Receivables | 5,251 | 6,310 |
| Deferred Income | 3,837 | 4,332 |
| Inventories | 952 | 1,223 |
| Contribution Carryover | 572 | |
| Total Deferred Income Tax Assets | 94,306 | 11,865 |
| Deferred Income Tax Liability: | ||
| Property and Equipment | (67,143) | (94,778) |
| NET DEFERRED INCOME TAX ASSET (LIABILITY) | $ 27,163 | $ (82,913) |
INCOME TAXES - Net deferred tax assets (liability) (Details 1) - USD ($) |
Jun. 30, 2017 |
Jun. 30, 2016 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Current Deferred Income Tax Asset | $ 90,469 | $ 7,533 |
| Noncurrent Deferred Income Tax Liability | (63,306) | (90,446) |
| NET DEFERRED INCOME TAX ASSET (LIABILITY) | $ 27,163 | $ (82,913) |
INCOME TAXES - Provision for income taxes (Details 2) - USD ($) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Income Tax Disclosure [Abstract] | ||
| Current Income Tax Expense (Credit) | $ (35) | $ 11,138 |
| Deferred Income Tax Credit | (110,076) | (8,665) |
| Provision (credit) for income taxes | $ (110,111) | $ 2,473 |
INCOME TAXES - Effective income tax rate reconciliation (Details 3) - USD ($) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Income Tax Disclosure [Abstract] | ||
| Computed at Federal Statutory Rate of 34% | $ (98,278) | $ 12,309 |
| Increase (Decrease) in Income Taxes Resulting from: | ||
| Non-Deductible Expenses | 111 | 630 |
| Federal Tax Adjustment Due to Actual Rate vs. Statutory Rate | (9,730) | |
| Domestic Production Activities Deduction Credit | (1,767) | |
| Other | (36) | (27) |
| State Income Taxes | (11,908) | 1,058 |
| Provision (credit) for income taxes | $ (110,111) | $ 2,473 |
INCOME TAXES - Effective income tax rate reconciliation (Parentheticals) (Details 3) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Income Tax Disclosure [Abstract] | ||
| Federal statutory income tax rate, percent | 34.00% | 34.00% |
INCOME TAX (Detail Textuals) |
Jun. 30, 2017
USD ($)
|
|---|---|
| Income Tax Disclosure [Abstract] | |
| Operating loss carryforwards | $ 219,526 |
LOSS PER SHARE (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Class of Stock [Line Items] | ||
| Net Income | $ (178,941) | $ 33,596 |
| Preferred Dividend Requirements: | ||
| Total Dividend Requirements | 128,072 | 128,072 |
| Net Income (Loss) - Common Stockholders | $ (307,013) | $ (94,476) |
| Weighted Average of Shares - Basic (in shares) | 969,834 | 969,834 |
| Dilutive Effect of Contingently Issuable Shares (in shares) | 1,033,334 | 1,033,334 |
| Weighted Average Shares - Diluted (in shares) | 2,003,168 | 2,003,168 |
| Basic Loss per Share | $ (0.32) | $ (0.10) |
| Diluted Loss per Share | $ (0.32) | $ (0.10) |
| 6% Prior Cumulative Preferred, $5 par value | ||
| Preferred Dividend Requirements: | ||
| Total Dividend Requirements | $ 60,000 | $ 60,000 |
| 5% Convertible Cumulative Preferred, $20 par value | ||
| Preferred Dividend Requirements: | ||
| Total Dividend Requirements | $ 68,072 | $ 68,072 |
LOSS PER SHARE (Parentheticals) (Details) |
12 Months Ended |
|---|---|
|
Jun. 30, 2017
$ / shares
| |
| 6% Prior Cumulative Preferred, $5 par value | |
| Class of Stock [Line Items] | |
| Stated percentage of preferred stock | 6.00% |
| Preferred stock, par value (in dollars per share) | $ 5 |
| 5% Convertible Cumulative Preferred, $20 par value | |
| Class of Stock [Line Items] | |
| Stated percentage of preferred stock | 5.00% |
| Preferred stock, par value (in dollars per share) | $ 20 |
INCOME (LOSS) PER SHARE (Details 1) |
Jun. 30, 2017
USD ($)
|
|---|---|
| Earnings Per Share [Abstract] | |
| Unused operating loss | $ 219,526 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Cash Paid for: | ||
| Interest Paid | $ 6,377 | $ 4,623 |
| Income Taxes | 6,757 | 66,408 |
| Non-Cash Transactions: | ||
| Financing of New Vehicles | $ 62,681 | |
COMMITMENTS AND CONTINGENCIES - Future minimum lease payments (Details) |
Jun. 30, 2017
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 2018 | $ 78,000 |
| 2019 | 78,000 |
| 2020 | 78,000 |
| 2021 | 78,000 |
| 2022 | 78,000 |
| Thereafter | 214,500 |
| Future minimum payments due, Total | $ 604,500 |
COMMITMENTS AND CONTINGENCIES (Detail Textuals) |
12 Months Ended | |
|---|---|---|
|
Jun. 30, 2017
USD ($)
Customer
|
Jun. 30, 2016
USD ($)
|
|
| Long-term Purchase Commitment [Line Items] | ||
| Additional lease period | 5 years | |
| Lease payments per month | $ 6,500 | |
| Percentage of base rent to be increased | 30.00% | |
| Rental expense | $ 78,000 | $ 78,000 |
| Raw material | ||
| Long-term Purchase Commitment [Line Items] | ||
| Raw materials purchase commitments, number of vendors | Customer | 4 | |
| Raw materials purchase commitments | $ 81,000 | |
CONCENTRATION OF CREDIT RISK (Detail Textuals) - Customer concentration risk |
12 Months Ended | |
|---|---|---|
|
Jun. 30, 2017
Customer
Vendor
|
Jun. 30, 2016
Customer
Vendor
|
|
| Gross sales | ||
| Concentration Risk [Line Items] | ||
| Number of customers accounted credit risk | Customer | 2 | 2 |
| Customer concentration risk, percentage | 54.00% | 58.00% |
| Trade receivables | ||
| Concentration Risk [Line Items] | ||
| Number of customers accounted credit risk | Vendor | 2 | 2 |
| Customer concentration risk, percentage | 52.00% | 60.00% |
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