CHASE GENERAL CORP - FORM 10-K/A

Attached files

Attached files

CHASE GENERAL CORP Reports

Also read

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

file	filename
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICER - CHASE GENERAL CORP	dex311.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND FINANCIAL OFFICER - CHASE GENERAL CORP	dex321.htm

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended June 30, 2010

¨	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

incorporation or organization)

(I.R.S. Employer

Identification Number)


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 ¨ 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.

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 15, 2010 there were 969,834 shares of Common Stock $1.00 par value, outstanding.

EXPLANATORY NOTE

This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended June 30, 2010, originally filed on September 27, 2010 (the “Original 10-K”), of Chase General Corporation, a Missouri corporation (Company). The Company is filing this Amendment to amend Item 8 to include the audit report of the Consolidated Financial Statements and Supplementary Data, which was not included in the Original 10-K. In addition, the Company is including amended Item 9A (T) to modify disclosure controls and procedures.

This Amendment should be read in conjunction with the Original 10-K and the Company’s other filings made with the Securities and Exchange Commission subsequent to the filing of the Original 10-K on September 27, 2010. The Original 10-K has not been amended or updated to reflect events occurring after September 27, 2010, except as specifically set forth in this Amendment.

CHASE GENERAL CORPORATION

ANNUAL REPORT ON FORM 10-K/A

(Amendment No. 1)

For the Year Ended June 30, 2010

TABLE OF CONTENTS


PART II
Item 8.	Consolidated Financial Statements and Supplementary Data	16
Item 9A(T)	Controls and Procedures	36

PART IV
Item 15.	Exhibits and Financial Statement Schedules	42
SIGNATURES		48

Item 8

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements meeting the requirements of Regulation S-B are contained on pages 17 through 35 of this Form 10-K.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

Table of Contents


	PAGE
Reports of Independent Registered Public Accounting Firm		18

Financial Statements

Consolidated Balance Sheets		19

Consolidated Statements of Operations		21

Consolidated Statements of Stockholders’ Equity		22

Consolidated Statements of Cash Flows		23

Notes to Consolidated Financial Statements		25

LOGO

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, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These 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 audits to obtain reasonable assurance about whether the 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 audits 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chase General Corporation and Subsidiary as of June 30, 2010 and 2009, and the consolidated 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

MAYER HOFFMAN MCCANN P.C.

Leawood, Kansas

September 23, 2010

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2010 and 2009

ASSETS


	2010		2009
CURRENT ASSETS
Cash and cash equivalents	$	106,508	$	28,771
Receivables
Net of allowance for doubtful accounts of $14,891 and $15,736, respectively (Note 12)		164,753		229,909
Inventories:
Finished goods		104,022		119,116
Goods in process		3,730		4,932
Raw materials		109,027		69,960
Packaging materials		186,420		172,764
Prepaid expenses		4,959		16,858
Deferred income taxes (Note 7)		5,844		4,626


Total current assets		685,263		646,936


PROPERTY AND EQUIPMENT
Land		35,000		35,000
Buildings		85,738		85,738
Machinery and equipment		1,029,093		771,330
Trucks and autos		139,601		139,601
Office equipment		37,027		36,471
Leasehold improvements		71,481		71,481

Total		1,397,940		1,139,621
Less accumulated depreciation		885,871		811,139


Total property and equipment		512,069		328,482


TOTAL ASSETS	$	1,197,332	$	975,418

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2010 and 2009

LIABILITIES AND STOCKHOLDERS’ EQUITY


	2010			2009
CURRENT LIABILITIES
Accounts payable	$	68,734		$	158,570
Current maturities of notes payable (Note 3 & 4)		56,820			30,142
Accrued expenses		15,337			15,487
Deferred income (Note 2)		1,299			1,299
Income tax payable		2			185


Total current liabilities		142,192			205,683


LONG-TERM LIABILITIES
Deferred income (Note 2)		17,857			19,155
Notes payable—less current maturities (Note 3)		150,475			42,604
Deferred income taxes (Note 7)		93,869			21,986


Total long-term liabilities		262,201			83,745


Total liabilities		404,393			289,428


COMMITMENTS AND CONTINGENCIES (NOTE 10)

STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding: (Note 6)
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $2,070,000 and $2,040,000, respectively)		500,000			500,000
Series B (liquidation preference $2,025,000 and $1,995,000, respectively)		500,000			500,000
Cumulative preferred stock, $20 par value:
Series A (liquidation preference $4,726,533 and $4,668,001, respectively)		1,170,660			1,170,660
Series B (liquidation preference $770,281 and $760,741, 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		(5,673,057	)		(5,780,006	)


Total stockholders’ equity		792,939			685,990


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,197,332		$	975,418

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended June 30, 2010 and 2009


	2010			2009
NET SALES (NOTE 12)	$	2,940,935		$	3,101,004

COST OF SALES		2,108,743			2,190,173


Gross Profit		832,192			910,831


OPERATING EXPENSES
Selling expenses		327,413			368,742
General and administrative expenses		323,221			319,038


Total operating expenses		650,634			687,780


Income from operations		181,558			223,051


OTHER INCOME (EXPENSE)
Miscellaneous income		385			14,003
Interest (expense) (Note 3, 4 & 5)		(4,127	)		(6,346	)


Total other income (expense)		(3,742	)		7,657


Income before income taxes		177,816			230,708

PROVISION FOR INCOME TAXES (NOTE 7)		70,867			38,459


NET INCOME		106,949			192,249

Preferred dividends		(128,072	)		(128,072	)


Net income (loss) applicable to common stockholders	$	(21,123	)	$	64,177


NET INCOME (LOSS) PER SHARE OF COMMON STOCK – (NOTE 8)

BASIC	$	(.02	)	$	.07


DILUTED	$	—		$	.03


WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING		969,834			969,834

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended June 30, 2010 and 2009


	Prior Cumulative Preferred Stock				Cumulative Preferred Stock				Common Stock		Paid-in Capital		Accumulated Deficit			Total
	Series A		Series B		Series A		Series B

BALANCE , JUNE 30, 2008	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,972,255	)	$	493,741

Net income		—		—		—		—		—		—		192,249			192,249


BALANCE , JUNE 30, 2009		500,000		500,000		1,170,660		190,780		969,834		3,134,722		(5,780,006	)		685,990

Net income		—		—		—		—		—		—		106,949			106,949


BALANCE , JUNE 30, 2010	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,673,057	)	$	792,939

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2010 and 2009


	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES

Collections from customers	$	3,006,936		$	3,081,032
Other income		925			690
Cost of sales, selling, general and administrative expenses paid		(2,799,647	)		(2,806,623	)
Interest paid		(3,871	)		(7,409	)
Income taxes paid		(385	)		—


Net cash provided by operating activities		203,958			267,690


CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property and equipment		—			24,000
Purchases of property and equipment		(260,770	)		(76,918	)


Net cash (used in) investing activities		(260,770	)		(52,918	)


CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line-of-credit		210,000			145,000
Principal payments on line-of-credit		(210,000	)		(195,000	)
Proceeds from equipment notes payable		163,909			—
Principal payments on stockholder notes payable		—			(140,000	)
Principal payments on vehicle note payable		(29,360	)		(20,829	)


Net cash provided by (used in) financing activities		134,549			(210,829	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		77,737			3,943

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		28,771			24,828


CASH AND CASH EQUIVALENTS, END OF YEAR	$	106,508		$	28,771

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2010 and 2009


	2010			2009
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Net income	$	106,949		$	192,249

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		75,344			71,030
Provision for bad debts		(845	)		1,995
Deferred income amortization		(1,299	)		(1,299	)
Deferred income taxes		70,665			38,274
(Gain) loss on sale of equipment		1,839			(12,014	)
Effects of changes in operating assets and liabilities:
Trade receivables		66,001			(19,972	)
Inventories		(36,426	)		(63,642	)
Prepaid expenses		11,899			(10,712	)
Accounts payable		(89,836	)		73,691
Accrued expenses		(150	)		(2,095	)
Income tax payable		(183	)		185


NET CASH PROVIDED BY OPERATING ACTIVITIES	$	203,958		$	267,690

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Chase General Corporation (the Company) was incorporated on November 6, 1944 in the State of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States.

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. Therefore, segment reporting for the two divisions is not maintained by Management and, accordingly, has not been disclosed in these consolidated financial statements.

USE OF ESTIMATES

The preparation of 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 the 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SHIPPING AND HANDLING COSTS

Shipping and handling costs for freight expense on goods shipped is included in cost of sales. Freight expense on goods shipped for the years ended June 30, 2010 and 2009 was $135,109 and $156,489, respectively.

RECEIVABLES

Accounts receivable are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Accounts receivable are stated at the invoice amount as no interest is charged to the customer for any past due amounts. Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or to require an excessive collection cost, are written off to the allowance for doubtful accounts.

INVENTORIES

Inventories are carried at the “lower of cost or market value” with cost being determined on the “first-in, first-out” basis of accounting. Finished goods and goods in process include a provision for manufacturing overhead.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. The Company’s property and equipment are 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

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 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 tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred 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 ASC 740, Income Taxes. As of June 30, 2010, the Company has not identified any uncertain tax positions requiring recognition in the consolidated financial statements.

EARNINGS PER 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, no diluted earnings per share shall be presented.

The following contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share:


	2010		2009
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

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING EXPENSE

Advertising is expensed when incurred. Advertising expense was $640 and $750 for the years ended June 30, 2010 and 2009, respectively.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Pursuant to SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”, the FASB Accounting Standards Codification (“ASC”) (FASB ASC 105) became the sole source of authoritative U.S. GAAP for interim and annual periods ending after September 15, 2009, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. The Company adopted this standard during the first quarter of 2009. Reference to specific accounting standards in the footnotes to our consolidated financial statements have been changed to refer to the appropriate section of the ASC.

During the third quarter, Chase adopted FASB accounting Standards Update (ASU) No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements, which amends ASC 855, Subsequent Events. This ASU removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated. This change removes potential conflicts with SEC requirements. Because this update affects the disclosure and not the accounting treatment for subsequent events, the adoption of this provision did not have a material impact on the Company’s consolidated financial statements.

During the third quarter, Chase adopted FASB ASU No. 2010-06 Fair Value Measurements and Disclosures (Topic 820). This ASU requires new disclosures for transfers in and out of Levels 1 and 2, and Activity in Level 3 fair value measurements. The update also clarifies the level disaggregation and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009. The requirement related to Level 3 fair value measurements is effective for the Company for interim and annual reporting periods beginning after January 29, 2011. The adoption of the effective portions of this new standard did not have a material impact to the Company’s consolidated financial statements and the Company does not expect a material impact to its consolidated financial statements related to the Level 3 fair value disclosures.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In June 2009, the FASB issued new guidance on the consolidation of variable interest entities (“VIE”) in response to concerns about the application of certain key provisions of pre-existing guidance, including those regarding the transparency of the involvement with a VIE. Specifically, this new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. In addition, this new guidance requires additional disclosures about the involvement with a VIE and any significant changes in risk exposure due to that involvement. This new guidance is effective for fiscal years beginning after November 15, 2009. We plan to adopt the new guidance in fiscal year 2011 and the Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.

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. At June 30, 2009, a total of $25,000 was reclassified to deferred revenue. Deferred revenue is recognized on a straight line basis over the lease term of 20 years. During the years ended June 30, 2010 and 2009, deferred revenue of $1,299 was amortized into income for each period.

NOTE 3 - NOTES PAYABLE

The Company’s long-term debt consists of:


Payee	Terms	2010		2009
Ford Credit	$1,001 monthly payments including interest of 0%; final payment due March 2011, secured by a vehicle.	$	9,003	$	21,010

Ford Credit	$573 monthly payments including interest of 6.99%; final payment due July 2012, secured by a vehicle.		13,636		19,039

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - NOTES PAYABLE (CONTINUED)


Payee	Terms	2010		2009
Honda	$508 monthly payments including interest of 1.9%; final payment due December 15, 2011, secured by a vehicle.		9,007		14,871

Nissan	$557 monthly payments including interest of 3.9%; final payment due April 2012, secured by a vehicle.		11,740		17,826

Nodaway Valley Bank	$3,192, including interest of 6.25%; final payment due June 2015, secured by equipment.		163,909		—


	Total		207,295		72,746
	Less current portion		56,820		30,142

	Long-term portion	$	150,475	$	42,604

Future minimum payments are:


2011	$	56,820
2012		45,768
2013		33,287
2014		34,822
2015		36,598

Total	$	207,295

NOTE 4 - NOTE PAYABLE - BANK

Effective January 1, 2009, the Company had a $250,000 line-of-credit agreement which expired on January 1, 2010. This line-of-credit agreement was renewed on that date to extend until January 3, 2011, with a variable interest rate at prime (5.0% at June 30, 2010 and 2009, respectively). The line-of-credit was collateralized by certain equipment. At June 30, 2010 and 2009, there was no outstanding balance on the line-of-credit.

NOTE 5 - NOTE PAYABLE - STOCKHOLDER

The Company borrowed $140,000 from a stockholder/officer during the fiscal year ending June 30, 2009, which were repaid by December 31, 2008. This unsecured loan had no maturity date and carried a 4.5% annual interest rate. Interest expense on stockholder/officer note was $2,534 for the year ending June 30, 2009.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - CAPITAL STOCK

Capital stock authorized, issued, and outstanding as of June 30, 2010 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

	Shares
			Issued and
	Authorized		Outstanding
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, 2010 and 2009 totaled $7,180,374 and $7,052,302, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2010 and 2009:


	2010		2009
6% Convertible
Series A	$	15.45	$	15.15
Series B		15.00		14.70

5% Convertible
Series A		60.75		59.75
Series B		60.75		59.75

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. It 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - CAPITAL STOCK (CONTINUED)

The Company has the privilege of redemption of 5% convertible cumulative preferred stock at $21.00 a share plus unpaid accrued dividends. In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20.00 a share plus unpaid accrued dividends. It may be exchanged for common stock at the option of the shareholders, in the ratio of 3.795 common shares for one of preferred.

NOTE 7 - INCOME TAX

The recognition of income tax expense related to uncertain tax provisions is determined under the provisions of FASB ASC-740-10. The Company had no unrecognized tax benefits as of the date of adoption, the income tax provisions taken for open years are appropriately stated and supported for all open years.

As of June 30, 2008, the Company had a net operating loss carryforward of approximately $170,706, of which the Company’s June 30, 2009 profits absorbed $166,194 and 2010 profits absorbed $4,512 of this available net operating loss.

The sources of deferred tax assets and liability at June 30, 2010 and 2009, and the tax effect of each are as follows:


	2010			2009
Deferred tax assets:
Inventories	$	174		$	120
Trade receivables		5,063			3,357
Contribution carryover		607			1,149
Deferred income		6,513			4,363


Total deferred tax assets		12,357			8,989

Deferred tax liability:
Property and equipment		(100,382	)		(26,349	)


NET DEFERRED TAX LIABILITY	$	(88,025	)	$	(17,360	)

The net deferred tax assets (liability) are presented in the accompanying June 30, 2010 and 2009 balance sheets as follows:


	2010			2009
Current deferred tax asset	$	5,844		$	4,626
Noncurrent deferred tax liability		(93,869	)		(21,986	)


NET DEFERRED TAX LIABILITY	$	(88,025	)	$	(17,360	)

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - INCOME TAX (CONTINUED)

The provision (credit) for income taxes, for the years ended June 30, 2010 and 2009, consists of the following:


	2010		2009
Current tax expense	$	202	$	185
Deferred tax expense (benefit)		70,665		38,274


	$	70,867	$	38,459

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, 2010 and 2009 due to the following:


	2010		2009
Computed “expected” tax (benefit)	$	62,236	$	80,748
Increase (decrease) in income taxes (benefits) resulting from:
State income taxes, net of federal benefit		5,960		11,896
Other		2,671		(54,185	)


	$	70,867	$	38,459

The Company has unused contributions of $1,771 to carryforward that will expire for tax years ranging from 2011 through 2015.

NOTE 8 - INCOME (LOSS) PER SHARE

The loss per share was computed on the weighted average of outstanding common shares during the year as follows:


	2010			2009
Net income	$	106,949		$	192,249


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 income (loss) - common stockholders	$	(21,123	)	$	64,177

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - INCOME (LOSS) PER SHARE (CONTINUED)


	2010			2009
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 earnings (loss) per share	$	(.02	)	$	.07


Diluted earnings per share	$	—		$	.03

NOTE 9 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


	2010		2009
Cash paid for:
Interest	$	3,871	$	7,409
Income taxes		385		—
Non-cash transaction:
Reclass of forgivable loan to deferred income		—		10,000
Financing of new vehicle		—		60,556

NOTE 10 - COMMITMENTS

Dye Candy Company leases its office and manufacturing facility, located at 1307 South 59^th, St. Joseph, Missouri, from an entity owned by the Vice-President and Director of the Company and his spouse. The period of the lease 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 shall 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, 2010 and 2009. The amounts are included in cost of sales.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - COMMITMENTS (CONTINUED)

Future minimum lease payments under this lease are as follows:

Year ending June 30:


2011	$	78,000
2012		78,000
2013		78,000
2014		78,000
2015		78,000
Thereafter		760,500

	$	1,150,500

As of June 30, 2010, the Company had raw materials purchase commitments with three vendors totaling $207,000.

NOTE 11 - 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, 2010, 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.

NOTE 12 - CONCENTRATION OF CREDIT RISK

For the years ending June 30, 2010 and 2009, two customers accounted for 39% and 44%, respectively, of the gross sales. For the year ending June 30, 2010 and 2009, four customers accounted for 77% and 76%, respectively, of accounts receivable.

Item 9A(T)

CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

The Company’s principal Chief Executive Officer, who is also the Chief Financial 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, the Company’s Chief Executive Officer, who is also the Chief Financial Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective.

The review performed by Chase General Corporation prior to submission to the Security Exchange Commission did not determine the audit report was omitted and only the auditor’s signature and date of the report were included with the Annual 10-K, June 30, 2010 filing. The Chief Executive Officer, who is also the Chief Financial Officer, has changed internal controls and procedures over financial reporting to require his review and approval of the final copy of the report as completed by RR Donnelly prior to submission to the SEC. Form 10-Q for Fiscal Quarter Ended September 30, 2010 filed November 15, 2010 and Form 10-Q for Fiscal Quarter Ended December 31, 2010 filed February 14, 2011 no audit report was required to be filed. Therefore, Form 10-Q for Fiscal Quarter Ended September 30, 2010 and Form 10-Q for Fiscal Quarter Ended December 31, 2010 are not required to amended at this time.

(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, 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, 2010, the Company’s internal control over financial reporting was not effective.

The Company concluded that the control over financial reporting did not determine the audit report was omitted prior to submission of the Annual 10-K report to the Security Exchange Commission. The Chief Executive Officer, who is also the Chief Financial Officer, has changed the internal control over financial reporting to require his review and approval of the final copy of the report as completed by RR Donnelly prior to submission to the SEC.

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 was a change in the Company’s internal controls over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the Exchange Act”) during the quarter ended June 30, 2010 that affected internal control over financial reporting.

The additional review by the Chief Executive Officer, who is also the Chief Financial Officer, was the only change to internal control over financial reporting as discussed in item (a) and (b) above.

PART IV

Item 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report.


			Page
1.	Financial Statements:

	Index to Financial Statements			17

	Consolidated Balance Sheets			19 - 20

	Consolidated Statements of Operations			21

	Consolidated Statements of Stockholders’ Equity			22

	Consolidated Statements of Cash Flows			23 - 24

	Notes to Consolidated Financial Statements			25 - 35

3.	The exhibits listed below are filed with this report.

	31.1	Certification of Chief Executive and Financial Officer required by Rule 13a-14(a)/15d – 14(a).

	32.1	Certification of Chief Executive officer and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company