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EXCEL - IDEA: XBRL DOCUMENT - CHASE GENERAL CORP | Financial_Report.xls |
EX-31.1 - EXHIBIT 31.1 - CHASE GENERAL CORP | ex31-1.htm |
EX-32.1 - EXHIBIT 32.1 - CHASE GENERAL CORP | ex32-1.htm |
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, 2014
o 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)
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1307 South 59th, St. Joseph, Missouri | 64507 | |||||
(Address of Principal Executive Offices)
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Zip Code |
(816) 279-1625 | ||
(Registrant’s telephone number, including area code) | ||
Securities Registered Pursuant to Section 12(b) of the Act:
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None | ||
Securities Registered Pursuant to Section 12(g) of the Act:
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None | ||
(Title of Class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o 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 o 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 o
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 o
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 o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).
Yes o 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 17, 2014 there were 969,834 shares of Common Stock, $1.00 par value, outstanding.
CHASE GENERAL CORPORATION
ANNUAL REPORT ON FORM 10-K
For the Year Ended June 30, 2014
TABLE OF CONTENTS
PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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7
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Item 1B.
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Unresolved Staff Comments
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7
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Item 2.
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Properties
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7
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Item 3.
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Legal Proceedings
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7
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Item 4.
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Mine Safety Disclosures
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7
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PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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8
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Item 6.
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Selected Financial Data
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8
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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15
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Item 8.
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Consolidated Financial Statements and Supplementary Data
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15
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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34
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Item 9A
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Controls and Procedures
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34
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Item 9B.
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Other Information
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34
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PART III
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Item 10.
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Directors, Executive Officers, and Corporate Governance
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36
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Item 11.
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Executive Compensation
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36
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Stockholder Matters
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38
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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39
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Item 14.
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Principal Accountant Fees and Services
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39
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PART IV
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Item 15.
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Exhibits and Consolidated Financial Statement Schedules
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40
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SIGNATURES
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41
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2 |
PART I
This report contains certain “forward-looking statements” concerning the Company’s operations, economic performance and financial condition, which are subject to inherent uncertainties and risks. Actual results could differ materially from those anticipated in this report. When used in this report, the word “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions are intended to identify forward-looking statements.
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:
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(1)
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60 count pack
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(2)
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12 boxes of 24 bars per box
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(3)
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200 count shipper box
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(4)
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100 count shipper box
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(5)
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100 # 2 box Counter Display
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(6)
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4 box - 36 count Counter Display
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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
3 |
PRINCIPAL PRODUCTS AND METHODS OF DISTRIBUTION (CONTINUED)
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:
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(1)
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Coconut Bon-Bons
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(6) Peanut Brittle
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(2)
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Coconut Stacks
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(7) Peanut Clusters
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(3)
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Home Style Poe Fudge
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(8) Champion Crème Drops
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(4)
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Peco Flake
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(9) Jelly Candies
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(5)
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Peanut Squares
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(10) Frosted Pretzels
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The Champion Creme Drops, Frosted Pretzels and Jelly Candies are not produced by the Company, but repackaged for wholesale distribution.
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, 2014 and 2013, this division accounted for 61% and 57%, 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, 2014 and 2013, this division accounted for 39% and 43%, 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 net income per quarter of the Company varies in direct proportion to the seasonal sales volume.
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.
4 |
COMPETITION AND MARKET AREA (CONTINUED)
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 market for the type of product produced by the divisions of Dye Candy Company is very competitive and quality minded. The confectionery (candy) industry in which the divisions operate is highly competitive with many small companies and, within certain specialized areas, a few competitors dominate. In the United States, the dominant competitors in the coconut candy industry are 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 during the fiscal years ended June 30, 2014 and 2013.
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. For the year ended June 30, 2014, one supplier accounted for 11% of the cost of sales. For the year ended June 30, 2013, two suppliers accounted for 22% of the cost of sales. No other supplier accounted for more than 10% of the Company’s cost of sales in fiscal years 2014 and 2013.
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, 2014, the Company had 20 full time employees. This expands to approximately 31 full time personnel during the busy production months of August through December.
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CUSTOMERS
For the years ended June 30, 2014 and 2013, one customer accounted for 29% and 32%, respectively, of gross sales, and 16% and 15%, respectively, of trade receivables. For the years ended June 30, 2014 and 2013, another customer and its affiliates accounted for 21% and 16%, respectively, of gross sales and 46% and 43%, respectively, of trade receivables. No other customer accounted for more than 10% of the Company’s sales in fiscal years 2014 and 2013.
ENVIRONMENTAL PROTECTION AND THE EFFECT ON PROBABLE GOVERNMENT REGULATIONS ON THE BUSINESS
Except as described in the paragraph below and 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.
In April 2012, the Company received a demand letter from the Public Building Commission of Chicago (“Chicago PBC”) related to a site acquired and remediated by the Chicago PBC that the Chicago PBC alleged was previously operated by a predecessor to the Company. The letter from the Chicago PBC demanded that the Company, as a successor, reimburse the Chicago PBC for approximately $822,000 that the Chicago PBC spent for environmental remediation at the site. On June 30, 2014, the Company and the Chicago PBC executed a settlement agreement in which the Company agreed to pay $100,000 and, to the extent allowed by law, assign potential rights to insurance claims relating to the site, to the Chicago PBC. The Chicago PBC agreed to release and discharge the Company from any and all claims it may have related to the site. The Company made the required settlement payment on July 7, 2014.
NEED FOR GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
The Company is required to meet the FDA 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.
6 |
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, 2014.
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 and his spouse. The annual rental expense of this facility was $78,000 for each year ended June 30, 2014 and 2013.
The net book value of our premises, land and office, and production equipment was $303,045 and $361,825, respectively, for fiscal years ending June 30, 2014 and 2013.
We believe both facilities are adequately covered by insurance.
Item 3 LEGAL PROCEEDINGS
In April 2012, the Company received a demand letter from the Public Building Commission of Chicago (“Chicago PBC”) related to a site acquired and remediated by the Chicago PBC that the Chicago PBC alleged was previously operated by a predecessor to the Company. The letter from the Chicago PBC demanded that the Company, as a successor, reimburse the Chicago PBC for approximately $822,000 that the Chicago PBC spent for environmental remediation at the site. On June 30, 2014, the Company and the Chicago PBC executed a settlement agreement in which the Company agreed to pay $100,000 and, to the extent allowed by law, assign potential rights to insurance claims relating to the site, to the Chicago PBC. The Chicago PBC agreed to release and discharge the Company from any and all claims it may have related to the site. The Company made the required settlement payment on July 7, 2014.
Item 4 MINE SAFETY DISCLOSURES
Not applicable.
7 |
PART II
Item 5 |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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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 17, 2014, 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.
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Item 6 |
SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.
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8 |
Item 7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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 “anticipate,” “plan,” “believe,” “expect,” “estimate,” 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 2014, the Company’s net sales were $3,243,951, as compared to net sales of $3,190,787 for fiscal year ended June 30, 2013. This 1.7% increase in volume combined with a 0.4% decrease in cost of sales resulted in increased profitability during the year, as reflected in the income from operations of $157,330 for fiscal year 2014 compared to $130,018 for fiscal year 2013. Working capital increased $57,815 to $621,127 for the current year from $563,312 for the fiscal year 2013 due to increases in prepaid expenses, increases in trade receivables, increases in cash, decreases in accounts payable, and decreases in current maturities of notes payable offset by increases in accrued expense, increases in income taxes payable, and decreases in inventory.
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.
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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.
Other than the legal proceedings disclosed in item 3, there have been no other events that have occurred subsequent to June 30, 2014, 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, 2014.
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.
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.
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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 income for each of the fiscal years ended June 30, 2014 and 2013, respectively:
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2014
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2013
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Net sales
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100.00 | % | 100.00 | % | ||||
Cost of sales
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68.98 | 70.39 | ||||||
Gross profit on sales
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31.02 | 29.61 | ||||||
Selling expense
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12.27 | 12.73 | ||||||
General and administrative expense
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13.89 | 13.50 | ||||||
Gain on sale of equipment
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- | (0.70 | ) | |||||
Income from operations
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4.86 | 4.08 | ||||||
Other income (expense), net
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(3.09 | ) | (0.17 | ) | ||||
Income before income taxes
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1.77 | 3.91 | ||||||
Provision for income taxes
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0.21 | 1.52 | ||||||
Net income
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1.56 | 2.39 | ||||||
Preferred dividends
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(3.95 | ) | (4.01 | ) | ||||
Loss applicable to common stockholders
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(2.39 | )% | (1.62 | )% |
FISCAL YEAR 2014 COMPARED TO FISCAL YEAR 2013
NET SALES
During the year ended June 30, 2014, sales, net of returns and allowances, increased $53,164 or 1.7% as compared to the year ended June 30, 2013. Gross sales for Chase Candy products increased $156,409 or 8.5% to $2,007,147 for the year ended June 30, 2014 compared to $1,850,738 for 2013. Gross sales for Seasonal Candy products decreased $93,913 or 6.8% to $1,296,360 for the year ended June 30, 2014 as compared to $1,390,273 for 2013. The Company’s returns and allowances decreased $6,589 or 10.6% to $69,045 for the year ended June 30, 2014, compared to $62,456 for the year ended June 30, 2013. The Company’s other sales decreased $2,743 or 22.4% to $9,489 for the year ended June 30, 2014, compared to $12,232 for the year ended June 30, 2013.
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NET SALES (CONTINUED)
The 8.5% increase in gross sales of Chase Candy of $156,409 for the year ended June 30, 2014 over the same period ended June 30, 2013, is primarily due to the net effect of the following: 1) increased sales of the L276 Cherry Mash Distributor Pack division by approximately $85,000 versus the same period a year ago primarily due to two customers increasing orders; 2) increased sales of the L212 Mini Mash division by approximately $38,000 versus the same period a year ago due to one customer increasing orders; 3) increased sales of the Cherry Mash Merchandisers division by approximately $22,000 versus the same period a year ago primarily due to four customers increasing orders; 4) increased sales of the L279/L299 Bulk Mini Mash division by approximately $22,000 versus the same period a year ago primarily due to one customer increasing orders; 5) various other fluctuations netting an increase of approximately $1,000; and offset by 6) decreased sales of the L260 Changemaker Jar division by approximately $6,000 versus the same period a year ago primarily due to two customers decreasing orders; and 7) decreased sales of the L278 Mini Mash division by approximately $6,000 versus the same period a year ago primarily due to one customer decreasing orders.
The 6.8% decrease in gross sales of Seasonal Candy of $93,913 for the year ended June 30, 2014 over the same period ended June 30, 2013, is primarily due to the following: 1) decreased orders from various customers in the bulk seasonal division netting approximately $15,000 versus the same period a year ago primarily due a sales price decrease of approximately 5%; 2) decreased orders from various customers in the clamshell seasonal division totaling approximately $114,000 versus the same period a year ago due to decreased orders and a sales price decrease of approximately 5%; 3) various other fluctuations netting a decrease of approximately $5,000; and offset by 4) increased orders in the generic seasonal division by approximately $40,000 due to increased sales to one customer.
COST OF SALES
Cost of sales for the year ended June 30, 2014, as compared to the year ended June 30, 2013, decreased by 0.4%. The cost of sales decreased $8,162 to $2,237,838 while decreasing to 69.0% of net sales for the year ended June 30, 2014, compared to $2,246,000 or 70.4% of net sales for the year ended June 30, 2013.
The 0.4% decrease in cost of sales of $8,162 is primarily due to slight decreases in the raw material costs of peanuts, chocolate, and sugar compared to the same period ended June 30, 2013 offset by an increase of $25,199 in freight expense. 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.
Labor costs, including wages, vacation pay and payroll taxes of $438,481 for the year ended June 30, 2014, decreased 0.2% or $801 as compared to $439,282 for the period ended 2013.
Freight expense, including shipping and handling costs on goods shipped of $175,986 for the year ended June 30, 2014, increased 16.7% or $25,199 as compared to $150,787 for the period ended 2013 due primarily the 1.7% increase in net sales, an increase in fuel costs, and an increase in refrigeration costs due to weather conditions.
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12 |
GROSS PROFIT ON SALES
The gross profit increased 6.5% or $61,326 to $1,006,113 increasing to 31.0% of related net sales for the year ended June 30, 2014, as compared to $944,787 or 29.6% of related net sales for the year ended June 30, 2013, as a result of the overall increase in net sales and decrease in cost of sales described above.
Finished goods inventory as of June 30, 2014 of $258,726 increased $334 or 0.1% from the June 30, 2013 finished goods inventory of $258,392. Raw materials inventory as of June 30, 2014 of $80,088 decreased $1,427 or 1.8% from the June 30, 2013 raw materials inventory of $81,515. Packaging materials inventory as of June 30, 2014 of $145,046 decreased $13,237 or 8.4% from June 30, 2013 packaging materials inventory of $158,283. Goods in process inventory as of June 30, 2014 of $11,950 increased $1,008 or 9.2% from the June 30, 2013 goods in process inventory of $10,942. Inventory levels vary based primarily on sales and purchases.
SELLING EXPENSES
Selling expenses for the year ended June 30, 2014 decreased $8,120 to $398,127, which is 12.3% of net sales, compared to $406,247 or 12.7% of net sales for the year June 30, 2013. This decrease is primarily due to lower premium promotions. Premium promotions, which are paid to customers for various marketing reasons, decreased $8,425 or 11.9% to $62,408 for the year ended June 30, 2014, as compared to $70,833 for the year ended June 30, 2013.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the year ended June 30, 2014 increased $19,787 to $450,563, which is 13.9% of net sales, compared to $430,776 or 13.5% of net sales for the year ended June 30, 2013. The increased costs are primarily because of a $4,337 increase in professional fees, a $2,992 increase in office salaries, a $9,151 increase in insurance expense and a $3,037 increase in various other administrative expenses. Professional fees increased $4,337 or 3.0% to $146,562 for the year ended June 30, 2014, as compared to $142,225 for the year ended June 30, 2013. Office salaries increased $2,992 or 4.2% to $74,769 for the year ended June 30, 2014, as compared to $71,777 for the year ended June 30, 2013. Insurance expense increased $9,151 or 6.4% to $151,809 for the year ended June 30, 2014, as compared to $142,658 for the year ended June 30, 2013.
INCOME (LOSS) FROM OPERATIONS
Income (loss) from operations for the year ended June 30, 2014 was 4.9% of net sales, as compared to 4.1% of net sales for the year ended June 30, 2013 for the reasons previously described above.
OTHER INCOME (EXPENSE)
Other income (expense), net, reflects net expense of $(100,386) for the year ended June 30, 2014, as compared to net expense of $(5,401) for the year ended June 30, 2013. This increase of $(94,985) in other income (expense) was primarily due to the settlement in the amount of $100,000 discussed previously under Item 3 in legal proceedings.
|
13 |
INCOME BEFORE INCOME TAXES
Income before income taxes was $56,944 for the year ended June 30, 2014, as compared to $124,617 for the year ended June 30, 2013. The reasons for the decrease of $67,673 have been previously discussed above.
PROVISION FOR INCOME TAXES
The Company recorded income tax expense for the year ended June 30, 2014 of $6,676 as compared to an income tax expense of $48,600 for the year ended June 30, 2013. The income tax expense for the year ended June 30, 2014 is a result of operations previously discussed above.
NET INCOME
Net income for the year ended June 30, 2014 was $50,268, compared to net income for the year ended June 30, 2013 of $76,017. This decrease of $25,749 is the result of those items previously discussed above.
LIQUIDITY AND SOURCES OF CAPITAL
The table below presents the summary of cash flow for the fiscal year indicated.
|
2014
|
2013
|
|||||||
Net cash provided by operating activities
|
$ | 230,410 | $ | 101,109 | ||||
Net cash provided by (used in) investing activities
|
$ | (28,767 | ) | $ | 18,751 | |||
Net cash used in financing activities
|
$ | (67,772 | ) | $ | (109,245 | ) |
Operating Activities
The positive cash flow of $230,410 generated from operations is a result of increases in net sales 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, 2014, sales, net of returns and allowances, increased $53,164 or 1.7% as compared to the year ended June 30, 2013. Total inventory as of June 30, 2014 of $495,810 decreased $13,322 or 2.6% from the June 30, 2013 total inventory of $509,132. The timing of inventory purchases and collections from customers impact cash flow generated from operations.
Investing Activities
The $28,767 of cash used in investing activities was the net result of capital expenditures and disposal of equipment for the current fiscal year. Machinery and equipment cash purchases of $28,767 and $3,749 were made during the years ended June 30, 2014 and 2013, respectively. Depending on results of operations and cash flows, the Company has plans to replace two cookers at an anticipated cost of $40,000 in the next several years, with no set target date.
|
14 |
Financing Activities
The Company borrowed $290,000 and $310,050, respectively, on its line-of-credit during the fall of 2013 and 2012 busy seasons. Payments of $290,000 and $350,050, respectively, were paid for years ended June 30, 2014 and 2013. The Company entered into a $350,000 line-of-credit agreement expiring on January 3, 2015, 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 payments were $67,772 and $69,245 for years ended June 30, 2014 and 2013, respectively.
Overall cash and cash equivalents increased $133,871 to $162,435 at June 30, 2014 from $28,564 at June 30, 2013.
At June 30, 2014, the Company’s accumulated deficit was $5,638,311, compared to an accumulated deficit of $5,688,579 as of June 30, 2013. Working capital as of June 30, 2014 increased $57,815 to $621,127 from $563,312 as of June 30, 2013.
The Company’s lease on its office and plant facility is effective through March 31, 2025, with an option to extend for an additional time 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 and his spouse.
In order to maintain funds to finance operations and meet debt obligations, it is the intention of management to continue its efforts to expand the present market area and increase sales to its customers. Management also intends to continue tight control on all expenditures.
There has been no other material impact from inflation and changing prices on net sales, or on income from continuing operations for the last two fiscal years.
|
|
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
PAGE
|
|
Report of Independent Registered Public Accounting Firm
|
17
|
Financial Statements
|
|
Consolidated Balance Sheets
|
18
|
Consolidated Statements of Income
|
20
|
Consolidated Statements of Stockholders’ Equity
|
21
|
Consolidated Statements of Cash Flows
|
22
|
Notes to Consolidated Financial Statements
|
23
|
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, 2014 and 2013, and the related consolidated statements of income, 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 audit 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 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 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, 2014 and 2013, 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 18, 2014
17 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
June 30, 2014 and 2013
|
||||||||
ASSETS
|
||||||||
2014
|
2013
|
|||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 162,435 | $ | 28,564 | ||||
Trade receivables, net of allowance for doubtful accounts of $16,508 and $16,196, respectively
|
178,686 | 166,585 | ||||||
Inventories:
|
||||||||
Finished goods
|
258,726 | 258,392 | ||||||
Goods in process
|
11,950 | 10,942 | ||||||
Raw materials
|
80,088 | 81,515 | ||||||
Packaging materials
|
145,046 | 158,283 | ||||||
Prepaid expenses
|
12,233 | 5,414 | ||||||
Deferred income taxes
|
7,047 | 6,863 | ||||||
Total current assets
|
856,211 | 716,558 | ||||||
PROPERTY AND EQUIPMENT
|
||||||||
Land
|
35,000 | 35,000 | ||||||
Buildings
|
77,348 | 77,348 | ||||||
Machinery and equipment
|
739,962 | 717,985 | ||||||
Trucks and autos
|
188,594 | 188,594 | ||||||
Office equipment
|
31,518 | 30,826 | ||||||
Leasehold improvements
|
72,068 | 72,068 | ||||||
Total
|
1,144,490 | 1,121,821 | ||||||
Less accumulated depreciation
|
841,445 | 759,996 | ||||||
Total property and equipment, net
|
303,045 | 361,825 | ||||||
TOTAL ASSETS
|
$ | 1,159,256 | $ | 1,078,383 |
The accompanying notes are an integral part of the consolidated financial statements.
18 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
|
||||||||
CONSOLIDATED BALANCE SHEETS (CONTINUED)
|
||||||||
June 30, 2014 and 2013
|
||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
2014
|
2013
|
|||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$ | 51,947 | $ | 66,598 | ||||
Current maturities of notes payable
|
21,537 | 54,172 | ||||||
Accrued expenses
|
139,098 | 27,466 | ||||||
Income taxes payable
|
21,203 | 3,711 | ||||||
Deferred income
|
1,299 | 1,299 | ||||||
Total current liabilities
|
235,084 | 153,246 | ||||||
LONG-TERM LIABILITIES
|
||||||||
Deferred income
|
12,661 | 13,960 | ||||||
Notes payable, less current maturities
|
4,650 | 39,787 | ||||||
Deferred income taxes
|
79,176 | 93,973 | ||||||
Total long-term liabilities
|
96,487 | 147,720 | ||||||
Total liabilities
|
331,571 | 300,966 | ||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Capital stock issued and outstanding:
|
||||||||
Prior cumulative preferred stock, $5 par value:
|
||||||||
Series A (liquidation preference $2,190,000 and $2,160,000, respectively)
|
500,000 | 500,000 | ||||||
Series B (liquidation preference $2,145,000 and $2,115,000, respectively)
|
500,000 | 500,000 | ||||||
Cumulative preferred stock, $20 par value Series A (liquidation preference $4,960,664 and $4,902,131, respectively)
|
1,170,660 | 1,170,660 | ||||||
Series B (liquidation preference $808,438 and $798,899, 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
|
(5,638,311 | ) | (5,688,579 | ) | ||||
Total stockholders’ equity
|
827,685 | 777,417 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 1,159,256 | $ | 1,078,383 |
The accompanying notes are an integral part of the consolidated financial statements.
19 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
|
||||||||
CONSOLIDATED STATEMENTS OF INCOME
|
||||||||
Years Ended June 30, 2014 and 2013
|
||||||||
2014
|
2013
|
|||||||
NET SALES
|
$ | 3,243,951 | $ | 3,190,787 | ||||
COST OF SALES
|
2,237,838 | 2,246,000 | ||||||
Gross profit on sales
|
1,006,113 | 944,787 | ||||||
OPERATING EXPENSES
|
||||||||
Selling
|
398,127 | 406,247 | ||||||
General and administrative
|
450,563 | 430,776 | ||||||
Gain on sale of equipment
|
93 | (22,254 | ) | |||||
Total operating expenses
|
848,783 | 814,769 | ||||||
Income from operations
|
157,330 | 130,018 | ||||||
OTHER INCOME (EXPENSE)
|
||||||||
Miscellaneous income (expense)
|
(96,513 | ) | 1,913 | |||||
Interest expense
|
(3,873 | ) | (7,314 | ) | ||||
Total other income (expense), net
|
(100,386 | ) | (5,401 | ) | ||||
Net income before income taxes
|
56,944 | 124,617 | ||||||
PROVISION FOR INCOME TAXES
|
6,676 | 48,600 | ||||||
NET INCOME
|
$ | 50,268 | $ | 76,017 | ||||
NET LOSS PER SHARE OF COMMON STOCK
|
||||||||
- BASIC
|
$ | (0.08 | ) | $ | (0.05 | ) | ||
- DILUTED
|
$ | (0.08 | ) | $ | (0.05 | ) |
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, 2014 and 2013
|
||||||||||||||||||||||||||||||||
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, 2012
|
$ | 500,000 | $ | 500,000 | $ | 1,170,660 | $ | 190,780 | $ | 969,834 | $ | 3,134,722 | $ | (5,764,596 | ) | $ | 701,400 | |||||||||||||||
Net income
|
- | - | - | - | - | - | 76,017 | 76,017 | ||||||||||||||||||||||||
BALANCE, JUNE 30, 2013
|
500,000 | 500,000 | 1,170,660 | 190,780 | 969,834 | 3,134,722 | (5,688,579 | ) | 777,417 | |||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 50,268 | 50,268 | ||||||||||||||||||||||||
BALANCE, JUNE 30, 2014
|
$ | 500,000 | $ | 500,000 | $ | 1,170,660 | $ | 190,780 | $ | 969,834 | $ | 3,134,722 | $ | (5,638,311 | ) | $ | 827,685 |
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, 2014 and 2013
|
||||||||
2014
|
2013
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Collections from customers
|
$ | 3,231,850 | $ | 3,164,165 | ||||
Deferred income
|
1,299 | 1,299 | ||||||
Cost of sales, selling, general and administrative expenses paid
|
(2,994,761 | ) | (3,057,008 | ) | ||||
Interest paid
|
(3,873 | ) | (7,347 | ) | ||||
Income taxes paid
|
(4,105 | ) | - | |||||
Net cash provided by operating activities
|
230,410 | 101,109 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds from sale of equipment
|
- | 22,500 | ||||||
Purchases of property and equipment
|
(28,767 | ) | (3,749 | ) | ||||
Net cash provided by (used in) investing activities
|
(28,767 | ) | 18,751 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from line-of-credit
|
290,000 | 310,050 | ||||||
Principal payments on line-of-credit
|
(290,000 | ) | (350,050 | ) | ||||
Principal payments on notes payable
|
(67,772 | ) | (69,245 | ) | ||||
Net cash used in financing activities
|
(67,772 | ) | (109,245 | ) | ||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
133,871 | 10,615 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
28,564 | 17,949 | ||||||
CASH AND CASH EQUIVALENTS, END OF YEAR
|
$ | 162,435 | $ | 28,564 | ||||
RECONCILIATION OF NET INCOME TO NET CASH
|
||||||||
PROVIDED BY OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 50,268 | $ | 76,017 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
87,454 | 90,294 | ||||||
Allowance for bad debts
|
1,713 | 1,741 | ||||||
Deferred income amortization
|
(1,299 | ) | (1,299 | ) | ||||
Deferred income taxes
|
(14,981 | ) | 44,889 | |||||
Gain (loss) on sale of equipment
|
93 | (22,254 | ) | |||||
Effects of changes in operating assets and liabilities:
|
||||||||
Trade receivables
|
(13,814 | ) | (28,363 | ) | ||||
Inventories
|
13,322 | (61,100 | ) | |||||
Prepaid expenses
|
(6,819 | ) | 6,103 | |||||
Accounts payable
|
(14,651 | ) | (12,200 | ) | ||||
Accrued expenses
|
111,632 | 3,570 | ||||||
Income taxes payable
|
17,492 | 3,711 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
$ | 230,410 | $ | 101,109 |
The accompanying notes are an integral part of the consolidated financial statements.
22 |
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. Management considers these two divisions as one reportable segment 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 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
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, 2014 and 2013 was $175,986 and $150,787, 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
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. 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, 2014 and 2013, 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, 2014 and 2013.
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
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
EARNINGS PER COMMON SHARE (CONTINUED)
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:
2014
|
2013
|
|||||||
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 |
ADVERTISING EXPENSE
Advertising is expensed when incurred. Advertising expense was $8,545 and $6,850 for the years ended June 30, 2014 and 2013, respectively.
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, 2014 and 2013, deferred revenue of $1,299 was amortized into income for each year.
26 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - NOTES PAYABLE
The Company’s long-term debt at June 30, 2014 and 2013 consists of:
Payee
|
Terms
|
2014
|
2013
|
|||||||
Nodaway Valley Bank
|
$350,000 line-of-credit agreement expiring on January 3, 2015, 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.
|
$ | - | $ | - | |||||
Ford Credit
|
$679 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
|
- | 22,413 | |||||||
Ford Credit
|
$517 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.
|
10,850 | 17,050 | |||||||
Nodaway Valley Bank
|
$3,192, including interest of 5.75%; final payment due June 2015, secured by equipment.
|
12,547 | 48,698 | |||||||
Toyota Financial Services
|
$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.
|
2,790 | 5,798 | |||||||
Total
|
26,187 | 93,959 | ||||||||
Less current portion
|
21,537 | 54,172 | ||||||||
Long-term portion
|
$ | 4,650 | $ | 39,787 | ||||||
Future minimum payments are:
|
2015
|
$ | 21,537 | ||
2016
|
4,650 | |||
Total
|
$ | 26,187 |
27 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK
Capital stock authorized, issued, and outstanding as of June 30, 2014 is as follows:
Shares
|
||||||||
Issued and
|
||||||||
Authorized
|
Oustanding
|
|||||||
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, 2014 and 2013 totaled $7,692,662 and $7,564,590, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2014 and 2013:
2014 | 2013 | |||||||
6% Convertible
|
||||||||
Series A
|
$ | 16.65 | $ | 16.35 | ||||
Series B
|
$ | 16.20 | $ | 15.90 | ||||
5% Convertible
|
||||||||
Series A
|
$ | 64.75 | $ | 63.75 | ||||
Series B
|
$ | 64.75 | $ | 63.75 |
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.
28 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAX
The
recognition of income tax expense related to uncertain tax provisions is determined under the provisions of Financial
Accounting Standards Board (FASB) ASC 740. The Company had no unrecognized tax benefits. 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 fiscal
years ended 2011, 2012, and 2013 are subject to examination by the IRS taxing authority.
The sources of deferred income tax assets and liability at June 30, 2014 and 2013 are as follows:
2014
|
2013
|
|||||||
Deferred income tax assets:
|
||||||||
Inventories
|
$ | 753 | $ | 688 | ||||
Trade receivables
|
6,294 | 6,175 | ||||||
Deferred income
|
5,323 | 5,818 | ||||||
Total deferred income tax assets
|
12,370 | 12,681 | ||||||
Deferred income tax liability:
|
||||||||
Property and equipment
|
(84,499 | ) | (99,791 | ) | ||||
NET DEFERRED INCOME TAX LIABILITY
|
$ | (72,129 | ) | $ | (87,110 | ) |
The net deferred income tax asset (liability) is presented in the accompanying June 30, 2014 and 2013 consolidated balance sheets as follows:
2014
|
2013
|
|||||||
Current deferred income tax asset
|
$ | 7,047 | $ | 6,863 | ||||
Noncurrent deferred income tax liability
|
(79,176 | ) | (93,973 | ) | ||||
NET DEFERRED INCOME TAX LIABILITY
|
$ | (72,129 | ) | $ | (87,110 | ) |
The provision (credit) for income taxes for the years ended June 30, 2014 and 2013 consists of the following:
2014 | 2013 | |||||||
Current income tax expense
|
$ | 21,657 | $ | 3,711 | ||||
Deferred income tax expense (credit)
|
(14,981 | ) | 44,889 | |||||
$ | 6,676 | $ | 48,600 |
29 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAX (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, 2014 and 2013 due to the following:
2014
|
2013
|
|||||||
Computed at federal statutory rate of 34%
|
$ | 19,367 | $ | 42,370 | ||||
Increase (decrease) in income taxes
resulting from: |
||||||||
Statutory rate adjustment
|
(11,750 | ) | - | |||||
Deferred income tax rate adjustment
|
- | 4,568 | ||||||
Other
|
(2,902 | ) | (3,948 | ) | ||||
State income taxes
|
1,961 | 5,610 | ||||||
$ | 6,676 | $ | 48,600 |
NOTE 6 - INCOME (LOSS) PER SHARE
The income (loss) per share for the years ended June 30, 2014 and 2013, respectively, was computed on the weighted average of outstanding common shares during the year as follows:
2014
|
2013
|
|||||||
Net income
|
$ | 50,268 | $ | 76,017 | ||||
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
|
$ | (77,804 | ) | $ | (52,055 | ) |
30 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME (LOSS) PER SHARE (CONTINUED)
2014
|
2013
|
|||||||
Weighted average of shares - basic
|
969,834 | 969,834 | ||||||
Dilutive effect of contingently issuable shares
|
1,033,344 | 1,033,344 | ||||||
Weighted average shares – diluted
|
2,003,178 | 2,003,178 | ||||||
Basic earnings (loss) per share
|
$ | (0.08 | ) | $ | (0.05 | ) | ||
Diluted earnings (loss) per share
|
$ | (0.08 | ) | $ | (0.05 | ) |
NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
2014
|
2013
|
|||||||
Cash paid for:
|
||||||||
Interest
|
$ | 3,873 | $ | 7,347 | ||||
Income taxes
|
4,105 | - |
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 and his spouse. 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, 2014 and 2013. The amounts are included in cost of sales.
31 |
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under this lease are as follows:
Year ending June 30:
2015
|
$ | 78,000 | ||
2016
|
78,000 | |||
2017
|
78,000 | |||
2018
|
78,000 | |||
2019
|
78,000 | |||
Thereafter
|
448,500 | |||
$ | 838,500 |
In
April 2012, the Company received a demand letter from the Public Building Commission of Chicago ("Chicago PBC") related to a
site acquired and remediated by the Chicago PBC that the Chicago PBC alleged was previously operated by a predecessor to the
Company. The letter from the Chicago PBC demanded that the Company, as a successor, reimburse the Chicago PBC for
approximately $822,000 that the Chicago PBC spent for environmental remediation at the site. On June 30, 2014, the Company
and the Chicago PBC executed a settlement agreement in which the Company agreed to pay $100,000 and, to the extent
allowed by law, assign potential rights to insurance claims relating to the site, to the Chicago PBC. The Chicago PBC agreed
to release and discharge the Company from any and all claims it may have related to the site. The $100,000 settlement is
included in accrued expenses on the consolidated balance sheets at June 30, 2014 and in miscellaneous expense on the
consolidated statements of income for the year ended June 30, 2014. The Company made the required settlement
payment on July 7, 2014.
As of June 30, 2014, the Company had raw materials purchase commitments with two vendors totaling approximately $189,000.
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, 2014, 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
NOTE 10 - CONCENTRATION OF CREDIT RISK
For the years ended June 30, 2014 and 2013, two customers accounted for 50% and 48%, respectively, of the gross sales. As of June 30, 2014 and 2013, two customers accounted for 62% and 58%, respectively, of trade receivables.
NOTE 11 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board issued new accounting guidance for the recognition of revenue from contracts with customers, which will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company’s fiscal year 2018, and early adoption is not permitted. The Company is evaluating the effect the new guidance will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effect of the standard on its ongoing financial reporting.
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 financial statements.
NOTE 12 – SUBSEQUENT EVENTS
On July 7, 2014, the Company made the required settlement payment of $100,000 as discussed in Note 8.
The Company monitors significant events occurring after June 30, 2014 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.
33 |
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 (1992), 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, 2014, 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
34 |
PART III
Item 10 DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
(a) Directors
Name
|
Age
|
Periods of Service as Director
|
Terms
|
|||
Barry M. Yantis
|
69
|
1980 to present
|
One year
|
|||
Brett A. Yantis
|
46
|
January 21, 1999 to present
|
One year
|
|||
Brian A. Yantis
|
66
|
July 16, 1986 to present
|
One year
|
Executive Officers
Years of
|
||||||||
Service as
|
||||||||
Name
|
Age
|
Position
|
an Officer
|
Term
|
||||
Barry M. Yantis
|
69
|
President, CEO
|
35
|
Until successor elected
|
||||
and Treasurer
|
||||||||
Brett A. Yantis
|
46
|
Vice-President
|
12
|
Until successor elected
|
||||
Brian A. Yantis
|
66
|
Secretary
|
22
|
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-five years, twelve years as Vice-President and twenty-three years as President. He has been on the board of directors for thirty-five years and has been associated with the candy business for thirty-nine 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 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.
|
|
(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
35 |
Item 10
|
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE (CONTINUED)
|
(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) 06-30-14 | $ | 132,000 | $ | 4,000 | $ | 2,240 | - | - | - | - | ||||||||||||||||||||
Barry M. Yantis
|
1) 06-30-13 | $ | 132,000 | $ | 26,000 | $ | 3,500 | - | - | - | - | ||||||||||||||||||||
Barry M. Yantis
|
1) 06-30-12 | $ | 132,000 | $ | - | $ | 4,100 | - | - | - | - | ||||||||||||||||||||
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
(e) Long-term incentive plan awards table
Not applicable
36 |
Item 11 EXECUTIVE COMPENSATION (CONTINUED)
(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. During the fiscal year 2014 and 2013, $1,067 and $482, respectively, of travel expenses were reimbursed to board member Brian A. Yantis.
(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.
37 |
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS
Amounts
|
|||||||||
and
|
|||||||||
Nature
|
|||||||||
of
|
|||||||||
Beneficial
|
|||||||||
Title of Class
|
Name and Address
|
Ownership
|
% of Class
|
||||||
(a)
|
Security ownership of certain beneficial owners
|
||||||||
Common; par value $1 per share
|
Barry Yantis, CEO &
|
||||||||
Director
|
194,385 (1)
|
16.9%
|
(2)
|
||||||
5605 Osage Drive
|
|||||||||
St. Joseph, Mo.
|
|||||||||
64503
|
|||||||||
Brian Yantis, Officer &
|
|||||||||
Director
|
97,192 (1)
|
8.4%
|
(2)
|
||||||
1210 E. Clarendon
|
|||||||||
Arlington Heights, IL.
|
|||||||||
60004
|
|||||||||
(b)
|
Security ownership of management
|
||||||||
Common; par value $1 per share
|
Two directors and CEO
|
110,856
|
11.4%
|
||||||
as a group
|
|||||||||
Prior Cumulative Preferred,
|
Two directors and CEO
|
21,533
|
21.5%
|
||||||
$5 par value: Series A, |
as a group
|
||||||||
6% convertible
|
|||||||||
Prior Cumulative Preferred
|
Two directors and CEO
|
21,533
|
21.5%
|
||||||
$5 par value: Series B, |
as a group
|
||||||||
6% convertible
|
|||||||||
Cumulative Preferred, $20 par
|
Two directors and CEO
|
3,017
|
5.2%
|
||||||
value: Series A, $5 convertible
|
as a group
|
||||||||
Cumulative Preferred, $20 par
|
Two directors and CEO
|
630
|
6.6%
|
||||||
value: Series B, $5 convertible
|
as a group
|
|
(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.
38 |
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 and his spouse. 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 ACCOUNTANT FEES AND SERVICES
The following table shows the aggregate fees billed to the Company for professional services for the years ended June 30, 2014 and 2013:
2014
|
2013
|
|||||||
Audit fees:
|
||||||||
Mayer Hoffman McCann P.C. (MHM)
|
$ | 60,577 | $ | 59,629 | ||||
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.
39 |
PART IV
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 Income
|
20
|
||
Consolidated Statements of Stockholders’ Equity
|
21
|
||
Consolidated Statements of Cash Flows
|
22
|
||
Notes to Consolidated Financial Statements
|
23 - 33
|
||
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:
|
|||
4.
|
Instruments defining the rights of security holders including indentures - Refer to Note 4.
|
||
11.
|
Computation of per share earnings - Refer to Note 6.
|
||
21.
|
Subsidiaries of registrant - Refer to Note 1 of Notes to Consolidated Financial Statements.
|
||
31.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
32.1
|
Certification of Chairman of the Board, Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
40 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHASE GENERAL CORPORATION (Registrant) |
||
Date: September 18, 2014
|
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 18, 2014
|
||
Barry M. Yantis
|
Chairman of the Board, Chief Executive | |||
Officer and Chief Financial Officer, | ||||
President, Treasurer and Director | ||||
/s/ Brett Yantis
|
|
September 18, 2014
|
||
Brett Yantis
|
Vice-President and Director | |||
/s/ Brian A. Yantis
|
|
September 18, 2014 | ||
Brian A. Yantis
|
Secretary and Director |
41 |