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Chase General Corp. – ‘10-K’ for 6/30/22

On:  Friday, 9/23/22, at 2:06pm ET   ·   For:  6/30/22   ·   Accession #:  1558370-22-14587   ·   File #:  2-05916

Previous ‘10-K’:  ‘10-K’ on 10/13/21 for 6/30/21   ·   Next & Latest:  ‘10-K’ on 9/26/23 for 6/30/23

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/23/22  Chase General Corp.               10-K        6/30/22   58:4.8M                                   Toppan Merrill Bridge/FA

Annual Report   —   Form 10-K

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.29M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     25K 
 3: EX-32.1     Certification -- §906 - SOA'02                      HTML     21K 
 9: R1          Document and Entity Information                     HTML     84K 
10: R2          Condensed Consolidated Balance Sheets               HTML    164K 
11: R3          Unaudited Condensed Consolidated Balance Sheets     HTML     36K 
                (Parentheticals)                                                 
12: R4          Condensed Consolidated Statements of Operations     HTML     90K 
13: R5          Consolidated Statements of Stockholders' Equity     HTML     38K 
14: R6          Consolidated Statements of Cash Flows               HTML     95K 
15: R7          Nature of Business and Significant Accounting       HTML     53K 
                Policies                                                         
16: R8          Forgivable Loan and Deferred Income                 HTML     21K 
17: R9          Notes Payable                                       HTML     47K 
18: R10         Capital Stock                                       HTML     64K 
19: R11         Income Taxes                                        HTML     79K 
20: R12         Earnings (Loss) Per Share                           HTML     69K 
21: R13         Supplemental Disclosures of Cash Flow Information   HTML     30K 
22: R14         Commitments, Contingencies and Related Party        HTML     31K 
                Transactions                                                     
23: R15         Disclosures About Fair Value of Financial           HTML     22K 
                Instruments                                                      
24: R16         Concentration of Credit Risk                        HTML     20K 
25: R17         Current Economic Conditions                         HTML     21K 
26: R18         Nature of Business and Significant Accounting       HTML     87K 
                Policies (Policies)                                              
27: R19         Nature of Business and Significant Accounting       HTML     37K 
                Policies (Tables)                                                
28: R20         Notes Payable (Tables)                              HTML     45K 
29: R21         Capital Stock (Tables)                              HTML     63K 
30: R22         Income Tax (Tables)                                 HTML     77K 
31: R23         Earnings (Loss) Per Share (Tables)                  HTML     69K 
32: R24         Supplemental Disclosures of Cash Flow Information   HTML     30K 
                (Tables)                                                         
33: R25         Commitments, Contingencies and Related Party        HTML     28K 
                Transactions (Tables)                                            
34: R26         NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING       HTML     35K 
                POLICIES - Estimated useful lives (Details)                      
35: R27         NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING       HTML     25K 
                POLICIES - Divisions of Revenue (Details)                        
36: R28         NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING       HTML     35K 
                POLICIES - Additional Information (Details)                      
37: R29         Forgivable Loan and Deferred Income (Details)       HTML     37K 
38: R30         NOTES PAYABLE - Long-term debt (Details)            HTML     34K 
39: R31         NOTES PAYABLE - Long-term debt (Parentheticals)     HTML     31K 
                (Details)                                                        
40: R32         CAPITAL STOCK - Shares authorized, issued, and      HTML     44K 
                outstanding (Details)                                            
41: R33         CAPITAL STOCK - Shares authorized, issued, and      HTML     31K 
                outstanding (Parenthetical) (Details)                            
42: R34         CAPITAL STOCK - Preferred Stock dividends in        HTML     28K 
                arrears on a per share basis (Details)                           
43: R35         CAPITAL STOCK - Additional Information (Details)    HTML     38K 
44: R36         INCOME TAXES - Sources of deferred tax assets and   HTML     46K 
                liability (Details)                                              
45: R37         INCOME TAXES - Effective income tax rate            HTML     37K 
                reconciliation (Details)                                         
46: R38         INCOME TAXES - Additional Information (Details)     HTML     23K 
47: R39         Earnings (Loss) Per Share (Details)                 HTML     66K 
48: R40         Earnings (Loss) Per Share (Parenthetical)           HTML     26K 
                (Details)                                                        
49: R41         Earnings (LOSS) PER SHARE - Antidilutive effect of  HTML     30K 
                contingently issuable shares (Details)                           
50: R42         Supplemental Disclosures of Cash Flow Information   HTML     20K 
                (Details)                                                        
51: R43         COMMITMENTS, CONTINGENCIES AND RELATED PARTY        HTML     30K 
                TRANSACTIONS - Future minimum lease payments                     
                (Details)                                                        
52: R44         COMMITMENTS, CONTINGENCIES AND RELATED PARTY        HTML     36K 
                TRANSACTIONS - Additional Information (Details)                  
53: R45         Concentration of Credit Risk (Details)              HTML     29K 
56: XML         IDEA XML File -- Filing Summary                      XML    105K 
54: XML         XBRL Instance -- csgn-20220630x10k_htm               XML    972K 
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57: JSON        XBRL Instance as JSON Data -- MetaLinks              276±   416K 
58: ZIP         XBRL Zipped Folder -- 0001558370-22-014587-xbrl      Zip    217K 


‘10-K’   —   Annual Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I
"Item 1
"Business
"Item 1A
"Risk Factors
"Item 1B
"Unresolved Staff Comments
"Item 2
"Properties
"Item 3
"Legal Procedings
"Item 4
"Mine Safety Disclosures
"Part Ii
"Item 5
"Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
"Item 6
"Selected Financial Data
"Item 7
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 7A
"Quantitative and Qualitative Disclosures About Market Risk
"Item 8
"Consolidated Financial Statements and Supplementary Data
"Index to Consolidated Financial Statements
"Report of Independent Registered Public Accounting Firm
"Report of the Independent Registered Public Accounting Firm (Current)
"Report of the Independent Registered Public Accounting Firm (Predecessor)
"Consolidated Balance Sheets
"Consolidated Statements of Operations
"Consolidated Statements of Stockholders' Equity
"Consolidated Statements of Cash Flows
"Notes to Consolidated Financial Statements
"Item 9
"Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"Item 9A
"Controls and Procedures
"Item 9B
"Other Information
"Part Iii
"Item 10
"Directors, Executive Officers, and Corporate Governance
"Item 11
"Executive Compensation
"Item 12
"Security Ownership of Certain Beneficial Owners and Management and Stockholder Matters
"Item 13
"Certain Relationships and Related Transactions, and Director Independence
"Item 14
"Principal Accountant Fees and Services
"Part Iv
"Item 15
"Exhibits and Consolidated Financial Statement Schedules
"Signatures

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i 10-K

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

For the Fiscal Year Ended  i  i June 30, 2022 / 

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

For the transition period from ______  to _______      

Commission File Number:  i 2-5916

 

Chase General Corporation

 

 

(Exact name of registrant as specified in its charter)

 

MISSOURI

    

 i 36-2667734

(State or other jurisdiction of

(IRS Employer Identification No.)

Incorporation or organization)

 

 i 1307 South 59th,  i St. Joseph,  i Missouri  i 64507

(Address of principal executive offices, Zip Code)

 i (816)  i 279-1625

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Ticker symbol(s)

Name of each exchange on which registered

 i None

 i Not Applicable

Not Applicable

Indicate by check mark if the registrant is a well-known issuer, as defined in Rule 405 of the Securities Act. Yes     i No   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes     i No   

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.  i Yes    No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).  i Yes    No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Nonaccelerated filer 

Smaller reporting company  i 

Emerging Growth Company  i 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   Yes    No   

Indicate by check mark whether the registrant has filed a report on and attestation to it management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit.   Yes    No   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes    No    i 

Aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of September 23, 2022 (based on the last closing sale price as of December 31, 2021) was NO BID.

As of September 23, 2022, there were  i 969,834 shares of common stock, $1.00 par value, outstanding.

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

PART I

ITEM 1.

BUSINESS

2

ITEM 1A.

RISK FACTORS

5

ITEM 1B.

UNRESOLVED STAFF COMMENTS

5

ITEM 2.

PROPERTIES

6

ITEM 3.

LEGAL PROCEDINGS

6

ITEM 4.

MINE SAFETY DISCLOSURES

6

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

7

ITEM 6.

SELECTED FINANCIAL DATA

7

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

7

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

13

ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

13

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

32

ITEM 9A.

CONTROLS AND PROCEDURES

32

ITEM 9B.

OTHER INFORMATION

33

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

34

ITEM 11.

EXECUTIVE COMPENSATION

35

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS

36

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

37

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

37

PART IV

ITEM 15.

EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

38

SIGNATURES

40

(1)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

PART I

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 the 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 case sizes:

(1)60 count pack
(2)12 boxes of 24 bars per box
(3)200 count shipper box
(4)100 count shipper box
(5)100 # 2 box Counter Display

In addition to the regular size bar, a “mini-mash” is distributed in the following case sizes:

(1)24 - 12 oz. bags
(2)3 jars - 60 bars per jar
(3)23 # wrapped bars
(4)22 # unwrapped bars
(5)12 - 12 oz. bags
(6)3 - 4 # jars
(7)24 - 12 oz. clamshell containers
(8)9 - 8 oz. clamshell containers

(2)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 1 BUSINESS (CONTINUED)

Principal Products and Methods of Distribution (Continued)

Seasonal Candy Products of Dye Candy Company produces coconut, peanut, chocolate, and fudge confectioneries and purchases other outsourced products. These products are distributed in bulk or packaged. Principal products include:

(1)

Coconut Bon-Bons

(6)

Peanut Brittle

(2)

Coconut Stacks

(7)

Peanut Clusters

(3)

Home Style Poe Fudge

(8)

Champion Créme Drops

(4)

Peco Flake

(9)

Jelly Candies

(5)

Peanut Squares

(10)

Frosted Pretzels

The Champion Crème Drops, Frosted Pretzels, and Jelly Candies are not produced by the Company.

All products are shipped to customers by commercial haulers.

Competition and Market Area

The Chase Candy Products division bars are sold primarily to wholesale candy, grocery accounts, vendors, and repackers. “Cherry Mash” bars are marketed in the Midwest region of the United States. For the years ended June 30, 2022 and 2021, this division accounted for 60% and 63%, 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, 2022 and 2021, this division accounted for 40% and 37%, respectively of the consolidated sales of Dye Candy Company.

The Company has no government contracts, foreign operations or export sales. In addition, all domestic sales are primarily in the Midwest region of the United States.

The Company is a seasonal business whereby the largest volume of sales occur in August through December of each year. The earnings per quarter of the Company varies in direct proportion to the seasonal sales volume.

Due to the seasonal nature of the business, there is a heavier demand on working capital in the fall and winter months of the year when the Company is building its inventories in anticipation of August through December sales. The fluctuation of demand on working capital due to the seasonal nature of the business is common to the confectionery industry. If necessary, the Company has the ability to borrow short-term funds to finance operations prior to receiving cash collections from fall sales. The Company occasionally offers extended payment terms of up to sixty days. Since this practice is infrequent, the effect on working capital is minimal.

Prompt service and efficient service are traits demanded in the confectionery industry, which results in a continual low volume of back-orders. Therefore, at no time during the year does the Company have a significant amount of back-orders.

(3)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 1 BUSINESS (CONTINUED)

Competition and Market Area (Continued)

Chase Candy Company seasonal products are sold in both the grocery and produce departments with bulk, prepackaged clamshell and shippers.  Chase Candy Company offers a variety of quality products at a value price.  The competitive set of the business does not have a national brand competitor but mostly regional competition and private label.  The primary competition includes:

1.Palmer Candy Company sells products that mostly mirror Chase Candy products but they market their products through the bakery department. Retail pricing on Palmer products is usually higher than Chase products.
2.Zachary Confections is another regional competitor that sells many similar items as Chase Candy and are also priced at retail similar to Chase.
3.The low price competitor is Private Label and depending on location, they have products that are of the same variety as Chase Candy products. Product quality is usually not at the same level as Chase products.

Principal methods of competition the Company uses include quality of product, price, reduced transportation costs due to central location, and service. The Company’s competitive position is positively influenced by labor costs being lower than industry average. Chase General Corporation is firmly established in the confectionery market and through its operating divisions has many years of experience associated with its name.

Research and Development

The Company has not developed any new products for the years ended June 30, 2022 and 2021.

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. One supplier accounted for more than 12% of the Company’s cost of sales for the year ended June 30, 2022 and no suppliers accounted for more than 10% of the Company’s costs of sales for the year ended June 30, 2021.

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 2029.

Employees

As of June 30, 2022, the Company had 18 full-time employees. This expands to approximately 30 full-time personnel during the busy production months of August through December.

(4)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 1 BUSINESS (CONTINUED)

Customers

For the years ended June 30, 2022 and 2021, one customer accounted for 40% and 41%, respectively, of

sales. As of June 30, 2022 and 2021, that same customer accounted for 21% and 24%, respectively, of trade

receivables. For the years ended June 30, 2022 and 2021, another customer and its affiliates accounted for

3% and 8%, respectively, of sales. As of June 30, 2022 and 2021, that same customer and its affiliates

accounted for 13% and 28%, respectively, of trade receivables. For the years ended June 30, 2022 and 2021, another customer and its affiliates accounted for 7% and 6%, respectively, of sales. As of June 30, 2022 and 2021, that same customer and its affiliates accounted for 15% and 2%, respectively, of trade receivables. No other customer accounted for more than 10% of the Company’s sales for the years ended June 30, 2022 and 2021. No other customers accounted for more than 10% of the Company’s trade receivables for the years ended June 30, 2022 and 2021.

Environmental Protection and the Effect on Probable Government Regulations on the Business

To the best of management’s knowledge, the Company is presently in compliance with all environmental laws and regulations and does not anticipate any future expenditures in this regard. The Company has evaluated the requirements of the Food Safety Modernization Act (FSMA). The FSMA aims to ensure the U.S. food supply is safe by shifting the focus of federal regulators from responding to contamination to preventing it. The FSMA has given the Food and Drug Administration (FDA) new authorities to regulate the way foods are grown, harvested, and processed. As of the fiscal year ended June 30, 2022 and through the filing of this form, management believes the Company is compliant with all FSMA requirements. Another inspection for compliance will be conducted by a third party within 12 months of year-end. Management does not anticipate any future significant expenditures in the next twelve months in this regard.

Need for Government Approval of Principal Products or Services

The Company is required to meet the Food and Drug Administration guidelines for proper labeling of its products and for contents of its products. Management does not anticipate any future significant expenditures in the next twelve months in this regard.

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 online on the SEC’s EDGAR website.

ITEM 1ARISK FACTORS

Not applicable to a smaller reporting company.

ITEM 1BUNRESOLVED STAFF COMMENTS

The Company has no unresolved SEC staff comments at June 30, 2022.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

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 that is owned by the son of the Chief Executive Officer of the Company. The annual rental expense of this facility was $78,000 for each year ended June 30, 2022 and 2021.

The net book value of our premises, land and office, and production equipment totaled $112,579 and $132,387 at June 30, 2022 and 2021, respectively.

We believe both facilities are adequately covered by insurance.

ITEM 3 LEGAL PROCEEDINGS

None.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

There is no established public trading market for the common stock (par value $1 per share) of the Company.

Security holders

As of September 23, 2022, the latest practicable date, the approximate number of record holders of common stock was 1,869, including individual participants in security listings.

Dividends

(1)Dividend history and restrictions

No dividends have been paid during the past two fiscal years and there are no dividend restrictions. Preferred stock dividends in arrears are accumulated.

(2)Dividend policy

There is no set policy on the payment of dividends due to the financial condition of the Company and other factors. It is not anticipated that cash dividends will be paid in the foreseeable future.

Securities authorized for issuance under equity compensation plans

The Company does not have any equity compensation plans.

ITEM 6 SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains statements that plan for or anticipate the future. Forward-looking statements may include statements about the future of our products and the industry, statements about our future business plans and strategies, and other statements that are not historical in nature. In this report, forward-looking statements are generally identified by the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and the like. Readers should carefully review these cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends, including the impact of the COVID-19 pandemic. 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; the assumption that the Company has stabilized its customer base and will continue its efforts to expand the existing market area and increase sales to customers; and the expectation that the Company will maintain tight control of all expenditures.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Overview

During fiscal year ended June 30, 2022, the Company’s sales were $3,064,443, as compared to sales of $2,960,357 for fiscal year ended June 30, 2021. The 3.5% increase in price and volume, 15% increase in cost of sales and 3% increase in operating expenses resulted in a change in profitability during the year, as reflected in the loss from operations of $22,264 for fiscal year 2022 compared to the income from operations of $186,160 for fiscal year 2021. Working capital decreased $7,074 to $561,602 for the fiscal year 2022 from $568,676 for the fiscal year 2021 due primarily to an increase in inventory and accounts payable.

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.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

The Company recognizes revenues as product is shipped to customers. Sales are comprised of the total sales billed during the period, including shipping and handling charges to the customer, less the estimated returns, customer allowances, and customer discounts.

Inventories

Inventories are carried at the “lower of cost or net realizable value,” with cost being determined on the “first-in, first-out” basis of accounting. The cost of goods in process include an estimate for manufacturing overhead. Finished goods inventory are valued using the lower of cost or market value, determined by the retail inventory method. Under the retail inventory method, the valuation of finished goods inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventories.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Results of Operations

The following table sets forth for the years indicated, the percentage of sales of certain items in the Company’s consolidated statements of operations for the years ended June 30, 2022 and 2021, respectively:

    

For the Years Ended

 

    

June 30,

 

    

2022

    

2021

 

    

Sales

 

100

%  

100

%

 

Cost of Sales

 

72

%  

65

%

 

Gross Profit on Sales

 

28

%  

35

%

 

Operating Expenses

 

29

%  

29

%

 

Income (Loss) from Operations

 

(1)

%  

6

%

 

Other Income, Net

 

%  

6

%

 

Net Income (Loss) before Income Taxes

 

(1)

%  

12

%

 

Income Tax Provision (Benefit)

 

%  

%

 

Net Income (Loss)

 

(1)

%  

12

%

 

Fiscal Year 2022 Compared to Fiscal Year 2021

Sales

During the year ended June 30, 2022, sales, net of returns and allowances, increased $104,086 or 3.5% as compared to the year ended June 30, 2021. Sales for Chase Candy products decreased $19,672 or 1.1% to $1,849,227 for the year ended June 30, 2022 compared to $1,868,899 for the year ended June 30, 2021. Sales for Seasonal Candy products increased $123,758 or 11.34% to $1,215,216 for the year ended June 30, 2022 as compared to $1,091,458 for the year ended June 30, 2021.

Sales for Chase Candy consisted of the following divisions: L276 Cherry Mash Distributor Pack division, Cherry Mash Merchandisers division, L260 Changemaker Jar division, L279/L299 Bulk Mini Mash division, and L278/L212 Mini Mash division. The 1.1% decrease in sales of Chase Candy of $19,672 for the year ended June 30, 2022 over the same period ended June 30, 2021, is primarily due to the following: 1) decreased sales of Cherry Mash Merchandisers division by approximately $90,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, 2) decreased sales of the L278/L212 Mini Mash division by approximately $58,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers, 3) decreased sales of the Cherry Mash internet sales via the Company’s website by approximately $20,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers; offset by 4) increased sales of the L276 Cherry Mash Distributor Pack division by approximately $126,000 versus the same period a year ago, primarily due to an increase in orders from existing customers, 5) increased sales of the L279/L299 Bulk Mini Mash division by approximately $17,000 versus the same period a year ago, primarily due to an increase in orders from existing customers, and 6) increased sales of the L260 Changemaker Jar Division of approximately $6,000 versus the same period a year ago, primarily due to an increase in orders from existing customers.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year 2022 Compared to Fiscal Year 2021 (Continued)

Sales (Continued)

Sales for Seasonal Candy consisted of the following divisions: bulk seasonal division, clamshell seasonal division, and the generic seasonal division. The 11.3% increase in sales of Seasonal Candy of $123,758 for the year ended June 30, 2022 over the same period ended June 30, 2021, is primarily due to the net effect of the following: 1) increased sales in the Chase clamshell seasonal division by approximately $53,000 versus the same period a year ago, primarily due to increased orders from existing customers, 2) increased sales in the generic seasonal division by approximately $100,000 due to increased orders from existing customers; offset by 3) decreased sales in the bulk seasonal division by approximately $22,000 versus the same period a year ago, primarily due to decreased orders from existing customers and 4) various other product sales decreases of approximately $7,000.

Cost of Sales

Cost of sales for the year ended June 30, 2022, as compared to the year ended June 30, 2021, increased by 15%. The cost of sales increased $287,068 to $2,198,765 while increasing to 71.8% of sales for the year ended June 30, 2022, compared to $1,911,697 or 64.6% of sales for the year ended June 30, 2021.

The 15% increase in cost of sales of $287,068 is primarily due to inflationary impacts on raw materials such as chocolate and packaging supplies.

Labor costs, including wages, vacation pay and payroll taxes of $757,292 for the year ended June 30, 2022, increased 12.5% or $84,413 as compared to $672,879 for the year ended June 20, 2021 primarily due to increased production wages due to increased hours, bonuses, and pay rates compared to the same period ended June 30, 2021.

Freight expense, including shipping and handling costs on goods shipped of $134,620 for the year ended June 30, 2022, increased 16.5% or $19,033 as compared to $115,587 for the year ended June 30, 2021 due primarily to inflationary impacts such as costs of fuel.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year 2022 Compared to Fiscal Year 2021 (Continued)

Gross Profit on Sales

The gross profit decreased 17.5% or $182,982 to $865,678 decreasing to 28.3% of related sales for the year ended June 30, 2022, as compared to $1,048,660 or 35.4% of related sales for the year ended June 30, 2021, as a net result of the 15% increase in cost of sales described above, the 3.5% increase in sales and a price increase that was effective in early 2022.

Finished goods inventory as of June 30, 2022 of $360,225 increased $72,980 or 25.4% from the June 30, 2021 finished goods inventory of $287,245. Raw materials inventory as of June 30, 2022 of $93,326 decreased $3,998 or 4.1% from the June 30, 2021 raw materials inventory of $97,324. Packaging materials inventory as of June 30, 2022 of $293,123 increased $68,805 or 30.7% from June 30, 2021 packaging materials inventory of $224,318. Goods in process inventory as of June 30, 2022 of $18,603 increased $7,349 or 65.3% from the June 30, 2021 goods in process inventory of $11,254. Inventory levels vary based primarily on sales and purchases.

Selling Expenses

Selling expenses for the year ended June 30, 2022 increased $1,217 to $321,992, which is 10.5% of sales, compared to $320,775 or 10.8% of sales for the year June 30, 2021. This increase is primarily due to higher commissions as a result of the sales force being able to return to client sites and trade shows. Commission expense increased $12,180 to $131,468 for the year ended June 30, 2022, as compared to $119,288 for the year ended June 30, 2021 primarily due to an increase in sales of items where the Company pays commissions as well as the operations of the sales team returning to pre-pandemic nature of operations. The above increase was offset by a decrease in shipping costs associated with selling expenses which decreased $12,297 to $35,128 for the year ended June 30, 2022, as compared to $47,425 for the year ended June 30, 2021.

General and Administrative Expenses

General and administrative expenses for the year ended June 30, 2022 increased $24,225 to $565,950, which is 18.5% of sales, compared to $541,725 or 18.3% of sales for the year ended June 30, 2021. The increase is primarily due to higher professional fees and insurance expense. Professional fees increased $10,029 to $210,770 for the year ended June 30, 2022, as compared to $200,741 for the year ended June 30, 2021 primarily due to increased audit and consulting fees. Insurance expense increased $17,500 to $163,661 for the year ended June 30, 2022, as compared to $146,161 for the year ended June 30, 2021 primarily due to the increase in insurance premiums.

Other Income (Expense)

Other income reflects income of $895 for the year ended June 30, 2022, as compared to income of $177,573 for the year ended June 30, 2021. This decrease of $176,678 in other income was primarily due to the gain on extinguishment of debt related to the Paycheck Protection Program loan received in 2021.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year 2022 Compared to Fiscal Year 2021 (Continued)

Income Tax Benefit (Provision)

The Company recorded no income tax benefit for the years ended June 30, 2022 and 2021. Additionally, the Company has placed a valuation allowance on the net deferred tax asset of $30,500 for the current year as it was determined that it is not likely the Company would use the remaining balance in the near future.

Net Income (Loss)

Net loss for the year ended June 30, 2022 was $21,369, compared to a net income for the year ended June 30, 2021 of $363,733. This decrease of $385,102 is the result of those items previously discussed.

Preferred Dividends

Preferred dividends were $128,072 for the years ended June 30, 2022 and June 30, 2021, which reflects additional preferred stock dividends in arrears on the Company’s Series A and Series B $5 par value preferred stock and its Series A and Series B $20 par value preferred stock.

Net Income (Loss) Applicable to Common Stockholders

Net loss applicable to common stockholders for the year ended June 30, 2022 was $(149,441) which is a decrease of $385,102 as compared to the net income applicable to common stockholders for the year ended June 30, 2021 of $235,661.

Liquidity and Sources of Capital

The table below presents the summary of cash flow for the fiscal year indicated.

    

For the Years Ended

    

June 30,

    

2022

    

2021

    

Net Cash Provided by (Used by) Operating Activities

$

29,754

$

(134,716)

Net Cash Used by Investing Activities

$

(18,628)

$

(15,880)

Net Cash Provided by (Used by) Financing Activities

$

(4,730)

$

104,321

Management has made no material commitments for capital expenditures for fiscal 2023.  The $29,754 of cash provided by operating activities for the year ended June 30, 2022 is fully detailed in the consolidated statement of cash flows.  The cash used by investing and financing activities for the year ended June 30, 2022 is fully detailed in the consolidated statement of cash flows.  

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2022

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year 2022 Compared to Fiscal Year 2021 (Continued)

Liquidity and Sources of Capital (Continued)

Overall cash and cash equivalents increased $6,396 to $13,511 at June 30, 2022 from $7,115 at June 30, 2021.

At June 30, 2022, the Company’s accumulated deficit was $5,726,735, compared to an accumulated deficit of $5,705,366 as of June 30, 2021. Working capital as of June 30, 2022 decreased $7,074 to $561,602 from $568,676 as of June 30, 2021.

The Company’s lease on its office and plant facility is effective through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of each five-year period, the base rent may be increased by an amount not greater than 30%, at the sole discretion of lessor. The facility is leased from an entity that is owned by the son of the Chief Executive Officer of the Company.

In order to maintain funds to finance operations and meet debt obligations, it is the intention of management to continue its efforts to expand the present market area and increase sales to its customers. Management also intends to continue tight control on all expenditures. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand. Gross margins have decreased primarily due to the fluctuations in these raw material prices. Management intends to make sales price adjustments in the future to correspond with changes in raw material prices.  Management believes that the projected cash flow from operations combined with the availability on the line of credit will be sufficient to meet its funding requirements for the foreseeable future.

ITEM 7AQUANTITATIVE 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 17 through 37 of this Form 10-K.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

TABLE OF CONTENTS

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:  i 483)

15

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:  i 199)

16

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

17

CONSOLIDATED STATEMENTS OF OPERATIONS

19

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

20

CONSOLIDATED STATEMENTS OF CASH FLOWS

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Chase General Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Chase General Corporation and its subsidiary (the Company) as of June 30, 2022, the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting 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.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 i HoganTaylor LLP

Graphic

We have served as the Company's auditor since 2022.

 i Oklahoma City, Oklahoma

September 23, 2022

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Chase General Corporation and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Chase General Corporation and Subsidiary (“Company”) as of June 30, 2021, and the related consolidated statement of operations, stockholders’ equity, and cash flows for the year then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021, and the results of its operations and its cash flows for the year in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/  i Mayer Hoffman McCann P.C.

We have served as the Company’s auditor from 2008 to 2022

 i Kansas City, Missouri

October 13, 2021

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2022 AND 2021

    

June 30,

June 30,

2022

    

2021

ASSETS

  

  

  

  

CURRENT ASSETS

  

  

Cash and Cash Equivalents

$

 i 13,511

$

 i 7,115

Trade Receivables, Net of Allowance for Doubtful Accounts of $ i 948 and $ i 14,948,

 

 

Respectively

 i 141,336

 i 196,802

Inventories:

 

  

 

  

Finished Goods

 

 i 360,225

 

 i 287,245

Goods in Process

 

 i 18,603

 

 i 11,254

Raw Materials

 

 i 93,326

 

 i 97,324

Packaging Materials

 

 i 293,123

 

 i 224,318

Prepaid Expenses

 

 i 6,640

 

 i 10,137

Total Current Assets

 

 i 926,764

 

 i 834,195

 

  

 

  

PROPERTY AND EQUIPMENT

 

  

 

  

Land

 

 i 35,000

 

 i 35,000

Buildings

 

 i 77,348

 

 i 77,348

Machinery and Equipment

 

 i 886,341

 

 i 867,691

Trucks and Autos

 

 i 158,632

 

 i 158,632

Office Equipment

 

 i 33,025

 

 i 33,025

Leasehold Improvements

 

 i 72,068

 

 i 72,068

Total

 

 i 1,262,414

 

 i 1,243,764

Less: Accumulated Depreciation and Amortization

 

( i 1,149,835)

 

( i 1,111,377)

Total Property and Equipment, Net

 

 i 112,579

 

 i 132,387

 

  

 

  

OTHER LONG-TERM ASSETS

Right of Use Assets

 i 196,126

 i 259,293

Total Long-Term Assets

 i 308,705

 i 391,680

Total Assets

$

 i 1,235,469

$

 i 1,225,875

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

(17)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (CONTINUED)

JUNE 30, 2022 AND 2021

June 30,

June 30, 

    

2022

    

2021

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable

$

 i 135,705

$

 i 40,274

Current Maturities of Notes Payable

 

 i 120,000

 

 i 124,730

Current Maturities of Lease Liability

 i 67,351

 i 63,137

Accrued Expenses

 

 i 32,598

 

 i 26,285

Refund Liability Owed to Customers

 i 8,209

 i 9,794

Deferred Income

 

 i 1,299

 

 i 1,299

Total Current Liabilities

 

 i 365,162

 

 i 265,519

LONG-TERM LIABILITIES

Lease Liabilities, Less Current Maturities

 i 128,775

 i 196,156

Deferred Income

 

 i 2,271

 

 i 3,570

Total Long-Term Liabilities

 

 i 131,046

 

 i 199,726

Total Liabilities

 

 i 496,208

 

 i 465,245

COMMITMENTS AND CONTINGENCIES (NOTE 8)

STOCKHOLDERS’ EQUITY

Capital Stock Issued and Outstanding:

Prior Cumulative Preferred Stock, $ i  i 5 /  Par Value:

Series A (Liquidation Preference $ i 2,430,000 and $ i 2,400,000, Respectively)

 

 i 500,000

 

 i 500,000

Series B (Liquidation Preference $ i 2,385,000 and $ i 2,355,000, Respectively)

 

 i 500,000

 

 i 500,000

Cumulative Preferred Stock, $ i  i 20 /  Par Value:

Series A (Liquidation Preference $ i 5,428,928 and $ i 5,370,395, Respectively)

 

 i 1,170,660

 

 i 1,170,660

Series B (Liquidation Preference $ i 884,750 and $ i 875,211, Respectively)

 

 i 190,780

 

 i 190,780

Common Stock, $ i  i 1 /  Par Value

 

 i 969,834

 

 i 969,834

Paid-In Capital in Excess of Par

 

 i 3,134,722

 

 i 3,134,722

Accumulated Deficit

 

( i 5,726,735)

 

( i 5,705,366)

Total Stockholders’ Equity

 

 i 739,261

 

 i 760,630

Total Liabilities and Stockholders’ Equity

$

 i 1,235,469

$

 i 1,225,875

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

(18)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

JUNE 30, 2022 AND 2021

For the Years Ended

June 30,

    

2022

    

2021

SALES

$

 i 3,064,443

$

 i 2,960,357

 

  

 

COST OF SALES

 

 i 2,198,765

 

 i 1,911,697

Gross Profit on Sales

 

 i 865,678

 

 i 1,048,660

 

  

 

OPERATING EXPENSES

 

  

 

Selling

 

 i 321,992

 

 i 320,775

General and Administrative

 

 i 565,950

 

 i 541,725

Total Operating Expenses

 

 i 887,942

 

 i 862,500

 

  

 

Income (Loss) from Operations

 

( i 22,264)

 

 i 186,160

 

  

 

OTHER INCOME (EXPENSE)

 

  

 

Miscellaneous Income

 

 i 4,957

 

 i 8,758

Gain on Extinguishment of Debt (Note 3)

 i 171,500

Interest Expense

 

( i 4,062)

 

( i 2,685)

Total Other Income, net

 

 i 895

 

 i 177,573

 

  

 

  

Income (Loss) before Income Taxes

 

( i 21,369)

 

 i 363,733

 

  

 

  

INCOME TAX BENEFIT (PROVISION)

 

 

 

  

 

  

NET INCOME (LOSS)

$

( i 21,369)

$

 i 363,733

 

  

 

  

EARNINGS (LOSS) PER SHARE

 

  

 

  

Basic

$

( i 0.15)

$

 i 0.24

Diluted

$

( i 0.15)

$

 i 0.18

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

(19)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED JUNE 30, 2022 AND 2021

Prior Cumulative

Cumulative

  

  

  

  

Preferred Stock

Preferred Stock

Common

Paid-In

Accumulated

  

    

Series A

    

Series B

    

Series A

    

Series B

    

Stock

    

Capital

    

Deficit

    

Total

BALANCE, July 1, 2020

$

 i 500,000

$

 i 500,000

$

 i 1,170,660

$

 i 190,780

$

 i 969,834

$

 i 3,134,722

$

( i 6,069,099)

$

 i 396,897

Net Income

 

 

 

 

 

 

 

 i 363,733

 

 i 363,733

BALANCE, June 30, 2021

 i 500,000

 i 500,000

 i 1,170,660

 i 190,780

 i 969,834

 i 3,134,722

( i 5,705,366)

 i 760,630

Net Loss

 

 

 

 

 

 

 

( i 21,369)

 

( i 21,369)

BALANCE, June 30, 2022

$

 i 500,000

$

 i 500,000

$

 i 1,170,660

$

 i 190,780

$

 i 969,834

$

 i 3,134,722

$

( i 5,726,735)

$

 i 739,261

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

(20)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

For the Year Ended

June 30,

    

2022

    

2021

    

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

Collections from Customers

$

 i 3,119,909

$

 i 2,906,017

Cost of Sales, Selling, General and Administrative Expenses Paid

 

( i 3,086,093)

 

( i 3,038,048)

Interest Paid

 

( i 4,062)

 

( i 2,685)

Net Cash Provided by (Used by) Operating Activities

 

 i 29,754

 

( i 134,716)

 

  

 

  

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchases of Property and Equipment

 

( i 18,628)

 

( i 15,880)

Net Cash Used by Investing Activities

 

( i 18,628)

 

( i 15,880)

 

  

 

  

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from Line of Credit

 

 i 375,000

 

 i 395,000

Principal Payments on Line of Credit

 

( i 375,000)

 

( i 275,000)

Principal Payments on Notes Payable

 

( i 4,730)

 

( i 15,679)

Net Cash Provided By (Used by) Financing Activities

 

( i 4,730)

 

 i 104,321

 

  

 

  

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 i 6,396

 

( i 46,275)

 

  

 

  

Cash and Cash Equivalents - Beginning of Period

 

 i 7,115

 

 i 53,390

 

  

 

  

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

 i 13,511

$

 i 7,115

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES

 

  

 

  

Net Income (Loss)

$

( i 21,369)

 i 363,733

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used by) Operating Activities:

 

Depreciation and Amortization

 

 i 38,436

 i 39,987

Allowance for Bad Debts

 

( i 14,000)

 i 1,777

Deferred Income Amortization

 

( i 1,299)

( i 1,299)

Gain on Extinguishment of Debt

 

( i 171,500)

Effects of Changes in Operating Assets and Liabilities:

 

Trade Receivables

 

 i 69,466

( i 54,340)

Inventories

 

( i 145,136)

( i 306,655)

Prepaid Expenses

 

 i 3,497

( i 2,484)

Accounts Payable

 

 i 95,431

( i 7,631)

Refund Liability Owed to Customers

( i 1,585)

( i 382)

Accrued Expenses

 

 i 6,313

 i 4,078

 

  

 

  

NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES

$

 i 29,754

$

( i 134,716)

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

(21)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

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.

 i 

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.

 i 

Segment Reporting of the Business

The subsidiary, Dye Candy Company, operates  i 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  i one reportable segment in these consolidated financial statements.

 / 
 i 

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 i 

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 i 

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, 2022 and 2021 was $ i 134,620 and $ i 115,587, respectively.

 / 
 i 

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.

 / 

(22)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

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

Trade Receivables (Continued)

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 collectibility 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.

 i 

Inventories

Raw material and packaging material inventories are carried at the “lower of cost or net realizable value,” with cost being determined on the “first-in, first-out” basis of accounting. The cost of goods in process include an estimate for manufacturing overhead. Finished goods inventory are valued using the lower of cost or market value, determined by the retail inventory method. Under the retail inventory method, the valuation of finished goods inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventories.

 i 

Property and Equipment

The Company’s property and equipment is recorded at cost and is being depreciated on straight-line method over the following estimated useful lives:

 i 

Buildings

    

 i 39 years

Machinery and equipment

 i 5 –  i 7 years

Trucks and autos

 i 5 years

Office equipment

 i 5 –  i 7 years

Leasehold improvements

 i Lesser of estimated useful life or the lease term

 / 
 / 

 i 

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.

 i 

Paycheck Protection Program Note

The Small Business Administration Paycheck Protection Program Promissory Note further discussed in Note 3 is being accounted for under Accounting Standards Codification (ASC) 470, Debt. Under ASC 470, the initial recognition of the debt is a financial liability that accrues interest. Under ASC 470, derecognition of the liability will occur when the Company has been “legally released” or pays off the loan at which time forgiveness will be recorded as a gain on extinguishment.

(23)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

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

 i 

Income Taxes

Deferred income taxes are provided using the liability method for temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred income tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred income tax assets are only recognized if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing authority. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred income tax assets will not be realized. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of relevant information. Deferred income tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the dates of enactment. Based on the facts, the Company has determined it necessary to reduce their deferred income tax asset with a valuation allowance due to it being more likely than not that the Company will not be able to realize all of the deferred income tax assets.

The Company’s policy is to evaluate uncertain tax positions under the guidance as prescribed by ASC 740, Income Taxes. As of June 30, 2022 and 2021, 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, 2022 and 2021.

 i 

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.

(24)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

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

 i 

Revenue Recognition

The majority of the Company’s revenue is derived by fulfilling customer orders for the purchase of our products, including 1) a candy bar marketed under the trade name “Cherry Mash” and 2) coconut, peanut, chocolate, and fudge confectioneries. The Company recognizes revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is typically upon shipment to the customer. Shipping and handling costs incurred to ship product to the customer are recorded within cost of sales. Amounts billed and due from our customers are classified as trade receivables on the balance sheet and require payment on a short-term basis. Generally, individual orders from customers are accounted for as a single performance obligation.

Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. The amount of consideration the Company expects to receive and revenue the Company recognizes includes estimates of variable consideration, including costs for trade promotional programs, customer incentives, and allowances and discounts associated with aged or potentially unsaleable products. These estimates are based upon our analysis of the programs offered, historical trends, and expectations regarding customer and consumer participation, sales and payment trends and our experience with payment patterns associated with similar programs offered in the past. The Company reviews and updates these estimates regularly and the impact of any adjustments are recognized in the period the adjustments are identified. The adjustments recognized for the year ended June 30, 2022 and 2021 resulting from updated estimates of revenue for prior year product sales were not significant. The Company has elected a  i practical expedient to recognize incremental costs incurred to obtain contracts, which primarily represent sales commissions where the amortization period would be less than one year, as a selling expense when incurred in the financial statements.

The majority of the Company’s products are confectionery and confectionery-based and, therefore, exhibit similar economic characteristics, such that they are based on similar ingredients and are marketed and sold through the same channels to the same customers. The 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. 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. Advertising is expensed when incurred and considered as a component of revenue. Advertising expense was $ i 7,115 and $ i 18,011 for the years ended June 30, 2022 and 2021, respectively.

The various divisions of revenue are as follows:

 i 

    

2022

    

2021

SALES

     Chase Candy

 

$

 i 1,849,227

 

$

 i 1,868,899

     Seasonal Candy

 

 i 1,215,216

 

 i 1,091,458

Total

 

$

 i 3,064,443

 

$

 i 2,960,357

 / 
 / 

(25)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 2       FORGIVABLE LOAN AND DEFERRED INCOME

During 2004, the Company received a $ i 25,000 economic development incentive from Buchanan County, which is a five-year forgivable loan at a rate of $ i 5,000 per year. The Nodaway Valley Bank established an Irrevocable Standby Letter of Credit in the amount of $ i 25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company met the criteria of occupying a  i 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  i 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  i 20 years. During the years ended June 30, 2022 and 2021, deferred revenue of $ i  i 1,299 /  was amortized into miscellaneous income.

 / 

 i 

NOTE 3       NOTES PAYABLE

The Company’s long-term debt at June 30, 2022 and 2021 consists of:

 i 

June 30,

June 30, 

Payee

    

Terms

    

2022

    

2021

Nodaway Valley Bank

$ i  i 350,000 /  line-of-credit agreement expiring on  i  i January 4, 2023 / , with a variable interest rate at prime but not less than  i  i 5 / %. The line of credit is collateralized by substantially all assets of the Company.

$

 i 120,000

$

 i 120,000

  

 

  

 

  

Toyota Credit

$ i  i 444 /  monthly payments, interest of  i  i 6.49 / %; matured May 2022, secured by a vehicle.

 

 i 

 

 i 4,730

  

 

  

 

  

Total

 

 i 120,000

 

 i 124,730

Less Current Portion

 

 i 120,000

 

 i 124,730

Long-Term Portion

$

 i 

$

 i 

 / 

During fiscal year 2020, the Company received a Small Business Administration Paycheck Protection Program (PPP) Promissory Note totaling $ i 171,500. This loan was fully forgiven during December 2020 and a gain on extinguishment of debt has been recognized as other income.

 / 

(26)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 4       CAPITAL STOCK

Capital stock authorized, issued, and outstanding as of June 30, 2022 is as follows:

 i 

Shares

Issued and

    

Authorized

    

Outstanding

Prior Cumulative Preferred Stock, $ i 5 Par Value:

 i 6% Convertible

 

 i 240,000

Series A

 

 i 100,000

Series B

 

 i 100,000

Cumulative Preferred Stock, $ i 20 Par Value:

 i 5% Convertible

 

 i 150,000

Series A

 

 i 58,533

Series B

 

 i 9,539

Common Stock, $ i 1 Par Value:

Reserved for Conversion of Preferred Stock -  i 1,030,166 shares

 

 i 2,000,000

 

 i 969,834

 / 

Cumulative Preferred Stock dividends in arrears at June 30, 2022 and 2021 totaled $ i 8,717,238 and $ i 8,589,166, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2022 and 2021:

 i 

For the Year Ended

June 30,

    

2022

    

2021

    

 i  i 6 / % Convertible:

Series A

$

 i 19

$

 i 19

Series B

$

 i 19

$

 i 18

 i  i 5 / % Convertible:

Series A

$

 i 73

$

 i 72

Series B

$

 i 73

$

 i 72

 / 

The  i 6% convertible prior cumulative preferred stock may, upon 30 days prior notice, be redeemed by the Corporation at $ i 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 $ i 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  i four common shares for one share of Series A and  i 3.75 common shares for one share of Series B.

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

 / 

(27)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 5       INCOME TAXES

Management believes the income tax positions taken for open years are appropriately stated and supported for all open years. The Company’s federal tax returns for the years ended June 30, 2021, 2020, and 2019 are subject to examination by the Internal Revenue Service taxing authority.

The sources of deferred income tax assets and liabilities at June 30, 2022 and 2021 are as follows:

 i 

June 30,

June 30,

    

2022

    

2021

Deferred tax assets:

Bad Debt Allowance

 i 200

 i 3,600

Deferred Income

 

 i 900

 

 i 1,200

Contribution Carryover

 

 i 500

 

 i 

Net operating loss carryforwards

 

 i 38,900

 

 i 38,600

 i 40,500

 i 43,400

Deferred tax liabilities:

Book/Tax Difference on Property and Equipment

 

( i 10,000)

 

( i 18,000)

( i 10,000)

( i 18,000)

Net deferred tax asset before valuation allowance

 i 30,500

 i 25,400

Valuation allowance:

Beginning balanace

( i 25,400)

( i 77,232)

(Increase) Decrease during the period

( i 5,100)

 i 51,832

Ending balance

( i 30,500)

( i 25,400)

Net deferred tax asset

$

 i 

$

 i 

 / 

The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax income (loss) for the years ended June 30, 2022 and 2021 due to the following:

 i 

For the Years Ended

June 30,

    

2022

    

2021

Computed at statutory rate

$

( i 4,487)

$

 i 76,384

Increase (decrease) resulting from:

Nondeductible Meals & Entertainment

 

 i 

 

 i 9

PPP Loan Forgivenss Income

( i 36,015)

State income taxes - net of federal tax benefit

( i 675)

 i 6,076

Change in deferred tax asset valuation allowance

 

 i 5,100

 

( i 51,832)

Other

 

 i 62

 

 i 5,378

Actual tax provision

$

 i 

$

 i 

 / 

The Company has available at June 30, 2022, $ i 161,212 of net unused operating losses that may be carried forward and applied against future taxable income. Within this amount of net operating loss carryforwards, $ i 54,902 expires on  i June 30, 2038, the remaining balance does not expire.

 / 

(28)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 6       EARNINGS (LOSS) PER SHARE

The earnings (loss) per share for the years ended June 30, 2022 and 2021, respectively, was computed on the weighted average of outstanding common shares during the year as follows:

 i 

For the Years Ended

June 30,

    

2022

    

2021

    

Net Income (Loss)

$

( i 21,369)

$

 i 363,733

Preferred Dividend Requirements:

 

  

 

  

 i  i 6 / % Prior Cumulative Preferred, $ i  i 5 /  Par Value

 

 i 60,000

 

 i 60,000

 i  i 5 / % Convertible Cumulative Preferred, $ i  i 20 /  Par Value

 

 i 68,072

 

 i 68,072

Total Dividend Requirements

 

 i 128,072

 

 i 128,072

Net Income (Loss) attributable to Common Stockholders

$

( i 149,441)

$

 i 235,661

Weighted Average Shares - Basic

 i 969,834

 i 969,834

Effect of Contingently Issuable Shares, if Dilutive

 i 1,033,334

 i 1,033,334

Weighted Average Shares - Diluted

 i 2,003,168

 i 2,003,168

Basic Earnings (Loss) per Share

$

( i 0.15)

$

 i 0.24

Diluted Earnings (Loss) per Share

$

( i 0.15)

$

 i 0.18

 / 

Contingently issuable shares were not included in the 2022 diluted earnings per common share as they would have an antidilutive effect upon earnings per share.

The following table details out the contingently issuable shares for the years ended June 30, 2022 and 2021. For 2022 and 2021, the contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share.

 i 

    

2022

    

2021

Shares Issuable Upon Conversion of Series A Prior Cumulative Preferred Stock

 

 i 400,000

 

 i 400,000

Shares Issuable Upon Conversion of Series B Prior Cumulative Preferred Stock

 

 i 375,000

 

 i 375,000

Shares Issuable Upon Conversion of Series A Cumulative Preferred Stock

 

 i 222,133

 

 i 222,133

Shares Issuable Upon Conversion of Series B Cumulative Preferred Stock

 

 i 36,201

 

 i 36,201

Total Dilutive Effect of Contingently Issuable Shares

 

 i 1,033,334

 

 i 1,033,334

 / 

 / 

 i 

NOTE 7       SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 i 

For the Years Ended

June 30,

    

2022

    

2021

    

Cash Paid for:

Interest

$

 i 4,062

$

 i 2,685

 / 

 / 

(29)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 8       COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

The Company leases its office and manufacturing facility, located in St. Joseph, Missouri under an operating lease from an entity that is owned by the son of the Chief Executive Officer of the Company. The lease term is from February 1, 2005 through March 31, 2025 with an option to extend for an additional term of five years. The Company does not believe that exercise of the renewal option is reasonably assured, and has not included the additional five years in the lease term. The lease currently requires payments of $ i 6,500 per month.

Operating lease right-of-use assets and liabilities were recognized upon adoption of the lease standard based on the present value of minimum lease payments over the remaining lease term. The Company’s operating lease has a remaining term of  i 2.75 years and the present value of the lease payments is calculated using the lessor’s implicit rate of  i 6.43%. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease agreement does not contain any residual value guarantees. Additionally, any other short-term leases are immaterial. The Company elected the practical expedient to not separate lease and nonlease components and also elected the short-term practical expedient for all leases that qualify. As a result, the Company will not recognize right-of-use assets or liabilities for short-term leases that qualify for the short-term practical expedient, but instead will recognize the lease payments as lease cost on a straight-line basis over the lease term. Operating lease expenses and cash paid for operating lease liabilities were $ i 78,000 for the year ended June 30, 2022, of which, $ i 71,565 is included in cost of sales and $ i 6,435 is included in general and administrative expenses.

Minimum annual payments required under existing operating lease liabilities that have initial or remaining noncancelable terms in excess of one year as of June 30, 2022 are as follows:

 i 

Twelve Months Ending June 30,

    

Amount

2023

$

 i 78,000

2024

 

 i 78,000

2025

 

 i 58,500

Total Lease Payments

 i 214,500

Less: Imputed Interest

( i 18,374)

Total Lease Liabilities

$

 i 196,126

 / 

As of June 30, 2022, the Company had raw materials purchase commitments with  i six vendors totaling approximately $ i 120,000.

 / 

 i 

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 financial instruments.

 i 

NOTE 10     CONCENTRATION OF CREDIT RISK

For the years ended June 30, 2022 and 2021,  i  i three /  customers accounted for  i 50% and  i 55%, respectively , of the sales. As of June 30, 2022 and 2021, these same  i  i three /  customers accounted for  i 49% and  i 54%, respectively, of trade receivables. The effects of the COVID-19 pandemic are further discussed below in Note 11. After considering the impact of the COVID-19 pandemic, the Company does not anticipate significant changes to the concentration of credit risk in the next 12 months.

 / 

(30)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

 i 

NOTE 11     CURRENT ECONOMIC CONDITIONS

The COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities. The Company put preparedness plans in place at the manufacturing facility. They have adjusted the number of people allowed at their facilities, enforced social distancing, maintained proper sanitation protocol and have asked that any high risk or employees feeling ill to not come in. The office and sales staff continues to work, while adhering to social distancing guidelines, implementing flexible hours, reducing person-to-person interaction and increasing safety measures.

The Company believes they have sufficient liquidity to satisfy current cash needs, however, they continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that the business can continue to operate during these uncertain times.

The potential impact to the Company’s consolidated financial statements could occur as early as the first quarter of fiscal year ending June 30, 2023 and include, but not limited to: impairment of long lived assets; including property and equipment and operating lease right-of-use assets related to the Company’s fair value and collectability of receivables and other financial assets.

The Company monitors significant events occurring after June 30, 2022 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.

(31)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable

ITEM 9ACONTROLS AND PROCEDURES

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 not effective as a result of a weakness in the design of internal control over financial reporting identified below.

Disclosure controls and procedures include controls and procedures designed 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.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rue 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management, under the supervision of the Company’s principal executive, who is also the chief financial and accounting officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2022 under the criteria set forth in the 2013 Internal Control – Integrated Framework.

(32)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

ITEM 9ACONTROLS AND PROCEDURES (CONTINUED)

Management’s Report on Internal Control over Financial Reporting (Continued)

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that material weaknesses exist due for the following reasons:

The Company has an ineffective control environment due to the lack of the necessary corporate accounting resources with SEC financial reporting experience to ensure consistent, complete and accurate financial reporting, as well as disclosure controls and procedures.  The Company has outsourced the financial reporting function to a qualified accounting firm; however, the Company does not have the internal resources to maintain appropriate disclosure controls and procedures.  

The Company has limited resources to ensure that necessary internal controls are implemented and followed throughout the Company.  The limited resources result in a lack of adequate segregation of duties relating to the authorization, recognition, capture, and review of transactions, facts, circumstances and events that could have a material impact on the Company’s financial reporting process.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

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

(33)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

PART III

ITEM 10DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

(a)Directors

Periods of Service

Name

    

Age

    

as Director

    

Terms

Barry M. Yantis

77

1980 to Present

One Year

Brian A. Yantis

 

74

 

July 16, 1986 to Present

 

One Year

    

    

Years of

    

  

Service as

Name

    

Age

    

an Officer

    

Term

Barry M. Yantis

 

77

 

43

 

Until Successor Elected

Brian A. Yantis

 

74

 

30

 

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.

Business Experience

(1)Barry M. Yantis, President and Treasurer has been an officer of the Company for 43 years, 13 years as Vice-President and 30 years as President. He has been on the board of directors for 43 years and has been associated with the candy business for 47 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 37 years and was a Vice-President of Aon Risk Services in Chicago, Illinois for 22 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

(e)Audit Committee Financial Expert

The board of directors are not considered audit committee financial experts, but do effectively operate as the audit committee.

(34)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

ITEM 10DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE (CONTINUED)

(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 11EXECUTIVE 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

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)06-30-22

$

113,333

$

2,640

Barry M. Yantis

 

1)06-30-21

102,500

 

2,240

 

 

 

 

Barry M. Yantis

 

1)06-30-20

 

116,507

 

 

2,340

 

 

 

 

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

(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.

(35)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

ITEM 11EXECUTIVE COMPENSATION (CONTINUED)

(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 and Barry M. 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.

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

Security Ownership of Certain

  

  

  

 

Beneficial Owners

 

 

Common; Par Value $1 per Share

 

Barry Yantis, CEO & Director 5605 Osage Drive St. Joseph, MO 64503

 

194,385

(1)

16.90

%(2)  

 

 

Brian Yantis, Officer & Director 1210 E. Clarendon Arlington Heights, IL 60004

97,192

(1)

8.40

%(2)  

(b)

 

Security Ownership of Management

 

  

 

  

 

  

 

Common; Par Value $1 per Share

 

Two Directors and CEO as a Group

 

110,856

 

11.40

%  

 

Prior Cumulative Preferred, $5 Par

 

Two Directors and CEO as a Group

 

21,533

 

21.50

%  

 

Value: Series A, 6% Convertible

 

Prior Cumulative Preferred, $5 Par

 

Two Directors and CEO as a Group

 

21,533

 

21.50

%  

 

Value: Series B, 6% Convertible

 

Cumulative Preferred, $20 Par

 

Two Directors and CEO as a Group

 

3,017

 

5.20

%  

 

Value: Series A, $5 Convertible

 

Cumulative Preferred, $20 Par

 

Two Directors and CEO as a Group

 

630

 

6.60

%  

 

Value: Series B, $5 Convertible

(36)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS (CONTINUED)

(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

ITEM 13CERTAIN 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 by the son of the Chief Executive Officer of the Company. 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 14PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table shows the aggregate fees billed to the Company for professional services for the years ended June 30, 2022 and 2021:

    

2022

    

2021

Audit Fees:

Mayer Hoffman McCann P.C. (MHM)

$

102,963

$

112,819

HoganTaylor LLP

15,000

Audit Related Fees

 

 

Tax Fees

 

 

All Other Fees

 

 

Substantially all MHM’s personnel, who work under the control of MHM shareholders, are employees of wholly-owned subsidiaries of CBIZ, Inc., which provides personnel and various services to MHM in an alternative practice structure.

(37)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

PART IV

ITEM 15EXHIBITS 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

14

Report of the Independent Registered Public Accounting Firm (Current)

15

Report of the Independent Registered Public Accounting Firm (Predecessor)

16

Consolidated Balance Sheets

17-18

Consolidated Statements of Operations

19

Consolidated Statements of Stockholders’ Equity

20

Consolidated Statements of Cash Flows

21

Notes to Consolidated Financial Statements

22-31

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 loss per share - 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.

(38)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

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.

101

The following financial statements for the year ended June 30, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets as of June 30, 2022 and 2021, (ii) Consolidated Statements of Operations for the years ended June 30, 2022 and 2021, (iii) Consolidated Statement of Stockholders’ Equity for the years ended June 30, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the years ended June 30, 2022 and 2021, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

104

Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

(39)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEARS ENDED JUNE 30, 2022 AND 2021

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 23, 2022

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 23, 2022

Barry M. Yantis

Chairman of the Board, Chief Executive Officer and Chief Financial Officer, President, Treasurer and Director

/s/ Brian A. Yantis

September 23, 2022

Brian A. Yantis

Secretary and Director

(40)


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-K’ Filing    Date    Other Filings
3/31/25
6/30/23
1/4/23
Filed on:9/23/22
For Period end:6/30/22
12/31/2110-Q
10/13/2110-K
6/30/2110-K,  NT 10-K
6/20/21
7/1/20
6/30/2010-K
6/30/1910-K
1/3/10
2/6/09
2/1/05
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