UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended June 30, 20202021

For transition period from                 to

Commission File Number: 2-5916

Chase General Corporation

(Exact name of registrant as specified in its charter)

1307 South 59th, St. Joseph, Missouri 64507

(Address of principal executive offices, Zip Code)

(816) 279-1625

(Issuer’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant (1) has submitted electronically 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). Yes x No ¨

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

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 x

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 x

As of September 23, 2020,October 13, 2021, there were 969,834 shares of common stock, $1.00 par value, outstanding.

Chase General Corporation and Subsidiary

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

PART I

Chase General Corporation was incorporated November 6, 1944 for the purpose of manufacturing confectionery products. In 1970, Chase General Corporation acquired a 100% interest in its wholly-owned subsidiary, Dye Candy Company. (Chase General Corporation and Dye Candy Company are sometimes referred herein as the Company). This subsidiary is the main operating company for the reporting entity.

Principal Products and Methods of Distribution

The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name “Cherry Mash”. The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions are sold to the same type of customers in the same geographical areas. In addition, both divisions share a common labor force and utilize the same basic equipment and raw materials. Management considers these two divisions as one reportable segment for inclusion in this filing.

The principal products produced are as follows:

Chase Candy Products of Dye Candy Company produces a candy bar under the trade name of “Cherry Mash”. The bar is distributed in the following case sizes:

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

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

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:

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 and tobacco jobbing houses, grocery accounts, vendors, and repackers. “Cherry Mash” bars are marketed in the Midwest region of the United States. For the years ended June 30, 20202021 and 2019,2020, this division accounted for 57%63% and 58%57%, respectively, of the consolidated sales of Dye Candy Company.

The Seasonal Candy Products division is sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For the years ended June 30, 20202021 and 2019,2020, this division accounted for 43%37% and 46%43%, respectively of the consolidated sales of Dye Candy Company.

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

The Company is a seasonal business whereby the largest volume of sales occur in August through December of each year. The 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.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Competition and Market Area (Continued)

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

The confectionery (candy) market for the type of product produced by the divisions of Dye Candy Company is very competitive and quality minded. The confectionery industry in which the divisions operate is highly competitive with many small companies and, within certain specialized areas, a few competitors dominate. In the United States, the dominant competitors in the coconut candy industry are Crown Candy Company, Vermico Candy Company, and the Seasonal Candy Products division of Dye Candy Company with approximately 70% of the market share among them. In the United States, Old Dominion has approximately 80% of the market share of the peanut candy business in which the Seasonal Candy Products division operates. Dye Candy Company sells approximately 95% of its products in the Midwest region with seasonal orders being shipped to the Southern and Eastern regions of the United States. Except for the coconut candy industry, Dye Candy Company is not a dominant competitor in any of the candy industries in which it competes. Dye Candy Company’s market share in the coconut industry does not vary significantly from year to year.

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

Research and Development

The Company has not developed any new products for the years ended June 30, 20202021 and 2019.2020.

Raw Materials and Principal Suppliers

Raw materials and packaging materials are produced on a national basis with products coming from locations throughout the United States. Raw materials and packaging materials are generally widely available, depending on common market influences. No suppliers accounted for more than 10% of the Company’s cost of sales for the years ended June 30, 20202021 and 2019.2020.

Patents and Trademarks

The largest single revenue producing product, the “Cherry Mash” bar, is protected by a trademark registered with The United States Patent and Trademark Office. The Company considers this trademark significant to operations. This trademark expires in the year 2023. The Company and its legal representatives do not expect any impediment to renewing this trademark prior to its expiration.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Employees

As of June 30, 2020,2021, the Company had 1819 full time employees. This expands to approximately 30 full time personnel during the busy production months of August through December.

Customers

For the years ended June 30, 20202021 and 2019,2020, one customer accounted for 45%41% and 42%45%, respectively, of sales. As of June 30, 20202021 and 2019,2020, that same customer accounted for 14%24% and 18%14%, respectively, of trade receivables. For the years ended June 30, 20202021 and 2019,2020, another customer and its affiliates accounted for 8% and 10%, respectively, of sales. As of June 30, 20202021 and 2019,2020, that same customer and its affiliates accounted for 23%28% and 21%23%, respectively, of trade receivables. No other customer accounted for more than 10% of the Company’s sales for the years ended June 30, 20202021 and 2019. One2020. No other customercustomers accounted for more than 10% of the Company’s trade receivables for the yearyears ended June 30, 2021 and 2020.

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, 20202021 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 on-line on the SEC’s EDGAR website.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Not applicable to a smaller reporting company.

The Company has no unresolved SEC staff comments at June 30, 2020.2021.

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 partially 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, 20202021 and 2019.2020.

The net book value of our premises, land and office, and production equipment totaled $156,494$132,387 and $211,100$156,494 at June 30, 20202021 and 2019,2020, respectively.

We believe both facilities are adequately covered by insurance.

None.

Not applicable.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

PART II

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, 2020,October 13, 2021, the latest practicable date, the approximate number of record holders of common stock was 1,869, including individual participants in security listings.

Dividends

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

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.

Not applicable to a smaller reporting company.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

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; our belief that the Company has stabilized its customer base; will continue its efforts to expand the existing market area and increase sales to customers; and maintain tight control of all expenditures.

Overview

During fiscal year ended June 30, 2020,2021, the Company’s sales were $2,576,311,$2,960,357, as compared to sales of $2,520,633$2,576,311 for fiscal year ended June 30, 2019. This 2.2%2020. The 14.9% increase in volume, 3.6% increase1.5% decrease in cost of sales and 14.7%10.5% increase in operating expenses resulted in a change in profitability during the year, as reflected in the income from operations of $186,160 for fiscal year 2021 compared to the loss from operations of $144,491 for fiscal year 2020 compared2020. Working capital increased $279,057 to $568,676 for the loss from operations of $33,184 for fiscal year 2019. Working capital decreased $68,803 to2021 from $289,619 for the fiscal year 2020 from $358,422 for the fiscal year 2019 due primarily to a decreasean increase in inventory and an increase in the current portion of lease liability offset by an increase in cash, a decrease in accounts payable, a decrease in the current portion of notes payable, a decrease in accrued expenses, an increase in trade receivables, and a decrease in refund liability owed to customers.receivable.

The following information should be read together with the consolidated financial statements and notes thereto included elsewhere herein.

Chase General Corporation and SubsidiaryCHASE GENERAL CORPORATION AND SUBSIDIARY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

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.

General (Continued)

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

There have been no other events that have occurred subsequent to June 30, 2020,2021, through the date of filing this form, that would require disclosure in the Form 10-K or would be required to be recognized in the consolidated financial statements as of or for the year ended June 30, 2020.2021.

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.

Trade Receivables

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

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

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

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.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of such assets to future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.

New Accounting Guidance

See Note 1, RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, to the consolidated financial statements for a discussion of new accounting standards.

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, 20202021 and 2019,2020, respectively:

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Fiscal Year 20202021 Compared to Fiscal Year 20192020

Sales

During the year ended June 30, 2020,2021, sales, net of returns and allowances, increased $55,678$384,046 or 2.2%14.9% as compared to the year ended June 30, 2019.2020. Sales for Chase Candy products increased $72,099$388,613 or 5.1%26.3% to $1,868,899 for the year ended June 30, 2021 compared to $1,480,286 for the year ended June 30, 2020 compared to $1,408,187 for 2019.2020. Sales for Seasonal Candy products decreased $16,421$4,567 or 1.5%.4% to $1,091,458 for the year ended June 30, 2021 as compared to $1,096,025 for the year ended June 30, 2020 as compared to $1,112,446 for 2019.2020.

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 5.1%14.9% increase in sales of Chase Candy of $72,099$388,613 for the year ended June 30, 20202021 over the same period ended June 30, 2019,2020, is primarily due to the following: 1) increased sales of Cherry Mash Merchandisers division by approximately $48,000$49,000 versus the same period a year ago, primarily due to an increase in orders from existing customers, 2) increased sales of the L278/L212 Mini Mash division by approximately $15,000$71,000 versus the same period a year ago, primarily due to an increase in orders from existing customers, 3) increased sales of the L276 Cherry Mash Distributor Pack division by approximately $13,000$257,000 versus the same period a year ago, primarily due to an increase in orders from existing customers, 4) increased sales of the Cherry Mash internet sales via the Company’s website by approximately $5,500$26,000 versus the same period a year ago, primarily due to an increase in orders from existing customers,customers; offset by 5) increaseddecreased sales of the L279/L299 Bulk Mini Mash division by approximately $3,500$12,000 versus the same period a year ago, primarily due to an increasea decrease in orders from existing customers and 6) various other fluctuations netting to an increase of approximately $500; offset by 7) an increase in promotions expenses allocated to the Chase Candy division of approximately $9,000$6,000 primarily due to selling more items with higher promotion fees associated with them; and 8) an increase in advertising expense allocated to the Chase Candy division of approximately $4,500 primarily due the increase in costs on regularly advertised markets.them.

Sales for Seasonal Candy consisted of the following divisions: bulk seasonal division, clamshell seasonal division, and the generic seasonal division. The 2.2%.4% decrease in sales of Seasonal Candy of $16,421$4,567 for the year ended June 30, 20202021 over the same period ended June 30, 2019,2020, is primarily due to the net effect of the following: 1) decreased sales in the generic seasonal division by approximately $14,500 due to decreased orders from existing customers, 2) decreased sales in the bulk seasonal division by approximately $14,500 versus the same period a year ago, primarily due to decreased orders from existing customers, and 3) various other fluctuations netting to a decrease of approximately $4,500; offset by 4) increased sales in the Chase clamshell seasonal division by approximately $17,000 versus the same period a year ago, primarily due to decreased orders from existing customers 2) decreased sales in the bulk seasonal division by approximately $28,000 versus the same period a year ago, primarily due to decreased orders from existing customers, offset by 3) increased sales in the generic seasonal division by approximately $30,000 due to increased orders from existing customers.customers and 4) decrease in sales allowances and discounts taken by customers of approximately $10,000.

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Fiscal Year 20202021 Compared to Fiscal Year 20192020 (Continued)

Cost of Sales

Cost of sales for the year ended June 30, 2020,2021, as compared to the year ended June 30, 2019, increased2020, decreased by 3.6%1.5%. The cost of sales increased $66,862decreased $28,414 to $1,911,697 while decreasing to 64.6% of sales for the year ended June 30, 2021, compared to $1,940,111 while increasing toor 75.3% of sales for the year ended June 30, 2020, compared to $1,873,249 or 74.3% of sales for the year ended June 30, 2019.2020.

The 3.6% increase1.5% decrease in cost of sales of $66,862 $28,414 is primarily due to the net impact of a 2% increase in sales of $55,678, a 3.9% increase in the price of sugar offset by a 5.1% decrease in the price of peanuts. In addition,adverse effect the COVID-19 pandemic had an adverse effect on the cost of sales for the fourth quarter of fiscal year ended June 30, 2020. WhileCost of sales did not fluctuate significantly duringfor the fourth quarter compared to the quarter ended June 30, 2019, the related costs of $324,066 for the quarter ended June 30, 2020 increased 35% or $84,787 as compared to $239,279 for the quarter ended June 30, 2019 due to the costs associated with repurposing of finished goods inventory to adequately fill customer orders and realignment of staff during a period of decreased production.

Due This cost was not applicable 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. Management has plans to make sales price adjustments to correspond with changes in raw material prices.year ended June 30, 2021.

Labor costs, including wages, vacation pay and payroll taxes of $429,288$672,879 for the year ended June 30, 2021, increased 7.8% or $48,827 as compared to $624,052 for the year ended June 30, 2020 decreased 2.8% or $12,610 as compared to $441,898 for the period ended 2019 primarily due to decreasedincreased production wages due to decreasedincreased hours, bonuses, and pay rates compared to the same period ended June 30, 2019.2020.

Freight expense, including shipping and handling costs on goods shipped of $115,587 for the year ended June 30, 2021, decreased 18.7% or $26,633 as compared to $142,220 for the year ended June 30, 2020 decreased 3.67% or $5,415 as compared to $147,635 for the period ended 2019 due primarily to changing carriers during the fiscal year.

Gross Profit on Sales

The gross profit decreased 1.7%increased 64.8% or $11,184$412,460 to $1,048,660 increasing to 35.4% of related sales for the year ended June 30, 2021, as compared to $636,200 decreasing toor 24.7% of related sales for the year ended June 30, 2020, as compared to $647,834 or 25.7% of related sales for the year ended June 30, 2019, as a net result of the 3.6% increase1.5% decrease in cost of sales described above, and the 2.2%14.9% increase in sales.sales and a price increase that was effective in early 2021.

Finished goods inventory as of June 30, 20202021 of $85,632 decreased $114,453$287,245 increased $201,613 or 57.2%235.44% from the June 30, 20192020 finished goods inventory of $200,085.$85,632. Raw materials inventory as of June 30, 20202021 of $65,555$97,324 increased $20,099$31,769 or 44.2%48.5% from the June 30, 20192020 raw materials inventory of $45,456.$65,555. Packaging materials inventory as of June 30, 20202021 of $156,038$224,318 increased $4,243$68,280 or 2.8%43.8% from June 30, 20192020 packaging materials inventory of $151,795.$156,038. Goods in process inventory as of June 30, 20202021 of $6,261 decreased $6,738$11,254 increased $4,993 or 51.8%79.8% from the June 30, 20192020 goods in process inventory of $12,999.$6,261. Inventory levels vary based primarily on sales and purchases.

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Fiscal Year 20202021 Compared to Fiscal Year 20192020 (Continued)

Selling Expenses

Selling expenses for the year ended June 30, 20202021 increased $15,534$20,831 to $299,944,$320,775, which is 11.6%10.8% of sales, compared to $284,410$299,944 or 11.3%11.6% of sales for the year June 30, 2019.2020. This increase is primarily due to higher sales salaries, commissions, and customer shows. Sales salariesshipping costs. Commission expense increased $12,163$17,560 to $110,745$119,288 for the year ended June 30, 2020,2021, as compared to $98,582$101,278 for the year ended June 30, 2019, primarily due to annual raises for one of the salespersons. Commission expense increased $2,239 to $101,728 for the year ended June 30, 2020 as compared to $99,489 for the year ended June 30, 2019 primarily due to an increase in sales of items where the Company pays commissions. Trade show expenseShipping costs associated with selling expenses increased $2,104$14,771 to $8,653$47,425 for the year ended June 30, 2021, as compared to $32,654 for the year ended June 30, 2020 as comparedprimarily due to $6,549an increase in orders placed. The above increases were offset by a decrease in depreciation expense of $12,554 for the year ended June 30, 2019, primarily due increased trade shows attended by the Company’s vendors.2021.

General and Administrative Expenses

General and administrative expenses for the year ended June 30, 20202021 increased $69,748$60,978 to $480,747,$541,725, which is 18.7%18.3% of sales, compared to $410,999$480,747 or 16.3%18.7% of sales for the year ended June 30, 2019.2020. The increase is primarily due to higher professional fees indirect costs, office salaries,and insurance expense, and bad debt expense. Professional fees increased $42,557$44,739 to $200,741 for the year ended June 30, 2021, as compared to $156,002 for the year ended June 30, 2020 as comparedprimarily due to $113,445increased audit and consulting fees. Insurance expense increased $15,181 to $146,161 for the year ended June 30, 2019 primarily due to the Company’s audit firm increasing their fees and an increase in attorney fees. During the current year, the Company began allocating indirect costs to general and administrative expenses that were previously allocated to cost of sales. This allocation is for the administrative portion of the office and totaled $13,500 for the year ended June 30, 2020. Office salaries increased $7,573 to $101,272 for the year ended June 30, 2020,2021, as compared to $93,699 for the year ended June 30, 2019 primarily due to annual raises for employees. Insurance expense increased $4,116 to $130,980 for the year ended June 30, 2020 as comparedprimarily due to $126,864the increase in insurance premiums.

Income (Loss) from Operations

Income from operations for the year ended June 30, 2019 primarily due2021 was 6.3% of sales, as compared to more employees enrolled in the plan. Bad debt expense increased $3,134 to $2,594a loss from operations which was (5.6)% of sales for the year ended June 30, 2020, for the reasons previously described.

Other Income (Expense)

Other income reflects a net of income of $177,573 for the year ended June 30, 2021, as compared to $(540)a net of expense of $(1,558) for the year ended June 30, 2020. This increase of $179,131 in other income was primarily due to the gain on extinguishment of debt related to the Paycheck Protection Program Promissory Note.

Income (Loss) before Income Taxes

Income before income taxes was $363,733 for the year ended June 30, 2019 primarily due2021, as compared to a write offloss before income taxes of a receivable in$146,049 for the current year.year ended June 30, 2020. The reasons for the increase of $509,782 have been previously discussed.

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Fiscal Year 20202021 Compared to Fiscal Year 20192020 (Continued)

Loss from Operations

Loss from operations for the year ended June 30, 2020 was (5.6)% of sales, as compared to a loss from operations of (1.3)% of sales for the year ended June 30, 2019 for the reasons previously described.

Other Expense

Other expense reflects a net expense of $1,558 for the year ended June 30, 2020, as compared to net expense of $1,878 for the year ended June 30, 2019. This decrease of $320 in other expense was primarily due to a decrease in the interest expense.

Loss before Income Taxes

Loss before income taxes was $146,049 for the year ended June 30, 2020, as compared to a loss before income taxes of $35,062 for the year ended June 30, 2019. The reasons for the increase of $110,987 have been previously discussed.

Tax Benefit for Income Taxes(Provision)

The Company recorded no income tax benefit for the years ended June 30, 20202021 and 2019.2020. Additionally, the Company has placed a valuation allowance on the net operating loss carryforwarddeferred tax asset of $361,181$25,400 for the current year after it was determined that the Company would not be likely to use the remaining balance in the near future.

Net LossIncome (Loss)

Net lossincome for the year ended June 30, 20202021 was $146,049,$363,733, compared to a net loss for the year ended June 30, 20192020 of $35,062.$(146,049). This increase of $110,987$509,782 is the result of those items previously discussed.

Liquidity and Sources of Capital

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

Operating Activities

The negative cash flow of $134,716 generated from operations is a result of increases in inventory, increases in trade receivables and the gain on extinguishment of the PPP loan of $171,500. Total inventory as of June 30, 2021 of $620,141 increased $306,655 or 97.8% from the June 30, 2020 total inventory of $313,486. Trade receivables as of June 30, 2021 of $192,945 increased $48,706 or 33.7% from the June 30, 2020 trade receivables of $144,239. These reductions in cash flow were offset by the net income amount of $363,733 for the year ended June 30, 2021. The increase in inventory and the gain on extinguishment of debt had the most impact on the negative cash flow from operations.

Investing Activities

The negative cash flow of $15,880 from investing is a result of equipment purchases made during the year ended June 30, 2021.

Chase General Corporation and Subsidiary

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 20202021

Fiscal Year 20202021 Compared to Fiscal Year 20192020 (Continued)

Operating Activities

The negative cash flow of $39,778 generated from operations is a result of a fluctuation in sales, decreases in inventory and the loss generated from operations. During the year ended June 30, 2020, sales, net of returns and allowances, increased $55,678, or 2.2% as compared to the year ended June 30, 2019. Total inventory as of June 30, 2020 of $313,486 decreased $96,849 or 23.6% from the June 30, 2019 total inventory of $410,335. Trade receivables as of June 30, 2020 of $144,239 increased $6,370 or 4.6% from the June 30, 2019 trade receivables of $137,869. The increase in the net loss caused by the increased operating expenses had the most impact on the negative cash flow from operations, however, this was offset by the decrease in inventory.

Investing Activities

The negative cash flow of $1,310 from investing is a result of equipment purchases made during the year ended June 30, 2019.

Financing Activities

The Company borrowed $227,000$395,000 and $425,000,$227,000, respectively, on its line-of-credit during fiscal 2021 and the fall of 2019 (fiscal 2020) and 2018 (fiscal 2019) busy seasons. Payments of $312,000$275,000 and $340,000,$312,000, respectively, were paid for years ended June 30, 20202021 and 2019.2020. The Company entered into a $350,000 line-of-credit agreement expiring on January 4, 2021,2022, with a variable interest rate at prime but not less than 5%. The line-of-credit is collateralized by substantially all assets of the Company. Management anticipates renewal of the line-of-credit agreement at similar terms upon expiration.

Notes payable principal payments were $12,132$15,679 and $17,935$12,132 for years ended June 30, 20202021 and 2019,2020, respectively.

The Company received a loan in the amount of $171,500 during the year ended June 30, 2020 to fund payroll, rent, utilities and interest on mortgages and existing debt through the federal Paycheck Protection Program (PPP). The PPP note has a 1.00% per annum interest rate and is subject to terms and conditions applicable to loans administered by the SBA under the CARES act, as amended by the PPP Flexibility Act. Monthly principal and interest payments, less the amount of any potential forgiveness (as discussed below) will commence on November 10, 2020. These amounts may beThis loan was fully forgiven subject to compliance and approval basedduring December 2020. A gain on the timing and useextinguishment of these funds in accordance with the program.debt has been recognized as other income.

Overall cash and cash equivalents increased $34,590decreased $46,275 to $7,115 at June 30, 2021 from $53,390 at June 30, 2020 from $18,800 at June 30, 2019.2020.

At June 30, 2020,2021, the Company’s accumulated deficit was $6,069,099,$5,705,366, compared to an accumulated deficit of $5,923,050$6,069,099 as of June 30, 2019.2020. Working capital as of June 30, 2020 decreased $68,8032021 increased $279,057 to $289,619$568,676 from $358,422$289,619 as of June 30, 2019.

Chase General Corporation and Subsidiary

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2020

Fiscal Year 2020 Compared to Fiscal Year 2019 (Continued)

Liquidity and Sources of Capital (Continued)

Financing Activities (Continued)2020.

The Company’s lease on its office and plant facility is effective through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of each five year period, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor. The facility is leased from an entity that is partially 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. Primarily due to the fluctuations in these raw material prices, gross margins have decreased due to unchanged sales prices during the period. Management intends to make sales price adjustments in the future to correspond with changes in raw material prices.

CHASE GENERAL CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2021

Not applicable to a smaller reporting company.

The Consolidated Financial Statements meeting the requirements of Regulation S-B are contained on pages 17 through 37 of this Form 10-K.

Chase General CorporationCHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

TABLE OF CONTENTS

FOR THE YEARS ENDED JUNE 30, 20202021 AND 20192020

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Chase General Corporation and Subsidiary:Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Chase General Corporation and Subsidiary (“Company”) as of June 30, 20202021 and 2019,2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the two years thenin the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company adopted the guidance of ASU No. 2016-02, Leases, (“ASC 842”) as of July 1, 2019 using the modified retrospective transition approach with the cumulative effect recognized at the date of initial application.

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"(“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/ Mayer Hoffman McCann P.C.

We have served as the Company's auditor since 2008.2008

Kansas City, Missouri

September 24, 2020October 13, 2021

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2020 AND 2019

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

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (CONTINUED)

JUNE 30, 2020 AND 2019

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

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONSBALANCE SHEETS

Years Ended juneJUNE 30, 20202021 AND 20192020