UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~December 31, 2022

☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 2-5916

Chase General Corporation

(Exact name of registrant as specified in its charter)

MISSOURI		36-2667734
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

1307 South 59th, St. Joseph, Missouri 64507

(Address of principal executive offices, Zip Code)

(816) 279-1625

(Registrant’s telephone number, including area code)

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


Title of each class	Ticker symbol(s)	Name of each exchange on which registered
None	Not Applicable	Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ 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). 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 ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 ⌧

As of ~~November 14, 2022,~~February 10, 2023, there were 969,834 shares of common stock, $1.00 par value, outstanding.

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

FOR THE ~~THREE~~SIX months ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2022

PART I	FINANCIAL INFORMATION

	ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		CONDENSED CONSOLIDATED BALANCE SHEETS AS OF ~~SEPTEMBER 30,~~DECEMBER 31, 2022 AND JUNE 30, 2022 (UNAUDITED) ~~(UNAUDITED)~~	1

		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2022 AND 2021 (UNAUDITED)	3

		CONDENSED CONSOLIDATED STATEMENTS OF ~~stockholders’ Equity~~OPERATIONS FOR THE ~~Three months~~Six MONTHS ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2022 AND 2021 (UNAUDITED)	4

		CONDENSED CONSOLIDATED STATEMENTS OF stockholders’ Equity FOR THE Three and six months ENDED DECEMBER 31, 2022 AND 2021 (UNAUDITED)	5

		CONDENSED CONSOLIDATED STATEMENTS OF Cash flows FOR THE ~~Three~~six months ENDED ~~SEPTEMBER 30,~~DECEMBER 31, 2022 AND 2021 (UNAUDITED)	56

		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	67

	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1213

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	1618

	ITEM 4.	CONTROLS AND PROCEDURES	1618

PART II	OTHER INFORMATION

	ITEM 1.	LEGAL PROCEEDINGS	1719

	ITEM 1A.	RISK FACTORS	1719

	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	1719

	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	1719

	ITEM 4.	MINE SAFETY DISCLOSURES	1719

	ITEM 5.	OTHER INFORMATION	1719

	ITEM 6.	EXHIBITS	1719

	SIGNATURES		1820

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	September 30,		June 30,		December 31,		June 30,
	2022		2022		2022		2022

ASSETS

CURRENT ASSETS
Cash and Cash Equivalents	$	—	$	13,511	$	332,615	$	13,511
Trade Receivables, Net of Allowance for Doubtful Accounts of $1,185 and $948, respectively		970,766		141,336
Trade Receivables, Net of Allowance for Doubtful Accounts of $1,422 and $948, respectively						225,198		141,336
Inventories:
Finished Goods		191,612		360,225		33,497		360,225
Goods in Process		21,122		18,603		20,753		18,603
Raw Materials		147,600		93,326		166,594		93,326
Packaging Materials		226,017		293,123		219,409		293,123
Prepaid Expenses		36,708		6,640		40,978		6,640
Total Current Assets		1,593,825		926,764		1,039,044		926,764

PROPERTY AND EQUIPMENT
Land		35,000		35,000		35,000		35,000
Buildings		77,348		77,348		77,348		77,348
Machinery and Equipment		886,341		886,341		886,341		886,341
Trucks and Autos		158,632		158,632		168,933		158,632
Office Equipment		33,025		33,025		33,025		33,025
Leasehold Improvements		72,068		72,068		72,068		72,068
Total		1,262,414		1,262,414		1,272,715		1,262,414
Less: Accumulated Depreciation		(1,157,801)		(1,149,835)		(1,106,243)		(1,149,835)
Total Property and Equipment, Net		104,613		112,579		166,472		112,579

Other Long-Term Assets:
Right of Use Assets		179,691		196,126		162,990		196,126
Total Long-Term Assets		284,304		308,705		329,462		308,705

Total Assets	$	1,878,129	$	1,235,469	$	1,368,506	$	1,235,469

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(1)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(UNAUDITED)


	September 30,		June 30,		December 31,		June 30,
	2022		2022		2022		2022

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Outstanding Checks in Excess of Bank Balance	$	19,858	$	—
Accounts Payable		310,875		135,705	$	64,802	$	135,705
Lines-of-credit		450,000		120,000
Current Maturities of Note Payable						13,164		120,000
Current Maturities of Lease Liability		68,440		67,351		69,546		67,351
Accrued Expenses		58,739		32,598		16,284		32,598
Refund Liability Owed to Customers		30,028		8,209		19,500		8,209
Deferred Income		1,299		1,299		1,299		1,299
Total Current Liabilities		939,239		365,162		184,595		365,162

LONG-TERM LIABILITIES
Lease Liabilities, Less Current Maturities		111,251		128,775
Note Payable, Less Current Maturities						37,736		—
Lease Liability, Less Current Maturities						93,444		128,775
Deferred Income		1,947		2,271		1,622		2,271
Total Long-Term Liabilities		113,198		131,046		132,802		131,046

Total Liabilities		1,052,437		496,208		317,397		496,208

COMMITMENTS AND CONTINGENCIES (NOTE 7)

STOCKHOLDERS’ EQUITY
Capital Stock Issued and Outstanding:
Prior Cumulative Preferred Stock, $5 Par Value:
Series A (Liquidation Preference $2,437,500 and $2,430,000, respectively)		500,000		500,000
Series B (Liquidation Preference $2,392,500 and $2,385,000, respectively)		500,000		500,000
Series A (Liquidation Preference $2,445,000 and $2,430,000, respectively)						500,000		500,000
Series B (Liquidation Preference $2,400,000 and $2,385,000, respectively)						500,000		500,000
Cumulative Preferred Stock, $20 Par Value:
Series A (Liquidation Preference $5,443,562 and $5,428,928, respectively)		1,170,660		1,170,660
Series B (Liquidation Preference $887,135 and $884,750, respectively)		190,780		190,780
Series A (Liquidation Preference $5,458,195 and $5,428,928, respectively)						1,170,660		1,170,660
Series B (Liquidation Preference $889,519 and $884,750, respectively)						190,780		190,780
Common Stock, $1 Par Value		969,834		969,834		969,834		969,834
Paid-In Capital in Excess of Par		3,134,722		3,134,722		3,134,722		3,134,722
Accumulated Deficit		(5,640,304)		(5,726,735)		(5,414,887)		(5,726,735)
Total Stockholders’ Equity		825,692		739,261		1,051,109		739,261

Total Liabilities and Stockholders’ Equity	$	1,878,129	$	1,235,469	$	1,368,506	$	1,235,469

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(2)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended				Three Months Ended
	September 30,				December 31,
	2022		2021		2022		2021
SALES	$	1,182,202		877,576	$	1,260,019		1,220,732

COST OF SALES		786,501		582,867		782,581		839,163
Gross Profit on Sales		395,701		294,709		477,438		381,569

OPERATING EXPENSES
Selling		99,340		85,890		109,196		98,019
General and Administrative		206,369		159,438		140,167		168,867
Total Operating Expenses		305,709		245,328		249,363		266,886

Income from Operations		89,992		49,381		228,075		114,683

OTHER INCOME (EXPENSE)
Miscellaneous Income		366		368		408		413
Interest Expense		(3,927)		(2,637)		(3,066)		(1,391)
Total Other Income (Expense)		(3,561)		(2,269)		(2,658)		(978)

Income before Income Taxes		86,431		47,112		225,417		113,705

INCOME TAX BENEFIT (PROVISION)		—		—		—		—

NET INCOME	$	86,431	$	47,112	$	225,417	$	113,705

EARNINGS PER SHARE
Basic	$	0.06	$	0.02	$	0.20	$	0.08

Diluted	$	0.04	$	0.02	$	0.11	$	0.06

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

(3)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Six Months Ended
	December 31,
	2022		2021
SALES	$	2,442,221		2,098,308

COST OF SALES		1,569,082		1,422,030
Gross Profit on Sales		873,139		676,278

OPERATING EXPENSES
Selling		208,536		183,909
General and Administrative		346,536		328,305
Total Operating Expenses		555,072		512,214

Income from Operations		318,067		164,064

OTHER INCOME (EXPENSE)
Miscellaneous Income		774		781
Interest Expense		(6,993)		(4,028)
Total Other Income (Expense)		(6,219)		(3,247)

Income before Income Taxes		311,848		160,817

INCOME TAX BENEFIT (PROVISION)		—		—

NET INCOME	$	311,848	$	160,817

EARNINGS PER SHARE
Basic	$	0.26	$	0.10

Diluted	$	0.16	$	0.08

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

~~(3)~~(4)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, October 1, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,640,304)	$	825,692

Net Income, three months ended December 31, 2022		—		—		—		—		—		—		225,417		225,417

BALANCE, December 31, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,414,887)	$	1,051,109

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, 2022

$
500,000

$
500,000

$
1,170,660

$
190,780

$
969,834

$
3,134,722

$
(5,726,735)

$
739,261

Net Income

—

—

—

—

—

—

86,431

86,431

BALANCE, SEPTEMBER 30, 2022

$
500,000

$
500,000

$
1,170,660

$
190,780

$
969,834

$
3,134,722

$
(5,640,304)

$
825,692

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, 2021

$
500,000

$
500,000

$
1,170,660

$
190,780

$
969,834

$
3,134,722

$
(5,705,366)

$
760,630

Net Income

—

—

—

—

—

—

47,112

47,112

BALANCE, SEPTEMBER 30, 2021

$
500,000

$
500,000

$
1,170,660

$
190,780

$
969,834

$
3,134,722

$
(5,658,254)

$
807,742


	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common		Paid-In		Accumulated
	Series A		Series B		Series A		Series B		Stock		Capital		Deficit		Total
BALANCE, October 1, 2021	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,658,254)	$	807,742

Net Income, three months ended December 31, 2021		—		—		—		—		—		—		113,705		113,705

BALANCE, December 31, 2021	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,544,549)	$	921,447


	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, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,726,735)	$	739,261

Net Income, six months ended December 31, 2022		—		—		—		—		—		—		311,848		311,848

BALANCE, December 31, 2022	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,414,887)	$	1,051,109


	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, 2021	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,705,366)	$	760,630

Net Income, six months ended December 31, 2021		—		—		—		—		—		—		160,817		160,817

BALANCE, December 31, 2021	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,544,549)	$	921,447

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

~~(4)~~(5)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended

September 30,


2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES





Net Income

$
86,431

$
47,112

Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:





Depreciation and Amortization

7,966

9,680

Allowance for Bad Debts

237

300

Deferred Income Amortization

(324)

(324)

Effects of Changes in Operating Assets and Liabilities:





Trade Receivables

(829,667)

(470,449)

Inventories

178,926

(22,475)

Prepaid Expenses

(30,068)

(21,490)

Accounts Payable

175,170

194,124

Refund Liability Owed to Customers

21,819

18,206

Accrued Expenses

26,141

30,268

Net Cash Used in Operating Activities

(363,369)

(215,048)





CASH FLOWS FROM FINANCING ACTIVITIES





Outstanding Checks in Excess of Bank Balance

19,858

—

Proceeds from Lines-of-Credit

330,000

215,000

Principal Payments on Notes Payable

—

(1,263)

Net Cash Provided by Financing Activities

349,858

213,737





DECREASE IN CASH AND CASH EQUIVALENTS

(13,511)

(1,311)





Cash and Cash Equivalents - Beginning of Period

13,511

7,115





CASH AND CASH EQUIVALENTS - END OF PERIOD

$
—

$
5,804


	Six Months Ended
	December 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	311,848	$	160,817
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
Depreciation and Amortization		19,173		19,358
Allowance for Bad Debts		474		(14,474)
Deferred Income Amortization		(649)		(649)
Gain on Sale of Property and Equipment		(17,500)		—
Effects of Changes in Operating Assets and Liabilities:
Trade Receivables		(84,336)		19,553
Inventories		325,024		228,950
Prepaid Expenses		(34,338)		(13,974)
Accounts Payable		(70,903)		35,408
Refund Liability Owed to Customers		11,291		5,635
Accrued Expenses		(16,314)		(12,945)
Net Cash Provided by Operating Activities		443,770		427,679

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of Property and Equipment		(4,666)		—
Net Cash Used in Investing Activities		(4,666)		—

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Lines-of-Credit		330,000		255,000
Principal Payments on Lines-of-Credit		(450,000)		(375,000)
Principal Payments on Note Payable		—		(2,547)
Net Cash Used in Financing Activities		(120,000)		(122,547)

INCREASE IN CASH AND CASH EQUIVALENTS		319,104		305,132

Cash and Cash Equivalents - Beginning of Period		13,511		7,115

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	332,615	$	312,247

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

~~(5)~~(6)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

General

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as Chase, the Company, we, our, and us) at June 30, 2022 has been taken from audited consolidated financial statements at that date and condensed. The condensed consolidated financial statements as of and for the three and six months ended ~~September 30,~~December 31, 2022 and for the three and six months ended ~~September 30,~~December 31, 2021 are unaudited and reflect all normal and recurring accruals and adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods presented in this quarterly report. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended June 30, 2022. The results of operations for the three and six months ended ~~September 30,~~December 31, 2022 and cash flows for the ~~three~~six months ended ~~September 30,~~December 31, 2022 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2023. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations, and cash flows for the periods have been included.

Revenue Recognition

The majority of our 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 consolidated 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 added, 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.

~~(6)~~(7)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue Recognition (cont.)

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. The various divisions of revenue are as follows:

For the three months ended ~~September 30,~~December 31,


	2022		2021		2022		2021
Sales - Chase Candy	$	432,504	$	366,788	$	542,579	$	544,639
Sales - Seasonal Candy		749,698		510,788		717,440		676,093
Sales	$	1,182,202	$	877,576	$	1,260,019	$	1,220,732

For the six months ended December 31,


	2022		2021
Sales - Chase Candy	$	974,832	$	911,399
Sales - Seasonal Candy		1,467,389		1,186,909
Sales	$	2,442,221	$	2,098,308

Recently Issued Pronouncements

There have been no newly issued or newly applicable accounting pronouncements that have, or are expected to have, a significant impact on the Company’s consolidated financial statements.

Subsequent Events

NoOther than what is disclosed in Note 3, no other events have occurred subsequent to ~~September 30,~~December 31, 2022, through the date of filing this form, that would require disclosure in this Form 10-Q or would be required to be recognized in the condensed consolidated financial statements as of or for the ~~three~~six month period ended ~~September 30, 2022.~~December 31, 2022.

~~(7)~~(8)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 2 EARNINGS PER SHARE

The earnings per share was computed on the weighted average of outstanding common shares during the period. Diluted earnings per share are calculated by including contingently issuable shares with the weighted average shares outstanding.


	Three Months Ended				Three Months Ended				Six Months Ended
	September 30,				December 31,				December 31,
	2022		2021		2022		2021		2022		2021
Net Income	$	86,431	$	47,112	$	225,417	$	113,705	$	311,848	$	160,817

Preferred Dividend Requirements:
6% Prior Cumulative Preferred, $5 Par Value		15,000		15,000		15,000		15,000		30,000		30,000
5% Convertible Cumulative Preferred, $20 Par Value		17,018		17,018		17,018		17,018		34,036		34,036
Total Dividend Requirements		32,018		32,018		32,018		32,018		64,036		64,036

Net Income - Common Stockholders	$	54,413	$	15,094	$	193,399	$	81,687	$	247,812	$	96,781

Weighted Average Shares - Basic		969,834		969,834		969,834		969,834		969,834		969,834
Dilutive Effect of Contingently Issuable Shares		1,033,334		1,033,334		1,033,334		1,033,334		1,033,334		1,033,334
Weighted Average Shares - Diluted		2,003,168		2,003,168		2,003,168		2,003,168		2,003,168		2,003,168

Basic Earnings per Share	$	0.06	$	0.02	$	0.20	$	0.08	$	0.26	$	0.10

Diluted Earnings per Share	$	0.04	$	0.02	$	0.11	$	0.06	$	0.16	$	0.08

Cumulative Preferred Stock dividends in arrears at ~~September 30,~~December 31, 2022 and 2021 totaled ~~$8,749,256~~$8,781,274 and ~~$8,621,184,~~$8,653,202, respectively. Total dividends in arrears, on a per share basis, consist of the following:


	Three Months Ended				Six Months Ended
	September 30,				December 31,
	2022		2021		2022		2021
6% Convertible:
Series A	$	19	$	19	$	19	$	19
Series B	$	19	$	18	$	19	$	18
5% Convertible:
Series A	$	73	$	72	$	73	$	72
Series B	$	73	$	72	$	73	$	72

The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 per share plus unpaid accrued dividends to date of redemption. In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends. It may be exchanged for common stock at the option of the shareholders in the ratio of four common shares for one share of Series A and 3.75 common shares for one share of Series B.

The Company has the privilege of redemption of 5% convertible cumulative preferred stock at $21 per share plus unpaid accrued dividends. In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20 per share plus unpaid accrued dividends. It may be exchanged for common stock at the option of the shareholders, in the ratio of 3.795 common shares for one of preferred.

~~(8)~~(9)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 2 EARNINGS PER SHARE (cont.)

NOTE 3 NOTE PAYABLE AND LINES-OF-CREDIT

The Company’s debt consists of:


		September 30,		June 30,			December 31,		June 30,
Payee	Terms	2022		2022		Terms	2022		2022
Nodaway Valley Bank	$150,100 line-of-credit agreement expiring on January 4, 2023, with an interest rate of 5.75%. The line of credit is collateralized by substantially all assets of the Company.	$	100,000	$	—	$150,100 line-of-credit agreement expiring on January 4, 2023, with an interest rate of 5.75%. The line of credit is collateralized by substantially all assets of the Company.	$	—	$	—

Nodaway Valley Bank	$350,000 line-of-credit agreement expiring on January 4, 2023, 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.		350,000		120,000	$350,000 line-of-credit agreement expiring on January 4, 2023, 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.		—		120,000

Ford Motor Credit Company, LLC						$1,126 monthly payments, interest of 2.90%; final payment due November 2026, secured by a vehicle		50,900		—
	Total		450,000		120,000
	Less Current Portion		450,000		120,000
	Long-Term Portion	$	—	$	—	Total		50,900		120,000
						Less Current Portion		13,164		120,000
						Long-Term Portion	$	37,736	$	—

Subsequent to the quarter ended December 31, 2022, the two line-of-credit agreements above were combined for a total borrowing base of $500,000 with a variable interest rate at prime but not less than 5%, maturing on January 4, 2024.

Future minimum payments for the twelve months ending December 31 are:


December 31,	Amount
2023	$	13,164
2024		12,581
2025		12,951
2026		12,204
Total	$	50,900

(10)

~~Subsequent to September 30, 2022, the prime rate~~Table of ~~interest increased to~~ Contents~~7.00%~~

~~NOTE 4 INCOME TAXES~~CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

~~The Company follows the provisions for uncertain tax positions as addressed in Financial Accounting Standards Board~~ ~~Accounting Standards Codification~~ 740-10. The Company recorded no income tax provision for the three month period ended September 30, 2022 due to net operating loss carryforwards as of June 30, 2022 that are available to offset taxable income in the current period. A valuation allowance has been placed on the remaining net operating loss carryforward. The Company recognized no liability for unrecognized tax benefits at September 30, 2022. The Company has no material tax positions at September 30, 2022, for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company had no accruals for interest or penalties at September 30, 2022. The Company’s federal income tax returns for the fiscal years ended 2020, 2021, and 2022 are subject to examination by the Internal Revenue Service taxing authority.

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE 4 INCOME TAXES

The Company follows the provisions for uncertain tax positions as addressed in Financial Accounting Standards Board Accounting Standards Codification 740-10. The Company recorded no income tax provision for the three and six month period ended December 31, 2022 due to net operating loss carryforwards as of June 30, 2022 that are available to offset taxable income in the current period. A valuation allowance has been placed on the remaining net operating loss carryforward. The Company recognized no liability for unrecognized tax benefits at December 31, 2022. The Company has no material tax positions at December 31, 2022, for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company had no accruals for interest or penalties at December 31, 2022. The Company’s federal income tax returns for the fiscal years ended 2020, 2021, and 2022 are subject to examination by the Internal Revenue Service taxing authority.

NOTE 5 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


	Three Months Ended				Six Months Ended
	September 30,				December 31,
	2022		2021		2022		2021
Cash Paid for:
Interest	$	—	$	70
Supplemental Cash Flows Information
Interest paid					$	6,809	$	4,028
Note Payable obligation incurred for equipment					$	50,900	$	—

~~(9)~~

~~Table of Contents~~

~~CHASE GENERAL CORPORATION AND SUBSIDIARY~~

~~PART I. FINANCIAL INFORMATION~~

~~Item 1. Condensed Consolidated financial statements~~

~~notes to condensed consolidated financial statements~~

~~(unaudited)~~

NOTE 6 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist principally of cash and cash equivalents, trade receivables, ~~and~~ payables, note payable and lines-of-credit. There are no significant differences between the carrying value and fair value of any of these financial instruments.

NOTE 7 COMMITMENT, 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 partially 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 $6,500 per month.

Operating lease right-of-use assets and lease 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 ~~2.5~~2.25 years and the present value of the lease payments is calculated using the lessor’s implicit rate of 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 non-lease 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 $19,500 for the three months ended September 30, 2022, of which, $17,891 is included in cost of sales and $1,609 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 September 30, 2022 are as follows:~~

Twelve Months Ending September 30,

Amount
2023

$
78,000
2024

78,000
2025

39,000
Total Lease Payments

195,000
Less: Imputed Interest

15,309
Total Lease Liabilities

$
179,691

~~(10)~~(11)

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated financial statements

notes to condensed consolidated financial statements

(unaudited)

NOTE ~~8 CURRENT ECONOMIC CONDITIONS~~7 COMMITMENT, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS (cont.)

The ~~COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities.~~Company’s lease agreement does not contain any residual value guarantees. Additionally, any other short-term leases are immaterial. The Company ~~put preparedness plans in place at~~elected the manufacturing facility. They have adjusted the number of people allowed at the facilities, enforced social distancing, maintained proper sanitation protocol and have asked that any high-risk employees or employees feeling illpractical expedient to not ~~come in. The office~~separate lease and ~~sales staff continues to work, while adhering to social distancing guidelines, implementing flexible hours, reducing person-to-person interaction~~non-lease components and ~~increasing safety measures.~~

~~The~~also elected the short-term practical expedient for all leases that qualify. As a result, the Company ~~believes we have sufficient liquidity to satisfy current~~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 ~~needs, however, we 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 second quarter of fiscal year ending June 30, 2023 and include, but not limited to: impairment of long-lived assets, including property and equipment andpaid for operating lease ~~right-of-use assets related to~~liabilities were $39,000 for the ~~Company’s fair value;~~six months ended December 31, 2022, of which, $35,782 is included in cost of sales and ~~receivables~~$3,218 is included in general and ~~other financial assets.~~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 December 31, 2022 are as follows:


Twelve Months Ending December 31,	Amount
2023	$	78,000
2024		78,000
2025		19,500
Total Lease Payments		175,500
Less: Imputed Interest		12,510
Total Lease Liabilities	$	162,990

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

OVERVIEW

Chase General Corporation (Chase) is a holding company for its wholly-owned subsidiary, Dye Candy Company. This subsidiary is the main operating company that is engaged in the manufacture of confectionery products which are sold primarily to wholesale houses, grocery accounts, vendors, and repackers. The subsidiary (Company) operates two divisions, Chase Candy division and Seasonal Candy division, which share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two divisions is not maintained by management.

The Company’s business, like that of many other confectionary product manufacturers, is seasonal. Historically, the Company has realized more of its ~~revenue~~sales and earnings in the second fiscal quarter, which includes the majority of the holiday shopping season, than in any other fiscal quarter.

RESULTS OF OPERATIONS - Three Months Ended ~~September 30,~~December 31, 2022 Compared to Three Months Ended ~~September 30,~~December 31, 2021, and Six Months Ended December 31, 2022 Compared to Six Months Ended December 31, 2021

The following management comments regarding Chase’s results of operations and outlook should be read in conjunction with the condensed consolidated financial statements included pursuant to Item 1 of the quarterly report.

The following table sets forth certain items as a percentage of sales for the periods presented:


	Three Months Ended				Three Months Ended				Six Months Ended
	September 30,				December 31,				December 31,
	2022		2021		2022		2021		2022		2021
Sales	100	%	100	%	100	%	100	%	100	%	100	%
Cost of Sales	67	%	66	%	62	%	69	%	64	%	68	%
Gross Profit on Sales	33	%	34	%	38	%	31	%	36	%	32	%
Operating Expenses	26	%	28	%	20	%	22	%	23	%	24	%
Income from Operations	7	%	6	%	18	%	9	%	13	%	8	%
Other Income, Net	—	%	—	%	—	%	—	%	—	%	—	%
Net Income before Income Taxes	7	%	6	%	18	%	9	%	13	%	8	%
Income Tax Provision (Benefit)	—	%	—	%	—	%	—	%	—	%	—	%
Net Income	7	%	6	%	18	%	9	%	13	%	8	%

SALES

Sales increased ~~$304,626~~$39,287 or ~~35%~~3% for the three months ended ~~September 30,~~December 31, 2022 to ~~$1,182,202~~$1,260,019 compared to ~~$877,576~~$1,220,732 for the three months ended ~~September 30,~~December 31, 2021. Sales for Chase Candy ~~increased $65,716~~decreased $2,060 to ~~$432,504~~$542,579 for the three months ended ~~September 30,~~December 31, 2022, compared to ~~$366,788~~$544,639 for the three months ended ~~September 30,~~December 31, 2021. Sales for Seasonal Candy increased ~~$238,910~~$41,347 to ~~$749,698~~$717,440 for the three months ended ~~September 30,~~December 31, 2022, compared to ~~$510,788~~$676,093 for the three months ended ~~September 30, 2021~~December 31, 2021.

The ~~18%~~3% increase in sales is mostly attributed to the increase in sales of ~~Chase~~Seasonal Candy of ~~$65,716~~$41,347 for the three months ended ~~September 30,~~December 31, 2022 over the same period ended ~~September 30,~~December 31, 2021 as the overall change in sales for Chase Candy was relatively flat. This increase in Seasonal Candy sales is primarily due to the ~~effect of~~increased sales to existing customers in the ~~following: 1) increased net sales of the L100/L200 Cherry Mash Merchandisers segment~~clamshell division by approximately $15,000 to existing customers; 2) increased net sales of approximately $30,000 for the Mini Mash L278/L212 segments to existing customers; and 3) increased sales of the L276 Cherry Mash Distributors Pack segment by approximately $20,000$38,000 versus the same period a year ago ~~primarily~~ due a price increase implemented in July 2022. Additionally, the bulk seasonal division and regular produce category also experienced small increases of sales to ~~increased orders from~~ existing ~~customers which also reflects price increases that were instituted in the third quarter~~customer for net increase of ~~fiscal year 2022.~~approximately $3,000.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

SALES (cont.)

Sales increased $343,913 or 16% for the six months ended December 31, 2022 to $2,442,221 compared to $2,098,308 for the six months ended December 31, 2021. Sales for Chase Candy increased $63,433 to $974,832 for the six months ended December 31, 2022, compared to $911,399 for the six months ended December 31, 2021. Sales for Seasonal Candy increased $280,480 to $1,467,389 for the six months ended December 31, 2022, compared to $1,186,909 for the six months ended December 31, 2021.

The ~~47%~~7% increase in sales of Chase Candy of $63,433 for the six months ended December 31, 2022 over the same period ended December 31, 2021, is primarily due to price increases that took effect in January 2022 and strong first quarter sales which resulted in: 1) increased net sales of approximately $40,000 for the Mini Mash L278/L212 segments to existing customers; 2) increased net sales of the L100/L200/SK2100 Cherry Mash Merchandisers segment by approximately $3,000 to existing customers; 3) increased sales of the L276 Cherry Mash Distributors Pack segment by approximately $12,000 versus the same period a year ago primarily due to increased orders from existing customers; 4) increased sales of the L279/L299 Bulk Mini Mash segment by approximately $8,000 versus the same period a year ago to existing customers.

The 24% increase in sales of Seasonal Candy of ~~$238,910~~$280,480 for the ~~three~~six months ended ~~September 30,~~December 31, 2022 over the same period ended ~~September 30,~~December 31, 2021, is primarily due to ~~the effect of~~a price increase in July 2022 which resulted in the following: 1) increased sales to existing customers in the regular produce category by approximately $80,000 versus the same period a year ~~ago;~~ago 2) increased sales to existing customers in the clamshell division by approximately ~~$110,000~~$154,000 versus the same period a year ago and 3) increased sales to existing customers in the bulk seasonal division by approximately $58,000 versus the same period a year ago; ~~and 3) increased sales~~offset by increases in ~~the bulk seasonal division~~promotional billbacks by approximately ~~$50,000 versus the same period a year ago, primarily due to increased sales to existing customers which also reflects price increases that were instituted in the third quarter of fiscal year 2022.~~$12,000.

COST OF SALES

~~Cost~~The cost of sales ~~increased $203,634~~decreased $56,582 to ~~$786,501~~$782,581 or ~~67%~~62% of related sales for the three months ended ~~September 30,~~December 31, 2022, compared to ~~$582,867~~$839,163 or ~~66%~~69% of related sales for the three months ended ~~September 30,~~December 31, 2021.

The ~~35%~~7% decrease in cost of sales of $56,582 is primarily due to cost savings on purchases of packing materials. The reduction in cost of sales as a percentage of sales is related to price increases implemented in July 2022.

The cost of sales increased $147,052 to $1,569,082 or 64% of related sales for the six months ended December 31, 2022, compared to $1,422,030 or 68% of related sales for the six months ended December 31, 2021.

The 10% increase in cost of sales of ~~$203,634~~$147,052 is primarily due to ~~the increased~~an increase in sales as well as increased cost of raw materials. ~~The raw material cost of chocolate increased 26% and raw material price of peanuts increased by 7%.~~ 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. The Company was able to increase their sales prices in January 2022 for Chase Candy products and July 2022 for Seasonal Candy products to mitigate increasing raw material prices. This increase in pricing also resulted in the increase in gross margin.

SELLING EXPENSES

Selling expenses for the three months ended ~~September 30,~~December 31, 2022 increased ~~$13,450~~$11,177 to ~~$99,340,~~$109,196, which is 8%9% of sales, compared to ~~$85,890,~~$98,019, or ~~10%~~8% of sales for the three months ended ~~September 30,~~December 31, 2021.

The increase of ~~$13,450~~$11,177 in selling expenses for the three months ended ~~September 30,~~December 31, 2022 is primarily due to ~~higher commissions. Commissions expense~~increased shipping costs, depreciation and contributions. Shipping costs increased approximately ~~$13,000 to approximately $57,000 for this period from approximately $44,000~~$5,000 for the three months ended ~~September 30, 2021,~~December 31, 2022, primarily due to increased sales.

~~GENERAL AND ADMINISTRATIVE EXPENSES~~

~~General and administrative expenses~~ Depreciation expense increased approximately $3,000 primarily due to the purchase of a new vehicle. The Company also made additional contributions of approximately $2,000 for the three months ended ~~September 30, 2022 increased $46,931 to $206,369 and 18% of sales, compared to $159,438 or 18% of sales for the three months ended September 30, 2021.~~

The increase of $46,931 in general and administrative expenses for the three months ended September 30, 2022 is primarily due to increases in professional fees and insurance costs. Professional fees increased approximately $40,000 to approximately $115,000 for this period from approximately $75,000 for the three months ended September 30, 2021 primarily due to increased audit and consulting fees. Insurance expense increased approximately $4,500 to approximately $42,500 for this period from approximately $38,000 for the three months ended September 30, 2021 primarily due to increases in rates.

December 31, 2022.

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

Selling expenses for the six months ended December 31, 2022 increased $24,627 to $208,536, which is 9% of sales, compared to $183,909, or 9% of sales for the six months ended December 31, 2021.

SELLING EXPENSES (cont.)

The increase of $24,627 in selling expenses for the six months ended December 31, 2022 is primarily due to increases in commissions, shipping, and promotions as a result of increase in sales and increases in depreciation expense due to the purchase of new vehicle. Shipping costs increased approximately $5,000, commissions expense increased approximately $14,000 and promotions expense increased approximately $3,000 for this period. Depreciation expense increased approximately $3,000 for this period.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended December 31, 2022 decreased $28,700 to $140,167 and 11% of sales, compared to $168,867 or 14% of sales for the three months ended December 31, 2021.

The decrease of $28,700 in general and administrative expenses for the three months ended December 31, 2022 is primarily due to a gain on sale of property and equipment of $17,500 plus decreases in professional fees offset by a reduction of $15,000 in the allowance for bad debt recorded in the three month period ended December 31, 2021. Increases in other miscellaneous general and administrative expense offset the decrease in professional fees. Professional fees decreased approximately $31,000 for this period primarily due to decreased audit and consulting fees.

General and administrative expenses for the six months ended December 31, 2022 increased $18,231 to $346,536 and 14% of sales, compared to $328,305 or 16% of sales for the six months ended December 31, 2021.

The increase of $18,231 in general and administrative expenses for the six months ended December 31, 2022 is primarily due to an increase in professional and insurance fees of approximately $15,000 offset by a gain on sale of property and equipment of $17,500 and $15,000 related to the reduction in allowance for bad debt recorded in the six month period ended December 31, 2021. Increases in other miscellaneous general and administrative also attributed to the increase.

OTHER INCOME (EXPENSE)

Other ~~expense~~income (expense) increased by ~~$1,292~~$1,680 for the three months ended ~~September 30,~~December 31, 2022 to ($~~3,561)~~2,658), compared to ($~~2,269)~~978) for the three months ended ~~September 30,~~December 31, 2021.

Other income (expense) increased by $2,972 for the six months ended December 31, 2022 to ($6,219) compared to ($3,247) for the six months ended December 31, 2021.

The majority of this change can be attributed to an increase in interest ~~expense of approximately $1,300.~~expense.

PROVISION FOR INCOME TAXES

The Company recorded no income tax provision for the three months ended ~~September 30, 2022~~December 31,2022 due to the net operating loss carryforward as of June 30, 2022 that is available to offset taxable income in the current period with a corresponding valuation allowance placed on the remaining net operating loss carryforward.

NET INCOME

The Company reported a net income for the three months ended ~~September 30,~~December 31, 2022 of ~~$86,431,~~$225,417, compared to a net income of ~~$47,112~~$113,705 for the three months ended ~~September 30,~~December 31, 2021. This increase of ~~$39,319~~$111,712 is explained above. The Company

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Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

reported a net income for the six months ended December 31, 2022 of $311,848, compared to a net income of $160,817 for the six months ended December 31, 2021. This increase of $151,031 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended ~~September 30,~~December 31, 2022 and ~~September 30,~~December 31, 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.

Preferred dividends were $64,036 for the six months ended December 31, 2022 and December 31, 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 APPLICABLE TO COMMON STOCKHOLDERS

Net income applicable to common stockholders for the three months ended ~~September 30,~~December 31, 2022 was ~~$54,413~~$193,399 which is aan increase of ~~$39,319~~$111,712 as compared to the net income applicable to common stockholders for the three months ended ~~September 30,~~December 31, 2021 of ~~$15,094.~~$81,687.

Net income applicable to common stockholders for the six months ended December 31, 2022 was $247,812 which is an increase of $151,031 as compared to the net income applicable to common stockholders for the six months ended December 31, 2021 of $96,781.

LIQUIDITY AND CAPITAL RESOURCES

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


	Three Months Ended				Six Months Ended
	September 30,				December 31,
	2022		2021		2022		2021
Net Cash Used in Operating Activities	$	(363,369)	$	(215,048)
Net Cash Provided by Financing Activities	$	349,858	$	213,737
Net Cash Provided by Operating Activities					$	443,770	$	427,679
Net Cash Used in Investing Activities					$	(4,666)	$	—
Net Cash Used in Financing Activities					$	(120,000)	$	(122,547)

Management has made no material commitments for capital expenditures during the remainder of fiscal year 2023. The ~~$363,369~~$443,770 of cash ~~used~~provided by operating activities for the ~~three~~six months ended ~~September 30,~~December 31, 2022 is fully detailed in the condensed consolidated statement of cash flows. The ~~$349,858~~$4,666 of cash ~~provided by~~used in investing activities and the $120,000 of cash used in financing activities for the ~~three~~six months ended ~~September 30,~~December 31, 2022 is fully detailed in the condensed consolidated statement of cash flows.

~~(14)~~

~~Table of Contents~~

~~CHASE GENERAL CORPORATION AND SUBSIDIARY~~

~~PART I financial INFORMATION~~

~~item 2. management’s discussion and analysis of~~

~~financial condition and results of operations~~

~~LIQUIDITY AND CAPITAL RESOURCES (cont.)~~

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, compared to quarter ended ~~September 30,~~December 31, 2021 have ~~decreased~~increased slightly, primarily due to ~~the fluctuations~~cost savings measures implemented in ~~these raw material prices; however,~~fiscal year 2023; margins in the ~~first~~second quarter of fiscal year 2023 have increased from the margins for the year ended June 30, 2022 and the first quarter ended September 30, 2022. 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 and the Company’s ability to generate positive working capital will be sufficient to meet its funding requirements for the foreseeable future.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I financial INFORMATION

item 2. management’s discussion and analysis of

financial condition and results of operations

CRITICAL ACCOUNTING POLICIES

Forward-Looking Information

This report, as well as our other reports filed with the Securities and Exchange Commission (SEC), contains forward-looking statements made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict,” and similar expressions are intended to identify forward-looking statements. This report contains forward-looking statements regarding, among other topics, our expected financial position, results of operations, cash flows, strategy, and management’s plans and objectives. Accordingly, these forward-looking statements are based on assumptions about a number of important factors. While we believe that our assumptions about such factors are reasonable, such factors involve risks, and uncertainties that could cause actual results to be different from what appear here. These risk factors include: the ability to adequately pass through customers unanticipated future increases in raw material costs, decreased demand for products, expected orders that do not occur, loss of key customers, the impact of competition and price erosion as well as supply and manufacturing constraints, and other risks and uncertainties. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will prove accurate, and our actual results may differ materially from these forward-looking statements. We assume no obligation to update any forward-looking statements made herein.

~~(15)~~(17)

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CHASE GENERAL CORPORATION AND SUBSIDIARY

PART I Financial information

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 4.CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

Chase’s management, with the participation of the Chief Executive Officer, has evaluated the effectiveness of Chase’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.

A material weakness was identified in our internal control over financial reporting due to a lack of accounting personnel with the appropriate level of knowledge, experience and training to perform an assessment of its internal controls. This has also resulted in a failure to maintain appropriate segregation of duties over system access. Management believes that this material weakness did not have an adverse effect on the Company’s financial results reported herein.

(b)Changes in Internal Control over Financial Reporting

There were no significant changes in Chase’s internal control over financial reporting or in other factors that management’s estimates are reasonably likely to materially affect Chase’s internal control over financial reporting subsequent to the date of evaluation.

~~(16)~~(18)

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CHASE GENERAL CORPORATION AND SUBSIDIARY

PART Ii other information

ITEM 1.LEGAL PROCEEDINGS

None.

ITEM 1A.RISK FACTORS

Not applicable to a smaller reporting company.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

a.None.

b.The total cumulative preferred stock dividends contingency at ~~September 30, 2022~~December 31,2022 is ~~$8,749,256.~~$8,781,274.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

a.Exhibits.

Exhibit 31.1

Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

Exhibit 32.1

Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101

The following financial statements for the quarter ended ~~September 30,~~December 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30,~~December 31, 2022 and June 30, 2022, (ii) Condensed Consolidated Statements of Operations for the Three months Ended ~~September 30,~~December 31, 2022 and 2021, (iii) Condensed Consolidated Statements of Operations for the Six months Ended December 31, 2022 and 2021, (iv) Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~September 30,~~December 31, 2022 and 2021, and ~~(iv)~~(v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

Exhibit 104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~(17)~~(19)

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CHASE GENERAL CORPORATION AND SUBSIDIARY

PART Ii other information

SIGNATURES

Pursuant to the requirements 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 and Subsidiary
		(Registrant)

~~November 14, 2022~~February 10, 2023		/s/ Barry M. Yantis
Date		Barry M. Yantis
		Chairman of the Board, Chief Executive Officer and
		Chief Financial Officer, President, and Treasurer

~~(18)~~(20)


Twelve Months Ending September 30,	Amount
2023	$	78,000
2024		78,000
2025		39,000
Total Lease Payments		195,000
Less: Imputed Interest		15,309
Total Lease Liabilities	$	179,691