10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2015

¨ 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 small business issuer 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

(Issuer’s telephone number, including area code)

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No ¨

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.

Large accelerated filer  ¨	Accelerated filer  ¨
Nonaccelerated filer  ¨      (Do not check if a smaller reporting company)	Smaller reporting company  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 February 11, 2016, there were 969,834 shares of common stock, $1.00 par value, outstanding.

CHASE GENERAL CORPORATION AND SUBSIDIARY

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2015

Part I	Financial Information
	Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets as of December 31, 2015 (unaudited) and June 30, 2015	1
		CONDENSED CONSOLIDATED STATEMENTS OF income FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014  (UNAUDITED)	3
		CONDENSED CONSOLIDATED STATEMENTS OF income FOR THE SIX MONTHS ENDED DECEMBER 31, 2015 AND 2014  (UNAUDITED)	4
		Condensed Consolidated Statements of Cash Flows for the six months ended december 31, 2015 and 2014 (unaudited)	5
		Notes to Condensed Consolidated Financial Statements (Unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
	Item 4.	Controls and Procedures	19
Part II	Other Information
	Item 1.	Legal Proceedings	20
	Item 1A.	Risk Factors	20
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 3.	Defaults Upon Senior Securities	20
	Item 4.	Mine Safety Disclosures	20
	Item 5.	Other Information	20
	Item 6.	Exhibits	21
	Signatures		22

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,		June 30,
	2015		2015
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	371,114	$	84,204
Trade Receivables, Net of Allowance for Doubtful Accounts  of $16,896 and $16,296, Respectively		175,289		187,607
Inventories:
Finished Goods		118,215		377,853
Goods in Process		8,733		13,815
Raw Materials		89,489		90,506
Packaging Materials		172,059		130,726
Prepaid Expenses		38,239		5,689
Deferred Income Taxes		6,727		7,288
Total Current Assets		979,865		897,688
PROPERTY AND EQUIPMENT
Land		35,000		35,000
Buildings		77,348		77,348
Machinery and Equipment		817,836		807,325
Trucks and Autos		213,116		198,845
Office Equipment		31,518		31,518
Leasehold Improvements		72,068		72,068
Total		1,246,886		1,222,104
Less Accumulated Depreciation		841,424		861,341
Total Property and Equipment, Net		405,462		360,763
Total Assets	$	1,385,327	$	1,258,451

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

	December 31,			June 30,
	2015			2015
	(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable	$	125,767		$	111,944
Current Maturities of Notes Payable		15,107			8,297
Accrued Expenses		14,903			17,966
Income Taxes Payable		20,335			26,119
Deferred Income		1,299			1,299
Total Current Liabilities		177,411			165,625
LONG-TERM LIABILITIES
Deferred Income		10,713			11,362
Notes Payable, Less Current Maturities		63,209			14,004
Deferred Income Taxes		96,462			98,866
Total Long-Term Liabilities		170,384			124,232
Total Liabilities		347,795			289,857
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock Issued and Outstanding:
Prior Cumulative Preferred Stock, $5 Par Value:
Series A (Liquidation Preference $2,235,000  and $2,220,000, Respectively)		500,000			500,000
Series B (Liquidation Preference $2,190,000  and $2,175,000, Respectively)		500,000			500,000
Cumulative Preferred Stock, $20 Par Value:
Series A (Liquidation Preference $5,048,464  and $5,019,197, Respectively)		1,170,660			1,170,660
Series B (Liquidation Preference $822,746 and $817,977, Respectively)		190,780			190,780
Common Stock, $1 Par Value		969,834			969,834
Paid-In Capital in Excess of Par		3,134,722			3,134,722
Accumulated Deficit		(5,428,464	)		(5,497,402	)
Total Stockholders' Equity		1,037,532			968,594
Total Liabilities and Stockholders' Equity	$	1,385,327		$	1,258,451

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended
	December 31
	2015			2014
NET SALES	$	1,278,677		$	1,291,273
COST OF SALES		920,887			846,057
Gross Profit on Sales		357,790			445,216
OPERATING EXPENSES
Selling		156,957			149,763
General and Administrative		95,236			90,453
Gain on Sale of Equipment		(8,990	)		(15,912	)
Total Operating Expenses		243,203			224,304
Income from Operations		114,587			220,912
OTHER INCOME (EXPENSE)
Miscellaneous Income		421			422
Interest Expense		(2,741	)		(1,069	)
Total Other Income (Expense), Net		(2,320	)		(647	)
Income before Income Taxes		112,267			220,265
PROVISION FOR INCOME TAXES		39,581			77,726
NET INCOME	$	72,686		$	142,539
NET INCOME PER SHARE OF COMMON STOCK
Basic	$	0.04		$	0.11
Diluted	$	0.02		$	0.06

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Six Months Ended
	December 31
	2015			2014
NET SALES	$	2,341,780		$	2,283,181
COST OF SALES		1,764,270			1,561,127
Gross Profit on Sales		577,510			722,054
OPERATING EXPENSES
Selling		279,733			264,404
General and Administrative		210,287			211,834
Gain on Sale of Equipment		(21,364	)		(15,912	)
Total Operating Expenses		468,656			460,326
Income from Operations		108,854			261,728
OTHER INCOME (EXPENSE)
Miscellaneous Income		799			12,444
Interest Expense		(3,014	)		(1,956	)
Total Other Income (Expense), Net		(2,215	)		10,488
Income before Income Taxes		106,639			272,216
PROVISION FOR INCOME TAXES		37,701			94,976
NET INCOME	$	68,938		$	177,240
NET INCOME PER SHARE OF COMMON STOCK
Basic	$	0.01		$	0.12
Diluted	$	-		$	0.06

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	December 31
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	68,938		$	177,240
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		60,968			50,127
Allowance for Bad Debts		600			1,350
Deferred Income Amortization		(649	)		(649	)
Deferred Income Taxes		(1,843	)		(4,270	)
(Gain) on Sale of Equipment		(21,364	)		(15,912	)
Effects of Changes in Operating Assets and Liabilities:
Trade Receivables		11,718			(91,597	)
Inventories		224,404			244,727
Prepaid Expenses		(32,550	)		(22,388	)
Accounts Payable		13,823			49,484
Accrued Expenses		(3,063	)		(124,026	)
Income Taxes Payable		(5,784	)		78,722
Net Cash Provided by Operating Activities		315,198			342,808
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment		(21,622	)		(33,876	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line-of-Credit		300,000			265,000
Principal Payments on Line-of-Credit		(300,000	)		(265,000	)
Principal Payments on Notes Payable		(6,666	)		(18,437	)
Net Cash Used by Financing Activities		(6,666	)		(18,437	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		286,910			290,495
Cash and Cash Equivalents - Beginning of Period		84,204			162,435
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	371,114		$	452,930

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 general

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as “Chase”, “we”, “our”, and “us”) at June 30, 2015 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 December 31, 2015 and for the three and six months ended December 31, 2014 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, 2015. The results of operations for the three and six months ended December 31, 2015 and cash flows for the six months ended December 31, 2015 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2016. 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.

No events have occurred subsequent to December 31, 2015, 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 six month period ended December 31, 2015.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 EARNINGS PER SHARE

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

	Three Months Ended				Six Months Ended
	December 31				December 31
	2015		2014		2015		2014
Net Income	$	72,686	$	142,539	$	68,938	$	177,240
Preferred Dividend Requirements:
6% Prior Cumulative Preferred, $5 Par Value		15,000		15,000		30,000		30,000
5% Convertible Cumulative Preferred, $20 Par Value		17,018		17,018		34,036		34,036
Total Dividend Requirements		32,018		32,018		64,036		64,036
Net Income - Common Stockholders	$	40,668	$	110,521	$	4,902	$	113,204
Weighted Average Shares - Basic		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
Weighted Average Shares – Diluted		2,003,168		2,003,168		2,003,168		2,003,168
Basic Earnings per Share	$	0.04	$	0.11	$	0.01	$	0.12
Diluted Earnings per Share	$	0.02	$	0.06	$	-	$	0.06

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

note 2 EARNINGS PER SHARE (continued)

Cumulative Preferred Stock dividends in arrears at December 31, 2015 and 2014 totaled $7,884,770 and $7,756,698, respectively. Total dividends in arrears, on a per share basis, consist of the following:

	Six Months Ended
	December 31
	2015		2014
6% Convertible
Series A	$	17	$	17
Series B		17		16
5% Convertible
Series A	$	66	$	65
Series B		66		65

The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid accrued dividends to date of redemption. In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends. It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.

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

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 NOTES PAYABLE

The Company’s long-term debt consists of:

		December 31,		June 30,
Payee	Terms	2015		2015
Nodaway Valley Bank	$350,000 line-of-credit agreement expiring on January 4, 2017, 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.	$	-	$	-
Ford Credit	$468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle.		16,596		19,151
Ford Credit	$705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle.		41,720		-
Ford Credit	$364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle.		20,000		-
Ford Credit	$517 monthly payments, interest of 0%; secured by a vehicle.		-		3,150
Total			78,316		22,301
Less Current Portion			15,107		8,297
Long-Term Portion		$	63,209	$	14,004

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

note 3 NOTES PAYABLE (continued)

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

December 31:	Amount
2016	$	15,107
2017		15,793
2018		16,481
2019		11,974
2020		12,098
Thereafter		6,863
Total	$	78,316

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 recognized no liability for unrecognized tax benefits at December 31, 2015. The Company has no material tax positions at December 31, 2015 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, 2015. The Company’s federal income tax returns for the fiscal years ended 2013, 2014 and 2015 are subject to examination by the Internal Revenue Service taxing authority.

NOTE 5 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Six Months Ended
	December 31
	2015		2014
Cash Paid for:
Interest	$	3,014	$	1,956
Income Taxes	$	45,368	$	28,504
Noncash Transactions:
Financing of New Vehicles	$	62,681	$	21,228
Sales Tax on New Vehicle in Accounts Payable	$	-	$	3,467

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 6 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2014-09, Revenue from Contracts with Customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. The updated standard becomes effective for interim and annual periods beginning after December 15, 2017, but allows the Company to adopt the standard one year earlier if it so chooses. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," ("ASU 2015-11"). An entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This update is effective as of January 1, 2017, with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

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

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CHASE GENERAL CORPORATION AND SUBSIDIARY

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 and earnings in the fiscal second quarter, which includes the majority of the holiday shopping season, than in any other fiscal quarter.

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.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

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

RESULTS OF OPERATIONS - Three Months Ended December 31, 2015 Compared to Three Months Ended December 31, 2014, and Six Months Ended December 31, 2015 Compared to Six Months Ended December 31, 2014

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 net sales and revenues for the periods presented:

	Three Months Ended						Six Months Ended
	December 31						December 31
	2015			2014			2015			2014
Net Sales		100	%		100	%		100	%		100	%
Cost of Sales		72			66			75			68
Gross Profit on Sales		28			34			25			32
Operating Expenses		19			17			20			20
Income from Operations		9			17			5			12
Other Income (Expense), Net		(1	)		-			-			-
Income before Income Taxes		8			17			5			12
Provision for Income Taxes		3			6			2			4
Net Income		5	%		11	%		3	%		8	%

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CHASE GENERAL CORPORATION AND SUBSIDIARY

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

NET SALES

Net sales decreased $12,596 or 1% for the three months ended December 31, 2015 to $1,278,677 compared to $1,291,273 for the three months ended December 31, 2014. Gross sales for Chase Candy decreased $113,845 to $432,883 for the three months ended December 31, 2015, compared to $546,728 for the three months ended December 31, 2014. Gross sales for Seasonal Candy increased $107,633 to $865,036 for the three months ended December 31, 2015, compared to $757,403 for the three months ended December 31, 2014. Gross sales for other sales for the Company decreased $3,458 to $7,310 for the three months ended December 31, 2015, compared to $3,852 for the three months ended December 31, 2014. Sales returns and allowances for the Company increased $2,926 to $23,094 for the three months ended December 31, 2015, compared to $20,168 for the three months ended December 31, 2014.

The 21% decrease in gross sales of Chase Candy of $113,845 for the three months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $63,000 versus the same period a year ago primarily due to two customers decreasing orders; 2) decreased sales of the L278/L212 Mini Mash division by approximately $30,000 versus the same period a year ago primarily due to one customer decreasing orders; 3) decreased sales of the Cherry Mash Merchandiser division by approximately $15,000 versus the same period a year ago primarily due to five customers decreasing orders; 4) various other fluctuations netting to a decrease of approximately $4,000; 5) decreased sales of the L279/L299 Bulk Mini Mash division by approximately $1,000 versus the same period a year ago primarily due to two customers decreasing orders; and 6) decreased sales of the L260 Changemaker Jar division by approximately $100 versus the same period a year ago primarily due to two customers decreasing orders.

The 14% increase in gross sales of Seasonal Candy of $107,633 for the three months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $168,000 due to sales to two new customers offset by the loss of one customer; 2) increased sales in the bulk seasonal division by approximately $22,000 versus the same period a year ago primarily due to increased orders from one customer; offset by 3) decreased sales in the clamshell seasonal division by approximately $82,000 versus the same period a year ago primarily due to decreased sales to four customers.

Net sales increased $58,599 or 3% for the six months ended December 31, 2015 to $2,341,780 compared to $2,283,181 for the six months ended December 31, 2014. Gross sales for Chase Candy decreased $113,940 to $924,868 for the six months ended December 31, 2015, compared to $1,038,808 for the six months ended December 31, 2014. Gross sales for Seasonal Candy increased $180,037 to $1,445,064 for the six months ended December 31, 2015, compared to $1,265,027 for the six months ended December 31, 2014. Gross sales for other sales for the Company decreased $3,646 to $4,578 for the six months ended December 31, 2015, compared to $8,224 for the six months ended December 31, 2014. Sales returns and allowances for the Company increased $3,582 to $32,730 for the six months ended December 31, 2015, compared to $28,878 for the six months ended December 31, 2014.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

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

NET SALES (CONTINUED)

The 11% decrease in gross sales of Chase Candy of $113,940 for the six months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $88,000 versus the same period a year ago primarily due to two customers decreasing orders; 2) decreased sales of the L278/L212 Mini Mash division by approximately $10,000 versus the same period a year ago primarily due to two customers decreasing orders; 3) various other fluctuations netting to a decrease of approximately $6,000; 4) decreased sales of the L279/L299 Bulk Mini Mash division by approximately $4,000 versus the same period a year ago primarily due to two customers decreasing orders; 5) decreased sales of the Cherry Mash Merchandiser division by approximately $4,000 versus the same period a year ago primarily due to one customer decreasing orders; and 6) decreased sales of the L260 Changemaker Jar division by approximately $1,000 versus the same period a year ago primarily due to one customer decreasing orders.

The 14% increase in gross sales of Seasonal Candy of $180,037 for the six months ended December 31, 2015 over the same period ended December 31, 2014, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $213,000 due to increased orders from one customer offset by decreased orders of another customer; 2) increased sales in the bulk seasonal division by approximately $34,000 versus the same period a year ago primarily due to increased orders from one customer; offset by 3) decreased sales in the clamshell seasonal division by approximately $67,000 versus the same period a year ago primarily due to decreased orders from four customers.

COST OF SALES

The cost of sales increased $74,830 to $920,887 or 72% of related revenues for the three months ended December 31, 2015, compared to $846,057 or 66% of related revenues for the three months ended December 31, 2014. The 9% increase in cost of sales of $74,830 is primarily due to a 10% increase in the price of sugar and a 7% increase in the price of corn syrup.

The cost of sales increased $203,143 to $1,764,270 or 75% of related revenues for the six months ended December 31, 2015, compared to $1,561,127 or 68% of related revenues for the six months ended December 31, 2014. The 13% increase in cost of sales of $203,143 is primarily due to a 10% increase in the price of sugar, a 7% increase in the price of corn syrup, and a 3% increase in net sales of $58,599. 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.

15 

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

SELLING EXPENSES

Selling expenses for the three months ended December 31, 2015 increased $7,194 to $156,957, which is 12% of sales, compared to $149,763, or 12% of sales for the three months ended December 31, 2014. The increase of $7,194 in selling expenses for the three months ended December 31, 2015 is primarily due to higher premium promotions expense and higher commissions expense offset by lower automobile expense. Premium promotions, which are paid to customers for various marketing reasons, increased $3,481 to $40,314 for this period from $36,833 for the three months ended December 31, 2014. Commissions expense, which are based on sales, increased $6,798 to $48,817 for this period from $42,019 for the three months ended December 31, 2014. Automobile expense decreased $3,832 to $3,038 for this period from $6,870 for the three months ended December 31, 2014.

Selling expenses for the six months ended December 31, 2015 increased $15,329 to $279,733, which is 12% of sales, compared to $264,404 or 12% of sales for the six months ended December 31, 2014. The increase of $15,329 in selling expenses for the six months ended December 31, 2015 is primarily due to higher commissions expense, and depreciation expense for the period. Commissions expense increased $9,276 to $90,402 for this period from $81,126 for the six months ended December 31, 2014 primarily due to a change in the mix of sales. Depreciation expense increased $6,433 to $27,979 for this period from $21,546 primarily due to the purchases of property and equipment of $84,303 during the six months ended December 31, 2015.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended December 31, 2015 increased $4,783 to $95,236 and 7% of sales, compared to $90,453 or 7% of sales for the three months ended December 31, 2014. The increase of $4,783 in general and administrative expenses for the three months ended December 31, 2015 is primarily due to higher professional fees offset by lower insurance expense. Professional fees increased $14,625 to $31,666 for this period from $17,041 for the three months ending December 31, 2014 due to timing of regular invoices. Insurance expense decreased $11,180 to $24,225 for this period from $35,405 for the three months ending December 31, 2014 due to employees changing their enrollment in insurance plans.

General and administrative expenses for the six months ended December 31, 2015 decreased $1,547 to $210,287 or 9% of sales, compared to $211,834 or 9% of sales for the six months ended December 31, 2014. The decrease of $1,547 in general and administrative expenses for the six months ended December 31, 2015 is primarily due to higher professional fees offset by lower insurance expense. Professional fees increased $19,107 to $86,337 for this period from $67,230 for the six months ending December 31, 2014 due to timing of regular invoices. Insurance expense decreased $21,716 to $46,582 for this period from $68,298 for the six months ending December 31, 2014 due to employees changing their enrollment in insurance plans.

16 

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

OTHER INCOME (EXPENSE)

Other income (expense) decreased by $1,673 for the three months ended December 31, 2015 to $(2,320), compared to $(647) for the three months ended December 31, 2014 primarily due to an increase of $1,673 in interest expense.

Other income (expense) decreased by $12,703 for the six months ended December 31, 2015 to $(2,215), compared to $10,488 for the six months ended December 31, 2014 primarily due to a decrease of $1,058 in interest expense, and a decrease of $11,645 in miscellaneous income. The decrease in miscellaneous income is primarily due to these unusual items that occurred during the six months ended December 31, 2014: 1) a freight claim of approximately $4,000 and 2) a refund of approximately $7,000 from a customer related to an underpayment written off in a previous period.

PROVISION FOR INCOME TAXES

The Company recorded income tax expense for the three months ended December 31, 2015 of $39,581 as compared to income tax expense of $77,726 for the three months ended December 31, 2014. The Company recorded income tax expense for the six months ended December 31, 2015 of $37,701 as compared to income tax expense of $94,976 for the six months ended December 31, 2014. The net income tax expense recorded for the three and six months ended December 31, 2015 is primarily due to recognizing income taxes related to current profitable operations.

NET INCOME

The Company reported net income for the three months ended December 31, 2015 of $72,686, compared to net income of $142,539 for the three months ended December 31, 2014. This decrease of $69,853 is explained above. The Company reported net income for the six months ended December 31, 2015 of $68,938, compared to net income of $177,240 for the six months ended December 31, 2014. This decrease of $108,302 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended December 31, 2015 and 2014, 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, 2015 and 2014, 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.

17 

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

NET INCOME APPLICABLE TO COMMON STOCKHOLDERS

Net income applicable to common stockholders for the three months ended December 31, 2015 was $40,668 which is a decrease of $69,853 as compared to the net income for the three months ended December 31, 2014 of $110,521.

Net income applicable to common stockholders for the six months ended December 31, 2015 was $4,902 which is a decrease of $108,302 as compared to the net income for the six months ended December 31, 2014 of $113,204.

LIQUIDITY AND CAPITAL RESOURCES

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

	Six Months Ended
	December 31
	2015			2014
Net Cash Provided by Operating Activities	$	315,198		$	342,808
Net Cash Used in Investing Activities	$	(21,622	)	$	(33,876	)
Net Cash Used by Financing Activities	$	(6,666	)	$	(18,437	)

Management has no material commitments for capital expenditures during the remainder of fiscal 2016. The $315,198 of cash provided by operating activities is fully detailed in the condensed consolidated statement of cash flows on page five. The $21,622 of cash used in investing activities is the purchase of equipment used during the manufacturing process and an automobile. The $6,666 of cash used in financing activities is the principal payments on equipment and vehicle loans. At December 31, 2015, the Company had $350,000 remaining on the line-of-credit, which could be utilized to help fund any working capital requirements.

Management believes that the projected cash flow from operations, combined with its existing cash balances, will be sufficient to meet its funding requirements for the foreseeable future.

Management believes that inflation will have only a minimal effect on future operations since such effects will be offset by sales price increases, which are not expected to have a significant effect upon demand.

18 

CHASE GENERAL CORPORATION AND SUBSIDIARY

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, the Chief Executive Officer and Management has concluded that Chase’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in periodic filings under the Exchange Act is accumulated and communicated to management, including those officers, and to members of the Board of Directors, to allow timely decisions regarding required disclosure.

(b) 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 in management’s estimates are reasonably likely to materially affect Chase’s internal control over financial reporting subsequent to the date of the evaluation.

19 

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 December 31, 2015 is $7,884,770.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

20 

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART II. OTHER INFORMATION (CONTINUED)

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 December 31, 2015, formatted in XBRL: (i) Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2015, (ii) Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2015 and 2014, (iii) Condensed Consolidated Statements of Income for the Six Months Ended December 31, 2015 and 2014, (iv) Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2015 and 2014, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

21 

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)
February 12, 2016	/s/ Barry M. Yantis
Date	Barry M. Yantis
	Chairman of the Board, Chief Executive Officer and
	Chief Financial Officer, President and Treasurer

22 

EX-31.1

EXHIBIT 31.1

CHASE GENERAL CORPORATION

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND FINANCIAL OFFICER

PURSUANT TO RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE

ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Barry M. Yantis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chase General Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am the certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. I am the certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 12, 2016	/s/ Barry M. Yantis
Date	Barry M. Yantis
	Chief Executive Officer and Chief Financial Officer,
	President and Treasurer

EX-32.1

EXHIBIT 32.1

CHASE GENERAL CORPORATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Chase General Corporation (the Company) on Form 10-Q for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Barry M. Yantis, as Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 12, 2016	/s/ Barry M. Yantis
Date	Barry M. Yantis
	Chairman of the Board, Chief Executive Officer and
	Chief Financial Officer, President and Treasurer

XML

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2015	Feb. 11, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	CHASE GENERAL CORP
Entity Central Index Key	0000015357
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		969,834
Document Type	10-Q
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Jun. 30, 2015
CURRENT ASSETS
Cash and Cash Equivalents	$ 371,114	$ 84,204
Trade Receivables, Net of Allowance for Doubtful Accounts of $16,896 and $16,296, Respectively	175,289	187,607
Inventories:
Finished Goods	118,215	377,853
Goods in Process	8,733	13,815
Raw Materials	89,489	90,506
Packaging Materials	172,059	130,726
Prepaid Expenses	38,239	5,689
Deferred Income Taxes	6,727	7,288
Total Current Assets	979,865	897,688
PROPERTY AND EQUIPMENT
Land	35,000	35,000
Buildings	77,348	77,348
Machinery and Equipment	817,836	807,325
Trucks and Autos	213,116	198,845
Office Equipment	31,518	31,518
Leasehold Improvements	72,068	72,068
Total	1,246,886	1,222,104
Less Accumulated Depreciation	841,424	861,341
Total Property and Equipment, Net	405,462	360,763
Total Assets	1,385,327	1,258,451
CURRENT LIABILITIES
Accounts Payable	125,767	111,944
Current Maturities of Notes Payable	15,107	8,297
Accrued Expenses	14,903	17,966
Income Taxes Payable	20,335	26,119
Deferred Income	1,299	1,299
Total Current Liabilities	177,411	165,625
LONG-TERM LIABILITIES
Deferred Income	10,713	11,362
Notes Payable, Less Current Maturities	63,209	14,004
Deferred Income Taxes	96,462	98,866
Total Long-Term Liabilities	170,384	124,232
Total Liabilities	$ 347,795	$ 289,857
COMMITMENTS AND CONTINGENCIES
Capital Stock Issued and Outstanding:
Common Stock, $1 Par Value	$ 969,834	$ 969,834
Paid-In Capital in Excess of Par	3,134,722	3,134,722
Accumulated Deficit	(5,428,464)	(5,497,402)
Total Stockholders' Equity	1,037,532	968,594
Total Liabilities and Stockholders' Equity	1,385,327	1,258,451
Prior Cumulative Preferred Stock, $5 Par Value | Series A
Capital Stock Issued and Outstanding:
Preferred stock, value	500,000	500,000
Prior Cumulative Preferred Stock, $5 Par Value | Series B
Capital Stock Issued and Outstanding:
Preferred stock, value	500,000	500,000
Cumulative Preferred Stock, $20 Par Value | Series A
Capital Stock Issued and Outstanding:
Preferred stock, value	1,170,660	1,170,660
Cumulative Preferred Stock, $20 Par Value | Series B
Capital Stock Issued and Outstanding:
Preferred stock, value	$ 190,780	$ 190,780

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Allowance for doubtful accounts on trade receivables (in dollars)	$ 16,896	$ 16,296
Common stock, par value (in dollars per share)	$ 1	$ 1
Prior Cumulative Preferred Stock, $5 Par Value | Series A
Preferred stock, par value (in dollars per share)	$ 5	$ 5
Preferred stock, liquidation preference (in dollars)	$ 2,235,000	$ 2,220,000
Prior Cumulative Preferred Stock, $5 Par Value | Series B
Preferred stock, par value (in dollars per share)	$ 5	$ 5
Preferred stock, liquidation preference (in dollars)	$ 2,190,000	$ 2,175,000
Cumulative Preferred Stock, $20 Par Value | Series A
Preferred stock, par value (in dollars per share)	$ 20	$ 20
Preferred stock, liquidation preference (in dollars)	$ 5,048,464	$ 5,019,197
Cumulative Preferred Stock, $20 Par Value | Series B
Preferred stock, par value (in dollars per share)	$ 20	$ 20
Preferred stock, liquidation preference (in dollars)	$ 822,746	$ 817,977

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
NET SALES	$ 1,278,677	$ 1,291,273	$ 2,341,780	$ 2,283,181
COST OF SALES	920,887	846,057	1,764,270	1,561,127
Gross Profit on Sales	357,790	445,216	577,510	722,054
OPERATING EXPENSES
Selling	156,957	149,763	279,733	264,404
General and Administrative	95,236	90,453	210,287	211,834
Gain on Sale of Equipment	(8,990)	(15,912)	(21,364)	(15,912)
Total Operating Expenses	243,203	224,304	468,656	460,326
Income from Operations	114,587	220,912	108,854	261,728
OTHER INCOME (EXPENSE)
Miscellaneous Income	421	422	799	12,444
Interest Expense	(2,741)	(1,069)	(3,014)	(1,956)
Total Other Income (Expense), Net	(2,320)	(647)	(2,215)	10,488
Income before Income Taxes	112,267	220,265	106,639	272,216
PROVISION FOR INCOME TAXES	39,581	77,726	37,701	94,976
NET INCOME	$ 72,686	$ 142,539	$ 68,938	$ 177,240
NET INCOME PER SHARE OF COMMON STOCK
Basic (in dollars per share)	$ 0.04	$ 0.11	$ 0.01	$ 0.12
Diluted (in dollars per share)	$ 0.02	$ 0.06		$ 0.06

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 68,938	$ 177,240
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization	60,968	50,127
Allowance for Bad Debts	600	1,350
Deferred Income Amortization	(649)	(649)
Deferred Income Taxes	(1,843)	(4,270)
(Gain) on Sale of Equipment	(21,364)	(15,912)
Effects of Changes in Operating Assets and Liabilities:
Trade Receivables	11,718	(91,597)
Inventories	224,404	244,727
Prepaid Expenses	(32,550)	(22,388)
Accounts Payable	13,823	49,484
Accrued Expenses	(3,063)	(124,026)
Income Taxes Payable	(5,784)	78,722
Net Cash Provided by Operating Activities	315,198	342,808
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment	(21,622)	(33,876)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line-of-Credit	300,000	265,000
Principal Payments on Line-of-Credit	(300,000)	(265,000)
Principal Payments on Notes Payable	(6,666)	(18,437)
Net Cash Used by Financing Activities	(6,666)	(18,437)
NET INCREASE IN CASH AND CASH EQUIVALENTS	286,910	290,495
Cash and Cash Equivalents - Beginning of Period	84,204	162,435
CASH AND CASH EQUIVALENTS - END OF PERIOD	$ 371,114	$ 452,930

XML

GENERAL

6 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL

NOTE 1 GENERAL

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as “Chase”, “we”, “our”, and “us”) at June 30, 2015 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 December 31, 2015 and for the three and six months ended December 31, 2014 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, 2015. The results of operations for the three and six months ended December 31, 2015 and cash flows for the six months ended December 31, 2015 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2016. 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.

No events have occurred subsequent to December 31, 2015, 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 six month period ended December 31, 2015.

XML

EARNINGS PER SHARE

6 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 2 EARNINGS PER SHARE

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

	Three Months Ended				Six Months Ended
	December 31				December 31
	2015		2014		2015		2014
Net Income	$	72,686	$	142,539	$	68,938	$	177,240
Preferred Dividend Requirements:
6% Prior Cumulative Preferred, $5 Par Value		15,000		15,000		30,000		30,000
5% Convertible Cumulative Preferred, $20 Par Value		17,018		17,018		34,036		34,036
Total Dividend Requirements		32,018		32,018		64,036		64,036
Net Income - Common Stockholders	$	40,668	$	110,521	$	4,902	$	113,204
Weighted Average Shares - Basic		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
Weighted Average Shares – Diluted		2,003,168		2,003,168		2,003,168		2,003,168
Basic Earnings per Share	$	0.04	$	0.11	$	0.01	$	0.12
Diluted Earnings per Share	$	0.02	$	0.06	$	-	$	0.06

Cumulative Preferred Stock dividends in arrears at December 31, 2015 and 2014 totaled $7,884,770 and $7,756,698, respectively. Total dividends in arrears, on a per share basis, consist of the following:

	Six Months Ended
	December 31
	2015		2014
6% Convertible
Series A	$	17	$	17
Series B		17		16
5% Convertible
Series A	$	66	$	65
Series B		66		65

The 6% convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid accrued dividends to date of redemption. In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends. It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.

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

XML

NOTES PAYABLE

6 Months Ended

Dec. 31, 2015

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 3 NOTES PAYABLE

The Company’s long-term debt consists of:

		December 31,		June 30,
Payee	Terms	2015		2015
Nodaway Valley Bank	$350,000 line-of-credit agreement expiring on January 4, 2017, 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.	$	-	$	-
Ford Credit	$468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle.		16,596		19,151
Ford Credit	$705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle.		41,720		-
Ford Credit	$364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle.		20,000		-
Ford Credit	$517 monthly payments, interest of 0%; secured by a vehicle.		-		3,150
Total			78,316		22,301
Less Current Portion			15,107		8,297
Long-Term Portion		$	63,209	$	14,004

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

December 31:	Amount
2016	$	15,107
2017		15,793
2018		16,481
2019		11,974
2020		12,098
Thereafter		6,863
Total	$	78,316

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INCOME TAXES

6 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

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 recognized no liability for unrecognized tax benefits at December 31, 2015. The Company has no material tax positions at December 31, 2015 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, 2015. The Company’s federal income tax returns for the fiscal years ended 2013, 2014 and 2015 are subject to examination by the Internal Revenue Service taxing authority.

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

6 Months Ended

Dec. 31, 2015

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

NOTE 5 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Six Months Ended
	December 31
	2015		2014
Cash Paid for:
Interest	$	3,014	$	1,956
Income Taxes	$	45,368	$	28,504
Noncash Transactions:
Financing of New Vehicles	$	62,681	$	21,228
Sales Tax on New Vehicle in Accounts Payable	$	-	$	3,467

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RECENTLY ISSUED ACCOUNTING PRONOUONCEMENTS

6 Months Ended

Dec. 31, 2015

Accounting Changes and Error Corrections [Abstract]

RECENTLY ISSUED ACCOUNTING PRONOUONCEMENTS

NOTE 6 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2014-09, Revenue from Contracts with Customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. The updated standard becomes effective for interim and annual periods beginning after December 15, 2017, but allows the Company to adopt the standard one year earlier if it so chooses. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," ("ASU 2015-11"). An entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This update is effective as of January 1, 2017, with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

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

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EARNINGS PER SHARE (Tables)

6 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Schedule of income per share computed on the weighted average of outstanding common shares

	Three Months Ended				Six Months Ended
	December 31				December 31
	2015		2014		2015		2014
Net Income	$	72,686	$	142,539	$	68,938	$	177,240
Preferred Dividend Requirements:
6% Prior Cumulative Preferred, $5 Par Value		15,000		15,000		30,000		30,000
5% Convertible Cumulative Preferred, $20 Par Value		17,018		17,018		34,036		34,036
Total Dividend Requirements		32,018		32,018		64,036		64,036
Net Income - Common Stockholders	$	40,668	$	110,521	$	4,902	$	113,204
Weighted Average Shares - Basic		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
Weighted Average Shares – Diluted		2,003,168		2,003,168		2,003,168		2,003,168
Basic Earnings per Share	$	0.04	$	0.11	$	0.01	$	0.12
Diluted Earnings per Share	$	0.02	$	0.06	$	-	$	0.06

Schedule of total dividends in arrears, on a per share basis

	Six Months Ended
	December 31
	2015		2014
6% Convertible
Series A	$	17	$	17
Series B		17		16
5% Convertible
Series A	$	66	$	65
Series B		66		65

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NOTES PAYABLE (Tables)

6 Months Ended

Dec. 31, 2015

Notes Payable [Abstract]

Schedule of long-term debt

		December 31,		June 30,
Payee	Terms	2015		2015
Nodaway Valley Bank	$350,000 line-of-credit agreement expiring on January 4, 2017, 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.	$	-	$	-
Ford Credit	$468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle.		16,596		19,151
Ford Credit	$705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle.		41,720		-
Ford Credit	$364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle.		20,000		-
Ford Credit	$517 monthly payments, interest of 0%; secured by a vehicle.		-		3,150
Total			78,316		22,301
Less Current Portion			15,107		8,297
Long-Term Portion		$	63,209	$	14,004

Schedule of future minimum payments of long term debt

December 31:	Amount
2016	$	15,107
2017		15,793
2018		16,481
2019		11,974
2020		12,098
Thereafter		6,863
Total	$	78,316

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Tables)

6 Months Ended

Dec. 31, 2015

Supplemental Cash Flow Elements [Abstract]

Schedule of supplemental disclosures of cash flow information

	Six Months Ended
	December 31
	2015		2014
Cash Paid for:
Interest	$	3,014	$	1,956
Income Taxes	$	45,368	$	28,504
Noncash Transactions:
Financing of New Vehicles	$	62,681	$	21,228
Sales Tax on New Vehicle in Accounts Payable	$	-	$	3,467

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EARNINGS PER SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Net Income	$ 72,686	$ 142,539	$ 68,938	$ 177,240
Preferred Dividend Requirements:
Total Dividend Requirements	32,018	32,018	64,036	64,036
Net Income (Loss) - Common Stockholders	$ 40,668	$ 110,521	$ 4,902	$ 113,204
Weighted Average Shares - Basic	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
Weighted Average Shares - Diluted (in shares)	2,003,168	2,003,168	2,003,168	2,003,168
Basic Earnings per Share (in dollars per share)	$ 0.04	$ 0.11	$ 0.01	$ 0.12
Diluted Earnings per Share (in dollars per share)	$ 0.02	$ 0.06		$ 0.06
6% Prior Cumulative Preferred, $5 Par Value
Preferred Dividend Requirements:
Total Dividend Requirements	$ 15,000	$ 15,000	$ 30,000	$ 30,000
5% Convertible Cumulative Preferred, $20 Par Value
Preferred Dividend Requirements:
Total Dividend Requirements	$ 17,018	$ 17,018	$ 34,036	$ 34,036

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EARNINGS PER SHARE (Parentheticals) (Details) - $ / shares	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
6% Prior Cumulative Preferred, $5 Par Value
Class of Stock [Line Items]
Stated percentage of preferred stock	6.00%	6.00%
Preferred stock, par value (in dollars per share)	$ 5	$ 5
5% Convertible Cumulative Preferred, $20 Par Value
Class of Stock [Line Items]
Stated percentage of preferred stock	5.00%	5.00%
Preferred stock, par value (in dollars per share)	$ 20	$ 20

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EARNINGS PER SHARE (Details 1) - $ / shares	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
6% Prior Convertible Cumulative Preferred Stock - Series A
Class of Stock [Line Items]
Cumulative preferred stock dividends in arrears	$ 17	$ 17
6% Prior Convertible Cumulative Preferred Stock - Series B
Class of Stock [Line Items]
Cumulative preferred stock dividends in arrears	17	16
5% Convertible Cumulative Preferred Stock - Series A
Class of Stock [Line Items]
Cumulative preferred stock dividends in arrears	66	65
5% Convertible Cumulative Preferred Stock - Series B
Class of Stock [Line Items]
Cumulative preferred stock dividends in arrears	$ 66	$ 65

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EARNINGS PER SHARE (Detail Textuals) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Total cumulative preferred stock dividends in arrears	$ 7,884,770	$ 7,756,698
6% Prior Cumulative Preferred, $5 par value
Class of Stock [Line Items]
Redemption price per share (in dollars per share)	$ 5.25	$ 5.25
Preferred stock, liquidation preference per share (in dollars per share)	$ 5.25	$ 5.25
6% Prior Convertible Cumulative Preferred Stock - Series A
Class of Stock [Line Items]
Number of common stock exchanged for each preferred stock held	4	4
6% Prior Convertible Cumulative Preferred Stock - Series B
Class of Stock [Line Items]
Number of common stock exchanged for each preferred stock held	3.75	3.75
5% Convertible Cumulative Preferred, $20 Par Value
Class of Stock [Line Items]
Redemption price per share (in dollars per share)	$ 21.00	$ 21.00
Preferred stock, liquidation preference per share (in dollars per share)	$ 20.00	$ 20.00
Number of common stock exchanged for each preferred stock held	3.795	3.795

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NOTES PAYABLE - Long-term debt (Details) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Debt Instrument [Line Items]
Total	$ 78,316	$ 22,301
Less Current Portion	15,107	8,297
Long-Term Portion	$ 63,209	$ 14,004
Nodaway Valley Bank: $350,000 line-of-credit agreement expiring on January 4, 2017, with a variable interest rate at prime but not less than 5%
Debt Instrument [Line Items]
Total
Ford Credit: $468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle
Debt Instrument [Line Items]
Total	$ 16,596	$ 19,151
Ford Credit: $705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle
Debt Instrument [Line Items]
Total	41,720
Ford credit : $364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle
Debt Instrument [Line Items]
Total	$ 20,000
Ford Credit: $517 monthly payments, interest of 0%; secured by a vehicle
Debt Instrument [Line Items]
Total		$ 3,150

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NOTES PAYABLE - Long-term debt (Parentheticals) (Details) - USD ($)	6 Months Ended	12 Months Ended
	Dec. 31, 2015	Jun. 30, 2015
Nodaway Valley Bank: $350,000 line-of-credit agreement expiring on January 4, 2017, with a variable interest rate at prime but not less than 5%
Debt Instrument [Line Items]
Line-of-credit agreement, amount	$ 350,000	$ 350,000
Interest rate, description	variable interest rate	variable interest rate
Line of Credit Facility, Expiration date	Jan. 04, 2017	Jan. 04, 2017
Line of credit facility, Basis for measurement	Prime	Prime
Interest rate	5.00%	5.00%
Ford Credit: $468 monthly payments, interest of 2.9%; final payment due January 2019, secured by a vehicle
Debt Instrument [Line Items]
Notes payable, periodic payment	$ 468	$ 468
Notes payable, frequency	monthly	monthly
Interest rate	2.90%	2.90%
Ford Credit: $705 monthly payments, interest of 5.8%; final payment due October 2021, secured by a vehicle
Debt Instrument [Line Items]
Notes payable, periodic payment	$ 705	$ 705
Notes payable, frequency	monthly	monthly
Interest rate	5.80%	5.80%
Ford credit : $364 monthly payments, interest of 3.5%; final payment due December 2020, secured by a vehicle
Debt Instrument [Line Items]
Notes payable, periodic payment	$ 364	$ 364
Notes payable, frequency	monthly	monthly
Interest rate	3.50%	3.50%
Ford Credit: $517 monthly payments, interest of 0%; secured by a vehicle
Debt Instrument [Line Items]
Notes payable, periodic payment	$ 517	$ 517
Notes payable, frequency	monthly	monthly
Interest rate	0.00%	0.00%

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NOTES PAYABLE - Future minimum payments (Details 1) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Notes Payable [Abstract]
2016	$ 15,107
2017	15,793
2018	16,481
2019	11,974
2020	12,098
Thereafter	6,863
Total	$ 78,316	$ 22,301

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Details) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash Paid for:
Interest	$ 3,014	$ 1,956
Income Taxes	45,368	28,504
Noncash Transactions:
Financing of New Vehicles	$ 62,681	21,228
Sales Tax on New Vehicle in Accounts Payable		$ 3,467