ITEM 1        BUSINESS

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

Principal Products and Methods of Distribution

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

Chase General Corporation

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2015

Principal Products and Methods of Distribution (Continued)

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

The Champion Creme Drops, Frosted Pretzels and Jelly Candies are not produced by the Company, but repackaged for wholesale distribution.

Competition and Market Area

The Chase Candy Products division bars are sold primarily to wholesale candy and tobacco jobbing houses, grocery accounts, vendors and repackers. “Cherry Mash” bars are marketed in the Midwest region of the United States. For both the years ended June 30, 20132015 and 2012,2014, this division accounted for 57% and 53%, respectively,61% of the consolidated sales of Dye Candy Company.

The Seasonal Candy Products division isis. sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For both the years ended June 30, 20132015 and 2012, the2014, this division accounted for 43% and 47%, respectively,39% of the consolidated sales of Dye Candy Company.

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

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

Chase General Corporation

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2015

Competition and Market Area (Continued)

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

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

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

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

Research and Development

The Company has not developed any new products during the fiscal years endingended June 30, 20132015 and 2012.

Raw Materials and Principal Suppliers

Raw materials and packaging materials are produced on a national basis with products coming from locations throughout the United States. Raw materials and packaging materials are generally widely available, depending on common market influences.

Chase General Corporation

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2015

Patents and Trademarks

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

Employees

As of June 30, 2013,2015, the Company had 1721 full time employees. This expands to approximately 31 full time personnel during the busy production months of August through December.

Environmental Protection and the paragraph below and toEffect on Probable Government Regulations on the Business

To the best of management’s knowledge, the Company is presently in compliance with all environmental laws and regulations and does not anticipate any future expenditures in this regard.

Need for the Public Building CommissionGovernment Approval of Chicago (PBC) in August 2012, alleging that the Company previously owned and operated a manufacturing facility in Chicago and that the Company is a liable party for environmental response costs incurred by the PBC in the amount of $822,642.  It is the opinion of Management, after reviewing the letter with counsel, that further information is required to determine the validity of the claim, the likelihood of an unfavorable outcome to the Company, and an amount of potential loss to the Company, if any, at all.  Management believes significant questions need to be resolved and answered before completing its assessment of the validity of the claim.  In the event that a loss were to be incurred by the Company in connection with this claim, the loss would be material.

The Company is required to meet the FDAFood and Drug Administration guidelines for proper labeling of its products and for contents of its products.

Reports to Security Holders

The Registrant is not required to send the annual audit report, annual 10-K report and quarterly 10-Q reports to security holders since the stock is not actively traded. These reports are available at the Registrant’s registered office or they are available on-line on the SEC’s EDGAR website.

The net book value of our premises, land and office, and production equipment was $361,825totaled $360,763 and $448,616, respectively, for fiscal years ending$303,045 at June 30, 20132015 and 2012.

We believe both facilities are adequately covered by insurance.

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

As of September 18, 2013,21, 2015, the latest practicable date, the approximate number of record holders of common stock was 1,869, including individual participants in security listings.

Overview

During fiscal year ended 2013,2015, the Company’s net sales were $3,190,787,$3,223,939, as compared to net sales of $2,953,665$3,243,951 for fiscal year ended June 30, 2012.2014. This 8.0% increase1% decrease in volume combined with a 2.9% decrease1% increase in cost of sales and a 10% decrease in operating expenses resulted in increased profitability during the year, as reflected in the net income before income taxesfrom operations of $124,617$190,390 for fiscal year 20132015 compared to net loss of $151,954$157,330 for fiscal year 2012.2014. Working capital increased $136,627$110,936 to $560,106$732,063 for the current year from $423,479$621,127 for the fiscal year 20122014 due primarily to an increase in inventory, trade receivables, increase in inventories, decreases in accrued expenses, and cash offset by a decreasedecreases in current maturities of notes payable offset by decreases in cash, decreases in prepaid expenses, increases in accounts payable, and accountsincreases in income taxes payable.

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

Critical Accounting Policies and Estimates

General

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical Accounting Policies and Estimates (Continued)

General (Continued)

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

There have been no other events that have occurred subsequent to June 30, 2013,2015, through the date of filing this form, that would require disclosure in the Form 10-K or would be required to be recognized in the consolidated financial statements as of or for the year ended June 30, 2013.

Revenue Recognition

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

Trade Receivables

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

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

Inventories

Inventories are carried at the “lower of cost or market value,” with cost being determined on the “first-in, first-out” basis of accounting. Finished goods and goods in process include a provision for manufacturing overhead.

Impairment of Long-Lived Assets

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

Results of Operations

The following table sets forth for the years indicated, the percentage of net sales of certain items in the Company’s consolidated statements of operationsincome for each of the fiscal years ended June 30, 20132015 and 2012,2014, respectively:

The 15.4% increase1.7% decrease in gross sales of Chase Candy of $247,312$34,292 for the year ended June 30, 20132015 over the same period ended June 30, 2012,2014, is primarily due to the net effect of some customers decreasing orders slightly offset by other customers increasing orders. Sales for Chase Candy consisted of the following: 1) increased sales offollowing divisions: L276 Cherry Mash Bar of approximately $246,000 to three customers; 2) increased sales of the 24/12oz. bag of Bite Size Mini Mash by approximately $28,000 primarily due to the timing of Halloween orders; 3) overall decreased sales toDistributor Pack division, Cherry Mash Merchandisers of approximately $1,000; 4) overall decreased sales of the Keg ofdivision, L260 Changemaker Jar division, L279/L299 Bulk Mini Mash of approximately $4,000; 5) overall decreased sales of bulkdivision, and L278/L212 Mini Mash division. While sales did fluctuate slightly due to changes in volume and an average 9.5% price increase during the year ended June 30, 2015 over the same period ended June 30, 2014 inside those divisions, the divisions of approximately $7,000 and 6) overall decreased internet salesChase Candy remained unchanged. While there were changes in the mix of various Cherry Mash products sold, there were no major changes in the types of approximately $12,000.

Chase General Corporation

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2015

Fiscal Year 2015 Compared to Fiscal Year 2014 (Continued)

Net Sales (Continued)

The 1.9%.8% decrease in gross sales of Seasonal Candy of $26,781$10,017 for the year ended June 30, 20132015 over the same period ended June 30, 2012,2014, is primarily due to the following:  1) decreasednet effect of some customers decreasing orders slightly offset by other customers increasing orders. Sales for Chase Candy consisted of the following divisions: bulk seasonal division, clamshell seasonal division, and the generic seasonal division. While sales did fluctuate slightly due to changes in volume and an average 2.8% price increase during the year ended June 30, 2015 over the same period ended June 30, 2014 inside those divisions, the divisions of bulk segment product of $4,000; 2) decreased salesSeasonal Candy remained unchanged. While there were changes in the clamshell seasonal product categorymix of approximately $9,000; and 3) decreased sales from severalproducts sold, there were no major changes in the types of customers in the generic segmentdivisions of approximately $17,000.

The 2.9% decrease1.3% increase in cost of sales of $67,498$29,945 is primarily due toincreased labor costs, a 53% decrease5% increase in the raw material costsmaterials cost of peanuts compared to the same period ended June 30, 2012.  The decrease in cost of sales was partially2014 offset by the 8.0% increase inan decrease of .6% of net sales of $237,122.sales. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand.

Labor costs, including wages, vacation pay and payroll taxes of $439,282$504,973 for the year ended June 30, 2013,2015, increased 12.8%15.2% or $49,700$66,492 as compared to $389,582$438,481 for the period ending 2012.  The increase wasended 2014 primarily due to increased production.

Freight expense, including shipping and handling costs on goods shipped of $187,778 for the year ended June 30, 2015, increased 6.7% or $11,792 as compared to $175,986 for the period ended 2014 due primarily to an increase in fuel costs and an increase in refrigeration costs due to weather conditions. 

Gross Profit on Sales

The gross profit increased 47.6%decreased 5.0% or $304,620$49,957 to $944,787 increasing$956,156 decreasing to 29.6%29.7% of related net sales for the year ended June 30, 2013,2015, as compared to $640,167$1,006,113 or 21.67%31.0% of related net sales for the year ended June 30, 2012,2014, as a result of the overall increasedecrease in net sales and decreaseincrease in cost of sales.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2015

Fiscal Year 2015 Compared to Fiscal Year 2014 (Continued)

Selling Expenses

Selling expenses for the year ended June 30, 20132015 increased $16,985$25,675 to $406,247,$423,802, which is 12.7%13.2% of net sales, compared to $389,262$398,127 or 13.1%12.3% of net sales for the year June 30, 2012.2014. This increase is primarily due to higher premium promotions being paid and higher customer show expenses for the period in an effort to increase sales volume.depreciation expense. Premium promotions, which are paid to customers for various marketing reasons, increased $8,844 or 14.3%$10,336 to $70,833$72,744 for the year ended June 30, 2013,2015, as compared to $61,989 for the year ending June 30, 2012.  Customer show expense increased $6,122 or 376.7% to $7,747$62,408 for the year ended June 30, 2013,2014. Depreciation expense increased $7,041 to $40,542 for the year ended June 30, 2015, as compared to $1,625$33,501 for the year endingended June 30, 2012.

FOR THE YEAR ENDED JUNE 30, 2015

Fiscal Year 2015 Compared to Fiscal Year 2014 (Continued)

Net Income

Net income for the year ended June 30, 20132015 was $76,017,$140,919, compared to a net lossincome for the year ended June 30, 20122014 of $(100,886).$50,268. This increase of $171,903$90,641 is the result of those items previously discussed above.

The positive cash flow of $101,109$55,681 generated from operations is a result of increasessmall fluctuations in net sales, decreases in operating expenses and the Company continuing to monitor raw material pricing, and when a price increase or decrease is anticipated, adjustments to inventory levels are made accordingly. During the year ended June 30, 2013,2015, sales, net of returns and allowances, increased $237,122decreased $20,012 or 8.0%.6% as compared to the year ended June 30, 2012.2014. Total inventory as of June 30, 20132015 of $509,132$601,896 increased $61,100$106,086 or 13.6%21.4% from the June 30, 20122014 total inventory of $448,032.$495,810. The timing of inventory purchases and collections from customers impact cash flow generated from operations.

Loan payments were $69,245$25,114 and $55,695$67,772 for years ended June 30, 20132015 and 2012,2014, respectively.

Overall cash and cash equivalents increased $10,615decreased $78,231 to $28,564$84,204 at June 30, 20132015 from $17,949$162,435 at June 30, 2012.

In order to maintain funds to finance operations and meet debt obligations, it is the intention of management to continue its efforts to expand the present market area and increase sales to its customers. Management also intends to continue tight control on all expenditures.

There has been no other material impact from inflation and changing prices on net sales, or on income from continuing operations for the last two fiscal years.