The Company’s notes payable consists of:

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s long-term debt consists of:

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

The Company follows the provisions for uncertain tax positions as addressed in Financial Accounting Standards BoardAccounting Standards Codification 740-10. The Company recognized no liability for unrecognized tax benefits at MarchDecember 31, 2016. The Company has no material tax positions at MarchDecember 31, 2016 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 MarchDecember 31, 2016. The Company’s federal income tax returns for the fiscal years ended 2013, 2014, 2015 and 20152016 are subject to examination by the Internal Revenue Service taxing authority.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required regarding customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The guidance will initially be applied retrospectively using one of two methods. The standard will be effective for the entity for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted beginning for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

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. The update is effective as of January 1, 2017,for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

In February 2016, the FASB issued amended guidance for the treatment of leases. The guidance requires lessees to recognize a right-of-use asset and a corresponding lease liability for all operating and finance leases with lease terms greater than one year. The guidance also requires both qualitative and quantitative disclosures regarding the nature of the entity’s leasing activities. The guidance will initially be applied using a modified retrospective approach. The amendments in the guidance are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the amended lease guidance on the its consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material effect on the financial position, results of operations or cash flows.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In November 2015, the FASB issued ASC Update No. 2015-17, “Balance Sheet Classification of Deferred Taxes” as part of its simplification initiatives. This update requires deferred tax liabilities and assets to be classified as non-current on the consolidated condensed balance sheet for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. An entity can elect to adopt prospectively or retrospectively to all periods presented. We do not expect the adoption of ASU 2014-152015-17 to have a material effect on our financial position, results of operations or cash flows.

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’sCompany's consolidated financial statements.

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.

RESULTS OF OPERATIONS - Three Months Ended December 31, 2016 Compared to Three Months Ended December 31, 2015, and Six Months Ended December 31, 2016 Compared to Six Months Ended December 31, 2015

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:

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

AND RESULTS OF OPERATIONS

NET SALES

Net sales decreased $125,208 or 10% for the three months ended December 31, 2016 to $1,153,469 compared to $1,278,677 for the three months ended December 31, 2015. Gross sales for Chase Candy increased $64,909 to $497,792 for the three months ended December 31, 2016, compared to $432,883 for the three months ended December 31, 2015. Gross sales for Seasonal Candy decreased $199,378 to $665,658 for the three months ended December 31, 2016, compared to $865,036 for the three months ended December 31, 2015. Gross sales for other sales for the Company increased $3,291 to $7,143 for the three months ended December 31, 2016, compared to $3,852 for the three months ended December 31, 2015. Sales returns and allowances for the Company decreased $5,970 to $17,124 for the three months ended December 31, 2016, compared to $23,094 for the three months ended December 31, 2015.

The 15% increase in gross sales of Chase Candy of $64,909 for the three months ended December 31, 2016 over the same period ended December 31, 2015, is primarily due to the net effect of the following: 1) increased sales of the L212 Mini Mash division by approximately $31,000 versus the same period a year ago primarily due to increased orders from existing customers; 2) increased sales of L276 Cherry Mash Distributor Pack division by approximately $19,000 versus the same period a year ago primarily due to increased orders from existing customers; 3) increased sales of L200 Cherry Mash Merchandisers division by approximately $9,000 versus the same period a year ago due to increased orders from existing customers; and 4) increased sales of L278 Mini Mash division by approximately $7,000 versus the same period a year ago due to increased orders from existing customers.

The 23% decrease in gross sales of Seasonal Candy of $199,378 for the three months ended December 31, 2016 over the same period ended December 31, 2015, is primarily due to the net effect of the following: 1) a decrease in the generic seasonal division netting approximately $180,000 versus the same period a year ago, primarily due to existing customers decreasing orders; and 2) decreased orders in the bulk seasonal division netting approximately $44,000, due to decreased sales from existing customers; offset by 3) increased volume from various customers in the clamshell seasonal division netting approximately $24,000 versus the same period a year ago, primarily due to existing customers increasing orders.

Net sales decreased $326,123 or 14% for the six months ended December 31, 2016 to $2,015,657 compared to $2,341,780 for the six months ended December 31, 2015. Gross sales for Chase Candy decreased $5,191 to $919,677 for the six months ended December 31, 2016, compared to $924,868 for the six months ended December 31, 2015. Gross sales for Seasonal Candy decreased $332,344 to $1,112,720 for the six months ended December 31, 2016, compared to $1,445,064 for the six months ended December 31, 2015. Gross sales for other sales for the Company increased $2,604 to $7,182 for the six months ended December 31, 2016, compared to $4,578 for the six months ended December 31, 2015. Sales returns and allowances for the Company decreased $8,808 to $23,922 for the six months ended December 31, 2016, compared to $32,730 for the six months ended December 31, 2015.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

AND RESULTS OF OPERATIONS

NET SALES (CONTINUED)

The 1% decrease in gross sales of Chase Candy of $5,191 for the six months ended December 31, 2016 over the same period ended December 31, 2015, is primarily due to the following: 1) decreased sales of the L278 Mini Mash division by approximately $15,000 versus the same period a year ago primarily due to existing customers decreasing orders; offset by 2) increased sales of the L276 Cherry Mash Distributor Pack division by approximately $11,000 versus the same period a year ago primarily due to existing customers increasing orders.

The 23% decrease in gross sales of Seasonal Candy of $332,344 for the six months ended December 31, 2016 over the same period ended December 31, 2015, is primarily due to the net effect of the following: 1) decreased orders from three customers in the generic seasonal division netting approximately $328,000 versus the same period a year ago, primarily due to customers decreasing orders; 2) decreased orders in the bulk seasonal division netting approximately $30,000 due to decreased sales from existing customers; offset by 3) increased volume from various customers in the clamshell seasonal division netting approximately $25,000 versus the same period a year ago, primarily due to customers increasing orders.

COST OF SALES

The cost of sales increased $10,348 to $931,235 or 81% of related revenues for the three months ended December 31, 2016, compared to $920,887 or 72% of related revenues for the three months ended December 31, 2015. The 1% increase in cost of sales of $10,348 is primarily due to a 15% increase in the price of peanuts offset by a 4% decrease in the price of sugar and the 10% decrease in net sales of $125,208.

The cost of sales decreased $161,144 to $1,603,126 or 80% of related revenues for the six months ended December 31, 2016, compared to $1,764,270 or 75% of related revenues for the six months ended December 31, 2015. The 9% decrease in cost of sales of $161,144 is primarily due to a 14% decrease in net sales of $326,123, offset by a 10% increase in the price of corn syrup and an 8% increase in the price of peanuts.

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.

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, 2016 decreased $24,728 to $132,229, which is 11% of sales, compared to $156,957, or 12% of sales for the three months ended December 31, 2015. The decrease of $24,728 in selling expenses for the three months ended December 31, 2016 is primarily due to lower promotions expense and lower commission expense. Promotions expense, which are paid to customers for various marketing reasons, decreased $13,291 to $27,023 for this period from $40,314 for the three months ended December 31, 2015. Commission expense, which are based on sales, decreased $9,122 to $39,695 for this period from $48,817 for the three months ended December 31, 2015.

Selling expenses for the six months ended December 31, 2016 decreased $48,238 to $231,495, which is 11% of sales, compared to $279,733 or 12% of sales for the six months ended December 31, 2015. The decrease of $48,238 in selling expenses for the six months ended December 31, 2016 is primarily due to lower promotions expense, lower commission expense, and lower depreciation expense for the period. Promotions expense decreased $21,273 to $44,098 for this period from $65,371 for the six months ended December 31, 2015. Commission expense decreased $17,392 to $73,010 for this period from $90,402 for the six months ended December 31, 2015 primarily due to the decrease in sales. Depreciation expense decreased $6,667 to $21,312 for this period from $27,979 primarily due to the decrease in purchases of property and equipment during this period opposed to the six months ended December 31, 2015.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended December 31, 2016 decreased $8,327 to $86,909 and 8% of sales, compared to $95,236 or 7% of sales for the three months ended December 31, 2015. The decrease of $8,327 in general and administrative expenses for the three months ended December 31, 2016 is primarily due to lower professional fees offset by higher insurance expense and higher payroll expense. Professional fees decreased $16,696 to $14,970 for this period from $31,666 for the three months ending December 31, 2015 due to lower audit fees versus the same period a year ago. Insurance expense increased $4,241 to $28,466 for this period from $24,225 for the three months ending December 31, 2015 due to employees changing their enrollment in insurance plans. Payroll expense increased $2,631 to $7,888 for this period from $5,257 for the three months ending December 31, 2015 due to reclassifying payroll expenses that were previously charged to cost of sales to general and administrative payroll expenses as roles in the company changed from the previous period.

General and administrative expenses for the six months ended December 31, 2016 increased $12,368 to $222,655 or 11% of sales, compared to $210,287 or 9% of sales for the six months ended December 31, 2015. The increase of $12,368 in general and administrative expenses for the six months ended December 31, 2016 is primarily due to higher insurance expense and higher payroll tax expense. Insurance expense increased $9,331 to $55,913 for this period from $46,582 for the six months ending December 31, 2015 due to employees changing their enrollment in insurance plans. Payroll tax expense increased $3,702 to $15,296 for this period from $11,594 for the six months ending December 31, 2015 due to reclassifying payroll expenses that were previously charged to cost of sales to general and administrative payroll expenses as roles in the company changed from the previous period.

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 $1,412 for the three months ended December 31, 2016 to $(3,732), compared to $(2,320) for the three months ended December 31, 2015 primarily due to an increase of $1,399 in interest expense.

Other income (expense) decreased by $1,958 for the six months ended December 31, 2016 to $(4,173), compared to $(2,215) for the six months ended December 31, 2015 primarily due to an increase of $1,943 in interest expense.

PROVISION (BENEFIT) FOR INCOME TAXES

The Company recorded income tax benefit for the three months ended December 31, 2016 of $(153) as compared to income tax expense of $39,581 for the three months ended December 31, 2015. The Company recorded income tax benefit for the six months ended December 31, 2016 of $(17,381) as compared to income tax expense of $37,701 for the six months ended December 31, 2015. The net income tax expense (benefit) recorded for the three and six months ended December 31, 2016 is primarily due to recognizing income taxes in relation to the profitability of operations.

NET INCOME (LOSS)

The Company reported net loss for the three months ended December 31, 2016 of $(483), compared to net income of $72,686 for the three months ended December 31, 2015. This decrease of $73,169 is explained above. The Company reported net loss for the six months ended December 31, 2016 of $(28,411), compared to net income of $68,938 for the six months ended December 31, 2015. This decrease of $97,349 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended December 31, 2016 and 2015, 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, 2016 and 2015, 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

AND RESULTS OF OPERATIONS

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended December 31, 2016 was $(32,501) which is a decrease of $73,169 as compared to the net income applicable to common stockholders for the three months ended December 31, 2015 of $40,668.

Net loss applicable to common stockholders for the six months ended December 31, 2016 was $(92,447) which is a decrease of $97,349 as compared to the net income applicable to common stockholders for the six months ended December 31, 2015 of $4,902.

LIQUIDITY AND CAPITAL RESOURCES

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

Management has no material commitments for capital expenditures during the remainder of fiscal 2017. The $305,566 of cash provided by operating activities is fully detailed in the condensed consolidated statement of cash flows on page five. The $17,245 of cash used in investing activities is the purchase of equipment used during the manufacturing process. The $7,648 of cash used in financing activities is the principal payments on equipment and vehicle loans. At December 31, 2016, 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

RESULTS OF OPERATIONS - Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015, and Nine Months Ended March 31, 2016 Compared to Nine Months Ended March 31, 2015

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:

NET SALES

Net sales increased $25,840 or 6% for the three months ended March 31, 2016 to $476,676 compared to $450,836 for the three months ended March 31, 2015. Gross sales for Chase Candy increased $19,142 to $468,975 for the three months ended March 31, 2016, compared to $449,833 for the three months ended March 31, 2015. Gross sales for Seasonal Candy increased $3,263 to $13,969 for the three months ended March 31, 2016, compared to $10,706 for the three months ended March 31, 2015. Gross sales for other sales for the Company decreased $605 to $662 for the three months ended March 31, 2016, compared to $1,267 for the three months ended March 31, 2015. Sales returns and allowances for the Company decreased $4,040 to $6,930 for the three months ended March 31, 2016, compared to $10,970 for the three months ended March 31, 2015.

The 4% increase in gross sales of Chase Candy of $19,142 for the three months ended March 31, 2016 over the same period ended March 31, 2015, is primarily due to the net effect of the following: 1) increased sales of the L212 Mini Mash division by approximately $31,000 versus the same period a year ago primarily due to one customer increasing orders; offset by 2) decreased sales in the L276 Cherry Mash Bar division by approximately $6,000 due to two customers decreasing orders; and 3) decreased sales in the L278 Mini Mash division by approximately $6,000 due to one customer decreasing orders.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NET SALES (CONTINUED)

The 30% increase in gross sales of Seasonal Candy of $3,263 for the three months ended March 31, 2016 over the same period ended March 31, 2015, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $8,000 due to sales to one new customer; offset by 2) decreased sales in the bulk seasonal division by approximately $3,000 versus the same period a year ago primarily due to decreased orders from one customer; and 3) decreased sales in the clamshell seasonal division by approximately $2,000 versus the same period a year ago primarily due to decreased sales to two customers.

Net sales increased $84,439 or 3% for the nine months ended March 31, 2016 to $2,818,456 compared to $2,734,017 for the nine months ended March 31, 2015. Gross sales for Chase Candy decreased $94,798 to $1,393,843 for the nine months ended March 31, 2016, compared to $1,488,641 for the nine months ended March 31, 2015. Gross sales for Seasonal Candy increased $183,300 to $1,459,033 for the nine months ended March 31, 2016, compared to $1,275,733 for the nine months ended March 31, 2015. Gross sales for other sales for the Company decreased $4,251 to $5,240 for the nine months ended March 31, 2016, compared to $9,491 for the nine months ended March 31, 2015. Sales returns and allowances for the Company decreased $188 to $39,660 for the nine months ended March 31, 2016, compared to $39,848 for the nine months ended March 31, 2015.

The 6% decrease in gross sales of Chase Candy of $94,798 for the nine months ended March 31, 2016 over the same period ended March 31, 2015, is primarily due to the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $94,000 versus the same period a year ago primarily due to three customers decreasing orders and 2) various other fluctuations netting to a decrease of approximately $1,000.

The 14% increase in gross sales of Seasonal Candy of $183,300 for the nine months ended March 31, 2016 over the same period ended March 31, 2015, is primarily due to the net effect of the following: 1) increased sales in the generic seasonal product division by approximately $221,000 due to increased orders from two customers offset by decreased orders of another customer; 2) increased sales in the bulk seasonal division by approximately $31,000 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 $69,000 versus the same period a year ago primarily due to decreased orders from four customers.

CHASE GENERAL CORPORATION AND SUBSIDIARY

COST OF SALES

The cost of sales increased $80,450 to $437,017 or 92% of related revenues for the three months ended March 31, 2016, compared to $356,567 or 79% of related revenues for the three months ended March 31, 2015. The 23% increase in cost of sales of $80,450 is primarily due to the net impact of a 6% increase in net sales of $25,840, a 4% increase in the price of sugar, a 1% increase in the price of chocolate, and a 8% increase in the price of corn syrup offset by a 10% decrease in the price of peanuts.

The cost of sales increased $283,593 to $2,201,287 or 78% of related revenues for the nine months ended March 31, 2016, compared to $1,917,694 or 70% of related revenues for the nine months ended March 31, 2015. The 15% increase in cost of sales of $283,593 is primarily due to the net impact of a 3% increase in net sales of $84,439, a 4% increase in the price of sugar, a 1% increase in the price of chocolate, and a 8% increase in the price of corn syrup offset by a 10% decrease in the price of peanuts. Due to volatility in the regions where these raw materials are grown, management anticipates the prices of these raw materials to continue to fluctuate primarily based on supply and demand. Primarily due to the fluctuations in these raw material prices, gross margins have decreased due to unchanged sales prices during the period. Management intends to make sales price adjustments in the future to correspond with changes in raw material prices.

SELLING EXPENSES

Selling expenses for the three months ended March 31, 2016 decreased $816 to $73,854, which is 15% of sales, compared to $74,670, or 17% of sales for the three months ended March 31, 2015. The decrease of $816 in selling expenses for the three months ended March 31, 2016 is primarily due to lower automobile expense and premium promotions offset by higher commissions, advertising expense, and customer shows expense. Premium promotions, which are paid to customers for various marketing reasons, decreased $3,149 to $545 for this period from $3,694 for the three months ended March 31, 2015. Automobile expense decreased $2,516 to $2,011 for this period from $4,527 for the three months ended March 31, 2015, primarily due to falling gasoline prices and the recent purchase of new vehicles. Commissions increased $1,624 to $12,839 for this period from $11,215 for the three months ended March 31, 2015, primarily due to a change in the mix of sales. Advertising increased $1,550 to $2,150 for this period from $600 for the three months ended March 31, 2015, primarily due to timing of regular invoices. Customer shows expense increased $1,830 to $4,534 for this period from $2,704 for the three months ended March 31, 2015 primarily due to timing of customer shows.

Selling expenses for the nine months ended March 31, 2016 increased $14,513 to $353,587, which is 13% of sales, compared to $339,074 or 12% of sales for the nine months ended March 31, 2015. The increase of $14,513 in selling expenses for the nine months ended March 31, 2016 is primarily due to higher commissions expense and depreciation expense, offset by lower automobile expenses for the period. Commission expense increased $10,900 to $103,241 for this period from $92,341 for the nine months ended March 31, 2015 primarily due to a change in the mix of sales. Depreciation expense increased $7,406 to $39,396 for this period from $31,990 primarily due to the purchases of property and equipment of $84,303 during the nine months ended March 31, 2016. Automobile expense decreased $6,080 to $8,917 for this period from $14,997 primarily due to falling gasoline prices and the recent purchase of new vehicles.

CHASE GENERAL CORPORATION AND SUBSIDIARY

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended March 31, 2016 increased $2,857 to $86,747 and 18% of sales, compared to $83,890 or 19% of sales for the three months ended March 31, 2015. The increase of $2,857 in general and administrative expenses for the three months ended March 31, 2016 is primarily due to higher office supplies and professional fees offset by lower insurance expense. Professional fees increased $1,081 to $12,975 for this period from $11,894 for the three months ending March 31, 2015 due to timing of regular invoices. Office expense increased $4,826 to $6,350 for this period from $1,524 for the three months ending March 31, 2015 due to a modification in computer software. Insurance expense decreased $3,549 to $26,257 for this period from $29,806 for the three months ending March 31, 2015 due to employees changing their enrollment in insurance plans.

General and administrative expenses for the nine months ended March 31, 2016 increased $1,310 to $297,034 or 11% of sales, compared to $295,724 or 11% of sales for the nine months ended March 31, 2015. The decrease of $1,310 in general and administrative expenses for the nine months ended March 31, 2016 is primarily due to higher professional fees and office expense offset by lower insurance expense. Professional fees increased $20,188 to $99,312 for this period from $79,124 for the nine months ending March 31, 2015 due to timing of regular invoices. Office expense increased $5,748 to $9,705 for this period from $3,957 for the three months ending March 31, 2015 due to a modification in computer software. Insurance expense decreased $25,265 to $72,839 for this period from $98,104 for the nine months ending March 31, 2015 due to employees changing their enrollment in insurance plans.

OTHER INCOME (EXPENSE)

Other income (expense) decreased by $782 for the three months ended March 31, 2016 to $(281), compared to $501 for the three months ended March 31, 2015 primarily due to an increase of $765 in interest expense.

Other income (expense) increased by $13,487 for the nine months ended March 31, 2016 to $(2,498), compared to $10,989 for the nine months ended March 31, 2015 primarily due to an increase of $1,825 in interest expense and a decrease of $11,662 in miscellaneous income. The decrease in miscellaneous income is primarily due to these unusual items that occurred during nine months ended March 31, 2015: 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

PROVISION (BENEFIT) FOR INCOME TAXES

The Company recorded income tax benefit for the three months ended March 31, 2016 of $(42,708) as compared to income tax benefit of $(18,397) for the three months ended March 31, 2015. The Company recorded income tax benefit for the nine months ended March 31, 2016 of $(5,007) as compared to income tax expense of $76,579 for the nine months ended March 31, 2015. The net income tax expense (benefit) recorded for the three and nine months ended March 31, 2016 is primarily due to recognizing income taxes related to current net income or loss.

NET INCOME (LOSS)

The Company reported a net loss for the three months ended March 31, 2016 of $(78,515), compared to a net loss of $(34,803) for the three months ended March 31, 2015. This earnings decrease of $43,712 is explained above. The Company reported net loss for the nine months ended March 31, 2016 of $(9,579), compared to net income of $142,437 for the nine months ended March 31, 2015. This earnings decrease of $152,016 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended March 31, 2016 and 2015, 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 $96,054 for the nine months ended March 31, 2016 and 2015, which reflects additional preferred stock dividends in arrears on the Company’s Series A and Series B $5 par value preferred stock and its Series A and Series B $20 par value preferred stock.

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended March 31, 2016 was $(110,533) which is a decrease in earnings of $43,712 as compared to the net loss for the three months ended March 31, 2015 of $(66,821).

Net income (loss) applicable to common stockholders for the nine months ended March 31, 2016 was $(105,633) which is a decrease in earnings of $152,016 as compared to the net income for the nine months ended March 31, 2015 of $46,383.

CHASE GENERAL CORPORATION AND SUBSIDIARY

LIQUIDITY AND CAPITAL RESOURCES

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

Management has no material commitments for capital expenditures during the remainder of fiscal 2016. The $230,458 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 $10,361 of cash used in financing activities is the principal payments on equipment and vehicle loans. At March 31, 2016, 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

Not applicable to a smaller reporting company.

(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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART II. OTHER INFORMATION

None.

Not applicable to a smaller reporting company.

None

Not applicable.

None.None

CHASE GENERAL CORPORATION AND SUBSIDIARY

PART II. OTHER INFORMATION (CONTINUED)

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.