UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 20162017

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)

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. YesxNo¨

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). YesxNo¨

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

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes¨   Nox

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¨Nox

As of November 9, 2016,12, 2017, 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 three months ended September 30, 20162017

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Chase General Corporation and Subsidiary

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of the unaudited

condensed consolidated financial statements.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as “Chase”, “we”, “our”, and “us”) at June 30, 20162017 has been condensed from audited consolidated financial statements at that date. The condensed consolidated financial statements as of and for the three months ended September 30, 20162017 and for the three months ended September 30, 20152016 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, 2016.2017. The results of operations for the three months ended September 30, 20162017 and cash flows for the three months ended September 30, 20162017 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2017.2018. 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 September 30, 2016,2017, through the date of filing this form, that would require disclosure in this Form 10-Q or would be required to be recognized in the condensed consolidated financial statements as of or for the three month period ended September 30, 2016.2017.

The earnings (loss) per share were computed on the weighted average of outstanding common shares during the period.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Diluted earnings per share are calculated by including contingently issuable shares with the weighted average shares outstanding.

The contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share. Cumulative Preferred Stock dividends in arrears at September 30, 2017 and 2016 totaled $8,108,896 and 2015 totaled $7,980,824, and $7,852,752, respectively. Total dividends in arrears, on a per share basis, consist of the following:

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.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s long-term debt consists of:

Future minimum payments for the twelve months ending September 30 are:

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 September 30, 2016.2017. The Company has no material tax positions at September 30, 20162017 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company’s federal income tax returns for the fiscal years ended 2014, 2015, 2016 and 20162017 are subject to examination by the IRSInternal Revenue Service (IRS) taxing authority.

In May 2014, the Financial Accounting Standards Board (“FASB”)(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 plans to adopt the new standard on July 1, 2018 on a modified retrospective basis. The Company is finalizing reviews and working on implementing the process, policy and disclosure changes that will go into effect on July 1, 2018. At this time, 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, with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

Chase General Corporation and Subsidiary

NOTES TO CONDENSED CONSOLIDATEDPART I. FINANCIAL STATEMENTS

(UNAUDITED)

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.

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. We do not expect the adoption of ASU 2014-15 to have a material effect on our financial position, results of operations or cash flows.

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 2015-17 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's consolidated financial statements.

Chase General Corporation and SubsidiaryINFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

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 consolidated financial statements.

Recently Adopted Pronouncements

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet, instead of separating deferred taxes into current and noncurrent amounts. During the period ended September 30, 2017, the Company elected to retrospectively adopt ASU 2015-17, resulting in a reclassification reducing both deferred tax assets and deferred tax liabilities by $63,306 on the balance sheet at June 30, 2017. There was no impact on results of operations as a result of the adoption of ASU 2015-17.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," (ASU 2015-11). The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance was effective on July 1, 2017. The adoption of this amendment did not have a material impact on these financial statements.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s financial instruments consist principally of cash and cash equivalents, trade receivables and payables, and notes payable. There are no significant differences between the carrying value and fair value of any of these consolidated financial instruments. As of September 30, 2017, the amount of the Company’s long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to the Company.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

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

AND RESULTS OF OPERATIONS

OVERVIEW

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

The Company’s business, like that of many other confectionary product manufacturers, is seasonal. Historically, the Company has realized more of its revenue 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 September 30, 20162017 Compared with Three Months Ended September 30, 20152016

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

PART I. FINANCIAL INFORMATION

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

AND RESULTS OF OPERATIONS

NET SALES

Net sales decreased $200,915increased $8,242 or 19%1% for the three months ended September 30, 20162017 to $862,188$870,430 compared to $1,063,103$862,188 for the three months ended September 30, 2015.2016. Gross sales for Seasonal Candy decreased $132,966increased $91,076 to $447,062$538,138 for the three months ended September 30, 2016,2017, compared to $580,028$447,062 for 2015.2016. Gross sales for Chase Candy decreased $70,100$72,864 to $421,885$349,021 for the three months ended September 30, 2016,2017, compared to $491,985$421,885 for 2015.2016. Sales returns and allowances for the Company decreased $2,838increased $10,464 to $6,798$17,262 for the three months ended September 30, 2016,2017, compared to $9,636$6,798 for 2015.2016. The Company’s other sales decreased $687increased $494 to $39$533 for the three months ended September 30, 2016,2017, compared to $726$39 for 2015.2016.

The 23% decrease20% increase in gross sales of Seasonal Candy of $132,966$91,076 for the three months ended September 30, 20162017 over the same period ended September 30, 2015,2016, is primarily due to the net effect of the following: 1) decreasedincreased orders from three customers in the genericbulk seasonal division netting approximately $148,000 versus the same period a year ago primarily$40,500 due to two lost customers and one customer decreasing orders; offset byincreased sales to existing customers; 2) increased volume from various customers in the clamshell seasonal division netting approximately $2,000$34,500 versus the same period a year ago primarily due to twoexisting customers increasing orders; 3) increased orders from customers in the bulkgeneric seasonal division netting approximately $14,000$16,000 versus the same period a year ago primarily due to increased salesexisting customer increasing orders; and 4) an approximate 5% average increase to two existing customers.the price of Seasonal Candy products.

The 14%17% decrease in gross sales of Chase Candy of $70,100$72,864 for the three months ended September 30, 20162017 over the same period ended September 30, 2015,2016, is primarily due to the net effect of the following: 1) decreased sales of the L276 Cherry Mash Distributor Pack division by approximately $14,000$68,000 versus the same period a year ago primarily due to decreased orders from two existing customers; 2) decreased sales of L278/L212 Mini Mash division by approximately $40,000$6,000 versus the same period a year ago primarily due to decreased orders from four existing customers; and 3) decreased sales of L100, L200, SK436, and SK2100 Cherry Mash Merchandisers division by approximately $17,000$6,000 versus the same period a year ago due to decreased orders from fiveexisting customers; offset by 4) increased sales in the L279 and L299 Bulk Mini Mash division by approximately $8,000 versus the same period a year ago due to increased orders from existing customers.

COST OF SALES

The cost of sales decreased $171,492$10,799 to $671,891,$661,092, or 78%76% of related sales for the three months ended September 30, 20162017 compared to $843,383,$671,891, or 79% of related sales for the three months ended September 30, 2015.2016.

The 20%2% decrease in cost of sales of $171,492$10,799 is primarily due to the 19%a decrease in net salesdirect labor of $200,915,approximately $41,000 due to less temporary labor being hired and shorter hours for the temporary labor that was hired and a 4%2% decrease in the raw material costquantity of sugar,Chase Candy and a 3% decrease in the raw material cost of chocolateSeasonal Candy divisions. This was offset by a 20%an 8% increase in the raw material cost of corn syrup, and a 1%4% increase in the raw material cost of peanuts.peanuts, and a 1% decrease in the raw material cost of chocolate. 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

PART I. FINANCIAL INFORMATION

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

AND RESULTS OF OPERATIONS

SELLING EXPENSES

Selling expenses for the three months ended September 30, 2016 decreased $23,5102017 increased $13,066 to $99,266,$112,332, which is 12%13% of sales, compared to $122,776$99,266 or 12% of sales for the three months ended September 30, 2015.2016.

The decreaseincrease of $23,510$13,066 in selling expenses for the three months ended September 30, 20162017 is primarily due to lower commissions expense for the period, lowerhigher promotions expense and commissions expense offset by lower truck and automobile depreciation expense. CommissionPromotions expense decreased $8,270increased $11,943 to $33,315$29,018 for this period from $41,585$17,075 for the three months ended September 30, 20152016 primarily due to the decrease in net sales. Promotions expense decreased $7,982 to $17,075 for this period from $25,057 for the three months ended September 30, 2015 primarily due to a decreasean increase in net sales that have a bill-back allowance. Truck and automobile depreciationCommission expense decreased $2,425increased $2,490 to $10,656$35,805 for this period from $13,081$33,315 for the three months ended September 30, 20152016 primarily due to the increase in net sales. Truck expense decreased $1,195 to $1,675 for this period from $2,870 for the three months ended September 30, 2016 primarily due to less shipments of that asset class placed in service ingoods to the 2016 period.local warehouse.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended September 30, 20162017 increased $20,695$11,290 to $135,746$147,036 and increased to 16%17% of sales, compared to $115,051$135,746 or 11%16% of sales for the three months ended September 30, 2015.2016. The increased costs are primarily because of an increase in professional fees, miscellaneous generalwebsite expense and insurance expense offset by a decrease in miscellaneous general expense. Professional feesWebsite expense increased $9,089$12,263 to $63,760$14,336 for this period from $54,671$2,073 for the three months ended September 30, 2017 primarily due to redesigning the website for the 100^th anniversary of the Cherry Mash. Insurance expense increased $4,037 to $31,484 for this period from $27,447 for the three months ended September 30, 2017 primarily due to an increase in the health insurance premiums partially paid by the Company. Miscellaneous general expense decreased $5,797 to $2,266 for this period from $8,063 for the three months ended September 30, 2017 primarily due to a non-recurring $6,000 expense occurring in the three months ended September 30, 2016.

OTHER INCOME (EXPENSE)

Other income (expense) decreased by $1,168 for the three months ended September 30, 2017 to $(1,608) compared to $(440) for the three months ended September 30, 2016 primarily due to an increase in fees. Miscellaneous generalinterest expense increased $5,180 to $8,063 for this period from $2,883of $1,163.

INCOME TAX EXPENSE (BENEFIT)

The Company recorded a tax expense for the three months ended September 30, 2016 primarily due2017 of $5,209 as compared to a non-recurring $6,000 expense occurring in the period. Insurance expense increased $5,090 to $27,447 for this period from $22,357tax benefit of $(17,228) for the three months ended September 30, 2016 primarily due to a more employees accepting health insurance coverage.

OTHER INCOME (EXPENSE)

Other income (expense) decreased by $547 for the three months ended September 30, 2016 to $(440) compared to $107 for the three months ended September 30, 2015 primarily due to a increase in interest expense of $544.

INCOME TAX BENEFIT

The Company recorded a tax benefit for the three months ended September 30, 2016 of $17,228 as compared to tax benefit of $1,880 for the three months ended September 30, 2015.2016. The income tax benefitexpense recorded for the three months ended September 30, 20162017 is primarily due to an approximately $25,000 change in estimate relating to the net operating loss beforedeferred tax asset recorded at June 30, 2017 and the amount of income taxes.tax refund actually expected to be received.

NET LOSS

The Company reported a net loss for the three months ended September 30, 20162017 of $27,927,$56,847, compared to net loss of $3,746$27,927 for the three months ended September 30, 2015.2016. This decrease of $24,181$28,920 is explained above.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

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

AND RESULTS OF OPERATIONS

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended September 30, 20162017 and 2015,2016, 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)LOSS APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended September 30, 20162017 was $59,945$88,865 which is a decrease of $24,181$28,920 as compared to the net loss for the three months ended September 30, 20152016 of $35,764.$59,945.

LIQUIDITY AND CAPITAL RESOURCES

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

Management has made no material commitments for capital expenditures during the remainder of fiscal 2017.2018. The $17,247 of cash used in investing activities is the purchase of equipment used during the manufacturing process. The $284,445$367,644 of cash used in operating activities is fully detailed in the condensed consolidated statement of cash flows on page four. The $288,350$326,031 of cash provided by financing activities is primarily due to the receipt of $275,000$330,000 drawn from a line-of-credit, net of principal payments on equipment and vehicle loans. The proceeds from the line-of-credit during the period ended September 30, 2017 were used to finance the buildup of inventories which is reflected in the cash used in operating activities. At September 30, 2016,2017, the Company had $75,000$20,000 remaining on the line-of-credit, which could be utilized to help fund any working capital requirements. Management expects that projected cash flows will enable the Company to pay the full balance on the line-of-credit prior to December 31, 2016.2017.

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 generally be offset by sales price increases, which are not expected to have a significant effect upon demand.

Chase General Corporation and Subsidiary

PART I. FINANCIAL INFORMATION

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

AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Forward-Looking Information

This report, as well as our other reports filed with the Securities and Exchange Commission (“SEC”)(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

PART I. FINANCIAL INFORMATION

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

ThereIn connection with the preparation of our financial statements for the period ending September 30, 2017, we identified a material weakness in our internal control over financial reporting related to our controls over the use of the retail inventory method in estimating ending inventory balances. This control deficiency resulted in a material adjustment to our ending inventory balance which is reflected in our financial statements for the period.

Except as described above, 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

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.