CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Future minimum payments for the twelve months ending December 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 DecemberMarch 31, 2016.2017. The Company has no material tax positions at DecemberMarch 31, 20162017, 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 DecemberMarch 31, 2016.2017. The Company’s federal income tax returns for the fiscal years ended 2014, 2015, and 2016 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory“Inventory (Topic 330): Simplifying the Measurement of Inventory," ("” (“ASU 2015-11"2015-11”). An entity using an inventory method other than last-in, first out ("LIFO"(“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 for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessingdoes not expect the impact that adopting this new accounting standard willadoption of ASU 2015-11 to have a material effect on its consolidatedthe financial statements.position, results of operations, or cash flows.

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“Presentation of Financial Statements - Going Concern (Subtopic 205-40)"”. ASU 2014-15 provides guidance related to management'smanagement’s responsibility to evaluate whether there is substantial doubt about an entity'sentity’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 doThe Company does 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'sCompany’s consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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 March 31, 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

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

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 DecemberMarch 31, 20162017 Compared to Three Months Ended DecemberMarch 31, 2015,2016, and SixNine Months Ended DecemberMarch 31, 20162017 Compared to SixNine Months Ended DecemberMarch 31, 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

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

AND RESULTS OF OPERATIONS

NET SALES

Net sales decreased $125,208$78,599 or 10%16% for the three months ended DecemberMarch 31, 20162017 to $1,153,469$398,077 compared to $1,278,677$476,676 for the three months ended DecemberMarch 31, 2015.2016. Gross sales for Chase Candy increased $64,909decreased $65,946 to $497,792$403,029 for the three months ended DecemberMarch 31, 2016,2017, compared to $432,883$468,975 for the three months ended DecemberMarch 31, 2015.2016. Gross sales for Seasonal Candy decreased $199,378$3,949 to $665,658$10,020 for the three months ended DecemberMarch 31, 2016,2017, compared to $865,036$13,969 for the three months ended DecemberMarch 31, 2015.2016. Gross sales for other sales for the Company increased $3,291decreased $160 to $7,143$502 for the three months ended DecemberMarch 31, 2016,2017, compared to $3,852$662 for the three months ended DecemberMarch 31, 2015.2016. Sales returns and allowances for the Company decreased $5,970increased $8,544 to $17,124$15,474 for the three months ended DecemberMarch 31, 2016,2017, compared to $23,094$6,930 for the three months ended DecemberMarch 31, 2015.2016.

The 15% increase14% decrease in gross sales of Chase Candy of $64,909$65,946 for the three months ended DecemberMarch 31, 20162017 over the same period ended DecemberMarch 31, 2015,2016, is primarily due to the net effect of the following: 1) increaseddecreased sales of the L276 Cherry Mash Distributor Pack division by approximately $38,000 versus the same period a year ago, primarily due to decreased orders from existing customers; 2) decreased sales of L200 Cherry Mash Merchandisers division by approximately $11,000 versus the same period a year ago, primarily due to decreased orders from existing customers; 3) decreased sales of L212 Mini Mash division by approximately $31,000$10,000 versus the same period a year ago, due to decreased orders from existing customers; 4) decreased sales of L100 Cherry Mash Merchandiser division by approximately $6,000 versus the same period a year ago, due to decreased orders from existing customers; and 5) various other fluctuations netting a decrease of approximately $1,000.

The 28% decrease in gross sales of Seasonal Candy of $3,949 for the three months ended March 31, 2017 over the same period ended March 31, 2016, is primarily due to the net effect of the following: 1) decreased sales in the generic produce division by approximately $8,000 due to a loss of a customer; offset by 2) increased sales in the clamshell division by approximately $3,000 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.one customer.

Net sales decreased $326,123$404,722 or 14% for the sixnine months ended DecemberMarch 31, 20162017 to $2,015,657$2,413,734 compared to $2,341,780$2,818,456 for the sixnine months ended DecemberMarch 31, 2015.2016. Gross sales for Chase Candy decreased $5,191$71,137 to $919,677$1,322,706 for the sixnine months ended DecemberMarch 31, 2016,2017, compared to $924,868$1,393,843 for the sixnine months ended DecemberMarch 31, 2015.2016. Gross sales for Seasonal Candy decreased $332,344$336,293 to $1,112,720$1,122,740 for the sixnine months ended DecemberMarch 31, 2016,2017, compared to $1,445,064$1,459,033 for the sixnine months ended DecemberMarch 31, 2015.2016. Gross sales for other sales for the Company increased $2,604$2,444 to $7,182$7,684 for the sixnine months ended DecemberMarch 31, 2016,2017, compared to $4,578$5,240 for the sixnine months ended DecemberMarch 31, 2015.2016. Sales returns and allowances for the Company decreased $8,808$264 to $23,922$39,396 for the sixnine months ended DecemberMarch 31, 2016,2017, compared to $32,730$39,660 for the sixnine months ended DecemberMarch 31, 2015.2016.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

AND RESULTS OF OPERATIONS

NET SALES (CONTINUED)

The 1%5% decrease in gross sales of Chase Candy of $5,191$71,137 for the sixnine months ended DecemberMarch 31, 20162017 over the same period ended DecemberMarch 31, 2015,2016, is primarily due to the following: 1) decreased sales of the L278 MiniL276 Cherry Mash Distributor Pack division by approximately $15,000$27,000 versus the same period a year ago, primarily due to existingtwo customers decreasing orders; offset byorders, 2) increaseddecreased sales of the L276L200 Cherry Mash Distributor PackMerchandisers division by approximately $11,000$21,000 versus the same period a year ago, primarily due to existingthree customers increasing orders.decreasing orders, 3) decreased sales of the L278 Mini Mash division by approximately $13,000 versus the same period a year ago, primarily due to two customers decreasing orders, 4) decreased sales of the L100 Cherry Mash merchandisers division by approximately $5,000 versus the same period a year ago, primarily due to one customer decreasing orders, 5) decreased sales of the L279 Bulk Mini Mash division by approximately $3,000 versus the same period a year ago, primarily due to decreased orders from customers, and 6) decreased sales of the L260 Changemaker Jar division by approximately $2,000 versus the same period a year ago, primarily due to decreased orders from customers

The 23% decrease in gross sales of Seasonal Candy of $332,344$336,293 for the sixnine months ended DecemberMarch 31, 20162017 over the same period ended DecemberMarch 31, 2015,2016, 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$336,000 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$29,000 versus the same period a year ago, primarily due to customers increasing orders.

COST OF SALES

The cost of sales increased $10,348decreased $28,503 to $931,235$408,514 or 81%103% of related revenues for the three months ended DecemberMarch 31, 2016,2017, compared to $920,887$437,017 or 72%92% of related revenues for the three months ended DecemberMarch 31, 2015.2016. The 1% increase7% decrease in cost of sales of $10,348$28,503 is primarily due to the net impact of a 16% decrease in net sales of $78,599 and a 4% decrease in the price of chocolate, offset by a 15% increase in the price of peanuts offset by a 4% decreaseand an 8% increase in the price of sugar and the 10% decrease incorn syrup. Cost of sales outpaced net sales of $125,208.primarily due to outdated inventory totaling approximately $13,000 being returned during the period.

The cost of sales decreased $161,144$189,647 to $1,603,126$2,011,640 or 80%83% of related revenues for the sixnine months ended DecemberMarch 31, 2016,2017, compared to $1,764,270$2,201,287 or 75%78% of related revenues for the sixnine months ended DecemberMarch 31, 2015.2016. The 9% decrease in cost of sales of $161,144$189,647 is primarily due to the net impact of a 14% decrease in net sales of $326,123,$404,722 offset by a 10% increase in the price of corn syruppeanuts and an 8%a 9% 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.corn syrup.

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 DecemberMarch 31, 20162017 decreased $24,728$4,184 to $132,229,$69,670, which is 11%18% of sales, compared to $156,957,$73,854, or 12%15% of sales for the three months ended DecemberMarch 31, 2015.2016. The decrease of $24,728$4,184 in selling expenses for the three months ended DecemberMarch 31, 20162017 is primarily due to lower promotions expense and lower commission expense. Commissions decreased $4,207 to $8,632 for this period from $12,839 for the three months ended March 31, 2016, primarily due to a decrease in sales.

Selling expenses for the nine months ended March 31, 2017 decreased $52,422 to $301,165, which is 12% of sales, compared to $353,587 or 13% of sales for the nine months ended March 31, 2016. The decrease of $52,422 in selling expenses for the nine months ended March 31, 2017 is primarily due to lower commissions, promotions, vehicle depreciation, and automobile expenses. Commission expense decreased $21,559 to $81,642 for this period from $103,241 for the nine months ended March 31, 2016 primarily due to a decrease in sales. Promotions expense, which are paid to customers for various marketing reasons, decreased $13,291$18,139 to $27,023$47,777 for this period from $40,314$65,916 for the three months ended DecemberMarch 31, 2015. Commission2016. Depreciation expense which are based on sales, decreased $9,122$7,429 to $39,695$31,967 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$39,396 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 thea decrease in purchases of property and equipment during this period opposed to the sixnine months ended DecemberMarch 31, 2015.2016. Automobile expense, which does not include depreciation, decreased $3,507 to $4,894 for this period from $8,401, primarily due to falling gasoline prices and reduced maintenance costs primarily caused by the purchase of new vehicles during the nine months ended March 31, 2016.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended DecemberMarch 31, 2016 decreased $8,3272017 increased $10,547 to $86,909$97,294 and 8%24% of sales, compared to $95,236$86,747 or 7%18% of sales for the three months ended DecemberMarch 31, 2015.2016. The decreaseincrease of $8,327$10,547 in general and administrative expenses for the three months ended DecemberMarch 31, 20162017 is primarily due to lower professional fees offset by higher insurance expense. Insurance expense and higher payroll expense. Professional fees decreased $16,696increased $10,407 to $14,970$36,664 for this period from $31,666$26,257 for the three months ending Decemberended March 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, 20152016 due to employees changing their enrollment in insurance plans. Payroll

General and administrative expenses for the nine months ended March 31, 2017 increased $22,915 to $319,949 or 13% of sales, compared to $297,034 or 11% of sales for the nine months ended March 31, 2016. The increase of $22,915 in general and administrative expenses for the nine months ended March 31, 2017 is primarily due to an increase in insurance expense, miscellaneous general expense, and payroll tax expense offset by a decrease in professional fees. Insurance expense increased $2,631$19,738 to $7,888$92,577 for this period from $5,257$72,839 for the nine months ended March 31, 2016 due to employees changing their enrollment insurance plans. Miscellaneous general expense increased $4,698 to $11,050 for this period from $6,352 for the three months ending Decemberended March 31, 20152016 due to the payment of a non-recurring workplace penalty. Payroll tax expense increased $4,462 to $22,812 for this period from $18,350 for the three months ended March 31, 2016 due to reclassifying payroll expenses that were previously charged to cost of sales to general and administrative payroll expensesexpense as roles in the companyCompany changed from the previous period.

General and administrative expenses for the six months ended December 31, 2016 increased $12,368periods. Professional fees decreased $7,443 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$91,869 for this period from $46,582$99,312 for the sixthree months ending Decemberended March 31, 20152016 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.lower audit fees.

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$6,783 for the three months ended DecemberMarch 31, 20162017 to $(3,732)$(7,064), compared to $(2,320)$(281) for the three months ended DecemberMarch 31, 20152016 primarily due to an increase of $1,399$6,912 in interestmiscellaneous expense. The reason for this increase is primarily due to a nonrecurring transition fee charged to the Company by a customer to offset the customer’s product relocation costs.

Other income (expense) decreased by $1,958$8,741 for the sixnine months ended DecemberMarch 31, 20162017 to $(4,173)$(11,239), compared to $(2,215)$(2,498) for the sixnine months ended DecemberMarch 31, 20152016 primarily due to an increases of $6,926 and $1,782 in miscellaneous expense and interest expense, respectively. The increase of $1,943 in interest expense.miscellaneous expense is primarily due to a nonrecurring transition fee charged to the Company by a customer to offset the customer’s product relocation costs.

PROVISION (BENEFIT) FOR INCOME TAXES

The Company recorded income tax benefit for the three months ended DecemberMarch 31, 20162017 of $(153)$(70,320) as compared to income tax expensebenefit of $39,581$(42,708) for the three months ended DecemberMarch 31, 2015.2016. The Company recorded income tax benefit for the sixnine months ended DecemberMarch 31, 20162017 of $(17,381)$(87,701) as compared to income tax expensebenefit of $37,701$(5,007) for the sixnine months ended DecemberMarch 31, 2015.2016. The net income tax expense (benefit) recorded for the three and sixnine months ended DecemberMarch 31, 20162017 is primarily due to recognizing income taxes in relationrelated to the profitability of operations.current net income or loss.

NET INCOME (LOSS)

The Company reported a net loss for the three months ended DecemberMarch 31, 20162017 of $(483)$(114,145), compared to a net incomeloss of $72,686$(78,515) for the three months ended DecemberMarch 31, 2015.2016. This earnings decrease of $73,169$35,630 is explained above. The Company reported net loss for the sixnine months ended DecemberMarch 31, 20162017 of $(28,411)$(142,558), compared to net incomeloss of $68,938$(9,579) for the sixnine months ended DecemberMarch 31, 2015.2016. This earnings decrease of $97,349$132,979 is explained above.

PREFERRED DIVIDENDS

Preferred dividends were $32,018 for the three months ended DecemberMarch 31, 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.

Preferred dividends were $64,036$96,054 for the sixnine months ended DecemberMarch 31, 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.

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

AND RESULTS OF OPERATIONS

NET INCOME (LOSS)LOSS APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended DecemberMarch 31, 20162017 was $(32,501)$(146,163) which is a decreasean increase in losses of $73,169$(35,630) as compared to the net loss for the three months ended March 31, 2016 of $(110,533).

Net income (loss) applicable to common stockholders for the threenine months ended DecemberMarch 31, 2015 of $40,668.

Net loss applicable to common stockholders for the six months ended December 31, 20162017 was $(92,447)$(238,612) which is a decreasean increase in losses of $97,349$(132,979) as compared to the net income applicable to common stockholdersloss for the sixnine months ended DecemberMarch 31, 20152016 of $4,902.$(105,633).

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$133,002 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$11,533 of cash used in financing activities is the principal payments on equipment and vehicle loans. At DecemberMarch 31, 2016,2017, 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

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.

NoneNone.

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.