t74528_10k.htm

10-K 1 t74528_10k.htm FORM 10-K t74528_10k.htm

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the Fiscal Year Ended June 30, 2012

o	Transaction Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For transition period from to

Commission File Number: 2-5916

	Chase General Corporation
(Exact name of registrant as specified in its charter)

	Missouri		36-2667734
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification Number)

	1307 South 59th, St. Joseph, Missouri		64507
	(Address of Principal Executive Offices)		Zip Code

	(816) 279-1625
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

	None
Securities Registered Pursuant to Section 12(g) of the Act:

	None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The aggregate market value of the shares of common stock held by non-affiliates of the Issuer is not actively traded. Therefore, market value of the stock is unknown as of 60 days prior to the date of this filing.

As of September 1, 2012 there were 969,834 shares of Common Stock, $1.00 par value, outstanding.

CHASE GENERAL CORPORATION

ANNUAL REPORT ON FORM 10-K

For the Year Ended June 30, 2012

TABLE OF CONTENTS

PART I

Item 1.	Business	3
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	7
Item 2.	Property	7
Item 3.	Legal Proceedings	7
Item 4.	Submission of Matters to a Vote of Security Holders	8

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Select Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 8.	Consolidated Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	35
Item 9A(T)	Controls and Procedures	35
Item 9B.	Other Information	35

PART III

Item 10.	Directors, Executive Officers, and Corporate Governance	36
Item 11.	Executive Compensation	37
Item 12.	Security Ownership of Certain Beneficial Owners and Management	39
Item 13.	Certain Relationships and Related Transactions, and Director Independence	40
Item 14.	Principal Accountant Fees and Services	40

PART IV

Item 15.	Exhibits and Consolidated Financial Statement Schedules	41
SIGNATURES		42

PART I

This report contains certain “forward-looking statements” concerning the Company’s operations, economic performance and financial condition, which are subject to inherent uncertainties and risks. Actual results could differ materially from those anticipated in this report. When used in this report, the word “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions are intended to identify forward-looking statements.

Item 1. BUSINESS

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

PRINCIPAL PRODUCTS AND SERVICES AND METHODS OF DISTRIBUTION

The subsidiary, Dye Candy Company, operates two divisions, Chase Candy Products and Seasonal Candy Products. Chase Candy Products involve production and sale of a candy bar marketed under the trade name “Cherry Mash”. The Seasonal Candy Products involve production and sale of coconut, peanut, chocolate, and fudge confectioneries. The products of both divisions are sold to the same type of customers in the same geographical areas. In addition, both divisions share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two divisions is not maintained by Management and, accordingly, is not available for inclusion in this filing.

The principal products produced are as follows:

Chase Candy Products of Dye Candy Company produces a candy bar under the trade name of “Cherry Mash”. The bar is distributed in six case sizes:

(1) 60 count pack

(2) 12 boxes of 24 bars per box

(3) 200 count shipper box

(4) 100 count shipper box

(5) 100 # 2 box Counter Display

(6) 4 box - 36 count Counter Display

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

(1) 24 - 12 oz. bags

(2) 6 jars - 60 bars per jar

(3) 23 # wrapped bars

(4) 22 # unwrapped bars

(5) 12 - 12 oz. bags

(6) 6 - 4 # jars

(7) 24 - 12 oz. clamshell containers

DESCRIPTION OF BUSINESS (CONTINUED)

Seasonal Candy Products of Dye Candy Company produces coconut, peanut, chocolate, and fudge confectioneries. These products are distributed in bulk or packaged. Principal products include:

(1)

Coconut Bon-Bons

(6) Peanut Brittle

(2)

Coconut Stacks

(7) Peanut Clusters

(3)

Home Style Poe Fudge

(8) Champion Crème Drops

(4)

Peco Flake

(9) Jelly Candies

(5)

Peanut Squares

(10) Frosted Pretzels

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

All products are shipped to customers by commercial haulers.

COMPETITION AND MARKET AREA

The Chase Candy Division bars are sold primarily to wholesale candy and tobacco jobbing houses, grocery accounts, vendors and repackers. “Cherry Mash” bars are marketed in the Midwest region of the United States. For the years ended June 30, 2012 and 2011, this division accounted for 53% and 55%, respectively, of the consolidated revenue of Dye Candy Company.

The Seasonal Candy Division is sold primarily on a Midwest regional basis to national syndicate accounts, repackers, and grocery accounts. For the years ended June 30, 2012 and 2011, the division accounted for 47% and 45%, respectively, of the consolidated revenue of Dye Candy Company.

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

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

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

COMPETITION AND MARKET AREA (CONTINUED)

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

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

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

RESEARCH AND DEVELOPMENT

The Company has not developed any new products during fiscal years ending June 30, 2012 and 2011.

RAW MATERIALS AND PRINCIPAL SUPPLIERS

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

PATENTS AND TRADEMARKS

The largest single revenue producing product, the “Cherry Mash” bar, is protected by a

trademark registered with The United States Patent and Trademark Office. The Company considers this trademark very important to the Company. This trademark expires in the year 2013. The Company and its legal representatives do not expect any impediment to renewing this trademark prior to its expiration.

EMPLOYEES

As of June 30, 2012, the Company had 20 full time employees. There were 12 in manufacturing, 2 in maintenance, 1 plant manager, 1½ in sales and marketing, 2½ in finance and administration, and 1 in general office. This expands to approximately 31 full time personnel during the busy production months of August through December.

CUSTOMERS

For the years ending June 30, 2012 and 2011, Associated Wholesale Grocers accounted for 31% and 31% of gross sales, and 12% and 36%, respectively, of accounts receivable. For the years ending June 30, 2012 and 2011, Wal-Mart and its affiliates accounted for 11% and 12%, respectively, of gross sales and 30% and 16%, respectively, of accounts receivable. No other customer accounted for more than 10% of the Company’s revenues in fiscal years 2012 and 2011.

ENVIRONMENTAL PROTECTION AND THE EFFECT ON PROBABLE GOVERNMENT REGULATIONS ON THE BUSINESS

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

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

NEED FOR GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES

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

REPORTS TO SECURITY HOLDERS

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

Item 1A. RISK FACTORS

Not applicable to smaller reporting company.

Item 1B. UNRESOLVED STAFF COMMENTS

The Company has no unresolved SEC staff comments at June 30, 2012.

Item 2. PROPERTY

We conduct our operations from two buildings as follows:

Chase Warehouse - This building located in St. Joseph, Missouri is owned by Dye Candy Company, a wholly-owned subsidiary of the registrant. The facility is currently devoted entirely to the storage of supplies, and the warehousing and shipping of candy products. This warehouse is over seventy years old and is in fair condition and adequate to meet present requirements. The warehouse has approximately 15,000 square feet and is not encumbered.

Chase General Office and Dye Candy Company Operating Plant - The building located at 1307 South 59th, St. Joseph, Missouri contains the general offices (of approximately 2,000 square feet) for Chase General Corporation, Dye Candy Company and its divisions. The production plant of Dye Candy Company occupies the remainder of the building or 18,000 square feet. The building, specifically designed for the Company, is leased from an entity owned by the Vice-President and Director of the Company and his spouse. The annual rental expense of this facility was $78,000 for each year ended June 30, 2012 and 2011.

The net book value of our premises, land and office, and production equipment was $448,616 and $497,909, respectively, for fiscal years ending June 30, 2012 and 2011.

We believe both facilities are adequately covered by insurance.

Item 3. LEGAL PROCEEDINGS

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s security holders during the fourth quarter of the fiscal year ended June 30, 2012.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

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

Security holders

As of September 1, 2012, the latest practicable date, the approximate number of record holders of common stock was 1,869, including individual participants in security listings.

Dividends

(1) Dividend history and restrictions

No dividends have been paid during the past two fiscal years and there are no dividend restrictions. Preferred stock dividends in arrears are accumulated.

(2) Dividend policy

There is no set policy on the payment of dividends due to the financial condition of the Company and other factors. It is not anticipated that cash dividends will be paid in the foreseeable future.

Securities authorized for issuance under equity compensation plans

The Company does not have any equity compensation plans.

Item 6. SELECT FINANCIAL DATA

Not applicable to a smaller reporting company.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report contains statements that plan for or anticipate the future. Forward-looking statements may include statements about the future of our products and the industry, statements about our future business plans and strategies, and other statements that are not historical in nature. In this report, forward-looking statements are generally identified by the words “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. Readers should carefully review these cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by the Company at the time the statements are made. These expectations, assumptions and uncertainties include: the Company’s expectation of heavier demand on working capital in the fall and winter months in anticipation of August through December sales; our belief that the Company has stabilized its customer base; will continue our efforts to expand the existing market area and increase sales to customers; and maintain tight control of all expenditures.

OVERVIEW

During fiscal year ended 2012, the Company’s net sales were $2,953,665, as compared to net sales of $2,996,319 for fiscal year ended June 30, 2011. This 1.4% decrease in volume offset by a 5.3% increase in cost of sales resulted in decreased profitability during the year, as reflected in the net loss before income taxes of $151,954 for fiscal year 2012 compared to net income of $14,748 for fiscal year 2011. Working capital decreased $134,485 to $423,479 for the current year from $557,964 for the fiscal year 2012 due to a decrease in inventory, trade receivables and accounts payable offset by an increase in current maturities of notes payable.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

GENERAL

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

GENERAL (CONTINUED)

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

REVENUE RECOGNITION

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

RECEIVABLES

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

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

INVENTORIES

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

IMPAIRMENT OF LONG-LIVED ASSETS

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

RESULTS OF OPERATIONS

The following table sets forth for the years indicated, the percentage of net sales of certain items in the Company’s consolidated statements of operations for each of the fiscal years ended June 30, 2012 and 2011, respectively:

	2012			2011

Net sales		100.00	%		100.00	%
Cost of sales		78.33			73.29
Gross profit		21.67			26.71
Selling expense		13.18			12.88
General and administrative expense		13.66			13.09
(Gain) loss on sale of equipment		(.37	)		-
Income (loss) from operations		(4.80	)		.74
Other income (expense), net		(.35	)		(.25	)
Income (loss) before income taxes		(5.15	)		.49
Provision for (benefit from) income taxes		(1.73	)		.18
Net income (loss)		(3.42	)		.31
Preferred dividends		(4.33	)		(4.27	)

Loss applicable to common stockholders		(7.75	)%		(3.96	)%

FISCAL YEAR 2012 COMPARED TO FISCAL YEAR 2011

NET SALES

During the year ended June 30, 2012, sales, net of returns and allowances, decreased $42,654 or 1.42% as compared to the year ended June 30, 2011. Gross sales for Chase Candy products decreased $70,553 or 4.21% to $1,603,426 for the year ended June 30, 2012 compared to $1,673,979 for 2011. Gross sales for seasonal candy increased $14,405 or 1.03% to $1,417,054 for the year ended June 30, 2012 as compared to $1,402,649 for 2011.

The 4.21% decrease in gross sales of Chase Candy of $70,553 for the year ended June 30, 2012 over the same period ended June 30, 2011, is primarily due to the net effect of the following: 1) increased sales of Cherry Mash Bar of approximately $128,000 offset by; 2) decreased sales of the 12/12oz. Mini Mash bag of approximately $174,000, with a decrease in sales to one customer by approximately $104,000 due to reduced distribution; 3) overall decreased sales to Cherry Mash Merchandisers of approximately $35,000. The 1.03% increase in gross sales of Seasonal Candy of $14,405 for the year ended June 30, 2012 over the same period ended June 30, 2011, is primarily due to the net effect of increased sales from two customers in the clamshell seasonal product category of approximately $93,000 offset by decreased sales from two customers in the bulk seasonal product category of approximately $70,000 and overall decreases in the generic seasonal product category of $6,000.

The Company’s returns and allowances decreased $11,224 or 12.28% to $80,211 for the year ended June 30, 2012, compared to $91,425 for the year ended June 30, 2011.

COST OF SALES

Cost of sales for the year ended June 30, 2012, as compared to the year ended June 30, 2011, increased by 5.35%. The cost of sales increased $117,447 to $2,313,498 while increasing to 78.33% of related revenues for the year ended June 30, 2012, compared to $2,196,051 or 73.29% of related revenues for the year ended June 30, 2011.

The 5.35% increase in cost of sales of $117,447 is primarily due to the 1.42% decrease in net sales of $42,654 offset by the raw material price increases in chocolate, peanuts, and sugar which were not passed along to customers due to the timing of the price increases. Direct costs of goods for materials manufactured and net change in inventories for the year ended June 30, 2012, increased $206,680 or 20.46% to $1,216,843 as compared to $1,010,163 for the year ended June 30, 2011. Increased chocolate prices were primarily caused by civil unrest in cocoa producing areas of West Africa where decreased supply lead to increased costs. Increases in the price of peanuts was primarily caused by a drought in Texas where decreased supply lead to increased costs. Increases in the price of sugar were primarily caused by increased worldwide demand for sugar and unintentional decreased production levels by sugar producers primarily caused by a domestic drought and a lengthy strike at one domestic sugar company where increased demand and decreased supply lead to increased costs. Management does not anticipate the prices of these raw materials to return to previous levels in the near future. Management has considered and evaluated the need to increase prices charged to customers for future sales. Accordingly, prices on fiscal 2013 orders were increased up to 16%, depending on the product. The impact on sales of increased prices charged to customers has not yet been determined.

Labor costs including wages, vacation pay and payroll taxes of $389,582 for the year ended June 30, 2012 decreased 11.54% or $50,836 as compared to $440,418 for the period ending 2011. The decrease was due to decreased production.

GROSS PROFIT

The gross margin decreased 20.01% or $160,101 to $640,167 decreasing to 21.67% of related revenues for the year ended June 30, 2012, as compared to $800,268 or 26.71% of related revenues for the year ended June 30, 2011, as a result of the overall increase in cost of sales.

Finished goods inventory as of June 30, 2012 of $237,569 decreased $26,365 or 9.99% from the June 30, 2011 finished goods inventory of $263,934. Raw materials inventory as of June 30, 2012 of $65,912 decreased $22,578 or 25.51% of the June 30, 2011 raw materials inventory of $88,490. The Company decreased packaging materials inventory 29.96% at June 30, 2012 to $131,687 from June 30, 2011 of $188,025. Goods in process inventory as of June 30, 2012 of $12,864 increased $9,589 or 292.79% from the June 30, 2011 goods in process inventory of $3,275.

SELLING EXPENSES

Selling expenses for the year ended June 30, 2012 increased $3,243 to $389,262, which is 13.18% of sales, compared to $386,019 or 12.88% of sales for the year June 30, 2011. This increase is primarily due to higher commissions and premium promotions being paid, and sample costs for the period in an effort to increase sales volume and increased depreciation due to recent vehicles purchased. Commissions and premium promotions, and sample costs increased $2,941 or 1.47% to $202,642 for the year ended June 30, 2012, as compared to $199,701 for the year ending June 30, 2011.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the year ended June 30, 2012 increased $11,404 to $403,568, which is 13.66% of sales, compared to $392,164 or 13.09% of sales for the year ended June 30, 2011. The increased costs are primarily reflected in insurance expense, professional fees, general taxes and licenses and office salaries.

INCOME (LOSS) FROM OPERATIONS

Income (loss) from operations for the year ended June 30, 2012 was (4.80)% of net sales, as compared to 0.74% of net sales for the year ended June 30, 2011 for the reasons described above.

OTHER INCOME (EXPENSE)

Other income and (expense) reflects expense of $(10,220) for the year ended June 30, 2012, as compared to expense of $(7,837) for the year ended June 30, 2011. This increase of $2,383 in expense was primarily due to increased interest expense.

INCOME (LOSS) BEFORE INCOME TAXES

Income (loss) before income taxes was $(151,954) for the year ended June 30, 2012, as compared to $14,748 for the year ended June 30, 2011. The reasons for the decrease of $166,702 have been discussed above.

PROVISION (CREDIT) FOR INCOME TAXES

The Company recorded a tax expense (credit) for the year ended June 30, 2012 of $(51,068), as compared to a tax expense of $5,401 for the year ended June 30, 2011. The tax expense (credit) for the year ended June 30, 2012 is a result of operations discussed above.

NET INCOME (LOSS)

Net loss for the year ended June 30, 2012 was $(100,886), compared to net income for the year ended June 30, 2011 of $9,347. This decrease of $110,233 is the result of those items discussed above.

PREFERRED DIVIDENDS

Preferred dividends were $128,072 for the years ended June 30, 2012 and 2011, which reflect additional preferred stock dividends in arrears on the Company’s Series A and Series B $5 par value preferred stock and its Series A & B $20 par value preferred stock.

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders was $(228,958) for the year ended June 30, 2012, which is an increase of $110,233 as compared to a net loss of $(118,725) for the year ended June 30, 2011 for the reasons discussed above.

LIQUIDITY AND SOURCES OF CAPITAL

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


	2012			2011

Net cash provided by operating activities	$	37,552		$	32,643
Net cash used in investing activities	$	(22,680	)	$	(32,988	)
Net cash used in financing activities	$	(15,695	)	$	(87,391	)

Operating Activities

The positive cash flow of $37,552 generated from operations is a result of the Company continuing to monitor raw material pricing, and when a price increase or decrease is anticipated, adjustments to inventory levels are made accordingly. Total inventory as of June 30, 2012 of $448,032 decreased $95,692 or 17.60% as compared to the June 30, 2011 total inventory of $543,724. This decrease was due to the use of inventory on hand because of raw material price increases.

Investing Activities

The $22,680 of cash used in investing activities was the net result of capital expenditures and disposal of equipment for the current fiscal year. The Company continues to write off equipment that is no longer useful to the operations of the Company. Machinery and equipment cash purchases of $45,680 and $33,488 were made during the years ended June 30, 2012 and 2011, respectively. Depending on results of operations and cash flows, the Company has plans to replace two cookers at an anticipated cost of $40,000 in the next several years, with no set target date.

Financing Activities

The Company borrowed $290,000 and $40,000, respectively, on its line-of-credit during the fall of 2011 and 2010 busy seasons. Payments of $250,000 and $40,000, respectively, were paid for years ending June 30, 2012 and 2011. The Company renewed its $250,000 line-of-credit until January 3, 2013 and management anticipates renewal of the line-of-credit at similar terms upon expiration.

The Company borrowed and repaid $100,000 on a note payable to a stockholder during the year ended June 30, 2012. Full payment was due in March 2012.

The Company financed $27,245 and $71,750 of vehicle purchases during fiscal years 2012 and 2011, respectively.

Loan payments were $55,695 and $87,391 for years ended June 30, 2012 and 2011, respectively.

Overall cash and cash equivalents decreased $823 to $17,949 at June 30, 2012 from $18,772 at June 30, 2011.

At June 30, 2012, the Company’s accumulated deficit was $5,764,596, compared to accumulated deficit of $5,663,710 as of June 30, 2011. Working capital as of June 30, 2012 decreased $134,485 to $423,479 from $557,964 as of June 30, 2011.

The Company’s lease on its office and plant facility is effective through March 31, 2025 with an option to extend for an additional time of five years, and currently requires payments of $6,500 per month. At the end of each five year period, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor. The facility is leased from an entity owned 100% by the Vice-President and Director and his spouse.

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

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

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements meeting the requirements of Regulation S-B are contained on pages 16 through 33 of this Form 10-K.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

Table of Contents

	PAGE

Report of Independent Registered Public Accounting Firm	18

Financial Statements

Consolidated Balance Sheets	19

Consolidated Statements of Operations	21

Consolidated Statements of Stockholders’ Equity	22

Consolidated Statements of Cash Flows	23

Notes to Consolidated Financial Statements	24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

CHASE GENERAL CORPORATION AND SUBSIDIARY

We have audited the accompanying consolidated balance sheets of Chase General Corporation and Subsidiary (the “Company”) as of June 30, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chase General Corporation and Subsidiary as of June 30, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Mayer Hoffman McCann P.C.

MAYER HOFFMAN MCCANN P.C.

Leawood, Kansas

September 14, 2012

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2012 and 2011

ASSETS

	2012		2011
CURRENT ASSETS
Cash and cash equivalents	$	17,949	$	18,772
Trade receivables, net of allowance for doubtful accounts, of $15,102 and $15,383, respectively		139,963		161,670
Inventories:
Finished goods		237,569		263,934
Goods in process		12,864		3,275
Raw materials		65,912		88,490
Packaging materials		131,687		188,025
Prepaid expenses		11,517		5,047
Deferred income taxes		7,277		6,900

Total current assets		624,738		736,113

PROPERTY AND EQUIPMENT
Land		35,000		35,000
Buildings		77,348		85,738
Machinery and equipment		776,462		1,025,118
Trucks and autos		188,594		173,486
Office equipment		30,826		37,757
Leasehold improvements		71,481		71,481
Total		1,179,711		1,428,580
Less accumulated depreciation		731,095		930,671

Total property and equipment		448,616		497,909

TOTAL ASSETS	$	1,073,354	$	1,234,022

The accompanying notes are an integral part of the

consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2012 and 2011

LIABILITIES AND STOCKHOLDERS’ EQUITY

	2012			2011
CURRENT LIABILITIES
Accounts payable	$	78,798		$	104,796
Current maturities of notes payable		97,266			54,844
Accrued expenses		23,896			17,210
Deferred income		1,299			1,299

Total current liabilities		201,259			178,149

LONG-TERM LIABILITIES
Deferred income		15,259			16,558
Notes payable, less current maturities		105,938			136,810
Deferred income taxes		49,498			100,219

Total long-term liabilities		170,695			253,587

Total liabilities		371,954			431,736

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $2,130,000 and $2,100,000 respectively)		500,000			500,000
Series B (liquidation preference $2,085,000 and $2,055,000 respectively)		500,000			500,000
Cumulative preferred stock, $20 par value Series A (liquidation preference $4,843,598 and $4,785,065 respectively)		1,170,660			1,170,660
Series B (liquidation preference $789,360 and $779,821 respectively)		190,780			190,780
Common stock, $1 par value		969,834			969,834
Paid-in capital in excess of par		3,134,722			3,134,722
Accumulated deficit		(5,764,596	)		(5,663,710	)

Total stockholders’ equity		701,400			802,286

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,073,354		$	1,234,022

The accompanying notes are an integral part of the

consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended June 30, 2012 and 2011

	2012			2011

NET SALES	$	2,953,665		$	2,996,319

COST OF SALES		2,313,498			2,196,051

Gross profit on sales		640,167			800,268

OPERATING EXPENSES
Selling		389,262			386,019
General and administrative		403,568			392,164
Gain on sale of equipment		(10,929	)		(500	)

Total operating expenses		781,901			777,683

Income (loss) from operations		(141,734	)		22,585

OTHER INCOME (EXPENSE)
Miscellaneous income		1,774			2,341
Interest expense		(11,994	)		(10,178	)

Total other income (expense)		(10,220	)		(7,837	)

Net income (loss) before income taxes		(151,954	)		14,748

PROVISION (CREDIT) FOR INCOME TAXES		(51,068	)		5,401

NET INCOME (LOSS)		(100,886	)		9,347

Preferred dividends		(128,072	)		(128,072	)

Net loss applicable to common stockholders	$	(228,958	)	$	(118,725	)

NET LOSS PER SHARE OF COMMON STOCK -
BASIC	$	(0.24	)	$	(0.12	)

DILUTED	$	(0.24	)	$	(0.12	)

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING		969,834			969,834

The accompanying notes are an integral part of the

consolidated financial statements.

CHASE GENERAL CORPORATION AN SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended June 30, 2012 and 2011

	Prior Cumulative				Cumulative
	Preferred Stock				Preferred Stock				Common Stock		Paid-In Capital		Accumulated Deficit
	Series A		Series B		Series A		Series B		Common Stock		Paid-In Capital		Accumulated Deficit			Total
BALANCE, JUNE 30, 2010	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,673,057	)	$	792,939

Net income		-		-		-		-		-		-		9,347			9,347

BALANCE, JUNE 30, 2011	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,663,710	)	$	802,286

Net loss		-		-		-		-		-		-		(100,886	)		(100,886	)

BALANCE, JUNE 30, 2012	$	500,000	$	500,000	$	1,170,660	$	190,780	$	969,834	$	3,134,722	$	(5,764,596	)	$	701,400

The accompanying notes are an integral part of the consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2012 and 2011

	2012			2011

CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers	$	2,975,372		$	2,999,402
Other income		1,299			1,299
Cost of sales, selling, general and administrative expenses paid		(2,927,158	)		(2,957,426	)
Interest paid		(11,961	)		(10,435	)
Income taxes paid		-			(197	)

Net cash provided by operating activities		37,552			32,643

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment		23,000			500
Purchases of property and equipment		(45,680	)		(33,488	)

Net cash used in investing activities		(22,680	)		(32,988	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line-of-credit		290,000			40,000
Principal payments on line-of-credit		(250,000	)		(40,000	)
Proceeds from notes payable - stockholder		100,000			-
Principal payments on notes payable - stockholder		(100,000	)		-
Principal payments on notes payable		(55,695	)		(87,391	)

Net cash used in financing activities		(15,695	)		(87,391	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(823	)		(87,736	)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		18,772			106,508

CASH AND CASH EQUIVALENTS, END OF YEAR	$	17,949		$	18,772

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income (loss)	$	(100,886	)	$	9,347
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		110,147			119,398
Allowance for bad debts		(281	)		492
Deferred income amortization		(1,299	)		(1,299	)
Deferred income taxes		(51,098	)		5,294
Gain on sale of equipment		(10,929	)		(500	)
Effects of changes in operating assets and liabilities:
Trade receivables		21,988			2,591
Inventories		95,692			(140,525	)
Prepaid expenses		(6,470	)		(88	)
Accounts payable		(25,998	)		36,062
Accrued expenses		6,686			1,873
Income taxes payable		-			(2	)

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	37,552		$	32,643

The accompanying notes are an integral part of the

consolidated financial statements.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Chase General Corporation (the Company) was incorporated on November 6, 1944 in the State of Missouri for the purpose of manufacturing confectionery products. The Company grants credit terms to substantially all customers, consisting of repackers, grocery accounts, and national syndicate accounts, who are primarily located in the Midwest region of the United States.

Significant accounting policies are as follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dye Candy Company. All intercompany transactions and balances have been eliminated in consolidation.

SEGMENT REPORTING OF THE BUSINESS

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents.

REVENUE RECOGNITION

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

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SHIPPING AND HANDLING COSTS

Shipping and handling costs for freight expense on goods shipped is included in cost of sales. Freight expense on goods shipped for the years ended June 30, 2012 and 2011 was $136,023 and $141,955, respectively.

RECEIVABLES

INVENTORIES

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

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. The Company’s property and equipment are being depreciated on straight-line and accelerated methods over the following estimated useful lives:

Buildings	39 years
Machinery and equipment	5 - 7 years
Trucks and autos	5 years
Office Equipment	5 - 7 years
Leasehold improvements	Lesser of estimated
	useful life or the
	lease term

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

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

INCOME TAXES

Deferred income taxes are provided using the liability method for temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the dates of enactment.

The Company’s policy is to evaluate uncertain tax positions under the guidance as prescribed by ASC 740, Income Taxes. As of June 30, 2012, the Company has not identified any uncertain tax positions requiring recognition in the consolidated financial statements.

EARNINGS PER SHARE

Basic Earnings Per Common Share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted Earnings Per Common Share shall be computed by including contingently issuable shares with the weighted average shares outstanding during the period. When inclusion of the contingently issuable shares would have an antidilutive effect upon earnings per share, diluted earnings per share will be calculated in the same manner as basic earnings per share.

The following contingently issuable shares were not included in diluted earnings per common share as they would have an antidilutive effect upon earnings per share:

	2012		2011
Shares issuable upon conversion of Series A
Prior Cumulative Preferred Stock		400,000		400,000
Shares issuable upon conversion of Series B
Prior Cumulative Preferred Stock		375,000		375,000
Shares issuable upon conversion of Series A
Cumulative Preferred Stock		222,133		222,133
Shares issuable upon conversion of Series B
Cumulative Preferred Stock		36,201		36,201

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING EXPENSE

Advertising is expensed when incurred. Advertising expense was $4,512 and $3,396 for the years ended June 30, 2012 and 2011, respectively.

NOTE 2 - FORGIVABLE LOAN AND DEFERRED INCOME

During 2004, the Company received a $25,000 economic development incentive from Buchanan County, which is a five year forgivable loan at a rate of $5,000 per year. The Nodaway Valley Bank established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company met the criteria of occupying a 20,000 square foot building and creating a minimum of two new full-time equivalent jobs during the first year of operation in the new facility. In addition, the Company maintained 19 existing jobs during the five year term. Notice was received February 6, 2009 from the Buchanan County Commission, that the Company had fulfilled its minimum loan requirements so that the loan was forgiven in full and has no further obligations. Since the Company was no longer legally required to return the monies, the liability was reclassified as deferred revenue and amortized into income over the life of the lease term of the new facility. Deferred revenue is recognized on a straight line basis over the lease term of 20 years. During the years ended June 30, 2012 and 2011, deferred revenue of $1,299 was amortized into income for each period.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - NOTES PAYABLE

The Company’s long-term debt consists of:

Payee	Terms	2012		2011

Nodaway Valley Bank	Line-of-credit agreement for $250,000 expiring on January 3, 2013 with a variable interest rate not less than 5%. The line-of-credit had an interest rate of 5% at June 30, 2012. The line-of-credit is collateralized by substantially all assets of the Company.	$	40,000	$	-

Ford Credit	$679 monthly payments, interest of 0%; final payment due March 2016, secured by a vehicle.		30,563		38,713

Ford Credit	$517 monthly payment, interest of 0%; final payment due March 2016, secured by a vehicle.		23,250		29,450

Honda	$508 monthly payments including interest of 1.9%; final payment made December 15, 2011, secured by a vehicle.		-		3,030

Nissan	$557 monthly payments including interest of 3.9%; final payment made April 2012, secured by a vehicle.		-		5,425

Nodaway Valley Bank	$3,192, including interest of 6.25%; final payment due June 2015, secured by equipment.		84,309		115,036

Toyota Financial Services	$502 monthly payments including interest of 4.9% due March 2015, secured by a vehicle.		15,438		-

Toyota Financial Services	$305 monthly payments including interest of 2.9% due March 2015, secured by a vehicle.		9,644		-

	Total		203,204		191,654
	Less current portion		97,266		54,844
	Long-term portion	$	105,938	$	136,810

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - NOTES PAYABLE (CONTINUED)

Future minimum payments are:

2013	$	97,266
2014		59,831
2015		35,344
2016		10,763

Total	$	203,204

NOTE 4 - CAPITAL STOCK

Capital stock authorized, issued, and outstanding as of June 30, 2012 is as follows:

	Shares
			Issued and
	Authorized		Outstanding
Prior Cumulative Preferred Stock, $5 par value:
6% Convertible		240,000
Series A				100,000
Series B				100,000

Cumulative Preferred Stock, $20 par value:
5% Convertible		150,000
Series A				58,533
Series B				9,539

	Shares
			Issued and
	Authorized		Outstanding
Common Stock, $1 par value:
Reserved for conversion of
Preferred Stock - 1,030,166 shares		2,000,000		969,834

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - CAPITAL STOCK (CONTINUED)

Cumulative Preferred Stock dividends in arrears at June 30, 2012 and 2011 totaled $7,436,518 and $7,308,446, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2012 and 2011:

	2012		2011

6% Convertible
Series A	$	16.05	$	15.75
Series B	$	15.60	$	15.30

5% Convertible
Series A	$	62.75	$	61.75
Series B	$	62.75	$	61.75

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. Cumulative preferred stock 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.

NOTE 5 - INCOME TAX

The recognition of income tax expense related to uncertain tax provisions is determined under the provisions of FASB ASC-740. The Company had no unrecognized tax benefits as of the date of adoption. The income tax positions taken for open years are appropriately stated and supported for all open years. The Company’s federal tax returns for the fiscal years ended 2009, 2010, and 2011 are subject to examination by the IRS taxing authority.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - INCOME TAX (CONTINUED)

The sources of deferred tax assets and liability at June 30, 2012 and 2011 are as follows:


	2012			2011

Deferred tax assets:
Inventories	$	588		$	472
Trade receivables		5,135			5,230
Contribution carryover		1,554			1,198
Deferred income		5,630			6,071
Net operating loss carryover		50,507			-

Total deferred tax assets		63,414			12,971

Deferred tax liability:
Property and equipment		(105,635	)		(106,290	)

NET DEFERRED TAX LIABILITY	$	(42,221	)	$	(93,319	)

The net deferred tax assets (liability) are presented in the accompanying June 30, 2012 and 2011 balance sheets as follows:

	2012			2011

Current deferred tax asset	$	7,277		$	6,900
Noncurrent deferred tax liability		(49,498	)		(100,219	)

NET DEFERRED TAX LIABILITY	$	(42,221	)	$	(93,319	)

The provision (credit) for income taxes, for the years ended June 30, 2012 and 2011, consists of the following:

	2012			2011

Current tax expense	$	30		$	107
Deferred tax expense		(51,098	)		5,294

	$	(51,068	)	$	5,401

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - INCOME TAX (CONTINUED)

The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax income for the years ended June 30, 2012 and 2011 due to the following:

	2012			2011

Computed “expected” tax (credit)	$	(51,665	)	$	5,162
Increase (decrease) in income taxes (benefits)
resulting from:
State income taxes, net of federal benefit		-			603
Other		597			(364	)

	$	(51,068	)	$	5,401

The Company has unused contributions of $4,571 to carryforward that will expire for tax years ranging from 2012 through 2016.

As of June 30, 2012, the Company had a net operating loss carryforward of approximately $148,550 available to use over the next twenty years.

NOTE 6 - INCOME (LOSS) PER SHARE

The income (loss) per share was computed on the weighted average of outstanding common shares during the year as follows:

	2012			2011

Net income (loss)	$	(100,886	)	$	9,347

Preferred dividend requirements:
6% Prior Cumulative Preferred, $5 par value		60,000			60,000
5% Convertible Cumulative Preferred, $20 par value		68,072			68,072

Total dividend requirements		128,072			128,072

Net loss - common stockholders	$	(228,958	)	$	(118,725	)

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - INCOME (LOSS) PER SHARE (CONTINUED)

	2012			2011

Weighted average of shares - Basic		969,834			969,834

Dilutive effect of contingently issuable shares		1,033,334			1,033,334

Weighted Average Shares – Diluted		2,003,168			2,003,168

Basic earnings (loss) per share	$	(0.24	)	$	(0.12	)

Diluted earnings per share	$	(0.24	)	$	(0.12	)

NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


	2012		2011
Cash paid for:
Interest	$	11,961	$	10,435
Income taxes		-		197
Non-cash transactions:
Financing of new vehicles		27,245		71,750
Value of vehicles traded-in		14,962		26,063

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Dye Candy Company leases its office and manufacturing facility, located at 1307 South 59th, St. Joseph, Missouri, from an entity owned by the Vice-President and Director of the Company and his spouse. The period of the lease is from February 1, 2005 through March 31, 2025, with an option to extend for an additional term of five years, and currently requires payments of $6,500 per month. At the end of the first five years, the base rent may be increased an amount not greater than 30%, at the sole discretion of lessor and for each additional term of five years. Rental expense was $78,000 for each year ended June 30, 2012 and 2011. The amounts are included in cost of sales.

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Future minimum lease payments under this lease are as follows:

Year ending June 30:

2013	$	78,000
2014		78,000
2015		78,000
2016		78,000
2017		78,000
Thereafter		604,500
	$	994,500

As of June 30, 2012, the Company had raw materials purchase commitments with two vendors totaling $82,023.

NOTE 9 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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 June 30, 2012, 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.

NOTE 10 - CONCENTRATION OF CREDIT RISK

For the years ending June 30, 2012 and 2011, two customers accounted for 42% and 43%, respectively, of the gross sales. For the year ending June 30, 2012 and 2011, two customer accounted for 41% and 52%, respectively, of accounts receivable.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable

Item 9A(T) CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer, who is also the chief financial and accounting officer, has evaluated the effectiveness of the Company’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, such officer has concluded that the Company’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)

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Management has assessed the Company’s internal control over financial reporting in relation to criteria described in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment using those criteria, management concluded that, as of June 30, 2012, the Company’s internal control over financial reporting was effective.

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

(c)

Changes in Internal Controls

There were no significant changes in the Company’s internal controls over financial reporting or in other factors that in management’s estimates are reasonably likely to materially affect the Company’s internal controls over financial reporting subsequent to the date of the evaluation.

Item 9B. OTHER INFORMATION

None

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

(a) Directors

Name	Age	Periods of Service as Director	Terms

Barry M. Yantis	67	1980 to present	One year
Brett A. Yantis	44	January 21, 1999 to present	One year
Brian A. Yantis	64	July 16, 1986 to present	One year

Executive Officers

			Years of
			Service as
Name	Age	Position	an Officer	Term

Barry M. Yantis	67	President, CEO	33	Until successor elected
		and Treasurer
Brett A. Yantis	44	Vice-President	10	Until successor elected
Brian A. Yantis	64	Secretary	20	Until successor elected

(b) Certain Significant Employees

There are no significant employees other than above.

Barry M. Yantis and Brian A. Yantis are brothers. Brett A. Yantis is the son of Barry M. Yantis.

Business Experience

(1)

Barry M. Yantis, President and Treasurer has been an officer of the Company for thirty-two years, twelve years as Vice-President and twenty years as President. He has been on the board of directors for thirty-two years and has been associated with the candy business for thirty-seven years.

Brett A. Yantis was elected to the position of Director during the year ending June 30, 1999. Brett was elected Vice-President in January 2003. Brett has been associated with the Company for eighteen years.

Brian A. Yantis, Secretary has been an officer of the Company since May 1992. Until retiring in 2011, he had been associated with the insurance business for thirty-six years and was a Vice-President of Aon Risk Services in Chicago, Illinois for twenty-two years.

(2)

The directors and executive officers listed above are also the directors and executive officers of Dye Candy Company.

(d) Involvement in Certain Legal Proceedings

Not applicable

(e) Audit Committee Financial Expert

Registrant is not required to have an audit committee since the stock is not actively traded. The Board of Directors are not considered audit committee financial experts, but do effectively operate as the audit committee.

(f) Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to all executive officers, directors and employees of the Company. The Code of Business Conduct and Ethics is attached as Exhibit 14 to this Annual Report on Form 10-K.

Item 11. EXECUTIVE COMPENSATION

(a) General

Executive officers are compensated for their services as set forth in the Summary Compensation Table. These salaries are approved yearly by the Board of Directors.

(b)

		Summary Compensation Table

										Long Term Compensation
		Annual Compensation								Awards				Payouts
								Other		Restricted
Name and	Fiscal							Annual		Stock		Option/		LTIP		All other
Principal Position	Year End	Salary		Bonus			Compensation			Award (s)		SARs (#)		Payouts		Compensation

Barry M. Yantis	1) 06-30-12	$	132,000		$	-		$	4,100		-		-		-		-
Barry M. Yantis	1) 06-30-11	$	132,000		$	1,000		$	2,340		-		-		-		-
Barry M. Yantis	1) 06-30-10	$	132,000		$	-		$	3,700		-		-		-		-

CEO, President and Treasurer

No other compensation than that which is listed in compensation table.

No other officers have compensation over $100,000 for their services besides those listed in this compensation table.

Not applicable

(d) Aggregated option/SAR exercises and fiscal year-end option/SAR value table

Not applicable

(e) Long-term incentive plan awards table

Not applicable

Item 11. EXECUTIVE COMPENSATION (CONTINUED)

(f) Compensation of Directors

Directors are not compensated for services on the board. The directors are reimbursed for travel expenses incurred in attending board meetings. During the fiscal year 2012 and 2011, $533 and $273, respectively, of travel expenses were reimbursed to board member Brian A. Yantis.

(g) Employment contracts and termination of employment and change in control arrangements

No employment contracts exist with any executive officers. In addition, there are no contracts currently in place regarding termination of employment or change in control arrangements.

(h) Report on repricing of option/SARs

Not applicable

(i) Additional information with respect to compensation committee interlocks and insider participation in compensation decisions

The registrant has no formal compensation committee. The Board of Directors, Brian A. Yantis, Barry M. Yantis, and Brett A. Yantis (all current officers of the Company) annually approve the compensation of Barry M. Yantis, CEO, President and Treasurer.

(j) Board compensation committee report on executive compensation

The Board bases the annual salary of the CEO on the Company’s prior year performance. The criteria is based upon, but is not limited to, market area expansion, gross profit improvement, control of operating expenses, generation of positive cash flow, and hours devoted to the business during the previous fiscal year.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

				Amounts
				and
				Nature
				of
				Beneficial
	Title of Class		Name and Address	Ownership		% of Class

(a)	Security ownership of certain
	beneficial owners

	Common; par value $1 per share		Barry Yantis, CEO &
			Director	194,385	(1)	16.9	% (2)
			5605 Osage Drive
			St. Joseph, Mo.
			64503

			Brian Yantis, Officer &
			Director	97,192	(1)	8.4	% (2)
			1210 E. Clarendon
			Arlington Heights, IL.
			60004

(b)	Security ownership of management

	Common; par value $1 per share		Two directors and CEO	110,856		11.4	%
			as a group

	Prior Cumulative Preferred,		Two directors and CEO	21,533		21.5	%
	$5 par value: Series A,		as a group
	6% convertible

	Prior Cumulative Preferred		Two directors and CEO	21,533		21.5	%
	$5 par value: Series B,		as a group
	6% convertible

	Cumulative Preferred, $20 par		Two directors and CEO	3,017		5.2	%
	value:	Series A, $5 convertible	as a group

	Cumulative Preferred, $20 par		Two directors and CEO	630		6.6	%
	value:	Series B, $5 convertible	as a group

	(1)	Includes 120,477 and 60,244 shares, respectively, which could be received within 30 days upon conversion of preferred stock.

	(2)	Reflects the percentage assuming the preferred shares above were converted into common stock.

(c)	No known change of control is anticipated.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

(a) Transactions with management and others

The registrant’s subsidiary, Dye Candy Company entered into an operating lease agreement during the 2005 fiscal year to provide office and manufacturing facilities with a limited liability company that is owned 100% by Vice-President and Director, Brett A. Yantis and his spouse. The annual rent is $78,000.

(b) Certain business relationships

Not applicable

(d) Transactions with promoters

Not applicable

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table shows the aggregate fees billed to the Company for professional services for the years ended June 30, 2012 and 2011:

	2012		2011

Audit fees:
Mayer Hoffman McCann P.C.	$	62,679	$	52,587
Tax fees		-		-
All other fees		-		-

PART IV

Item 15.	EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

	The following documents are filed as part of this report.

	1.	Consolidated Financial Statements:	Page

		Index to Consolidated Financial Statements	17

		Consolidated Balance Sheets	19 - 20

		Consolidated Statements of Operations	21

		Consolidated Statements of Stockholders’ Equity	22

		Consolidated Statements of Cash Flows	23

		Notes to Consolidated Financial Statements	24 - 34

	2.	Consolidated Financial Statements Schedules:

		None

	3.	Exhibits:

			The exhibits listed below are filed with or incorporated by reference in this report.

			The following have been previously filed and are incorporated by reference to prior years’ Forms 10-K filed by the Registrant:

			3.1	Articles of Incorporation of Chase General Corporation

			3.2	Bylaws

			The following are Exhibits attached or explanations included in “Notes to Financial Statements” in Part II of this report:

			4.	Instruments defining the rights of security holders including indentures - Refer to Note 4.
			11.	Computation of per share earnings - Refer to Note 6.
			14.	Code of Ethics
			21.	Subsidiaries of registrant - Refer to Note 1 of Notes to Consolidated Financial Statements.
			31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
			32.1	Certification of Chairman of the Board, Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			CHASE GENERAL CORPORATION (Registrant)

Date:	September 14, 2012	By:	/s/ Barry M. Yantis
			Barry M. Yantis
			Chairman of the Board, Chief Executive Officer, President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated below.


Signatures	Title	Date

/s/ Barry M. Yantis		September 14, 2012
Barry M. Yantis	Chairman of the Board, Chief Executive Officer and Chief Financial Officer, President, Treasurer and Director

/s/ Brett Yantis		September 14, 2012
Brett Yantis	Vice-President and Director

/s/ Brian A. Yantis		September 14, 2012
Brian A. Yantis	Secretary and Director