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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)



|x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

For the Fiscal Year Ended June 30, 2010



| ̈ | 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
incorporation or organization) |  | (I.R.S. Employer 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   ̈     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   ̈     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   ̈

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   ̈     No   ̈

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 |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | 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   ̈    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 15, 2010 there were 969,834
shares of Common Stock $1.00 par value, outstanding.



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EXPLANATORY NOTE

This Amendment No. 1 to Form 10-K (this Amendment) amends the Annual Report on Form 10-K for the fiscal year ended June 30, 2010, originally filed on September 27, 2010 (the
Original 10-K), of Chase General Corporation, a Missouri corporation (Company). The Company is filing this Amendment to amend Item 8 to include the audit report of the Consolidated Financial Statements and Supplementary Data, which
was not included in the Original 10-K. In addition, the Company is including amended Item 9A (T) to modify disclosure controls and procedures.

This Amendment should be read in conjunction with the Original 10-K and the Companys other filings made with the Securities and Exchange Commission subsequent to the filing of the Original 10-K on
September 27, 2010. The Original 10-K has not been amended or updated to reflect events occurring after September 27, 2010, except as specifically set forth in this Amendment.



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CHASE GENERAL CORPORATION

ANNUAL REPORT ON FORM 10-K/A

(Amendment No. 1)

For the Year Ended June 30, 2010

TABLE OF CONTENTS



|           |  |                                                          |    |  |    | 
|---------- |  | -------------------------------------------------------- | -- |  | -- | 
|PART II    |  |                                                          |    |  |    | 
|Item 8.    |  | Consolidated Financial Statements and Supplementary Data |    |  | 16 | 
|Item 9A(T) |  | Controls and Procedures                                  |    |  | 36 | 
|           |  |                                                         
|PART IV    |  |                                                          |    |  |    | 
|Item 15.   |  | Exhibits and Financial Statement Schedules               |    |  | 42 | 
|SIGNATURES |  |                                                          | 48 | 

|
|



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|Item 8 | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------ | --------------------------------------------------------

The Consolidated Financial Statements meeting the requirements of Regulation S-B are contained on pages 17 through 35 of this Form 10-K.



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

Table of Contents



|                                                         |  |      |    | 
|-------------------------------------------------------- |  | ---- | -- | 
|                                                         |  | PAGE |   
|Reports 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               |  |      | 25 | 



17



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LOGO

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, 2010 and 2009, 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 audits 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 audits 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, 2010 and 2009, 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 23, 2010



18



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2010 and 2009

ASSETS



|                                                                                      |  |      |           |  |      |   |           | 
|------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                      |  | 2010 |           |  | 2009 |  
|CURRENT ASSETS                                                                        |  |      |           |  |      |   |           | 
|Cash and cash equivalents                                                             |  | $    | 106,508   |  |      | $ | 28,771    | 
|Receivables                                                                           |  |      |           |  |      |   |           | 
|Net of allowance for doubtful accounts of $14,891 and $15,736, respectively (Note 12) |  |      | 164,753   |  |      |   | 229,909   | 
|Inventories:                                                                          |  |      |           |  |      |   |           | 
|Finished goods                                                                        |  |      | 104,022   |  |      |   | 119,116   | 
|Goods in process                                                                      |  |      | 3,730     |  |      |   | 4,932     | 
|Raw materials                                                                         |  |      | 109,027   |  |      |   | 69,960    | 
|Packaging materials                                                                   |  |      | 186,420   |  |      |   | 172,764   | 
|Prepaid expenses                                                                      |  |      | 4,959     |  |      |   | 16,858    | 
|Deferred income taxes (Note 7)                                                        |  |      | 5,844     |  |      |   | 4,626     | 
|                                                                                      |  |      |           |  |      |   |           | 
|                                                                                      |  |     
|Total current assets                                                                  |  |      | 685,263   |  |      |   | 646,936   | 
|                                                                                      |  |      |           |  |      |   |           | 
|                                                                                      |  |     
|PROPERTY AND EQUIPMENT                                                                |  |      |           |  |      |   |           | 
|Land                                                                                  |  |      | 35,000    |  |      |   | 35,000    | 
|Buildings                                                                             |  |      | 85,738    |  |      |   | 85,738    | 
|Machinery and equipment                                                               |  |      | 1,029,093 |  |      |   | 771,330   | 
|Trucks and autos                                                                      |  |      | 139,601   |  |      |   | 139,601   | 
|Office equipment                                                                      |  |      | 37,027    |  |      |   | 36,471    | 
|Leasehold improvements                                                                |  |      | 71,481    |  |      |   | 71,481    | 
|                                                                                      |  |      |           |  |      |   |           | 
|Total                                                                                 |  |      | 1,397,940 |  |      |   | 1,139,621 | 
|Less accumulated depreciation                                                         |  |      | 885,871   |  |      |   | 811,139   | 
|                                                                                      |  |      |           |  |      |   |           | 
|                                                                                      |  |     
|Total property and equipment                                                          |  |      | 512,069   |  |      |   | 328,482   | 
|                                                                                      |  |      |           |  |      |   |           | 
|                                                                                      |  |     
|TOTAL ASSETS                                                                          |  | $    | 1,197,332 |  |      | $ | 975,418   | 
|                                                                                      |  |      |           |  |      |   |           | 

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



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2010 and 2009

LIABILITIES AND STOCKHOLDERS EQUITY



|                                                                          |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                          |  | 2010 |            |   | 2009 |  
|CURRENT LIABILITIES                                                       |  |      |            |   |      |   |            |  
|Accounts payable                                                          |  | $    | 68,734     |   |      | $ | 158,570    |  
|Current maturities of notes payable (Note 3 & 4)                          |  |      | 56,820     |   |      |   | 30,142     |  
|Accrued expenses                                                          |  |      | 15,337     |   |      |   | 15,487     |  
|Deferred income (Note 2)                                                  |  |      | 1,299      |   |      |   | 1,299      |  
|Income tax payable                                                        |  |      | 2          |   |      |   | 185        |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|Total current liabilities                                                 |  |      | 142,192    |   |      |   | 205,683    |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|LONG-TERM LIABILITIES                                                     |  |      |            |   |      |   |            |  
|Deferred income (Note 2)                                                  |  |      | 17,857     |   |      |   | 19,155     |  
|Notes payableless current maturities (Note 3)                            |  |      | 150,475    |   |      |   | 42,604     |  
|Deferred income taxes (Note 7)                                            |  |      | 93,869     |   |      |   | 21,986     |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|Total long-term liabilities                                               |  |      | 262,201    |   |      |   | 83,745     |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|Total liabilities                                                         |  |      | 404,393    |   |      |   | 289,428    |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|COMMITMENTS AND CONTINGENCIES (NOTE 10)                                   |  |      |            |   |      |   |            |  
|                                                                          |  |     
|STOCKHOLDERS EQUITY                                                      |  |      |            |   |      |   |            |  
|Capital stock issued and outstanding: (Note 6)                            |  |      |            |   |      |   |            |  
|Prior cumulative preferred stock, $5 par value:                           |  |      |            |   |      |   |            |  
|Series A (liquidation preference $2,070,000 and $2,040,000, respectively) |  |      | 500,000    |   |      |   | 500,000    |  
|Series B (liquidation preference $2,025,000 and $1,995,000, respectively) |  |      | 500,000    |   |      |   | 500,000    |  
|Cumulative preferred stock, $20 par value:                                |  |      |            |   |      |   |            |  
|Series A (liquidation preference $4,726,533 and $4,668,001, respectively) |  |      | 1,170,660  |   |      |   | 1,170,660  |  
|Series B (liquidation preference $770,281 and $760,741, 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                                                       |  |      | (5,673,057 | ) |      |   | (5,780,006 | )
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|Total stockholders equity                                                |  |      | 792,939    |   |      |   | 685,990    |  
|                                                                          |  |      |            |   |      |   |            |  
|                                                                          |  |     
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                |  | $    | 1,197,332  |   |      | $ | 975,418    |  
|                                                                          |  |      |            |   |      |   |            |  

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



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended June 30, 2010 and 2009



|                                                       |  |      |           |   |      |   |           |  
|------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                       |  | 2010 |           |   | 2009 |  
|NET SALES (NOTE 12)                                    |  | $    | 2,940,935 |   |      | $ | 3,101,004 |  
|                                                       |  |     
|COST OF SALES                                          |  |      | 2,108,743 |   |      |   | 2,190,173 |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Gross Profit                                           |  |      | 832,192   |   |      |   | 910,831   |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|OPERATING EXPENSES                                     |  |      |           |   |      |   |           |  
|Selling expenses                                       |  |      | 327,413   |   |      |   | 368,742   |  
|General and administrative expenses                    |  |      | 323,221   |   |      |   | 319,038   |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Total operating expenses                               |  |      | 650,634   |   |      |   | 687,780   |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Income from operations                                 |  |      | 181,558   |   |      |   | 223,051   |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|OTHER INCOME (EXPENSE)                                 |  |      |           |   |      |   |           |  
|Miscellaneous income                                   |  |      | 385       |   |      |   | 14,003    |  
|Interest (expense) (Note 3, 4 & 5)                     |  |      | (4,127    | ) |      |   | (6,346    | )
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Total other income (expense)                           |  |      | (3,742    | ) |      |   | 7,657     |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Income before income taxes                             |  |      | 177,816   |   |      |   | 230,708   |  
|                                                       |  |     
|PROVISION FOR INCOME TAXES (NOTE 7)                    |  |      | 70,867    |   |      |   | 38,459    |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|NET INCOME                                             |  |      | 106,949   |   |      |   | 192,249   |  
|                                                       |  |     
|Preferred dividends                                    |  |      | (128,072  | ) |      |   | (128,072  | )
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|Net income (loss) applicable to common stockholders    |  | $    | (21,123   | ) |      | $ | 64,177    |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|NET INCOME (LOSS) PER SHARE OF COMMON STOCK  (NOTE 8) |  |      |           |   |      |   |           |  
|                                                       |  |     
|BASIC                                                  |  | $    | (.02      | ) |      | $ | .07       |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|DILUTED                                                |  | $    |          |   |      | $ | .03       |  
|                                                       |  |      |           |   |      |   |           |  
|                                                       |  |     
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING    |  |      | 969,834   |   |      |   | 969,834   |  
|                                                       |  |      |           |   |      |   |           |  

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



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years Ended June 30, 2010 and 2009



|                        |  |                                 |         |  |                           |   |         |             |  |   |                |  |  |                    |         |  |       |   |         |  |  |   |           |  |  |   |            |   |  |   |         | 
|----------------------- |  | ------------------------------- | ------- |  | ------------------------- | - | ------- | ----------- |  | - | -------------- |  |  | ------------------ | ------- |  | ----- | - | ------- |  |  | - | --------- |  |  | - | ---------- | - |  | - | ------- | 
|                        |  | Prior CumulativePreferred
Stock |         |  | CumulativePreferred
Stock |   |         | CommonStock |  |   | Paid-inCapital |  |  | AccumulatedDeficit |         |  | Total |  
|                        |  | Series A                        |         |  | Series B                  |   |         | Series A    |  |   | Series B       |  |  |                    |         |  |       |   |         |  |  |   |           | 
|                        |  |                                 |         |  |                           |   |         |            
|BALANCE , JUNE 30, 2008 |  | $                               | 500,000 |  |                           | $ | 500,000 |             |  | $ | 1,170,660      |  |  | $                  | 190,780 |  |       | $ | 969,834 |  |  | $ | 3,134,722 |  |  | $ | (5,972,255 | ) |  | $ | 493,741 | 
|                        |  |                                 |         |  |                           |   |         |            
|Net income              |  |                                 |        |  |                           |   |        |             |  |   |               |  |  |                    |        |  |       |   |        |  |  |   |          |  |  |   | 192,249    |   |  |   | 192,249 | 
|                        |  |                                 |         |  |                           |   |         |             |  |   |                |  |  |                    |         |  |       |   |         |  |  |   |           |  |  |   |            |   |  |   |         | 
|                        |  |                                 |         |  |                           |   |         |            
|BALANCE , JUNE 30, 2009 |  |                                 | 500,000 |  |                           |   | 500,000 |             |  |   | 1,170,660      |  |  |                    | 190,780 |  |       |   | 969,834 |  |  |   | 3,134,722 |  |  |   | (5,780,006 | ) |  |   | 685,990 | 
|                        |  |                                 |         |  |                           |   |         |            
|Net income              |  |                                 |        |  |                           |   |        |             |  |   |               |  |  |                    |        |  |       |   |        |  |  |   |          |  |  |   | 106,949    |   |  |   | 106,949 | 
|                        |  |                                 |         |  |                           |   |         |             |  |   |                |  |  |                    |         |  |       |   |         |  |  |   |           |  |  |   |            |   |  |   |         | 
|                        |  |                                 |         |  |                           |   |         |            
|BALANCE , JUNE 30, 2010 |  | $                               | 500,000 |  |                           | $ | 500,000 |             |  | $ | 1,170,660      |  |  | $                  | 190,780 |  |       | $ | 969,834 |  |  | $ | 3,134,722 |  |  | $ | (5,673,057 | ) |  | $ | 792,939 | 
|                        |  |                                 |         |  |                           |   |         |             |  |   |                |  |  |                    |         |  |       |   |         |  |  |   |           |  |  |   |            |   |  |   |         | 

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



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2010 and 2009



|                                                                 |  |      |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | 2010 |            |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                             |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Collections from customers                                       |  | $    | 3,006,936  |   |      | $ | 3,081,032  |  
|Other income                                                     |  |      | 925        |   |      |   | 690        |  
|Cost of sales, selling, general and administrative expenses paid |  |      | (2,799,647 | ) |      |   | (2,806,623 | )
|Interest paid                                                    |  |      | (3,871     | ) |      |   | (7,409     | )
|Income taxes paid                                                |  |      | (385       | ) |      |   |           |  
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Net cash provided by operating activities                        |  |      | 203,958    |   |      |   | 267,690    |  
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|CASH FLOWS FROM INVESTING ACTIVITIES                             |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Proceeds from sale of property and equipment                     |  |      |           |   |      |   | 24,000     |  
|Purchases of property and equipment                              |  |      | (260,770   | ) |      |   | (76,918    | )
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Net cash (used in) investing activities                          |  |      | (260,770   | ) |      |   | (52,918    | )
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|CASH FLOWS FROM FINANCING ACTIVITIES                             |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Proceeds from line-of-credit                                     |  |      | 210,000    |   |      |   | 145,000    |  
|Principal payments on line-of-credit                             |  |      | (210,000   | ) |      |   | (195,000   | )
|Proceeds from equipment notes payable                            |  |      | 163,909    |   |      |   |           |  
|Principal payments on stockholder notes payable                  |  |      |           |   |      |   | (140,000   | )
|Principal payments on vehicle note payable                       |  |      | (29,360    | ) |      |   | (20,829    | )
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|Net cash provided by (used in) financing activities              |  |      | 134,549    |   |      |   | (210,829   | )
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|NET INCREASE IN CASH AND CASH EQUIVALENTS                        |  |      | 77,737     |   |      |   | 3,943      |  
|                                                                 |  |     
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                     |  |      | 28,771     |   |      |   | 24,828     |  
|                                                                 |  |      |            |   |      |   |            |  
|                                                                 |  |     
|CASH AND CASH EQUIVALENTS, END OF YEAR                           |  | $    | 106,508    |   |      | $ | 28,771     |  
|                                                                 |  |      |            |   |      |   |            |  

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



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2010 and 2009



|                                                                                  |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | 2010 |         |   | 2009 |  
|RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES         |  |      |         |   |      |   |         |  
|                                                                                  |  |     
|Net income                                                                        |  | $    | 106,949 |   |      | $ | 192,249 |  
|                                                                                  |  |     
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |      | 75,344  |   |      |   | 71,030  |  
|Provision for bad debts                                                           |  |      | (845    | ) |      |   | 1,995   |  
|Deferred income amortization                                                      |  |      | (1,299  | ) |      |   | (1,299  | )
|Deferred income taxes                                                             |  |      | 70,665  |   |      |   | 38,274  |  
|(Gain) loss on sale of equipment                                                  |  |      | 1,839   |   |      |   | (12,014 | )
|Effects of changes in operating assets and liabilities:                           |  |      |         |   |      |   |         |  
|Trade receivables                                                                 |  |      | 66,001  |   |      |   | (19,972 | )
|Inventories                                                                       |  |      | (36,426 | ) |      |   | (63,642 | )
|Prepaid expenses                                                                  |  |      | 11,899  |   |      |   | (10,712 | )
|Accounts payable                                                                  |  |      | (89,836 | ) |      |   | 73,691  |  
|Accrued expenses                                                                  |  |      | (150    | ) |      |   | (2,095  | )
|Income tax payable                                                                |  |      | (183    | ) |      |   | 185     |  
|                                                                                  |  |      |         |   |      |   |         |  
|                                                                                  |  |     
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  | $    | 203,958 |   |      | $ | 267,690 |  
|                                                                                  |  |      |         |   |      |   |         |  

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



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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

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, has not been disclosed in these consolidated financial statements.

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 the 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.



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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, 2010 and 2009 was $135,109 and $156,489,
respectively.

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.

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         



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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, 2010, 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, no diluted earnings per share shall be presented.

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:



|                                                                             |  |      |         |  |      |  |         | 
|---------------------------------------------------------------------------- |  | ---- | ------- |  | ---- |  | ------- | 
|                                                                             |  | 2010 |         |  | 2009 | 
|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  | 



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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 $640 and $750 for the years ended June 30, 2010 and 2009, respectively.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Pursuant to SFAS No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162, the FASB Accounting Standards Codification (ASC) (FASB ASC 105) became the
sole source of authoritative U.S. GAAP for interim and annual periods ending after September 15, 2009, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. The Company adopted this
standard during the first quarter of 2009. Reference to specific accounting standards in the footnotes to our consolidated financial statements have been changed to refer to the appropriate section of the ASC.

During the third quarter, Chase adopted FASB accounting Standards Update (ASU) No. 2010-09, Amendments to Certain Recognition and Disclosure
Requirements, which amends ASC 855, Subsequent Events. This ASU removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated. This change removes potential conflicts with SEC requirements. Because
this update affects the disclosure and not the accounting treatment for subsequent events, the adoption of this provision did not have a material impact on the Companys consolidated financial statements.

During the third quarter, Chase adopted FASB ASU No. 2010-06 Fair Value Measurements and Disclosures (Topic 820). This ASU requires new disclosures
for transfers in and out of Levels 1 and 2, and Activity in Level 3 fair value measurements. The update also clarifies the level disaggregation and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning after December 15, 2009. The requirement related to Level 3 fair value measurements is effective for the Company for interim and annual reporting periods beginning
after January 29, 2011. The adoption of the effective portions of this new standard did not have a material impact to the Companys consolidated financial statements and the Company does not expect a material impact to its consolidated
financial statements related to the Level 3 fair value disclosures.



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



In June 2009, the FASB issued new guidance on the consolidation of variable interest entities
(VIE) in response to concerns about the application of certain key provisions of pre-existing guidance, including those regarding the transparency of the involvement with a VIE. Specifically, this new guidance requires a qualitative
approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. In addition, this new guidance
requires additional disclosures about the involvement with a VIE and any significant changes in risk exposure due to that involvement. This new guidance is effective for fiscal years beginning after November 15, 2009. We plan to adopt the new
guidance in fiscal year 2011 and the Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.

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. At June 30,
2009, a total of $25,000 was reclassified to deferred revenue. Deferred revenue is recognized on a straight line basis over the lease term of 20 years. During the years ended June 30, 2010 and 2009, deferred revenue of $1,299 was amortized into
income for each period.

NOTE 3 - NOTES PAYABLE

The Companys long-term debt consists of:



|            |  |                                                                                                       |  |      |        |  |      |   |        | 
|----------- |  | ----------------------------------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|Payee       |  | Terms                                                                                                 |  | 2010 |        |  | 2009 |  
|Ford Credit |  | $1,001 monthly payments including interest of 0%; final payment due March 2011, secured by a vehicle. |  | $    | 9,003  |  |      | $ | 21,010 | 
|            |  |                                                                                                       | 
|Ford Credit |  | $573 monthly payments including interest of 6.99%; final payment due July 2012, secured by a vehicle. |  |      | 13,636 |  |      |   | 19,039 | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - NOTES PAYABLE(CONTINUED)



|                    |  |                                                                                                              |  |      |         |  |      |   |        | 
|------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | ------- |  | ---- | - | ------ | 
|Payee               |  | Terms                                                                                                        |  | 2010 |         |  | 2009 |  
|Honda               |  | $508 monthly payments including interest of 1.9%; final payment due December 15, 2011, secured by a vehicle. |  |      | 9,007   |  |      |   | 14,871 | 
|                    |  |                                                                                                              | 
|Nissan              |  | $557 monthly payments including interest of 3.9%; final payment due April 2012, secured by a vehicle.        |  |      | 11,740  |  |      |   | 17,826 | 
|                    |  |                                                                                                              | 
|Nodaway Valley Bank |  | $3,192, including interest of 6.25%; final payment due June 2015, secured by equipment.                      |  |      | 163,909 |  |      |   |       | 
|                    |  |                                                                                                              |  |      |         |  |      |   |        | 
|                    |  |                                                                                                              | 
|                    |  | Total                                                                                                        |  |      | 207,295 |  |      |   | 72,746 | 
|                    |  | Less current portion                                                                                         |  |      | 56,820  |  |      |   | 30,142 | 
|                    |  |                                                                                                              |  |      |         |  |      |   |        | 
|                    |  | Long-term portion                                                                                            |  | $    | 150,475 |  |      | $ | 42,604 | 
|                    |  |                                                                                                              |  |      |         |  |      |   |        | 

|                             |  |  |  |  |  |  |  |  |  | 
|---------------------------- |  |  |  |  |  |  |  |  |  | 
|Future minimum payments are: |  |  |  |  |  |  |  | 

|      |  |  |  |   |         | 
|----- |  |  |  | - | ------- | 
|2011  |  |  |  | $ | 56,820  | 
|2012  |  |  |  |   | 45,768  | 
|2013  |  |  |  |   | 33,287  | 
|2014  |  |  |  |   | 34,822  | 
|2015  |  |  |  |   | 36,598  | 
|      |  |  |  |   |         | 
|Total |  |  |  | $ | 207,295 | 
|      |  |  |  |   |         | 

NOTE 4 - NOTE PAYABLE - BANK

Effective January 1, 2009, the Company had a $250,000 line-of-credit agreement which expired on January 1, 2010. This line-of-credit agreement was renewed on that date to extend until
January 3, 2011, with a variable interest rate at prime (5.0% at June 30, 2010 and 2009, respectively). The line-of-credit was collateralized by certain equipment. At June 30, 2010 and 2009, there was no outstanding balance on the
line-of-credit.

NOTE 5 - NOTE PAYABLE - STOCKHOLDER

The Company borrowed $140,000 from a stockholder/officer during the fiscal year ending June 30, 2009, which were repaid by December 31, 2008. This unsecured loan had no maturity date and carried
a 4.5% annual interest rate. Interest expense on stockholder/officer note was $2,534 for the year ending June 30, 2009.



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - CAPITAL STOCK

Capital stock authorized, issued, and outstanding as of June 30, 2010 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 | 

Cumulative Preferred Stock dividends
in arrears at June 30, 2010 and 2009 totaled $7,180,374 and $7,052,302, respectively. Total dividends in arrears, on a per share basis, consist of the following at June 30, 2010 and 2009:



|               |  |      |       |  |      |   |       | 
|-------------- |  | ---- | ----- |  | ---- | - | ----- | 
|               |  | 2010 |       |  | 2009 |  
|6% Convertible |  |      |       |  |      |   |       | 
|Series A       |  | $    | 15.45 |  |      | $ | 15.15 | 
|Series B       |  |      | 15.00 |  |      |   | 14.70 | 
|               |  |     
|5% Convertible |  |      |       |  |      |   |       | 
|Series A       |  |      | 60.75 |  |      |   | 59.75 | 
|Series B       |  |      | 60.75 |  |      |   | 59.75 | 

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. It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - CAPITAL STOCK(CONTINUED)



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 7 - INCOME TAX

The recognition of income tax expense related to uncertain tax provisions is determined under the provisions of FASB ASC-740-10. The Company had no
unrecognized tax benefits as of the date of adoption, the income tax provisions taken for open years are appropriately stated and supported for all open years.

As of June 30, 2008, the Company had a net operating loss carryforward of approximately $170,706, of which the Companys June 30, 2009 profits absorbed $166,194 and 2010 profits absorbed
$4,512 of this available net operating loss.

The sources of deferred tax assets and liability at June 30, 2010 and 2009, and the tax
effect of each are as follows:



|                           |  |      |          |   |      |   |         |  
|-------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|                           |  | 2010 |          |   | 2009 |  
|Deferred tax assets:       |  |      |          |   |      |   |         |  
|Inventories                |  | $    | 174      |   |      | $ | 120     |  
|Trade receivables          |  |      | 5,063    |   |      |   | 3,357   |  
|Contribution carryover     |  |      | 607      |   |      |   | 1,149   |  
|Deferred income            |  |      | 6,513    |   |      |   | 4,363   |  
|                           |  |      |          |   |      |   |         |  
|                           |  |     
|Total deferred tax assets  |  |      | 12,357   |   |      |   | 8,989   |  
|                           |  |     
|Deferred tax liability:    |  |      |          |   |      |   |         |  
|Property and equipment     |  |      | (100,382 | ) |      |   | (26,349 | )
|                           |  |      |          |   |      |   |         |  
|                           |  |     
|NET DEFERRED TAX LIABILITY |  | $    | (88,025  | ) |      | $ | (17,360 | )
|                           |  |      |          |   |      |   |         |  

The net deferred tax assets (liability) are presented in the accompanying June 30, 2010 and 2009 balance sheets as
follows:



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2010 |         |   | 2009 |  
|Current deferred tax asset        |  | $    | 5,844   |   |      | $ | 4,626   |  
|Noncurrent deferred tax liability |  |      | (93,869 | ) |      |   | (21,986 | )
|                                  |  |      |         |   |      |   |         |  
|                                  |  |     
|NET DEFERRED TAX LIABILITY        |  | $    | (88,025 | ) |      | $ | (17,360 | )
|                                  |  |      |         |   |      |   |         |  



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7 - INCOME TAX (CONTINUED)



The provision (credit) for income taxes, for the years ended June 30, 2010 and 2009, consists of
the following:



|                               |  |      |        |  |      |   |        | 
|------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                               |  | 2010 |        |  | 2009 |  
|Current tax expense            |  | $    | 202    |  |      | $ | 185    | 
|Deferred tax expense (benefit) |  |      | 70,665 |  |      |   | 38,274 | 
|                               |  |      |        |  |      |   |        | 
|                               |  |     
|                               |  | $    | 70,867 |  |      | $ | 38,459 | 
|                               |  |      |        |  |      |   |        | 

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, 2010 and 2009 due to the following:



|                                                               |  |      |        |  |      |   |         |  
|-------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------- | -
|                                                               |  | 2010 |        |  | 2009 |  
|Computed expected tax (benefit)                              |  | $    | 62,236 |  |      | $ | 80,748  |  
|Increase (decrease) in income taxes (benefits) resulting from: |  |      |        |  |      |   |         |  
|State income taxes, net of federal benefit                     |  |      | 5,960  |  |      |   | 11,896  |  
|Other                                                          |  |      | 2,671  |  |      |   | (54,185 | )
|                                                               |  |      |        |  |      |   |         |  
|                                                               |  |     
|                                                               |  | $    | 70,867 |  |      | $ | 38,459  |  
|                                                               |  |      |        |  |      |   |         |  

The Company has unused contributions of $1,771 to carryforward that will expire for tax years ranging from 2011 through
2015.

NOTE 8 - INCOME (LOSS) PER SHARE

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



|                                                   |  |      |         |   |      |   |         | 
|-------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | 
|                                                   |  | 2010 |         |   | 2009 |  
|Net income                                         |  | $    | 106,949 |   |      | $ | 192,249 | 
|                                                   |  |      |         |   |      |   |         | 
|                                                   |  |     
|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 income (loss) - common stockholders            |  | $    | (21,123 | ) |      | $ | 64,177  | 
|                                                   |  |      |         |   |      |   |         | 



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8 - INCOME (LOSS) PER SHARE(CONTINUED)



|                                                |  |      |           |   |      |   |           | 
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | 
|                                                |  | 2010 |           |   | 2009 |  
|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                 |  | $    | (.02      | ) |      | $ | .07       | 
|                                                |  |      |           |   |      |   |           | 
|                                                |  |     
|Diluted earnings per share                      |  | $    |          |   |      | $ | .03       | 
|                                                |  |      |           |   |      |   |           | 

NOTE 9 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION



|                                              |  |      |       |  |      |   |        | 
|--------------------------------------------- |  | ---- | ----- |  | ---- | - | ------ | 
|                                              |  | 2010 |       |  | 2009 |  
|Cash paid for:                                |  |      |       |  |      |   |        | 
|Interest                                      |  | $    | 3,871 |  |      | $ | 7,409  | 
|Income taxes                                  |  |      | 385   |  |      |   |       | 
|Non-cash transaction:                         |  |      |       |  |      |   |        | 
|Reclass of forgivable loan to deferred income |  |      |      |  |      |   | 10,000 | 
|Financing of new vehicle                      |  |      |      |  |      |   | 60,556 | 

NOTE 10 - COMMITMENTS

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 shall 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, 2010 and 2009.
The amounts are included in cost of sales.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10 - COMMITMENTS(CONTINUED)



Future minimum lease payments under this lease are as follows:

Year ending June 30:



|           |  |   |           | 
|---------- |  | - | --------- | 
|2011       |  | $ | 78,000    | 
|2012       |  |   | 78,000    | 
|2013       |  |   | 78,000    | 
|2014       |  |   | 78,000    | 
|2015       |  |   | 78,000    | 
|Thereafter |  |   | 760,500   | 
|           |  |   |           | 
|           |  | $ | 1,150,500 | 
|           |  |   |           | 

As of June 30, 2010, the Company had raw materials purchase commitments with three vendors totaling $207,000.

NOTE 11 - 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, 2010, 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 12 - CONCENTRATION OF CREDIT RISK

For the years ending June 30, 2010 and 2009, two customers accounted for 39% and 44%, respectively, of the gross sales. For the year ending
June 30, 2010 and 2009, four customers accounted for 77% and 76%, respectively, of accounts receivable.



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##### Table of Contents

|Item 9A(T) | CONTROLS AND PROCEDURES
|---------- | -----------------------



| | (a) | Evaluation of Disclosure Controls and Procedures
| | --- | ------------------------------------------------

The Companys principal Chief Executive Officer, who is also the Chief Financial 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, the Companys Chief Executive Officer,
who is also the Chief Financial Officer has concluded that, as of the end of such period, the Companys disclosure controls and procedures were not effective.

The review performed by Chase General Corporation prior to submission to the Security Exchange Commission did not determine the audit report was omitted and only the auditors signature and date of
the report were included with the Annual 10-K, June 30, 2010 filing. The Chief Executive Officer, who is also the Chief Financial Officer, has changed internal controls and procedures over financial reporting to require his review and approval
of the final copy of the report as completed by RR Donnelly prior to submission to the SEC. Form 10-Q for Fiscal Quarter Ended September 30, 2010 filed November 15, 2010 and Form 10-Q for Fiscal Quarter Ended December 31, 2010 filed
February 14, 2011 no audit report was required to be filed. Therefore, Form 10-Q for Fiscal Quarter Ended September 30, 2010 and Form 10-Q for Fiscal Quarter Ended December 31, 2010 are not required to amended at this time.



| | (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, 2010, the Companys internal control over financial reporting was not effective.

The Company concluded that the control over financial reporting did not determine the audit report was omitted prior to submission of the
Annual 10-K report to the Security Exchange Commission. The Chief Executive Officer, who is also the Chief Financial Officer, has changed the internal control over financial reporting to require his review and approval of the final copy of the
report as completed by RR Donnelly prior to submission to the SEC.

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 was a change in the Companys internal controls over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the
Exchange Act) during the quarter ended June 30, 2010 that affected internal control over financial reporting.

The
additional review by the Chief Executive Officer, who is also the Chief Financial Officer, was the only change to internal control over financial reporting as discussed in item (a) and (b) above.



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##### Table of Contents

PART IV



|Item 15 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|------- | ------------------------------------------

The following documents are filed as part of this report.



|   |  |                                                       |  |                                                                                                                                                                          |         |  |  | 
|-- |  | ----------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------- |  |  | 
|   |  |                                                       |  | Page                                                                                                                                                                     |        
|1. |  | Financial Statements:                                 |  |                                                                                                                                                                          |         | 
|   |  |                                                      
|   |  | Index to 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 - 24 | 
|   |  |                                                      
|   |  | Notes to Consolidated Financial Statements            |  |                                                                                                                                                                          | 25 - 35 | 
|   |  |                                                      
|3. |  | The exhibits listed below are filed with this report. |  |                                                                                                                                                                          |         | 
|   |  |                                                      
|   |  | 31.1                                                  |  | Certification of Chief Executive and Financial Officer required by Rule 13a-14(a)/15d  14(a).                                                                           |        
|   |  |                                                      
|   |  | 32.1                                                  |  | Certification of Chief Executive officer and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |        



42