Chase General Sales Dip 1.5% Amid Customer Loss Warning

TL;DR

**Avoid Chase General; a 17% sales hit from losing major customers and weak cybersecurity makes this candy company a sour deal.**

AI Summary

CHASE GENERAL CORP, a confectionery manufacturer, reported a slight revenue decrease of 1.5% to $3,343,170 for the fiscal year ended June 30, 2025, down from $3,395,505 in fiscal year 2024. This decline was driven by a 13.3% volume decrease in its higher-priced Chase Candy Products division, despite an 18.5% volume increase in the Seasonal Candy Products division. The company improved its loss from operations to $73,132 in fiscal year 2025, compared to a loss of $98,626 in fiscal year 2024, attributed to a 5.0% decrease in cost of sales, partially offset by a 5.0% increase in operating expenses. Working capital decreased by $145,644 to $415,447. A significant risk identified is the anticipated loss of two major customers in fiscal year 2026, projected to result in a $575,000, or 17%, loss of sales. The company also noted basic cybersecurity measures and a lack of a formal incident response plan, posing a significant risk of future incidents.

Why It Matters

This filing reveals a small, regional confectionery company facing significant headwinds, particularly the projected loss of $575,000 in sales from two major customers, representing 17% of its total revenue. For investors, this signals potential future revenue contraction and increased customer concentration risk, especially given the lack of a public trading market for its stock. Employees might face job insecurity if sales decline further, as the company already anticipates not expanding production personnel to historical busy season levels. Customers could see changes in product availability or pricing as the company adjusts to its reduced scale and competitive pressures from regional rivals like Palmer Candy Company and Zachary Confections. The broader market impact is minimal due to the company's small size and regional focus, but it highlights the challenges faced by niche manufacturers in a competitive food industry.

Risk Assessment

Risk Level: high — The company faces high risk due to the anticipated loss of two major customers in fiscal year 2026, projected to result in a $575,000 or 17% loss of sales. Additionally, the company's cybersecurity posture is weak, with only basic measures, no regular risk assessments, and no formalized incident response plan, leading to a "significant" risk of future incidents.

Analyst Insight

Investors should exercise extreme caution and likely avoid CHASE GENERAL CORP given the significant customer concentration risk and projected 17% sales loss. Monitor future filings for concrete plans and progress on customer diversification and substantial cybersecurity improvements before considering any involvement.

Financial Highlights

revenue

$3,343,170

revenue Growth

-1.5%

Revenue Breakdown

Key Numbers

• $3,343,170 — Total Sales (for fiscal year ended June 30, 2025, a 1.5% decrease from prior year)
• $3,395,505 — Total Sales (for fiscal year ended June 30, 2024)
• 1.5% — Sales Decrease (year-over-year decrease in total sales)
• 13.3% — Volume Decline (in Chase Candy Products division sales volume)
• 18.5% — Volume Increase (in Seasonal Candy Products division sales volume)
• $73,132 — Loss from Operations (for fiscal year 2025, an improvement from prior year)
• $98,626 — Loss from Operations (for fiscal year 2024)
• $575,000 — Anticipated Sales Loss (from two major customers in fiscal year 2026)
• 17% — Percentage of Sales Loss (anticipated from two major customers in fiscal year 2026)
• 41% — Customer Concentration (one customer accounted for 41% of sales in fiscal year 2025)

Key Players & Entities

• CHASE GENERAL CORP (company) — registrant
• Dye Candy Company (company) — wholly-owned subsidiary and main operating company
• Cherry Mash (product) — trademarked candy bar, largest single revenue producing product
• Palmer Candy Company (company) — regional competitor
• Zachary Confections (company) — regional competitor
• Food Safety Modernization Act (FSMA) (regulator) — federal regulation for food safety
• Food and Drug Administration (FDA) (regulator) — regulates food supply and labeling
• United States Patent and Trademark Office (regulator) — protects the 'Cherry Mash' trademark

FAQ

Risk Factors

• Customer Concentration and Loss [high — financial]: The company faces significant risk from customer concentration, with one customer accounting for 41% of sales in FY2025. The anticipated loss of two major customers in FY2026 is projected to result in a $575,000, or 17%, loss of sales, which could negatively impact financial condition and operating results.
• Cybersecurity Weaknesses [medium — operational]: The company has basic cybersecurity measures but lacks a formal incident response plan. This poses a significant risk of future cybersecurity incidents, which could disrupt operations and potentially lead to data breaches.
• Seasonal Sales Fluctuation [medium — market]: The business is seasonal, with the largest sales volume occurring from August through December. This seasonality creates a heavier demand on working capital in the fall and winter months, requiring careful inventory management and potential short-term financing.
• Intense Regional Competition [medium — market]: The company faces competition from regional players like Palmer Candy Company and Zachary Confections, as well as private label brands. While Chase General Corporation competes on quality, price, and service, the competitive landscape is challenging.

Industry Context

The confectionery industry is characterized by regional competition and private label brands, with companies like Chase General Corporation competing on product quality, price, and service. The industry is also seasonal, with peak sales typically occurring in the latter half of the year, impacting working capital needs. Companies must also adhere to stringent food safety regulations like the FSMA.

Regulatory Implications

The company must comply with FDA guidelines for product labeling and content. Additionally, adherence to the Food Safety Modernization Act (FSMA) is critical, with management believing current compliance is in place, though a third-party inspection is pending.

What Investors Should Do

1. Monitor customer diversification strategy
2. Assess cybersecurity preparedness
3. Evaluate seasonal working capital management

Key Dates

• 2025-06-30: Fiscal Year End — Reporting period for the 10-K filing, showing a 1.5% decrease in revenue and an improved loss from operations.
• 2026-01-01: Anticipated Loss of Customers — Beginning of fiscal year 2026, when the company expects to lose two major customers, resulting in a projected 17% sales loss.
• 2029: Cherry Mash Trademark Expiration — The trademark for the company's largest single revenue-producing product, 'Cherry Mash,' is set to expire.

Glossary

Smaller Reporting Company

A company that meets certain criteria for revenue, public float, and filing history, allowing it to file less comprehensive disclosures. (Explains why certain sections like 'Risk Factors' and 'Selected Financial Data' are marked as not applicable in this filing.)

Food Safety Modernization Act (FSMA)

U.S. legislation that shifts the focus of food safety regulation from responding to contamination to preventing it, granting the FDA new authorities. (The company believes it is compliant with FSMA requirements, indicating a focus on regulatory compliance in food production.)

Trade Receivables

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for. (High concentration in trade receivables from one customer (45% as of June 30, 2025) highlights the financial risk associated with customer concentration.)

Year-Over-Year Comparison

Total sales decreased by 1.5% to $3,343,170 in FY2025 compared to FY2024. The loss from operations improved, narrowing from $98,626 to $73,132, driven by a 5.0% decrease in cost of sales. A significant new risk identified is the anticipated loss of two major customers in FY2026, projected to cause a 17% drop in sales, alongside existing concerns about customer concentration where one customer accounts for 41% of sales.

Key Financial Figures

• $1.00 — re were 969,834 shares of common stock, $1.00 par value, outstanding. Table of Conte
• $575,000 — a total loss of sales of approximately $575,000 or 17%. The termination of these relati
• $84,000 — ual rental expense of this facility was $84,000 for the year ended June 30, 2025 and $7
• $78,000 — 00 for the year ended June 30, 2025 and $78,000 for the year ended June 30, 2024. The
• $323,645 — ffice, and production equipment totaled $323,645 and $206,872 at June 30, 2025 and 2024,
• $206,872 — oduction equipment totaled $323,645 and $206,872 at June 30, 2025 and 2024, respectively
• $1 — market for the common stock (par value $1 per share) of the Company. Security ho
• $3,343,170 — June 30, 2025, the Company's sales were $3,343,170, as compared to sales of $3,395,505 for
• $3,395,505 — ere $3,343,170, as compared to sales of $3,395,505 for fiscal year ended June 30, 2024. Th
• $73,132 — eflected in the loss from operations of $73,132 for fiscal year 2025 compared to the lo
• $98,626 — compared to the loss from operations of $98,626 for fiscal year 2024. Working capital d
• $145,644 — al year 2024. Working capital decreased $145,644 to $415,447 for the fiscal year 2025 fr
• $415,447 — . Working capital decreased $145,644 to $415,447 for the fiscal year 2025 from $561,091
• $561,091 — $415,447 for the fiscal year 2025 from $561,091 for the fiscal year 2024 due primarily
• $52,335 — et of returns and allowances, decreased $52,335 or 1.5% as compared to the year ended J

Filing Documents

• csgn-20250630x10k.htm (10-K) — 1345KB
• csgn-20250630xex31d1.htm (EX-31.1) — 16KB
• csgn-20250630xex32d1.htm (EX-32.1) — 9KB
• 0001104659-25-094882.txt ( ) — 5614KB
• csgn-20250630.xsd (EX-101.SCH) — 39KB
• csgn-20250630_cal.xml (EX-101.CAL) — 58KB
• csgn-20250630_def.xml (EX-101.DEF) — 159KB
• csgn-20250630_lab.xml (EX-101.LAB) — 303KB
• csgn-20250630_pre.xml (EX-101.PRE) — 289KB
• csgn-20250630x10k_htm.xml (XML) — 801KB

BUSINESS

BUSINESS 3 ITEM 1A.

RISK FACTORS

RISK FACTORS 6 ITEM 1B. UNRESOLVED STAFF COMMENTS 6 ITEM 1C. CYBERSECURITY 7 ITEM 2.

PROPERTIES

PROPERTIES 7 ITEM 3.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS 8 ITEM 4. MINE SAFETY DISCLOSURES 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 8 ITEM 6.

SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA 8 ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 14 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 33 ITEM 9A.

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 33 ITEM 9B. OTHER INFORMATION 34 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 34 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 35 ITEM 11.

EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION 36 ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND STOCKHOLDER MATTERS 37 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 38 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 38 PART IV ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES 39

SIGNATURES

SIGNATURES 41 (2) Table of Contents CHASE GENERAL CORPORATION AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2025 PART I

BUSINESS

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 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 the 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. Management considers these two divisions as one reportable segment 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 the following case sizes: (1) 60 count pack (2) 12 boxes of 24 bars per box (3) 200 count shipper box (4) 100 count shipper box In addition to the regular size bar, a "mini-mash" is distributed in the following 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) 3 - 4 # jars (7) 24 - 12 oz. clamshell containers (8) 9 - 8 oz. clamshell containers (3) Table of Contents CHASE GENERAL CORPORATION AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2025

BUSINESS (CONTINUED)

ITEM 1 BUSINESS (CONTINUED) Principal Products and Methods of Distribution (Continued) Seasonal Candy Products of Dye Candy Company produces coconut, peanut, chocolate, and fudge confectioneries and purchases other outsourced products. These products are distributed in bulk or packaged. Principal products include: (1) Coconut Bon-Bons (Discontinued Fall 2025) (6) Peanut Brittle (2) Coconut Stacks (7) Peanut Clusters (3) Home Style Poe Fudge (8) Champion Crme Drops (Discontinued Fall 2025) (4) Peco Flake (9) Jelly Candies (5) Peanut Squares (10) Frosted Pretzels The Champion Crme Drops, Frosted Pretzels, and Jelly Candies are not produced by the Company. All products are shipped to customers by shipping companies. Competition and Market Area The Chase Candy Products division bars are sold primarily to wholesale candy, grocery accounts, vendors, and repackers. "Cherry Mash" bars are marketed in the Midwest region of the United States. For the years ended June 30, 2025 and 2024, this division accounted for 58% and 55%, respectively, of the sales of Dye Candy Company. The Seasonal Candy Products division is sold primarily on a Midwest regional basis to national syndicate accounts, repackers and grocery accounts. For the years ended June 30, 2025 and 2024, this division accounted for 42% and 45%, respectively, of the sales 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 earnings 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

BUSINESS (CONTINUED)

ITEM 1 BUSINESS (CONTINUED) Competition and Market Area (Continued) Chase Candy Company seasonal products are sold in both the grocery and produce departments with bulk, prepackaged clamshell and shippers. Chase Candy Company offers a variety of quality products at a value price. The competitive set of the business does not have a national brand competitor but mostly regional competition and private label. The primary competition includes: 1. Palmer Candy Company sells products that mostly mirror Chase Candy products but they market their products through the bakery department. Retail pricing on Palmer products is usually higher than Chase products. 2. Zachary Confections is another regional competitor that sells many similar items as Chase Candy and are also priced at retail similar to Chase. 3. The low price competitor is Private Label and depending on location, they have products that are of the same variety as Chase Candy products. Product quality is usually not at the same level as Chase products. 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 for the years ended June 30, 2025 and 2024. Raw Materials and Principal Suppliers Raw materials and packaging materials are produced on a national basis with products coming from locations throughout the United States. Raw materials and packaging materials are generally widely available, depending on common market influences. Two suppliers accounted for more than 22% of the Company's cost of sales for the year ended June 30, 2025 and for more than 24% of the Comp

BUSINESS (CONTINUED)

ITEM 1 BUSINESS (CONTINUED) Customers For the years ended June 30, 2025 and 2024, one customer accounted for 41% and 38%, respectively, of sales. As of June 30, 2025 and 2024, that same customer accounted for 45% and 28%, respectively, of trade receivables. No other customer accounted for more than 10% of the Company's sales for the years ended June 30, 2025 and 2024. No other customers accounted for more than 10% of the Company's trade receivables for the year ended June 30, 2025. One customer accounted for more than 10% of the Company's trade receivables for the year ended June 30, 2024. Beginning fiscal year 2026, the Company anticipates the loss of two major customers. Based on historical sales to these customers, management expects a total loss of sales of approximately $575,000 or 17%. The termination of these relationships may negatively impact the Company's financial condition and operating results. The Company continues to assess its customer concentration risk and is implementing strategic initiatives to broaden its customer base. Environmental Protection and the Effect on Probable Government Regulations on the Business 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 evaluated the requirements of the Food Safety Modernization Act (FSMA). The FSMA aims to ensure the U.S. food supply is safe by shifting the focus of federal regulators from responding to contamination to preventing it. The FSMA has given the Food and Drug Administration (FDA) new authorities to regulate the way foods are grown, harvested, and processed. As of the fiscal year ended June 30, 2025 and through the filing of this form, management believes the Company is compliant with all FSMA requirements. Another inspection for compliance will be conducted by a third party within 12 months of year-end. Management does not anticipate any

RISK FACTORS

ITEM 1A RISK FACTORS Not applicable to a smaller reporting company.

UNRESOLVED STAFF COMMENTS

ITEM 1B UNRESOLVED STAFF COMMENTS The Company has no unresolved SEC staff comments at June 30, 2025. (6) Table of Contents CHASE GENERAL CORPORATION AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2025

CYBERSECURITY

ITEM 1C CYBERSECURITY Risk Management and Strategy: Currently, the Company has basic cybersecurity measures in place , such as password protection and antivirus software. However, the Company acknowledges that these measures may not be sufficient to protect against more sophisticated cyber threats. The Company does not currently perform regular comprehensive cybersecurity risk assessments. There is a recognized need to develop a formalized approach to identifying and mitigating cybersecurity risks. The Company lacks a formalized incident response plan. In the event of a cybersecurity incident, the Company would rely on ad-hoc measures to respond and manage the situation. The Company recognizes the need to improve its cybersecurity posture. Planned future initiatives include developing a formal incident response plan, conducting a cybersecurity risk assessment, and exploring additional protective measures, such as data encryption and enhanced network security protocols. However, the timing and extent of these improvements are contingent on available resources. Governance and Oversight: Currently, the Company does not have dedicated personnel or committees for cybersecurity risk oversight. Cybersecurity matters are informally reported to senior management as needed. The board of directors is informed of cybersecurity risks on an as-needed basis but does not actively oversee cybersecurity strategy . The Company will continue evaluating the need to hire a cybersecurity expert or consultant to enhance its cybersecurity governance and oversight. The Company has not experienced any material cybersecurity incidents in the past year. However, due to the current limited cybersecurity measures, the risk of future incidents remains significant.

PROPERTIES

ITEM 2 PROPERTIES We conduct our operations from two buildings as follows: Chase Warehouse – This building is located in St. Joseph, Missouri and 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, 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 – This building is located in St. Joseph, Missouri and 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 that is owned by the son of the Chief Executive Officer of the Company. The annual rental expense of this facility was $84,000 for the year ended June 30, 2025 and $78,000 for the year ended June 30, 2024. The net book value of our premises, land and office, and production equipment totaled $323,645 and $206,872 at June 30, 2025 and 2024, respectively. We believe both facilities are adequately covered by insurance. (7) Table of Contents CHASE GENERAL CORPORATION AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2025

LEGAL PROCEEDINGS

ITEM 3 LEGAL PROCEEDINGS None.

MINE SAFETY DISCLOSURES

ITEM 4 MINE SAFETY DISCLOSURES Not applicable. PART II

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 30, 2025, 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.

SELECTED FINANCIAL DATA

ITEM 6 SELECTED FINANCIAL DATA Not applicable to a smaller reporting company. (8) Table of Contents CHASE GENERAL CORPORATION AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2025

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

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 "estimate," "project," "anticipate," "expect," "intend," "believe," 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; the assumption that the Company has stabilized its customer base and will continue its efforts to expand the existing market area and increase sales to customers; and the expectation that the Company will maintain tight control of all expenditures. Overview During fiscal year ended June 30, 2025, the Company's sales were $3,343,170, as compared to sales of $3,395,505 for fiscal year ended June 30, 2024. The 1.5% decrease in sales is attributable to change in composition of sales between Chase Candy Products division and the Seasonal Candy Products division. The Chase Candy Products division, which historically has a higher average price, saw volume of sales decline by 13.3% while the Seasonal Candy Products division experienced volume increases of 18.5%. Additionally, the 5.0% decrease in cost of sales and 5.0% increase in operating expenses resulted in a change in profitability during th

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Critical Accounting Policies and Estimates (continued) 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. Sales are comprised of the total sales billed during the period, including shipping and handling charges to the customer, less the estimated returns, customer allowances, customer discounts, billbacks and advertising. Inventories Raw material and packaging material inventories are carried at the "lower of cost or net realizable value," with cost being determined on the "first-in, first-out" basis of accounting. The cost of goods in process include an estimate for manufacturing overhead. Finished goods inventory are valued using the lower of cost or market value, determined by the retail inventory method. Under the retail inventory method, the valuation of finished goods inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventories. Results of Operations The following table sets forth for the years indicated, the percentage of sales of certain items in the Company's consolidated statements of operations for the years ended June 30, 2025 and 2024, respectively: For the Years Ended June 30, 2025 2024 Sales 100 % 100 % Cost of Sales 72 % 75 % Gross Profit on Sales 28 % 25 % Operating Expenses 30 % 28 % Loss from Operations (2) % (3) % Other Expense, Net — % — % Loss before Income Taxes (2) % (3) % Income Tax Provision (Benefit) (1) % — % Net Loss (3) % (3) % Fiscal Year 2025 Compared to Fiscal Year 2024 Sales During the year ended June 30, 2025, sales, net of

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year 2025 Compared to Fiscal Year 2024 (Continued) Sales (continued) Sales for Chase Candy consisted of the following divisions: L276 Cherry Mash Distributor Pack division, L100/L200 Cherry Mash Merchandisers division, L260 Changemaker Jar division, L279/L299 Bulk Mini Mash division, and L278/L212 Mini Mash division. The 2.7% increase in sales of Chase Candy of $50,152 for the year ended June 30, 2025 over the same period ended June 30, 2024, is primarily due to the following: 1) increased sales to existing customers of the L276/L277 Cherry Mash Bar segment of approximately $60,000 versus the same period a year ago, 2) increased sales to existing customers of the L100/L200 Cherry Mash Merchandisers segment of approximately $3,000, 3) increased sales to existing customers of the L260/L264 Chasemaker Jar segment of approximately $2,500, and 4) increased sales of the L279/L299 Bulk Mini Mash segment of approximately $3,000, offset by 5) decreased sales of the L212/L278 Mini Mash segment by approximately $15,000 versus the same period a year ago, primarily due to a decrease in orders from existing customers and 6) decreased sales revenue attributable to changes in sales allowances and discounts, promotions, billbacks, and miscellaneous sales of approximately $4,000. Sales for Seasonal Candy consisted of the following divisions: bulk seasonal division, clamshell seasonal division, and the generic seasonal division. The 6.8% decrease in sales of Seasonal Candy of $102,487 for the year ended June 30, 2025 over the same period ended June 30, 2024, is primarily due to 1) decreased sales in the generic seasonal division by approximately $74,000 versus the same period a year ago, primarily due to decreased orders from existing customers, 2) decreased sales in the bulk seasonal division by approximately $23,000 due to decreased orders from existing customers an

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