10QSB

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from          to         

Commission File Number 2-5916

CHASE GENERAL CORPORATION

(Exact name of small business issuer as specified in its charter)

Missouri	36-2667734
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1307 South 59th, St. Joseph, Missouri 64507

(Address of principal executive offices, Zip Code)

(816) 279-1625

(Issuer’s telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act during the past 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨     No  x

As of April 30, 2006, there were 969,834 shares of common stock, $1 par value, issued and outstanding.

Transitional Small Business Disclosure Format    Yes  ¨    No  x

CHASE GENERAL CORPORATION

Index

Form 10-QSB for the Quarter Ended March 31, 2006

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2006 (Unaudited) and June 30, 2005	3
Condensed Consolidated Statements of Operations - For the Three Months Ended March 31, 2006 and 2005 (Unaudited)	5
Condensed Consolidated Statements of Operations - For the Nine Months Ended March 31, 2006 and 2005 (Unaudited)	6
Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended March 31, 2006 and 2005 (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis or Plan of Operation	11
Item 3. Controls and Procedures	15
PART II - OTHER INFORMATION
Item 1. Legal proceedings	16
Item 2. Unregistered Shares of Equity Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities	16
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits	16
Signatures	17
Exhibit 31 - Certification of Chief Executive Officer and Treasurer Pursuant                     to Section 302 of the Sarbanes Oxley Act of 2002	18
Exhibit 32 - Certification 18 U.S.C. Section 1350, as Adopted Pursuant                     to Section 906 of the Sarbanes-Oxley Act of 2002	20

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	March 31, 2006		June 30, 2005
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	100,115	$	60,805
Trade receivables, net		120,418		185,521
Advance to stockholder (Note 6)		20,317		—
Income tax refund claims receivable		2,909		18,425
Inventories:
Finished goods		31,670		110,403
Goods in process		4,976		4,440
Raw materials		36,391		38,188
Packaging materials		113,913		90,845
Prepaid expenses		8,375		3,197
Deferred income taxes		5,234		4,230
Total current assets		444,318		516,054
PROPERTY AND EQUIPMENT - NET		359,652		384,096
TOTAL ASSETS	$	803,970	$	900,150

The accompanying notes are an integral part of these

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

	March 31, 2006			June 30, 2005
	(Unaudited)
CURRENT LIABILITIES
Current maturities of forgivable loan - bank	$	5,000		$	5,000
Accounts payable		21,292			104,380
Accrued expenses		10,049			23,029
Deferred income		1,299			—
Total current liabilities		37,640			132,409
LONG-TERM LIABILITIES
Deferred income		3,376			—
Deferred income taxes		32,541			29,812
Forgivable loan - bank, less current maturities		15,000			20,000
Total long-term liabilities		50,917			49,812
Total liabilities		88,557			182,221
STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $1,942,500 and $1,920,000 respectively)		500,000			500,000
Series B (liquidation preference $1,897,500 and $1,875,000 respectively)		500,000			500,000
Cumulative preferred stock, $20 par value
Series A (liquidation preference $4,477,772 and $4,433,873 respectively)		1,170,660			1,170,660
Series B (liquidation preference $729,736 and $722,581 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		(5,750,583	)		(5,748,067	)
Total stockholders’ equity		715,413			717,929
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	803,970		$	900,150

The accompanying notes are an integral part of these

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31
	2006			2005
NET SALES	$	319,365		$	396,156
COST OF SALES		322,403			359,845
Gross profit (loss) on sales		(3,038	)		36,311
OPERATING EXPENSES
Selling expense		49,512			51,429
General and administrative expenses		66,011			52,017
Total operating expenses		115,523			103,446
Loss from operations		(118,561	)		(67,135	)
OTHER INCOME (EXPENSE)		1,016			340
Net loss before income taxes		(117,545	)		(66,795	)
PROVISION FOR INCOME TAXES (BENEFITS)		(28,451	)		(25,431	)
NET LOSS		(89,094	)		(41,364	)
Preferred dividends		(32,018	)		(32,018	)
Net loss applicable to common stockholders	$	(121,112	)	$	(73,382	)
NET LOSS PER SHARE OF COMMON STOCK - BASIC	$	(0.12	)	$	(0.08	)

The accompanying notes are an integral part of these

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Nine Months Ended March 31
	2006			2005
NET SALES	$	2,001,494		$	2,114,478
COST OF SALES		1,571,578			1,579,399
Gross profit on sales		429,916			535,079
OPERATING EXPENSES
Selling expense		217,424			221,198
General and administrative expenses		214,068			188,614
Total operating expenses		431,492			409,812
Income (loss) from operations		(1,576	)		125,267
OTHER INCOME (EXPENSE)		(2,124	)		(1,267	)
Net income (loss) before income taxes		(3,700	)		124,000
PROVISION FOR INCOME TAXES (BENEFITS)		(1,184	)		28,114
NET INCOME (LOSS)		(2,516	)		95,886
Preferred dividends		(96,054	)		(96,054	)
Net loss applicable to common stockholders	$	(98,570	)	$	(168	)
NET LOSS PER SHARE OF COMMON STOCK - BASIC	$	(.10	)	$	—

The accompanying notes are an integral part of these

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended March 31
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,516	)	$	95,886
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		46,001			37,216
Provision for bad debts		1,584			3,195
(Gain) on sale of equipment		—			(5,849	)
Deferred income amortization		(325	)		—
Deferred income taxes		1,725			7,261
Effects of changes in operating assets and liabilities:
Trade receivables		63,519			(7,003	)
Income tax refund claims receivable		15,516			—
Inventories		56,926			92,200
Prepaid expenses		(5,178	)		(3,217	)
Accounts payable		(83,088	)		(46,262	)
Accrued expenses		(12,980	)		1,523
Income taxes payable		—			(23,919	)
Net cash provided by operating activities		81,184			151,031
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in advance to stockholder		(20,317	)		—
Purchases of equipment		(21,557	)		(207,227	)
Proceeds from sale of equipment		—			15,000
Net cash (used in) investing activities		(41,874	)		(192,227	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable, Series B		—			(7,032	)
Proceeds from forgivable loan		—			25,000
Net cash provided by financing activities		—			17,968
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		39,310			(23,228	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		60,805			177,919
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	100,115		$	154,691
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Income taxes, net of (refunds)	$	(18,425	)	$	44,772
Interest	$	3,216		$	2,140
Non-cash transaction:
Reclass of forgivable loan to deferred income	$	5,000		$	—

The accompanying notes are an integral part of these

condensed consolidated financial statements.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL

The condensed consolidated balance sheet of Chase General Corporation (“Chase” or “we”, “us”, or “our”) at June 30, 2005 has been taken from audited consolidated financial statements at that date and condensed. The condensed consolidated financial statements as of and for the three months and nine months ended March 31, 2006 and for the three months and nine months ended March 31, 2005 are unaudited and reflect all normal and recurring accruals and adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods presented in this quarterly report. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-KSB for the year ended June 30, 2005. The results of operations for the three months and nine months ended March 31, 2006 and cash flows for the nine months ended March 31, 2006 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2006. Where appropriate, items within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation.

NOTE 2 - NET LOSS PER SHARE

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

	Three Months Ended March 31						Nine Months Ended March 31
	2006			2005			2006			2005
Net income (loss)	$	(89,094	)	$	(41,364	)	$	(2,516	)	$	95,886
Preferred dividend requirements:
6% Prior Cumulative Preferred, $5 par value		15,000			15,000			45,000			45,000
5% Convertible Cumulative Preferred, $20 par value		17,018			17,018			51,054			51,054
Total dividend requirements		32,018			32,018			96,054			96,054
Net loss common stockholders	$	(121,112	)	$	(73,382	)	$	(98,570	)	$	(168	)
Weighted average of outstanding common shares		969,834			969,834			969,834			969,834
Net loss per share - basic	$	(.12	)	$	(.08	)	$	(.10	)	$	—

No computation was made on common stock equivalents outstanding because loss per share would be anti-dilutive.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTE 2 - NET INCOME PER SHARE (CONTINUED)

Cumulative Preferred Stock dividends in arrears at March 31, 2006 and 2005, totaled $6,636,068, respectively. Total dividends in arrears, on a per share basis, consist of the following at March 31:

	Nine Months Ended March 31
	2006		2005
6% Convertible
Series A	$	14	$	14
Series B		14		13
5% Convertible
Series A		57		56
Series B		57		56

Six percent convertible prior cumulative preferred stock may, upon thirty days prior notice, be redeemed by the Corporation at $5.25 a share plus unpaid accrued dividends to date of redemption. In the event of voluntary liquidation, holders of this stock are entitled to receive $5.25 per share plus accrued dividends. It may be exchanged for common stock at the option of the shareholders in the ratio of 4 common shares for one share of Series A and 3.75 common shares for one share of Series B.

The Company has the privilege of redemption of 5% convertible cumulative preferred stock at $21.00 a share plus unpaid accrued dividends. In the event of voluntary or involuntary liquidation, holders of this stock are entitled to receive $20.00 a share plus unpaid accrued dividends. It may be exchanged for common stock at the option of the shareholders, in the ratio of 3.795 common shares for one of preferred.

NOTE 3 - NOTE PAYABLE - BANK

Effective June 3, 2005, the Company has a line-of-credit agreement with an original maturity date of June 3, 2006. The line-of-credit is collateralized by certain equipment and bears interest at an annual rate of 6%. At March 31, 2006, the outstanding balance on the line-of-credit was $-0-.

NOTE 4 - FORGIVABLE LOAN

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 Company has met the criteria of occupying a 20,000 square foot building and the criteria of creating a minimum of two new full-time equivalent jobs during the first year of operations in the new facility. In addition, the Company must maintain 19 existing jobs each year thereafter until the five year term has expired. Once the Company is no longer legally entitled to return the monies, the liability is reclassified as deferred revenue and amortized into income over the life of the lease term of the new facility the forgivable loan related to. At March 31, 2006, $5,000 has been reclassified to deferred revenue and $325 has been amortized into income.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5 - LEGAL PROCEEDINGS

On December 16, 2005, a lawsuit was filed by 3600 S. Leonard Road, LLC., (the Plaintiff) against the Company in the Circuit Court of Buchanan County, Missouri. The Plaintiff alleges that the Company failed to honor certain sections of a lease agreement entered into between the Plaintiff, as owner and landlord of the premises subject to the lease agreement, and the Company, as tenant to the premises. The Plaintiff is seeking damages in an amount in excess of $200,000. The Company has filed a response with the Circuit Court denying all material allegations made by the Plaintiff. A status review hearing was held March 15, 2006 in the Circuit Court where upon the Judges ruled for the parties to meet to agree to a scheduling order. The Company believes the claim is without merit and intends to contest it vigorously, however the outcome of this lawsuit cannot be predicted at this time.

NOTE 6 - ADVANCE TO STOCKHOLDER

The Company recorded an advance to a stockholder for $20,317 as of March 31, 2006. The advance is non-interest bearing with no stated maturity date. The advance is included in current assets; management intends to collect the advance in full no later than June 30, 2006.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations section and other parts of this Report contain forward-looking statements that involve risks and uncertainties. The Company’s actual results and the timing of certain events may differ significantly from the results and timing discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed or referred to in this report and in Item 6 of the Annual Report on Form 10-KSB for the year ended June 30, 2005.

The following discussion is intended to provide a better understanding of the significant changes in trends relating to Chase’s financial condition and results of operations. Management’s Discussion and Analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.

OVERVIEW

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

RESULTS OF OPERATIONS

The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:

	Three Months Ended March 31				Nine Months Ended March 31
	2006		2005		2006		2005
Net sales	100	%	100	%	100	%	100	%
Cost of sales	101		91		78		75
Gross profit (loss)	(1	)	9		22		25
Operating expenses	36		26		22		19
Income (loss) from operations	(37	)	(17	)	—		6
Net income (loss) before income taxes	(37	)	(17	)	—		6
Provision (credit) for income taxes	(9	)	(6	)	—		1
Net income (loss)	(28	)%	(11	)%	—	%	5	%

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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)

NET SALES

Net sales decreased $76,791 or 19% for the three months ended March 31, 2006 to $319,365 compared to $396,156 for the three months ended March 31, 2005. Gross sales for Chase Candy Company decreased $71,370 to $330,035 for the three months ended March 31, 2006 compared to $401,405 for 2005. Gross sales for Poe Candy Company increased $1,547 to $4,115 for the three months ended March 31, 2006 compared to $2,568 for 2005.

Net sales decreased $112,984 or 5% for the nine months ended March 31, 2006 to $2,001,494 compared to $2,114,478 for the nine months ended March 31, 2005. Gross sales for Chase Candy Company decreased $120,475 to $1,157,774 for the nine months ended March 31, 2006 compared to $1,278,249 for 2005. Gross sales for Poe Candy Company increased $16,505 to $885,424 for the nine months ended March 31, 2006 compared to $868,919 for 2005.

The 19% decrease in net sales of $76,791 for the three month period ended March 31, 2006, over the same period ended March 31, 2005, is primarily due to Chase orders received in the current quarter from a customer changing a standard order from a 24 count packaging bag to a 12 count packaging bag, which resulted in less volume. In addition, the Company’s returns and allowances increased $4,741 or 36% for the three month period ended March 31, 2006, compared to $13,306 for the three months ended March 31, 2005. Year to date net sales had a slight decrease of 5% without any loss of significant customers.

COST OF SALES

The cost of sales decreased $37,442 to $322,403 increasing to 101% of related revenues for the three months ended March 31, 2006, compared to $359,845 or 91% of related revenues for the three months ended March 31, 2005. The cost of sales decreased $7,821 to $1,571,578 increasing to 78% of related revenues for the nine months ended March 31, 2006, compared to $1,579,399 or 75% of related revenues for the nine months ended March 31, 2005.

The higher percentage for cost of sales is anticipated due to the increased costs of labor rates of 3-4%, shipping costs of 12%, occupancy costs 14%, and production supplies of 8% to date. The multiple increases in rates for fuel and petroleum products have caused the increases for shipping and production supply cost.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)

SELLING EXPENSES

Selling expenses for the three months ended March 31, 2006 decreased $1,917 to $49,512, which is 16% of sales, compared to $51,429 or 13% of sales for the three months ended March 31, 2005. Selling expenses for the nine months ended March 31, 2006 decreased $3,774 to $217,424, which is 11% of sales, compared to $221,198 or 10% of sales for the nine months ended March 31, 2005. No significant change in selling expenses was expected due to the fact that there have been no significant changes in the nature of operations and management’s efforts to control these costs.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended March 31, 2006 increased $13,994 to $66,011, and increased to 21% of sales, compared to $52,017 or 13% of sales for the three months ended March 31, 2005. General and administrative expenses for the nine months ended March 31, 2006 increased $25,454 to $214,068, and increased to 11% of sales, compared to $188,614 or 9% of sales for the nine months ended March 31, 2005. The increase in costs is due to increased professional fees, personal property taxes and health insurance costs.

OTHER INCOME (EXPENSE)

Other income and expense increased by $676 for the three months ended March 31, 2006 to $1,016, compared to $340 for the three months ended March 31, 2005. Other income and expense increased by $(857) for the nine months ended March 31, 2006 to $(2,124), compared to $(1,267) for the nine months ended March 31, 2005. This was primarily due to an increase in interest expense of $1,609 due to paying off a short-term operating note during the nine month period.

PROVISION FOR INCOME TAXES (BENEFITS)

The Company recorded a tax (benefit) for the three months ended March 31, 2006 of $(28,451) as compared to $(25,431) for the three months ended March 31, 2005. The Company recorded a tax (benefit) for the nine months ended March 31, 2006 of $(1,184) as compared to a tax provision of $28,114 for the nine months ended March 31, 2005. The benefit recorded for the nine months ended March 31, 2006 is primarily due to recognizing refundable taxes due to the operating loss.

NET INCOME

The Company reported a net loss for the quarter ended March 31, 2006 of $(89,094), compared to a net loss of $(41,364) for the quarter ended March 31, 2005. This increase in net loss of $47,730 is explained above.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS ON PLAN OF OPERATION (CONTINUED)

NET INCOME (CONTINUED)

The Company reported a net loss for the nine months ended March 31, 2006 of $(2,516), compared to a net income of $95,886 for the nine months ended March 31, 2005. This decrease of $98,402 is explained above.

PREFERRED DIVIDENDS

These amounts reflect additional preferred stock dividends in arrears for the three and nine months ended March 31, 2006 and 2005, respectively, on the Company’s Series A and Series B $5 par value preferred stock and its Series A and Series B $20 par value preferred stock.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended March 31, 2006 was $(121,112) which is an increase of $47,730 as compared to the three months ended March 31, 2005 of $(73,382).

Net loss applicable to common stockholders for the nine months ended March 31, 2006 was $(98,570) which is an increase of $98,402 as compared to the nine months ended March 31, 2005 of $(168). These items are explained above.

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended March 31, 2006, the Company obtained bank financing totaling $250,000, which was used to fund operations. This loan was paid in full during the second quarter ended December 31, 2005.

Cash and cash equivalents increased $39,310 to $100,115 at March 31, 2006 from $60,805 at June 30, 2005.

The Company believes it will have sufficient resources to finance its current operations for at least the next twelve months through working capital. To date, there are no material commitments by the Company for capital expenditures. At March 31, 2006, the Company’s accumulated deficit was $5,750,583, compared to accumulated deficit of $5,748,067 as of June 30, 2005. Working capital as of March 31, 2006 increased 6% to $406,678 from $383,645 as of June 30, 2005.

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

There has been no material impact from inflation and changing prices on net sales or on income from continuing operations for the last three months.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 3. - CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

On December 16, 2005, a lawsuit was filed by 3600 S. Leonard Road, LLC., (the Plaintiff) against the Company in the Circuit Court of Buchanan County, Missouri. The Plaintiff alleges that the Company failed to honor certain sections of a lease agreement entered into between the Plaintiff, as owner and landlord of the premises subject to the lease agreement, and the Company, as tenant to the premises. The Plaintiff is seeking damages in an amount in excess of $200,000. The Company has filed a response with the Circuit Court denying all material allegations made by the Plaintiff. A status review hearing was held March 15, 2006 in the Circuit Court where upon the Judges ruled for the parties to meet to agree to a scheduling order. The Company believes the claim is without merit and intend to contest it vigorously, however the outcome of this lawsuit cannot be predicted at this time.

The Company is not subject to any other material pending or threatened litigation.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

a. None

b. The total cumulative preferred stock dividends contingency at March 31, 2006 is $6,636,068.

ITEM 6.     EXHIBITS

Exhibits.

31	Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Treasurer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHASE GENERAL CORPORATION

Registrant

Dated: May 10, 2006	By:	/s/ Barry M. Yantis
		Barry M. Yantis
		President, Chief Executive Officer, Treasurer and Chairman of the Board

17

EX-31

Exhibit 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND TREASURER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry M. Yantis, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Chase General Corporation (the “Company”); for the quarter ended March 31, 2006.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am the certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Company, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

Exhibit 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND TREASURER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

5. I am the certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Company’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 10, 2006

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

EX-32

Exhibit 32

CERTIFICATION

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Chase General Corporation (the “Company”) on Form 10-QSB for the quarterly period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Barry M. Yantis, President and Chief Executive Officer of Chase General Corporation, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry M. Yantis

Barry M. Yantis

President and Chief Executive Officer

Treasurer and Chairman of the Board

Dated: May 10, 2006