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 December 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 January 31, 2007, 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 December 31, 2006

PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 2006 (Unaudited) and June 30, 2006		3
Condensed Consolidated Statements of Operations—For the Three Months Ended December 31, 2006 and 2005 (Unaudited)		5
Condensed Consolidated Statements of Operations—For the Six Months Ended December 31, 2006 and 2005 (Unaudited)		6
Condensed Consolidated Statements of Cash Flows—For the Six Months Ended December 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	12
Item 3.	Controls and Procedures	16
PART II—OTHER INFORMATION
Item 1.	Legal proceedings	17
Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds—None
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Submission of Matters to a Vote of Security Holders—None
Item 5.	Other Information—None
Item 6.	Exhibits	17
Signatures		18
Exhibit 31—Certification of Chief Executive Officer and Treasurer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002		19
Exhibit 32—Certification 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		21

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	December 31, 2006		June 30, 2006
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	189,645	$	26,558
Trade receivables, net		169,592		111,217
Advance to shareholder		—		9,000
Income tax refund claims receivable		5,342		29,197
Inventories:
Finished goods		19,986		71,631
Goods in process		7,842		4,515
Raw materials		42,027		37,202
Packaging materials		117,455		80,675
Prepaid expenses		5,063		12,446
Deferred income taxes		3,781		16,051
Total current assets		560,733		398,492
PROPERTY AND EQUIPMENT—NET		320,548		349,301
TOTAL ASSETS	$	881,281	$	747,793

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

	December 31, 2006			June 30, 2006
	(Unaudited)
CURRENT LIABILITIES
Current maturities of forgivable loan—bank	$	5,000		$	5,000
Accounts payable		112,151			61,515
Accrued expenses		13,145			17,070
Income taxes payable		13,181			—
Deferred income		1,299			1,299
Total current liabilities		144,776			84,884
LONG-TERM LIABILITIES
Deferred income		7,402			3,052
Deferred income taxes		18,457			18,953
Forgivable loan—bank, less current maturities		10,000			15,000
Total long-term liabilities		35,859			37,005
Total liabilities		180,635			121,889
STOCKHOLDERS’ EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock, $5 par value:
Series A (liquidation preference $1,965,500 and $1,950,000 respectively)		500,000			500,000
Series B (liquidation preference $1,920,000 and $1,905,000 respectively)		500,000			500,000
Cumulative preferred stock, $20 par value
Series A (liquidation preference $4,521,671 and $4,492,405 respectively)		1,170,660			1,170,660
Series B (liquidation preference $736,891 and $732,121 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		(5,765,350	)		(5,840,092	)
Total stockholders’ equity		700,646			625,904
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	881,281		$	747,793

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 December 31
	2006			2005
NET SALES	$	1,187,403		$	1,259,180
COST OF SALES		840,094			879,175
Gross profit on sales		347,309			380,005
OPERATING EXPENSES
Selling expense		110,400			112,827
General and administrative expenses		89,076			58,725
Total operating expenses		199,476			171,552
Income from operations		147,833			208,453
OTHER INCOME (EXPENSE)		(2,215	)		(2,974	)
Net income before income taxes		145,618			205,479
PROVISION FOR INCOME TAXES		38,434			49,042
NET INCOME		107,184			156,437
Preferred dividends		(32,018	)		(32,018	)
Net income applicable to common stockholders	$	75,166		$	124,419
NET INCOME PER SHARE OF COMMON STOCK—BASIC	$	.08		$	.13
NET INCOME PER SHARE OF COMMON STOCK—DILUTED	$	.05		$	.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)

	Six Months Ended December 31
	2006			2005
NET SALES	$	1,646,902		$	1,682,129
COST OF SALES		1,173,503			1,249,175
Gross profit on sales		473,399			432,954
OPERATING EXPENSES
Selling expense		164,813			167,912
General and administrative expenses		206,426			148,057
Total operating expenses		371,239			315,969
Income from operations		102,160			116,985
OTHER INCOME (EXPENSE)		(2,463	)		(3,140	)
Net income before income taxes		99,697			113,845
PROVISION FOR INCOME TAXES		24,955			27,267
NET INCOME		74,742			86,578
Preferred dividends		(64,036	)		(64,036	)
Net income applicable to common stockholders	$	10,706		$	22,542
NET INCOME PER SHARE OF COMMON STOCK—BASIC	$	.01		$	.02
NET INCOME PER SHARE OF COMMON STOCK—DILUTED	$	.01		$	.02

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)

	Six Months Ended December 31
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	74,742		$	86,578
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,753			30,667
Provision for bad debts		600			1,056
Deferred income amortization		(650	)		—
Deferred income taxes		11,774			—
Effects of changes in operating assets and liabilities:
Trade receivables		(58,975	)		46,334
Income tax refund claims receivable		23,855			18,425
Inventories		6,713			35,376
Prepaid expenses		7,383			(2,753	)
Accounts payable		50,636			(43,867	)
Accrued expenses		(3,925	)		(17,520	)
Income taxes payable		13,181			25,767
Net cash provided by operating activities		154,087			180,063
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in advance to officer		9,000			—
Purchases of equipment		—			(18,552	)
Net cash provided by (used in) investing activities		9,000			(18,552	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		163,087			161,511
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		26,558			60,805
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	189,645		$	222,316
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
Income taxes, net of (refunds)	$	(23,855	)	$	(16,925	)
Interest	$	3,502		$	3,216
Non-cash transaction:
Reclass of forgivable loan to deferred income	$	5,000		$	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, 2006 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 six months ended December 31, 2006 and for the three months and six months ended December 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, 2006. The results of operations for the three months and six months ended December 31, 2006 and cash flows for the six months ended December 31, 2006 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2007. Where appropriate, items within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation.

NOTE 2—NET INCOME PER SHARE

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

	Three Months Ended December 31				Six Months Ended December 31
	2006		2005		2006		2005
Net income	$	107,184	$	156,437	$	74,742	$	86,578
Preferred dividend requirements:
6% Prior Cumulative Preferred, $5 par value		15,000		15,000		30,000		30,000
5% Convertible Cumulative Preferred, $20 par value		17,018		17,018		34,036		34,036
Total dividend requirements		32,018		32,018		64,036		64,036
Net income common stockholders	$	75,166	$	124,419	$	10,706	$	22,542
Weighted average of outstanding common shares		969,834		969,834		969,834		969,834
Net income per share—basic	$	.08	$	.13	$	.01	$	.02

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2—NET INCOME PER SHARE (CONTINUED)

The diluted earnings per share was computed on the weighted average of outstanding common shares plus potential dilutive common shares as follows:

	Three Months Ended December 31				Six Months Ended December 31
	2006		2005		2006		2005
Net income	$	107,184	$	156,437	$	74,742	$	86,578
Preferred dividend requirements:
6% Series Convertible
Series A		—		—		15,000		15,000
Series B		—		—		15,000		15,000
5% Series Convertible
Series A		—		—		29,266		29,266
Series B		—		—		4,770		4,770
Total Dividend Requirements		—		—		64,036		64,036
Net Income Common Stockholders		107,184		156,437		10,706		22,542
Weighted average of outstanding common shares		969,834		969,834		969,834		969,834
Dilutive effect of conversion:
6% Series Convertible
Series A		400,000		400,000		—		—
Series B		375,000		375,000		—		—
5% Series Convertible
Series A		222,133		222,133		—		—
Series B		36,201		36,201		—		—
Weighted average of diluted outstanding common shares		2,003,168		2,003,168		969,834		969,834
Diluted Earnings Per Share	$	.05	$	.08	$	.01	$	.02

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2—NET LOSS PER SHARE (CONTINUED)

Cumulative Preferred Stock dividends in arrears at December 31, 2006 and 2005, totaled $6,732,122 and $6,604,050, respectively. Total dividends in arrears, on a per share basis, consist of the following at September 30:

	Six Months Ended December 31
	2006		2005
6% Convertible
Series A	$	14	$	14
Series B		14		14
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—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 has established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of December 31, 2009. 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 operation in the new facility. In addition, the Company maintained 19 existing jobs the year thereafter and will be required to do so until the five year term has expired. Once the Company is no longer legally obligated to return the monies, the liability will be reclassified as deferred revenue and amortized into income over the life on the lease term of the new facility. As of December 31, 2006, $10,000 was reclassified to deferred revenue and $1,299 has been amortized into income.

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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4—NOTE PAYABLE—BANK

Effective June 3, 2006 the Company had a $250,000 line-of-credit agreement which expired on December 31, 2006. This line-of-credit agreement has not been renewed. The line-of-credit was collateralized by certain equipment and bears interest at an annual rate of 8%. At December 31, 2006 the outstanding balance on the line-of-credit was $-0-.

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 alleged that the Company failed to honor certain sections of a lease agreement, for its former facility, 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 Company filed a response with the Circuit Court denying all material allegations made by the Plaintiff, whom was seeking damages in an amount in excess of $200,000. The trial was held in January 2007, at which time, the Judge ruled in favor of the Company. The Plaintiff was awarded no damages.

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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, 2006.

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 products and seasonal candy products, which share a common labor force and utilize the same basic equipment and raw materials. Therefore, segment reporting for the two divisions is not maintained by Management.

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 December 31				Six Months Ended December 31
	2006		2005		2006		2005
Net sales	100	%	100	%	100	%	100	%
Cost of sales	71		70		71		74
Gross profit	29		30		29		26
Operating expenses	17		14		23		19
Net income from operations	12		16		6		7
Net income before income taxes	12		16		6		7
Provision for income taxes	3		4		2		2
Net income	9	%	12	%	4	%	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 $71,777 or 6% for the three months ended December 31, 2006 to $1,187,403 compared to $1,259,180 for the three months ended December 31, 2005. Gross sales for Chase Candy decreased $36,236 to $385,839 for the three months ended December 31, 2006 compared to $422,075 for 2005. Gross sales for seasonal candy decreased $45,193 to $809,346 for the three months ended December 31, 2006 compared to $854,539 for 2005.

Net sales decreased $35,227 or 2% for the six months ended December 31, 2006 to $1,646,902 compared to $1,682,129 for the six months ended December 31, 2005. Gross sales for Chase Candy decreased $75,263 to $752,476 for the six months ended December 31, 2006 compared to $827,739 for 2005. Gross sales for seasonal candy increased $29,874 to $911,183 for the six months ended December 31, 2006 compared to $881,309 for 2005.

The 6% decrease in net sales of $71,777 for the three month period ended December 31, 2006, over the same period ended December 31, 2005, is primarily due to seasonal candy customers ordered earlier this year, which was reflected in the previous quarter. The Chase sales decrease of $36,236 was due to a customer ordering the 12 count packaging product rather than 24 count packaging to date. Year to date net sales had a slight decrease of 2% without any loss of significant customers.

COST OF SALES

The cost of sales decreased $39,081 to $840,094 increasing to 71% of related revenues for the three months ended December 31, 2006, compared to $879,175 or 70% of related revenues for the three months ended December 31, 2005. The cost of sales decreased $75,672 to $1,173,503 decreasing to 71% of related revenues for the six months ended December 31, 2006, compared to $1,249,175 or 74% of related revenues for the six months ended December 31, 2006.

This dollar decrease in cost of sales included 5% or $32,486 in direct materials and labor costs for the three months ended December 31, 2006 to $669,623 as compared to $702,109 for the three months ended December 31, 2005. The Company decreased finished goods inventory for the three months ended December 31, 2006 to $19,986 or 72% of the June 30, 2006 finished goods inventory of $71,631 due to the end of the Company’s busy season. Raw material inventory of $42,027 and packaging materials inventory of $117,455 is 35% higher than the June 30, 2006 inventories of $37,202 raw material and $80,675 packaging as a result of purchasing inventory at competitive prices but not all of this inventory was used during the second quarter ending December 31, 2006. Included in the cost of sales are labor costs for the three months ended December 31, 2006 that decreased 19% or $23,469 to $99,356 as compared to $122,825 for the three months ended December 31, 2005. This decrease is a result of using the same personnel for the second busy season in the new facility and not needing to hire temporary personnel.

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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 December 31, 2006 decreased $2,427 to $110,400, which is 9% of sales, compared to $112,827 or 9% of sales for the three months ended December 31, 2005. Selling expenses for the six months ended December 31, 2006 decreased $3,099 to $164,813, which is 10% of sales, compared to $167,912 or 10% of sales for the six months ended December 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 December 31, 2006 increased $30,351 to $89,076, and increased to 8% of sales, compared to $58,725 or 5% of sales for the three months ended December 31, 2005. General and administrative expenses for the six months ended December 31, 2006 increased $55,270 to $206,426, and increased to 13% of sales, compared to $148,057 or 9% of sales for the six months ended December 31, 2006. The increase in costs is due to increased professional fees of $57,652, of which, $53,000 is in connection with legal proceedings (see Note 5).

OTHER INCOME (EXPENSE)

Other income and expense decreased by $759 for the three months ended December 31, 2006 to $(2,215), compared to $(2,974) for the three months ended December 31, 2006. Other income and expense decreased by $677 for the six months ended December 31, 2006 to $(2,463), compared to $(3,140) for the six months ended December 31, 2005. This was primarily due to an increase in miscellaneous income of $963.

PROVISION FOR INCOME TAXES

The Company recorded a tax provision for the three months ended December 31, 2006 of $38,434 as compared to $49,042 for the three months ended December 31, 2005. The Company recorded a tax provision for the six months ended December 31, 2006 of $24,955 as compared to $27,267 for the six months ended December 31, 2005. The effective tax rate of 25% for the six months ended December 31, 2006 increased from 24% for the six months ended December 31, 2005.

NET INCOME

The Company reported a net income for the quarter ended December 31, 2006 of $107,184, compared to a net income of $156,437 for the quarter ended December 31, 2005. This decrease of $49,253 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 income for the six months ended December 31, 2006 of $74,742, compared to a net income of $86,578 for the six months ended September 30, 2005. This decrease of $11,836 is explained above.

PREFERRED DIVIDENDS

These amounts reflect additional preferred stock dividends in arrears for the three and six months ended December 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 INCOME APPLICABLE TO COMMON STOCKHOLDERS

Net income applicable to common stockholders for the three months ended December 31, 2006 was $75,166 which is a decrease of $49,253 as compared to the three months ended December 31, 2005 of $124,419.

Net income applicable to common stockholders for the six months ended December 31, 2006 was $10,706 which is a decrease of $11,836 as compared to the six months ended December 31, 2005 of $22,542. These items are explained above.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased $163,087 to $189,645 at December 31, 2006 from $26,558 at June 30, 2006. To date, there are no material commitments by the Company for capital expenditures. At December 31, 2006, the Company’s accumulated deficit was $5,765,350, compared to accumulated deficit of $5,840,092 as of June 30, 2006. Working capital as of December 31, 2006 increased 33% to $415,957 from $313,608 as of June 30, 2006.

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 alleged that the Company failed to honor certain sections of a lease agreement, for its former facility, 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 Company filed a response with the Circuit Court denying all material allegations made by the Plaintiff, whom was seeking damages in an amount in excess of $200,000. The trial was held in January 2007, at which time, the Judge ruled in favor of the Company. The Plaintiff was awarded no damages.

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 December 31, 2006 is $6,732,122.

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: February 12, 2007	By:	/s/ Barry M. Yantis
		Barry M. Yantis
		President, Chief Executive Officer,
		Treasurer and Chairman of the Board

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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 December 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

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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: February 12, 2007

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

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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 December 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: February 12, 2007

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