---



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, 2003



| ̈ | 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.)



3600 Leonard Road,
St. Joseph, Missouri 64503

(Address of principal executive offices)



(816) 279-1625

(Issuers telephone number)



Check whether the issuer (1)
filed all reports required to be filed by Section 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 ̈



As of January 31, 2004, there were 969,834 shares of common stock, $1 par value, issued and outstanding.



Transitional Small Business Disclosure Format (Check one):

Yes ̈; No x



---



1



---

CHASE GENERAL CORPORATION



Index



|                                                                                                                    |  |   
|------------------------------------------------------------------------------------------------------------------- |  | --
|PART I - FINANCIAL INFORMATION                                                                                      |  |   
|                                                                                                                    | 
|Item 1. Condensed Consolidated Financial Statements                                                                 |  |   
|                                                                                                                    | 
|Condensed Consolidated Balance Sheets at December 31, 2003 (Unaudited) and June 30, 2003                            |  | 3 
|                                                                                                                    | 
|Condensed Consolidated Statements of Operations - For the Three Months Ended December 31, 2003 and 2002 (Unaudited) |  | 5 
|                                                                                                                    | 
|Condensed Consolidated Statements of Operations - For the Six Months Ended December 31, 2003 and 2002 (Unaudited)   |  | 6 
|                                                                                                                    | 
|Condensed Consolidated Statements of Cash Flows - For the Six Months Ended December 31, 2003 and 2002 (Unaudited)   |  | 7 
|                                                                                                                    | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                    |  | 8 
|                                                                                                                    | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 11
|                                                                                                                    | 
|Item 3.
Controls and Procedures                                                                                     |  | 15
|                                                                                                                    | 
|PART II - OTHER INFORMATION                                                                                         |  |   
|                                                                                                                    | 
|Item 1. Legal proceedings - None                                                                                    |  |   
|                                                                                                                    | 
|Item 2. Changes In 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 and Reports on Form 8-K                                                                            |  | 16
|                                                                                                                    | 
|Signatures                                                                                                          |  | 16

|              |  |                                                                                                                        |  |   
|------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | --
|              |  |                                                                                                                       
|Exhibit 31
 - |  | Certification of Chief Executive Officer and Treasurer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002       |  | 17
|              |  |                                                                                                                       
|Exhibit 32 -  |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | 19



2



---

PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS



ASSETS



|                             |  |                   |         |              |   |        
|---------------------------- |  | ----------------- | ------- | ------------ | - | -------
|                             |  | December 31, 2003 |         | June 30,2003
|                             |  | (Unaudited)       |         |             
|CURRENT ASSETS               |  |                   |         |              |   |        
|Cash and cash equivalents    |  | $                 | 342,878 |              | $ | 138,806
|Trade receivables, net       |  |                   | 114,218 |              |   | 146,691
|Inventories:                 |  |                   |         |              |   |        
|Finished goods               |  |                   | 12,962  |              |   | 50,934 
|Goods in process             |  |                   | 6,232   |              |   | 4,337  
|Raw materials                |  |                   | 60,627  |              |   | 46,504 
|Packaging materials          |  |                   | 120,134 |              |   | 100,720
|Prepaid expenses             |  |                   | 1,967   |              |   | 17,801 
|                             |  |                   |         |              |   |        
|Total current assets         |  |                   | 659,018 |              |   | 505,793
|PROPERTY AND EQUIPMENT - NET |  |                   | 136,825 |              |   | 139,790
|                             |  |                   |         |              |   |        
|TOTAL ASSETS                 |  | $                 | 795,843 |              | $ | 645,583
|                             |  |                   |         |              |   |        



The accompanying notes
are an integral part of these

condensed consolidated financial statements.



3



---

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS



LIABILITIES AND STOCKHOLDERS EQUITY



|                                                                         |  |                  |            |   |               |   |            |  
|------------------------------------------------------------------------ |  | ---------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                         |  | December 31,2003 |            |   | June 30, 2003 |  
|                                                                         |  | (Unaudited)      |            |   |               |  
|CURRENT LIABILITIES                                                      |  |                  |            |   |               |   |            |  
|Accounts payable                                                         |  | $                | 49,784     |   |               | $ | 48,717     |  
|Accrued expenses                                                         |  |                  | 59,599     |   |               |   | 31,183     |  
|                                                                         |  |                  |            |   |               |   |            |  
|Total current liabilities                                                |  |                  | 109,383    |   |               |   | 79,900     |  
|LONG-TERM LIABILITIES                                                    |  |                  |            |   |               |   |            |  
|Notes payable, Series B                                                  |  |                  | 7,032      |   |               |   | 22,032     |  
|                                                                         |  |                  |            |   |               |   |            |  
|Total liabilities                                                        |  |                  | 116,415    |   |               |   | 101,932    |  
|                                                                         |  |                  |            |   |               |   |            |  
|STOCKHOLDERS EQUITY                                                     |  |                  |            |   |               |   |            |  
|Capital stock issued and outstanding:                                    |  |                  |            |   |               |   |            |  
|Prior cumulative preferred stock, $5 par value:                          |  |                  |            |   |               |   |            |  
|Series A (liquidation preference $1,875,000 and $1,860,000 respectively) |  |                  | 500,000    |   |               |   | 500,000    |  
|Series B (liquidation preference $1,830,000 and $1,815,000 respectively) |  |                  | 500,000    |   |               |   | 500,000    |  
|Cumulative preferred stock, $20 par value                                |  |                  |            |   |               |   |            |  
|Series A (liquidation preference $4,346,075 and $4,316,809 respectively) |  |                  | 1,170,660  |   |               |   | 1,170,660  |  
|Series B (liquidation preference $708,271 and $703,501 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                                                      |  |                  | (5,786,568 | ) |               |   | (5,922,345 | )
|                                                                         |  |                  |            |   |               |   |            |  
|Total stockholders equity                                               |  |                  | 679,428    |   |               |   | 543,651    |  
|                                                                         |  |                  |            |   |               |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                               |  | $                | 795,843    |   |               | $ | 645,583    |  
|                                                                         |  |                  |            |   |               |   |            |  



The accompanying notes
are an integral part of these

condensed consolidated financial statements.



4



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CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



|                                               |  |                               |           |   |      |   |           |  
|---------------------------------------------- |  | ----------------------------- | --------- | - | ---- | - | --------- | -
|                                               |  | Three Months EndedDecember 31 |          
|                                               |  | 2003                          |           |   | 2002 |  
|NET SALES                                      |  | $                             | 1,104,450 |   |      | $ | 1,022,055 |  
|COST OF SALES                                  |  |                               | 729,296   |   |      |   | 729,485   |  
|                                               |  |                               |           |   |      |   |           |  
|Gross profit on sales                          |  |                               | 375,154   |   |      |   | 292,570   |  
|                                               |  |                               |           |   |      |   |           |  
|OPERATING EXPENSES                             |  |                               |           |   |      |   |           |  
|Selling expense                                |  |                               | 100,773   |   |      |   | 92,619    |  
|General and administrative expenses            |  |                               | 57,234    |   |      |   | 55,830    |  
|                                               |  |                               |           |   |      |   |           |  
|Total operating expenses                       |  |                               | 158,007   |   |      |   | 148,449   |  
|                                               |  |                               |           |   |      |   |           |  
|Income from operations                         |  |                               | 217,147   |   |      |   | 144,121   |  
|OTHER INCOME (EXPENSE)                         |  |                               | 200       |   |      |   | 589       |  
|                                               |  |                               |           |   |      |   |           |  
|Net income before income taxes                 |  |                               | 217,347   |   |      |   | 144,710   |  
|PROVISION FOR INCOME TAXES                     |  |                               | 62,759    |   |      |   | 35,534    |  
|                                               |  |                               |           |   |      |   |           |  
|NET INCOME                                     |  |                               | 154,588   |   |      |   | 109,176   |  
|Preferred dividends                            |  |                               | (32,018   | ) |      |   | (32,018   | )
|                                               |  |                               |           |   |      |   |           |  
|Net income applicable to common stockholders   |  | $                             | 122,570   |   |      | $ | 77,158    |  
|                                               |  |                               |           |   |      |   |           |  
|NET INCOME PER SHARE OF COMMON STOCK - BASIC   |  | $                             | .13       |   |      | $ | .08       |  
|                                               |  |                               |           |   |      |   |           |  
|NET INCOME PER SHARE OF COMMON STOCK - DILUTED |  | $                             | .08       |   |      | $ | .05       |  
|                                               |  |                               |           |   |      |   |           |  



The accompanying notes
are an integral part of these

condensed consolidated financial statements.



5



---

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



|                                               |  |                             |           |   |      |   |           |  
|---------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | -
|                                               |  | Six Months EndedDecember 31 |          
|                                               |  | 2003                        |           |   | 2002 |  
|NET SALES                                      |  | $                           | 1,447,232 |   |      | $ | 1,348,429 |  
|COST OF SALES                                  |  |                             | 977,887   |   |      |   | 990,888   |  
|                                               |  |                             |           |   |      |   |           |  
|Gross profit on sales                          |  |                             | 469,345   |   |      |   | 357,541   |  
|                                               |  |                             |           |   |      |   |           |  
|OPERATING EXPENSES                             |  |                             |           |   |      |   |           |  
|Selling expense                                |  |                             | 149,596   |   |      |   | 136,591   |  
|General and administrative expenses            |  |                             | 126,390   |   |      |   | 103,638   |  
|                                               |  |                             |           |   |      |   |           |  
|Total operating expenses                       |  |                             | 275,986   |   |      |   | 240,229   |  
|                                               |  |                             |           |   |      |   |           |  
|Income from operations                         |  |                             | 193,359   |   |      |   | 117,312   |  
|OTHER INCOME (EXPENSE)                         |  |                             | 3,693     |   |      |   | (9,335    | )
|                                               |  |                             |           |   |      |   |           |  
|Net income before income taxes                 |  |                             | 197,052   |   |      |   | 107,977   |  
|PROVISION FOR INCOME TAXES                     |  |                             | 61,275    |   |      |   | 28,210    |  
|                                               |  |                             |           |   |      |   |           |  
|NET INCOME                                     |  |                             | 135,777   |   |      |   | 79,767    |  
|Preferred dividends                            |  |                             | (64,036   | ) |      |   | (64,036   | )
|                                               |  |                             |           |   |      |   |           |  
|Net income applicable to common stockholders   |  | $                           | 71,741    |   |      | $ | 15,731    |  
|                                               |  |                             |           |   |      |   |           |  
|NET INCOME PER SHARE OF COMMON STOCK  BASIC   |  | $                           | .07       |   |      | $ | .02       |  
|                                               |  |                             |           |   |      |   |           |  
|NET INCOME PER SHARE OF COMMON STOCK  DILUTED |  | $                           | .06       |   |      | $ | .02       |  
|                                               |  |                             |           |   |      |   |           |  



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



6



---

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months EndedDecember 31 |        
|                                                                                  |  | 2003                        |         |   | 2002 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 135,777 |   |      | $ | 79,767  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                             | 18,142  |   |      |   | 17,703  |  
|Provision for bad debts                                                           |  |                             | 3,210   |   |      |   | 3,210   |  
|Loss on disposition of equipment                                                  |  |                             |        |   |      |   | 9,747   |  
|Effects of changes in operating assets and liabilities:                           |  |                             |         |   |      |   |         |  
|Receivables                                                                       |  |                             | 29,263  |   |      |   | (615    | )
|Inventories                                                                       |  |                             | 2,540   |   |      |   | (30,566 | )
|Prepaid expense                                                                   |  |                             | 15,834  |   |      |   | 23,160  |  
|Accounts payable                                                                  |  |                             | 1,067   |   |      |   | (31,621 | )
|Accrued expenses                                                                  |  |                             | 28,416  |   |      |   | 15,752  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 234,249 |   |      |   | 86,537  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Purchases of equipment                                                            |  |                             | (15,177 | ) |      |   |        |  
|Proceeds from sale of equipment                                                   |  |                             |        |   |      |   | 5,804   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                               |  |                             | (15,177 | ) |      |   | 5,804   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Principal payments on notes payable, Series B                                     |  |                             | (15,000 | ) |      |   | (28,978 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                             | 204,072 |   |      |   | 63,363  |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    |  |                             | 138,806 |   |      |   | 188,528 |  
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                          |  | $                           | 342,878 |   |      | $ | 251,891 |  
|                                                                                  |  |                             |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                             |         |   |      |   |         |  
|Cash payments for:                                                                |  |                             |         |   |      |   |         |  
|Income taxes                                                                      |  | $                           | 1,808   |   |      | $ |        |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Interest                                                                          |  | $                           | 1,322   |   |      | $ | 3,860   |  
|                                                                                  |  |                             |         |   |      |   |         |  



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



7



---

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, 2003 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, 2003 and for the three months and six months ended December 31, 2002 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-K for the year ended June 30, 2003. The results of operations for the
three months and six months ended December 31, 2003 and cash flows for the six months ended December 31, 2003 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2004. 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
|                                                   |  | 2003                           |         | 2002                         |   | 2003    |  | 2002
|Net income                                         |  | $                              | 154,588 |                              | $ | 109,176 |  | $    | 135,777 |  | $ | 79,767 
|                                                   |  |                                |         |                              |   |         |  |      |         |  |   |        
|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                     |  | $                              | 122,570 |                              | $ | 77,158  |  | $    | 71,741  |  | $ | 15,731 
|                                                   |  |                                |         |                              |   |         |  |      |         |  |   |        
|Weighted average of outstanding common shares      |  |                                | 969,834 |                              |   | 969,834 |  |      | 969,834 |  |   | 969,834
|                                                   |  |                                |         |                              |   |         |  |      |         |  |   |        
|Net income per share  basic                       |  | $                              | .13     |                              | $ | .08     |  |      | .07     |  |   | .02    
|                                                   |  |                                |         |                              |   |         |  |      |         |  |   |        



8



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CHASE GENERAL CORPORATION AND SUBSIDIARY



NOTE 2 - NET LOSS 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
|                                                      |  | 2003                           |           | 2002                         |   | 2003      |  | 2002
|Net income                                            |  | $                              | 154,588   |                              | $ | 109,176   |  | $    | 135,777   |  | $ | 79,767 
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|Preferred dividend requirements:                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|6% Series Convertible                                 |  |                                |           |                              |   |           |  |      |           |  |   |        
|Series A                                              |  |                                |          |                              |   |          |  |      |          |  |   | 15,000 
|Series B                                              |  |                                |          |                              |   |          |  |      |          |  |   | 15,000 
|5% Series Convertible                                 |  |                                |           |                              |   |           |  |      |           |  |   |        
|Series A                                              |  |                                |          |                              |   |          |  |      | 29,266    |  |   | 29,266 
|Series B                                              |  |                                |          |                              |   |          |  |      | 4,770     |  |   | 4,770  
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|Total Dividend Requirements                           |  |                                |          |                              |   |          |  |      | 34,036    |  |   | 64,036 
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|Net Income Common Stockholders                        |  |                                | 154,588   |                              |   | 109,176   |  |      | 101,741   |  |   | 15,731 
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|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   |  |      | 400,000   |  |   |       
|Series B                                              |  |                                | 375,000   |                              |   | 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 |  |      | 1,744,834 |  |   | 969,834
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        
|Diluted Earnings Per Share                            |  | $                              | 0.08      |                              | $ | 0.05      |  | $    | 0.06      |  | $ | 0.02   
|                                                      |  |                                |           |                              |   |           |  |      |           |  |   |        



9



---

CHASE GENERAL CORPORATION AND SUBSIDIARY



NOTE 2 - NET LOSS PER SHARE(CONTINUED)



Cumulative Preferred Stock dividends in arrears, at December 31, 2003 and 2002, totaled $6,347,906 and $6,219,834,
respectively. Total dividends in arrears, on a per share basis, consist of the following at December 31:



|               |  |                            |    |      |   |   
|-------------- |  | -------------------------- | -- | ---- | - | --
|               |  | Six MonthsEndedDecember 31
|               |  | 2003                       |    | 2002
|6% Convertible |  |                            |    |      |   |   
|Series A       |  | $                          | 14 |      | $ | 13
|Series B       |  |                            | 13 |      |   | 13
|               |  |                           
|5% Convertible |  |                            |    |      |   |   
|Series A       |  |                            | 54 |      |   | 53
|Series B       |  |                            | 54 |      |   | 53



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.



10



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CHASE GENERAL CORPORATION AND SUBSIDIARY



ITEM 2. - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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 7 of the Annual Report on Form 10-K for the year ended June 30, 2003.



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 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 |  
|                               |  | 2003                           |   |  | 2002                         |   |  | 2003 |   |  | 2002 |  
|Net sales                      |  | 100                            | % |  | 100                          | % |  | 100  | % |  | 100  | %
|Cost of sales                  |  | 66                             |   |  | 71                           |   |  | 68   |   |  | 73   |  
|                               |  |                                |   |  |                              |   |  |      |   |  |      |  
|Gross profit                   |  | 34                             |   |  | 29                           |   |  | 32   |   |  | 27   |  
|Operating expenses             |  | 14                             |   |  | 15                           |   |  | 19   |   |  | 18   |  
|                               |  |                                |   |  |                              |   |  |      |   |  |      |  
|Net income from operations     |  | 20                             |   |  | 14                           |   |  | 13   |   |  | 9    |  
|Net income before income taxes |  | 20                             |   |  | 14                           |   |  | 13   |   |  | 8    |  
|Provision for income taxes     |  | 6                              |   |  | 3                            |   |  | 4    |   |  | 2    |  
|                               |  |                                |   |  |                              |   |  |      |   |  |      |  
|Net income                     |  | 14                             | % |  | 11                           | % |  | 9    | % |  | 6    | %
|                               |  |                                |   |  |                              |   |  |      |   |  |      |  



11



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CHASE GENERAL CORPORATION AND SUBSIDIARY



|ITEM 2.  - | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
|---------- | -------------------------------------------------------------------------------------------------



NET SALES



Net sales increased $82,395 or 8% for the three months ended December 31, 2003 to $1,104,450 compared to $1,022,055 for the three months ended December 31, 2002. Gross
sales for Chase Candy Company increased $10,662 to $360,499 for the three months ended December 31, 2003 compared to $349,837 for 2002. Gross sales for Poe Candy Company increased $76,991 to $787,775 for the three months ended December 31, 2003
compared to $710,784 for 2002.



Net sales increased $98,803 or 7% for the six
months ended December 31, 2003 to $1,447,232 compared to $1,348,429 for the six months ended December 31, 2002. Gross sales for Chase Candy Company increased $32,862 to $722,231 for the six months ended December 31, 2003 compared to $689,369 for
2002. Gross sales for Poe Candy Company increased $69,782 to $801,796 for the six months ended December 31, 2003 compared to $732,014 for 2002.



The overall increase in net sales for the three month period ended December 31, 2003 is primarily due to this time completes the busy season for the Company, along with
expansion of the sales market and its website sales, which continued from the first quarter so that year to date net sales have significant gains.



COST OF SALES



The cost of sales decreased $189 to $729,296 decreasing to 66% of related revenues for the three months ended December 31, 2003, compared to $729,485 or 71% of related revenues for the three months ended December 31,
2002. The cost of sales decreased $13,001 to $977,887 decreasing to 68% of related revenues for the six months ended December 31, 2003, compared to $990,888 or 73% of related revenues for the six months ended December 31, 2002. The decrease is due
to improved packaging design, that was instituted in the previous year and lower equipment maintenance costs.



SELLING EXPENSES



Selling expenses for
the three months ended December 31, 2003 increased $8,154 to $100,773, and increased to 9% of sales, compared to $92,619 or 9% of sales for the three months ended December 31, 2002. Selling expenses for the six months ended December 31, 2003
increased $13,005 to $149,596, and increased to 10% of sales, compared to $136,591 or 10% of sales for the six months ended December 31, 2002. The increase in selling expenses and increase as a percentage of sales are due to the Companys
increased sales and marketing activity.



12



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CHASE GENERAL CORPORATION AND SUBSIDIARY



|ITEM 2.  - | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
|---------- | -------------------------------------------------------------------------------------------------



GENERAL AND ADMINISTRATIVE EXPENSES



General and administrative expenses for the three months ended December 31, 2003 increased $1,404 to $57,234, and increased to 5% of sales,
compared to $55,830 or 6% of sales for the three months ended December 31, 2002. General and administrative expenses for the six months ended December 31, 2003 increased $22,752 to $126,390, and increased to 9% of sales, compared to $103,638 or 8%
of sales for the six months ended December 31, 2002. The increase as a percentage of sales is due to increased professional fees and insurance costs.



OTHER INCOME (EXPENSE)



Other income and expense decreased by $389 for the three months ended December 31, 2003 to $200, compared to $589 for the three months ended December 31, 2002. Other income and expense increased by $13,028 for the six
months ended December 31, 2003 to $3,693, compared to $(9,335) for the six months ended December 31, 2002. This was due to an increase in miscellaneous income of $13,100 and a decrease in interest expense due to a portion of Notes Payable, Series B
being paid off in the prior year.



PROVISION FOR INCOME TAXES



The Company recorded a tax provision for the three months ended December
31, 2003 of $62,759 as compared to $35,534 for the three months ended December 31, 2002. The Company recorded a tax provision for the six months ended December 31, 2003 of $61,275 as compared to $28,210 for the six months ended December 31, 2002.
This increase of $33,065 was due to increased profits for the current year to date.



NET INCOME



The Company reported a net income for the quarter
ended December 31, 2003 of $154,588, compared to a net profit of $109,176 for the quarter ended December 31, 2002. This increase of $45,412 is explained above.



The Company reported a net income for the six months ended December 31, 2003 of $135,777, compared to a net income of $79,767 for the six months ended September 30,
2002. This increase of $56,010 is explained above.



PREFERRED DIVIDENDS



These amounts reflect additional preferred stock dividends in arrears for
the three and six months ended December 31, 2003 and 2002, 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.



13



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CHASE GENERAL CORPORATION AND SUBSIDIARY



|ITEM 2.  - | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
|---------- | -------------------------------------------------------------------------------------------------



NET INCOME APPLICABLE TO COMMON STOCKHOLDERS



Net income applicable to common stockholders for the three months ended December 31, 2003 was $122,570 which is an increase of $45,412 as
compared to the three months ended December 31, 2002.



Net income applicable to
common stockholders for the six months ended December 31, 2003 was $71,741 which is an increase of $56,010 as compared to the six months ended December 31, 2002.



LIQUIDITY AND CAPITAL RESOURCES



To date, the Company has been able to fund its operating cash requirements from operations.



The Company believes it has sufficient resources to finance its current operations for at least the next twelve months through working
capital. Cash and cash equivalents increased $204,072 to $342,878 at December 31, 2003 from $138,806 at June 30, 2003. To date, there are no material commitments by the Company for capital expenditures. At December 31, 2003, the Companys
accumulated deficit was $5,786,568, compared to accumulated deficit of $5,922,345 as of June 30, 2003. Working capital as of December 31, 2003 increased 29% to $549,635 from $425,893 as of June 30, 2003.



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 six 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.



15



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PART II. OTHER INFORMATION



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



| | a. | None
| | -- | ----



| | b. | The total cumulative preferred stock dividends contingency at December 31, 2003 is $6,347,906.
| | -- | ----------------------------------------------------------------------------------------------



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K.
|------- | ---------------------------------



| | a. | 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.



| | b. | Reports on Form 8-K.
| | -- | --------------------



No reports on Form 8-K were filed by the Registrant in the quarter ended December 31, 2003.



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 11, 2004 |  |  |  | By: |  | /s/    BARRY M. YANTIS
|                         |  |  |  |     |  |                        | 
|                         |  |  |  |     |  |                        |  | Barry M. Yantis President, Chief Executive Officer, Treasurer and Chairman of the Board



Dated:



16