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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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

For the quarterly period ended September 30, 2007



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

For the transition period from              to

Commission File Number 2-5916



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CHASE GENERAL CORPORATION

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



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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)



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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 October 31, 2007, there were 969,834 shares of common stock, $1 par value, issued and outstanding.

Transitional Small Business Disclosure Format    Yes ̈No  x



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##### Table of Contents

CHASE GENERAL CORPORATION

Index

Form 10-QSB for the Quarter Ended September 30, 2007



|                                                                                                                                    |  |                                                                                                                     |  |   
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | --
|PART I - FINANCIAL INFORMATION                                                                                                      |  |                                                                                                                    
|                                                                                                                                    |  |                                                                                                                    
|Item 1.                                                                                                                             |  | Condensed Consolidated Financial Statements                                                                         |  |   
|                                                                                                                                    |  |                                                                                                                    
|                                                                                                                                    |  | Condensed Consolidated Balance Sheets at September 30, 2007 (Unaudited)and June 30, 2007                            |  | 3 
|                                                                                                                                    |  |                                                                                                                    
|                                                                                                                                    |  | Condensed Consolidated Statements of Operations -For the Three Months Ended September 30, 2007 and 2006 (Unaudited) |  | 5 
|                                                                                                                                    |  |                                                                                                                    
|                                                                                                                                    |  | Condensed Consolidated Statements of Cash Flows -For the Three Months Ended September 30, 2007 and 2006 (Unaudited) |  | 6 
|                                                                                                                                    |  |                                                                                                                    
|                                                                                                                                    |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                    |  | 7 
|                                                                                                                                    |  |                                                                                                                    
|Item 2.                                                                                                                             |  | Managements Discussion and Analysis or Plan of Operation                                                           |  | 11
|                                                                                                                                    |  |                                                                                                                    
|Item 3.                                                                                                                             |  | Controls and Procedures                                                                                             |  | 14
|                                                                                                                                    | 
|PART II - OTHER INFORMATION                                                                                                         |  |                                                                                                                    
|                                                                                                                                    |  |                                                                                                                    
|Item 1.                                                                                                                             |  | Legal proceedings                                                                                                   |  | 15
|                                                                                                                                    |  |                                                                                                                    
|Item 2.                                                                                                                             |  | Unregistered Shares of Equity Securities and Use of Proceeds - None                                                 |  |   
|                                                                                                                                    |  |                                                                                                                    
|Item 3.                                                                                                                             |  | Defaults Upon Senior Securities                                                                                     |  | 15
|                                                                                                                                    |  |                                                                                                                    
|Item 4.                                                                                                                             |  | Submission of Matters to a Vote of Security Holders - None                                                          |  |   
|                                                                                                                                    |  |                                                                                                                    
|Item 5.                                                                                                                             |  | Other Information - None                                                                                            |  |   
|                                                                                                                                    |  |                                                                                                                    
|Item 6.                                                                                                                             |  | Exhibits                                                                                                            |  | 15
|                                                                                                                                    | 
|Signatures                                                                                                                          |  | 15                                                                                                                 
|                                                                                                                                    | 
|Exhibit 31 - Certification of Chief Executive Officer and Treasurer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002       |  | 16                                                                                                                 
|                                                                                                                                    | 
|Exhibit 32 - Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 |  | 18                                                                                                                 



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS



|                                   |  |                   |           |              |   |        
|---------------------------------- |  | ----------------- | --------- | ------------ | - | -------
|                                   |  | September 30,2007 |           | June 30,2007
|                                   |  | (Unaudited)       |           |             
|CURRENT ASSETS                     |  |                   |           |              |   |        
|                                   |  |                  
|Cash and cash equivalents          |  | $                 | 25,080    |              | $ | 22,232 
|Trade receivables, net             |  |                   | 193,120   |              |   | 182,345
|Inventories:                       |  |                   |           |              |   |        
|Finished goods                     |  |                   | 360,806   |              |   | 68,079 
|Goods in process                   |  |                   | 10,488    |              |   | 2,279  
|Raw materials                      |  |                   | 97,877    |              |   | 23,396 
|Packaging materials                |  |                   | 138,581   |              |   | 119,341
|Prepaid expenses                   |  |                   |          |              |   | 6,500  
|Deferred income taxes              |  |                   | 4,851     |              |   | 3,961  
|                                   |  |                   |           |              |   |        
|Total current assets               |  |                   | 830,803   |              |   | 428,133
|                                   |  |                  
|PROPERTY AND EQUIPMENT - NET       |  |                   | 276,433   |              |   | 290,595
|                                   |  |                  
|OTHER ASSETS                       |  |                   |           |              |   |        
|Deferred income taxes - noncurrent |  |                   | 14,631    |              |   | 11,789 
|                                   |  |                   |           |              |   |        
|TOTAL ASSETS                       |  | $                 | 1,121,867 |              | $ | 730,517
|                                   |  |                   |           |              |   |        

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



|                                                                          |  |                   |            |   |               |   |            |  
|------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                          |  | September 30,2007 |            |   | June 30, 2007 |  
|                                                                          |  | (Unaudited)       |            |   |               |  
|CURRENT LIABILITIES                                                       |  |                   |            |   |               |   |            |  
|                                                                          |  |                  
|Note payable - bank                                                       |  | $                 | 175,000    |   |               | $ |           |  
|Current maturities of forgivable loan - bank                              |  |                   | 5,000      |   |               |   | 5,000      |  
|Notes payable - stockholder                                               |  |                   | 65,000     |   |               |   | 45,000     |  
|Accounts payable                                                          |  |                   | 396,903    |   |               |   | 168,562    |  
|Accrued expenses                                                          |  |                   | 38,409     |   |               |   | 22,764     |  
|Deferred income                                                           |  |                   | 1,299      |   |               |   | 1,299      |  
|                                                                          |  |                   |            |   |               |   |            |  
|Total current liabilities                                                 |  |                   | 681,611    |   |               |   | 242,625    |  
|                                                                          |  |                   |            |   |               |   |            |  
|LONG-TERM LIABILITIES                                                     |  |                   |            |   |               |   |            |  
|                                                                          |  |                  
|Deferred income                                                           |  |                   | 6,428      |   |               |   | 6,753      |  
|Forgivable loan - bank, less current maturities                           |  |                   | 10,000     |   |               |   | 10,000     |  
|                                                                          |  |                   |            |   |               |   |            |  
|Total long-term liabilities                                               |  |                   | 16,428     |   |               |   | 16,753     |  
|                                                                          |  |                   |            |   |               |   |            |  
|Total liabilities                                                         |  |                   | 698,039    |   |               |   | 259,378    |  
|                                                                          |  |                   |            |   |               |   |            |  
|STOCKHOLDERS EQUITY                                                      |  |                   |            |   |               |   |            |  
|                                                                          |  |                  
|Capital stock issued and outstanding:                                     |  |                   |            |   |               |   |            |  
|Prior cumulative preferred stock, $5 par value:                           |  |                   |            |   |               |   |            |  
|Series A (liquidation preference $ 1,987,500 and $1,980,000 respectively) |  |                   | 500,000    |   |               |   | 500,000    |  
|Series B (liquidation preference $ 1,942,500 and $1,935,000 respectively) |  |                   | 500,000    |   |               |   | 500,000    |  
|Cumulative preferred stock, $20 par value                                 |  |                   |            |   |               |   |            |  
|Series A (liquidation preference $ 4,565,570 and $4,550,937 respectively) |  |                   | 1,170,660  |   |               |   | 1,170,660  |  
|Series B (liquidation preference $ 744,046 and $741,661 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                                                       |  |                   | (6,042,168 | ) |               |   | (5,994,857 | )
|                                                                          |  |                   |            |   |               |   |            |  
|Total stockholders equity                                                |  |                   | 423,828    |   |               |   | 471,139    |  
|                                                                          |  |                   |            |   |               |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                |  | $                 | 1,121,867  |   |               | $ | 730,517    |  
|                                                                          |  |                   |            |   |               |   |            |  

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 EndedSeptember 30 |        
|                                                       |  | 2007                           |         |   | 2006 |  
|NET SALES                                              |  | $                              | 403,428 |   |      | $ | 459,499 |  
|COST OF SALES                                          |  |                                | 298,510 |   |      |   | 333,409 |  
|                                                       |  |                                |         |   |      |   |         |  
|Gross profit on sales                                  |  |                                | 104,918 |   |      |   | 126,090 |  
|                                                       |  |                                |         |   |      |   |         |  
|OPERATING EXPENSES                                     |  |                                |         |   |      |   |         |  
|Selling expense                                        |  |                                | 56,722  |   |      |   | 54,413  |  
|General and administrative expenses                    |  |                                | 98,257  |   |      |   | 117,350 |  
|                                                       |  |                                |         |   |      |   |         |  
|Total operating expenses                               |  |                                | 154,979 |   |      |   | 171,763 |  
|                                                       |  |                                |         |   |      |   |         |  
|Loss from operations                                   |  |                                | (50,061 | ) |      |   | (45,673 | )
|OTHER INCOME (EXPENSE)                                 |  |                                | (982    | ) |      |   | (248    | )
|                                                       |  |                                |         |   |      |   |         |  
|Net loss before income taxes                           |  |                                | (51,043 | ) |      |   | (45,921 | )
|INCOME TAXES BENEFIT                                   |  |                                | (3,732  | ) |      |   | (13,479 | )
|                                                       |  |                                |         |   |      |   |         |  
|NET LOSS                                               |  |                                | (47,311 | ) |      |   | (32,442 | )
|Preferred dividends                                    |  |                                | (32,018 | ) |      |   | (32,018 | )
|                                                       |  |                                |         |   |      |   |         |  
|Net loss applicable to common stockholders             |  | $                              | (79,329 | ) |      | $ | (64,460 | )
|                                                       |  |                                |         |   |      |   |         |  
|NET LOSS PER SHARE OF COMMON STOCK - BASIC AND DILUTED |  | $                              | (.08    | ) |      | $ | (.07    | )
|                                                       |  |                                |         |   |      |   |         |  
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING    |  |                                | 969,834 |   |      |   | 969,834 |  
|                                                       |  |                                |         |   |      |   |         |  

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)



|                                                                              |  |                                |          |   |      |   |          |  
|----------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                              |  | Three Months EndedSeptember 30 |         
|                                                                              |  | 2007                           |          |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |  |                                |          |   |      |   |          |  
|Net loss                                                                      |  | $                              | (47,311  | ) |      | $ | (32,442  | )
|Adjustments to reconcile net loss to net cash (used in) operating activities: |  |                                |          |   |      |   |          |  
|Depreciation and amortization                                                 |  |                                | 14,665   |   |      |   | 14,401   |  
|Provision for bad debts                                                       |  |                                | 300      |   |      |   | 300      |  
|Deferred income amortization                                                  |  |                                | (325     | ) |      |   | (325     | )
|Deferred income taxes                                                         |  |                                | (3,732   | ) |      |   | (13,479  | )
|Effects of changes in operating assets and liabilities:                       |  |                                |          |   |      |   |          |  
|Trade receivables                                                             |  |                                | (11,075  | ) |      |   | (98,086  | )
|Inventories                                                                   |  |                                | (394,657 | ) |      |   | (314,879 | )
|Prepaid expenses                                                              |  |                                | 6,500    |   |      |   | 6,919    |  
|Accounts payable                                                              |  |                                | 228,341  |   |      |   | 233,895  |  
|Accrued expenses                                                              |  |                                | 15,645   |   |      |   | 17,638   |  
|                                                                              |  |                                |          |   |      |   |          |  
|Net cash (used in) operating activities                                       |  |                                | (191,649 | ) |      |   | (186,058 | )
|                                                                              |  |                                |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |  |                                |          |   |      |   |          |  
|Decrease in advance to officer                                                |  |                                |         |   |      |   | 9,000    |  
|Purchases of property and equipment                                           |  |                                | (503     | ) |      |   |         |  
|                                                                              |  |                                |          |   |      |   |          |  
|Net cash (used in) provided by investing activities                           |  |                                | (503     | ) |      |   | 9,000    |  
|                                                                              |  |                                |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |  |                                |          |   |      |   |          |  
|Proceeds from note payable - bank                                             |  |                                | 175,000  |   |      |   | 175,000  |  
|Proceeds from notes payable - stockholder                                     |  |                                | 20,000   |   |      |   |         |  
|                                                                              |  |                                |          |   |      |   |          |  
|Net cash provided by financing activities                                     |  |                                | 195,000  |   |      |   | 175,000  |  
|                                                                              |  |                                |          |   |      |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |  |                                | 2,848    |   |      |   | (2,058   | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                |  |                                | 22,232   |   |      |   | 26,558   |  
|                                                                              |  |                                |          |   |      |   |          |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                      |  | $                              | 25,080   |   |      | $ | 24,500   |  
|                                                                              |  |                                |          |   |      |   |          |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                            |  |                                |          |   |      |   |          |  
|Cash payments for:                                                            |  |                                |          |   |      |   |          |  
|Income taxes                                                                  |  | $                              |         |   |      | $ |         |  
|                                                                              |  |                                |          |   |      |   |          |  
|Interest                                                                      |  | $                              | 859      |   |      | $ | 925      |  
|                                                                              |  |                                |          |   |      |   |          |  

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, 2007 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 ended September 30, 2007 and for the three months ended September 30, 2006 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, 2007. The
results of operations and cash flows for the three months ended September 30, 2007 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2008. Where appropriate, items within the condensed consolidated
financial statements have been reclassified from the previous periods presentation.

NOTE 2 - NET LOSS PER SHARE

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



|                                                   |  |                                |         |   |      |   |         |  
|-------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                   |  | Three Months EndedSeptember 30 |        
|                                                   |  | 2007                           |         |   | 2006 |  
|Net loss                                           |  | $                              | (47,311 | ) |      | $ | (32,442 | )
|                                                   |  |                                |         |   |      |   |         |  
|Preferred dividend requirements:                   |  |                                |         |   |      |   |         |  
|6% Prior Cumulative Preferred, $5 par value        |  |                                | 15,000  |   |      |   | 15,000  |  
|5% Convertible Cumulative Preferred, $20 par value |  |                                | 17,018  |   |      |   | 17,018  |  
|                                                   |  |                                |         |   |      |   |         |  
|Total dividend requirements                        |  |                                | 32,018  |   |      |   | 32,018  |  
|                                                   |  |                                |         |   |      |   |         |  
|Net loss common stockholders                       |  | $                              | (79,329 | ) |      | $ | (64,460 | )
|                                                   |  |                                |         |   |      |   |         |  
|Weighted average of outstanding common shares      |  |                                | 969,834 |   |      |   | 969,834 |  
|                                                   |  |                                |         |   |      |   |         |  
|Net loss per share - basic                         |  | $                              | (.08    | ) |      | $ | (.07    | )
|                                                   |  |                                |         |   |      |   |         |  

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 2 - NET LOSS PER SHARE(CONTINUED)



Cumulative Preferred Stock dividends in arrears at September 30, 2007 and 2006, totaled $6,828,176 and $6,700,104, respectively. Total
dividends in arrears, on a per share basis, consist of the following at September 30:



|               |  |                                |    |      |   |   
|-------------- |  | ------------------------------ | -- | ---- | - | --
|               |  | Three Months EndedSeptember 30
|               |  | 2007                           |    | 2006
|6% Convertible |  |                                |    |      |   |   
|Series A       |  | $                              | 15 |      | $ | 14
|Series B       |  |                                | 15 |      |   | 14
|               |  |                               
|5% Convertible |  |                                |    |      |   |   
|Series A       |  |                                | 58 |      |   | 57
|Series B       |  |                                | 58 |      |   | 57

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 for two years thereafter and will be required to do so until the five year term has expired.
Once the Company is no longer legally entitled 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 September 30, 2007 and
June 30, 2007, $10,000 has been reclassified to deferred revenue. During the three months ended September 30, 2007 and 2006, $325 and $325 has been amortized into income, respectively.



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 4 - NOTE PAYABLE - BANK

The Company has a $250,000 line-of-credit agreement with an original maturity date of January 1, 2008. The line-of-credit is collateralized by certain equipment and bears interest at an annual rate of 8.25%. At
September 30, 2007, the outstanding balance on the line-of-credit was $175,000. There were no outstanding borrowings on the line-of-credit at June 30, 2007.

NOTE 5 - NOTES PAYABLE - STOCKHOLDER

The Company borrowed $45,000 from a stockholder/officer during fiscal year
ended June 30, 2007 and $20,000 during the three months ended September 30, 2007. These unsecured loans have no maturity date and carry a 5% annual interest rate. The outstanding balance at September 30, 2007 was $65,000. Interest
expense on stockholder/officer notes was $481 and $-0- for the three months ending September 30, 2007 and 2006, respectively.

NOTE 6 - INCOME
TAXES BENEFIT

The Company has a net operating loss carryforward of approximately $248,000 as of September 30, 2007. Based on the available
objective evidence, it is more likely than not, that the full loss will not be fully utilized. Therefore, an allowance of $148,000 has been recorded for the three months ended September 30, 2007 as compared to $100,000 at June 30, 2007.
The deferred income taxes for the three months ended September 30, 2007 increased $3,732 to $19,482 compared to $15,750 at June 30, 2007.

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued Interpretation No. 48 Accounting for Uncertainty in
Income Taxes(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS No. 109, Accounting for Income
Taxes. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also
provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company adopted FIN 48 as of July 1, 2007. The adoption of FIN 48 had no impact on the Companys financial
statements for the three months ended September 30, 2007.

We recognize interest and penalties related to uncertain tax positions in general and
administrative expense. As of September 30, 2007, we have not recorded any provisions for accrued interest and penalties related to uncertain tax positions.



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CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS(CONTINUED)



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (
SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosure about fair value measurements. SFAS No. 157 emphasizes that
fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. This statement
clarifies that market participant assumptions include assumptions about risk. A fair value measurement should include an adjustment for risk if market participants would include one in pricing the related asset or liability, even if the adjustment
is difficult to determine. This statement also clarifies that market participant assumptions should also include assumptions about the effect of a restriction on the sale or use of an asset. This statement clarifies that fair value measurement for a
liability should reflect nonperformance risk (the risk that the obligation will not be fulfilled). This statement expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial
recognition. The disclosures focus on the inputs used to measure fair value and for recurring fair value measurements using significant unobservable inputs and the effect of the measurements on earnings (or changes in net assets) for the period.
SFAS No. 157 is effective for financial statements issue for fiscal years beginning after November 15, 2007. We are evaluating the impact that SFAS No. 157 may have on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial Assets and Financial Liabilities (SFAS No. 159). SFAS
No. 159 provides an option to report selected financial assets and financial liabilities using fair value. The standard establishes required presentation and disclosures to facilitate comparisons with companies that use different measurements
for similar assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption allowed if SFAS No. 157 is also adopted. The Company is currently evaluating the impact of adopting
SFAS No. 159 on its consolidated financial statements.



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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 or
Plan of Operation 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, 2007.

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 division and Seasonal Candy division, 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 EndedSeptember 30 |   
|                             |  | 2007                           |    |  | 2006 |   
|Net sales                    |  | 100                            | %  |  | 100  | % 
|Cost of sales                |  | 74                             |    |  | 73   |   
|                             |  |                                |    |  |      |   
|Gross profit                 |  | 26                             |    |  | 27   |   
|                             |  |                               
|Operating expenses           |  | 38                             |    |  | 37   |   
|                             |  |                                |    |  |      |   
|Loss from operations         |  | (12                            | )  |  | (10  | ) 
|Net loss before income taxes |  | (13                            | )  |  | (10  | ) 
|Credit for income taxes      |  | (1                             | )  |  | (3   | ) 
|                             |  |                                |    |  |      |   
|Net loss                     |  | (12                            | )% |  | (7   | )%
|                             |  |                                |    |  |      |   



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CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)



NET SALES

Net
sales decreased $56,071 or 12% for the three months ended September 30, 2007 to $403,428 as compared to $459,499 for the three months ended September 30, 2006. Gross sales for Chase Candy division decreased $32,910 to $333,727 for the
three months ended September 30, 2007 compared to $366,637 for 2006. Gross sales for Seasonal Candy division decreased $22,719 to $79,118 for the three months ended September 30, 2007 compared to $101,837 for 2006.

The decrease in net sales for the three month period ended September 30, 2007 for the Chase Candy division is primarily due to a customer continuing to order in 12
count packaging bags, rather than 24 count and at the same time reducing orders from the previous year by $40,000. A customer of Seasonal Candy division ordered earlier last year so that the sale occurred in the first quarter of the prior year. This
year orders received will occur in the second quarter, which represented the majority of the decrease in this divisions sales. The Company has received new business orders for the second quarter 2008 of approximately $134,000.

COST OF SALES

The cost of sales decreased $34,899 to $298,510 or 74%
of related revenues for the three months ended September 30, 2007, compared to $333,409 or 73% of related revenues for the three months ended September 30, 2006.

The decrease in cost of sales is a 10.5% decrease which is proportionate to the 12% decrease in net sales as reflected above. Direct costs of goods for materials manufactured and production labor force for the three
months ended September 30, 2007 increased $12,570 to $426,885 as compared to $414,315 for the three months ended September 30, 2006 as a result of raw material price increases for sugar4 cents per pound; peanuts 8 cents per pound and
a 4% raise for the production labor force. These costs accounted for the 1.4% decrease in gross profit margin of 27.4% for the three months ended September 30, 2006 to 26% for the three months ended September 30, 2007.

This is the height of the Companys busy season which explains having raw materials inventory of $97,877 and packaging materials inventory of $138,581 at
September 30, 2007 or 66% higher than the June 30, 2007 inventories of $23,396 raw materials and $119,341 packaging.

SELLING EXPENSES

Selling expenses for the three months ended September 30, 2007 increased $2,309 to $56,722, and increased to 14% of sales, compared to $54,413 or 12%
of sales for the three months ended September 30, 2006. The increase in selling expenses is due to higher commissions being paid and vehicle expenses for the period. Vehicle expense increased 21% to $11,309 for the three months ended
September 30, 2007 from $9,362 for the three months ended September 30, 2006.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)



GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the three months ended September 30, 2007 decreased $19,093 to $98,257, and decreased to 24% of sales, compared to $117,350 or 25% of sales for the three months ended
September 30, 2006. The decreased costs are due to decreased professional fees of $23,448 of which were in connection with legal proceedings settled in the prior fiscal year.

OTHER INCOME (EXPENSE)

Other income and (expense) increased by $734 for the three months ended September 30,
2007 to $(982), compared to $(248) for the three months ended September 30, 2006. This increase was due to an increase in interest expense.

INCOME
TAXES BENEFIT

The Company recorded a tax benefit for the three months ended September 30, 2007 of $3,732 as compared to the tax benefit of $13,479
for the three months ended September 30, 2006. The net tax benefit recorded for the three months ended September 30, 2007 is due primarily to recognizing deferred taxes related to the operating loss. The Company has incurred a loss for the
past two years. Based on the available objective evidence, Management believes it is more likely than not, that the net deferred tax asset will not be fully realizable. Accordingly, the Company provided for a valuation allowance against its net
deferred tax asset at September 30, 2007. The net tax affected benefit of the valuation allowance was a $14,000 increase for the three months ended September 30, 2007 of $43,000 as compared to June 30, 2007 of $29,000. There was no
valuation allowance at September 30, 2006.

NET LOSS

The Company reported a net loss for the three months ended September 30, 2007 of $47,311, compared to a net loss of $32,442 for the three months ended September 30, 2006. This increase of $14,869 is explained above.

PREFERRED DIVIDENDS

These amounts of $32,018 reflect additional
preferred stock dividends in arrears for the three months ended September 30, 2007 and 2006, 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 September 30, 2007 was $(79,329) which is an increase in net loss of $14,869 as compared to the three months ended September 30, 2006 of $(64,460). The increase in net loss is
explained above.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

ITEM 2. - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)



LIQUIDITY AND CAPITAL RESOURCES

Negative cash flows from operating activities were generated for the quarter ended September 2007 in the amount of $(191,649). The negative cash flow is to be expected during this time period, since this is the start
of the busy season for the Company as reflected in increased inventories of $394,657 and accounts payable of $228,341 from June 30, 2007 fiscal year end balances of $213,095 inventory and $168,562 accounts payable. The negative cash flows from
operating activities required the Company to obtain bank financing totaling $175,000 and $20,000 from a shareholder/officer, which results in net cash provided by financing activities of $195,000 for the quarter ended September 30, 2007.
Negative cash flows from operating activities were generated for quarter ended September 2006 in the amount of $(186,058), which required net cash provided by financing activities of $175,000 from bank borrowings. Overall cash and cash equivalents
increased $2,848 to $25,080 at September 30, 2007 from $22,232 at June 30, 2007.

To date, there are no material commitments by the Company for
capital expenditures. At September 30, 2007, the Companys accumulated deficit was $6,042,168, compared to accumulated deficit of $5,994,857 as of June 30, 2007. Working capital as of September 30, 2007 decreased 20% to $149,192
from $185,508 as of June 30, 2007.

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.

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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##### Table of Contents

PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



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



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



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



| | b. | The total cumulative preferred stock dividends contingency at September 30, 2007 is $6,828,176.
| | -- | -----------------------------------------------------------------------------------------------



|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.

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: November 13, 2007 |  |  |  | By: |  | /s/ Barry M. Yantis                
|                         |  |  |  |     |  | Barry M. Yantis                    
|                         |  |  |  |     |  | President, Chief Executive Officer,
|                         |  |  |  |     |  | Treasurer and Chairman of the Board
|                         |  |  | 
|                         |  |  |  |     |  |                                    



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