##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, 2011



|[   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------

For the transition period from              to

Commission File Number 2-5916

Chase General Corporation

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



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

1307 South 59th, St. Joseph, Missouri 64507

(Address of principal
executive offices, Zip Code)

(816) 279-1625

(Issuers telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed
since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12, 13,
or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 (1) has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [   ]    No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                              |  |                                               |  |                              
|----------------------------- |  | --------------------------------------------- |  | -----------------------------
|Large accelerated filer [   ] |  |                                               |  | Accelerated filer [   ]      
|                              |  |                                              
|Non-accelerated filer [   ]   |  | (Do not check if a smaller reporting company) |  | Smaller reporting company [X]

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)

Yes
[   ]    No [X]

As of April 30, 2011, there were 969,834 shares of common stock, $1.00 par value,
outstanding.



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##### Table of Contents

Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

Quarterly
Report on Form 10-Q

For the Nine Months Ended March 31, 2011

TABLE OF CONTENTS



|                                 |  |                                                                                                                |    |  |    | 
|-------------------------------- |  | -------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I.    FINANCIAL INFORMATION |  |                                                                                                                |    | 
|                                 |  |                                                                                                               
|Item 1.                          |  | Condensed Consolidated Financial Statements                                                                    |    |  |    | 
|                                 |  |                                                                                                               
|                                 |  | Condensed Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and June 30, 2010                       |    |  | 3  | 
|                                 |  |                                                                                                               
|                                 |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 (Unaudited) |    |  | 5  | 
|                                 |  |                                                                                                               
|                                 |  | Condensed Consolidated Statements of Operations for the Nine Months Ended March 31, 2011 and 2010 (Unaudited)  |    |  | 6  | 
|                                 |  |                                                                                                               
|                                 |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2011 and 2010 (Unaudited)  |    |  | 7  | 
|                                 |  |                                                                                                               
|                                 |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                               |    |  | 8  | 
|                                 |  |                                                                                                               
|Item 2.                          |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                          |    |  | 14 | 
|                                 |  |                                                                                                               
|Item 3.                          |  | Quantitative and Qualitative Disclosures About Market Risk                                                     |    |  | 22 | 
|                                 |  |                                                                                                               
|Item 4T.                         |  | Controls and Procedures                                                                                        |    |  | 22 | 
|                                 | 
|PART II.    OTHER INFORMATION    |  |                                                                                                                |    | 
|                                 |  |                                                                                                               
|Item 1.                          |  | Legal Proceedings                                                                                              |    |  | 23 | 
|                                 |  |                                                                                                               
|Item 1A.                         |  | Risk Factors                                                                                                   |    |  | 23 | 
|                                 |  |                                                                                                               
|Item 3.                          |  | Defaults Upon Senior Securities                                                                                |    |  | 23 | 
|                                 |  |                                                                                                               
|Item 4.                          |  | Submission of Matters to Vote of Security Holders                                                              |    |  | 23 | 
|                                 |  |                                                                                                               
|Item 6.                          |  | Exhibits                                                                                                       |    |  | 23 | 
|                                 | 
|SIGNATURES                       |  |                                                                                                                | 24 | 



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS



|                                                                                                |  |               |           |  |              |   |           | 
|----------------------------------------------------------------------------------------------- |  | ------------- | --------- |  | ------------ | - | --------- | 
|                                                                                                |  | March 31,2011 |           |  | June 30,2010 |  
|                                                                                                |  | (Unaudited)   |           |  | (Audited)    |  
|                                                                                                |  |              
|CURRENT ASSETS                                                                                  |  |               |           |  |              |   |           | 
|                                                                                                |  |              
|Cash and cash equivalents                                                                       |  | $             | 186,209   |  |              | $ | 106,508   | 
|Trade receivables, net of allowance for doubtful accounts, of $15,791 and $14,891, respectively |  |               | 131,926   |  |              |   | 164,753   | 
|Inventories:                                                                                    |  |               |           |  |              |   |           | 
|Finished goods                                                                                  |  |               | 131,532   |  |              |   | 104,022   | 
|Goods in process                                                                                |  |               | 7,503     |  |              |   | 3,730     | 
|Raw materials                                                                                   |  |               | 95,921    |  |              |   | 109,027   | 
|Packaging materials                                                                             |  |               | 207,666   |  |              |   | 186,420   | 
|Prepaid expenses                                                                                |  |               | 35,473    |  |              |   | 4,959     | 
|Deferred income taxes                                                                           |  |               | 6,256     |  |              |   | 5,844     | 
|                                                                                                |  |               |           |  |              |   |           | 
|                                                                                                |  |              
|Total current assets                                                                            |  |               | 802,486   |  |              |   | 685,263   | 
|                                                                                                |  |              
|PROPERTY AND EQUIPMENT - NET                                                                    |  |               | 519,947   |  |              |   | 512,069   | 
|                                                                                                |  |               |           |  |              |   |           | 
|                                                                                                |  |              
|TOTAL ASSETS                                                                                    |  | $             | 1,322,433 |  |              | $ | 1,197,332 | 
|                                                                                                |  |               |           |  |              |   |           | 





The accompanying notes are an integral part of the

condensed consolidated
financial statements.



3



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS EQUITY



|                                                                         |  |               |            |   |              |   |            |  
|------------------------------------------------------------------------ |  | ------------- | ---------- | - | ------------ | - | ---------- | -
|                                                                         |  | March 31,2011 |            |   | June 30,2010 |  
|                                                                         |  | (Unaudited)   |            |   | (Audited)    |  
|                                                                         |  |              
|CURRENT LIABILITIES                                                      |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Accounts payable                                                         |  | $             | 54,345     |   |              | $ | 68,734     |  
|Current maturities of notes payable                                      |  |               | 56,937     |   |              |   | 56,820     |  
|Accrued expenses                                                         |  |               | 16,663     |   |              |   | 15,337     |  
|Deferred income                                                          |  |               | 1,299      |   |              |   | 1,299      |  
|Income taxes payable                                                     |  |               | 14,760     |   |              |   | 2          |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Total current liabilities                                                |  |               | 144,004    |   |              |   | 142,192    |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|LONG-TERM LIABILITIES                                                    |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Deferred income                                                          |  |               | 16,883     |   |              |   | 17,857     |  
|Notes payable, less current maturities                                   |  |               | 148,798    |   |              |   | 150,475    |  
|Deferred income taxes                                                    |  |               | 113,290    |   |              |   | 93,869     |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Total long-term liabilities                                              |  |               | 278,971    |   |              |   | 262,201    |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Total liabilities                                                        |  |               | 422,975    |   |              |   | 404,393    |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|STOCKHOLDERS EQUITY                                                     |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Capital stock issued and outstanding:                                    |  |               |            |   |              |   |            |  
|Prior cumulative preferred stock, $5 par value:                          |  |               |            |   |              |   |            |  
|Series A (liquidation preference $2,092,500 and $2,070,000 respectively) |  |               | 500,000    |   |              |   | 500,000    |  
|Series B (liquidation preference $2,047,500 and $2,025,000 respectively) |  |               | 500,000    |   |              |   | 500,000    |  
|Cumulative preferred stock, $20 par value                                |  |               |            |   |              |   |            |  
|Series A (liquidation preference $4,764,308 and $4,726,533 respectively) |  |               | 1,170,660  |   |              |   | 1,170,660  |  
|Series B (liquidation preference $783,560 and $770,281 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                                                      |  |               | (5,566,538 | ) |              |   | (5,673,057 | )
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|Total stockholders equity                                               |  |               | 899,458    |   |              |   | 792,939    |  
|                                                                         |  |               |            |   |              |   |            |  
|                                                                         |  |              
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                               |  | $             | 1,322,433  |   |              | $ | 1,197,332  |  
|                                                                         |  |               |            |   |              |   |            |  

The accompanying notes are an integral part of the

condensed consolidated financial statements.



4



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                    |  |                             |          |   |      |   |         |  
|--------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | ------- | -
|                                                    |  | Three Months EndedMarch 
31 |         
|                                                    |  | 2011                        |          |   | 2010 |  
|                                                    |  |                            
|NET SALES                                           |  |                             | 376,491  |   |      | $ | 441,877 |  
|                                                    |  |                            
|COST OF SALES                                       |  |                             | 329,511  |   |      |   | 382,473 |  
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Gross profit on sales                               |  |                             | 46,980   |   |      |   | 59,404  |  
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|OPERATING EXPENSES                                  |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Selling                                             |  |                             | 79,655   |   |      |   | 58,946  |  
|General and administrative                          |  |                             | 86,093   |   |      |   | 66,846  |  
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Total operating expenses                            |  |                             | 165,748  |   |      |   | 125,792 |  
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Loss from operations                                |  |                             | (118,768 | ) |      |   | (66,388 | )
|                                                    |  |                            
|OTHER INCOME (EXPENSE)                              |  |                             | (1,272   | ) |      |   | (834    | )
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Net loss before income taxes                        |  |                             | (120,040 | ) |      |   | (67,222 | )
|                                                    |  |                            
|PROVISION (CREDIT) FOR INCOME TAXES                 |  |                             | (51,191  | ) |      |   | (26,600 | )
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|NET LOSS                                            |  |                             | (68,849  | ) |      |   | (40,622 | )
|                                                    |  |                            
|Preferred dividends                                 |  |                             | (32,018  | ) |      |   | (32,018 | )
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|Net loss applicable to common stockholders          |  | $                           | (100,867 | ) |      | $ | (72,640 | )
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|NET LOSS PER SHARE OF COMMON STOCK -                |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|BASIC                                               |  | $                           | (0.10    | ) |      | $ | (0.07   | )
|                                                    |  |                             |          |   |      |   |         |  
|                                                    |  |                            
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING |  |                             | 969,834  |   |      |   | 969,834 |  
|                                                    |  |                             |          |   |      |   |         |  



The accompanying notes are an integral
part of the

condensed consolidated financial statements.



5



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                    |  |                            |           |   |      |   |           |  
|--------------------------------------------------- |  | -------------------------- | --------- | - | ---- | - | --------- | -
|                                                    |  | Nine Months EndedMarch 
31 |          
|                                                    |  | 2011                       |           |   | 2010 |  
|                                                    |  |                           
|NET SALES                                           |  | $                          | 2,572,029 |   |      | $ | 2,483,890 |  
|                                                    |  |                           
|COST OF SALES                                       |  |                            | 1,831,878 |   |      |   | 1,731,120 |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Gross profit on sales                               |  |                            | 740,151   |   |      |   | 752,770   |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|OPERATING EXPENSES                                  |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Selling                                             |  |                            | 310,626   |   |      |   | 266,315   |  
|General and administrative                          |  |                            | 283,362   |   |      |   | 260,806   |  
|(Gain) on sale of equipment                         |  |                            | (500      | ) |      |   |          |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Total operating expenses                            |  |                            | 593,488   |   |      |   | 527,121   |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Income from operations                              |  |                            | 146,663   |   |      |   | 225,649   |  
|                                                    |  |                           
|OTHER INCOME (EXPENSE)                              |  |                            | (6,180    | ) |      |   | (2,820    | )
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Net income before income taxes                      |  |                            | 140,483   |   |      |   | 222,829   |  
|                                                    |  |                           
|PROVISION FOR INCOME TAXES                          |  |                            | 33,964    |   |      |   | 82,022    |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|NET INCOME                                          |  |                            | 106,519   |   |      |   | 140,807   |  
|                                                    |  |                           
|Preferred dividends                                 |  |                            | (96,054   | ) |      |   | (96,054   | )
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|Net income applicable to common stockholders        |  | $                          | 10,465    |   |      | $ | 44,753    |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|NET INCOME PER SHARE OF COMMON STOCK -              |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|BASIC                                               |  | $                          | 0.01      |   |      | $ | 0.05      |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|DILUTED                                             |  | $                          | 0.01      |   |      | $ | 0.02      |  
|                                                    |  |                            |           |   |      |   |           |  
|                                                    |  |                           
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING |  |                            | 969,834   |   |      |   | 969,834   |  
|                                                    |  |                            |           |   |      |   |           |  



The accompanying notes are an integral
part of the

condensed consolidated financial statements.



6



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                            |         |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                  |  | Nine Months EndedMarch 
31 |        
|                                                                                  |  | 2011                       |         |   | 2010 |  
|                                                                                  |  |                           
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                            |         |   |      |   |          |  
|Net income                                                                        |  | $                          | 106,519 |   |      | $ | 140,807  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |         |   |      |   |          |  
|Depreciation and amortization                                                     |  |                            | 82,297  |   |      |   | 56,469   |  
|Allowance for bad debts                                                           |  |                            | 900     |   |      |   | 900      |  
|Deferred income amortization                                                      |  |                            | (974    | ) |      |   | (973     | )
|Deferred income taxes                                                             |  |                            | 19,009  |   |      |   | (4,672   | )
|(Gain) on sale of equipment                                                       |  |                            | (500    | ) |      |   |         |  
|Effects of changes in operating assets and liabilities:                           |  |                            |         |   |      |   |          |  
|Trade receivables                                                                 |  |                            | 31,927  |   |      |   | 11,653   |  
|Inventories                                                                       |  |                            | (39,423 | ) |      |   | (4,849   | )
|Prepaid expenses                                                                  |  |                            | (30,514 | ) |      |   | (103,094 | )
|Accounts payable                                                                  |  |                            | (14,389 | ) |      |   | (71,839  | )
|Accrued expenses                                                                  |  |                            | 1,326   |   |      |   | 2,292    |  
|Income taxes payable                                                              |  |                            | 14,758  |   |      |   | 86,309   |  
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|Net cash provided by operating activities                                         |  |                            | 170,936 |   |      |   | 113,003  |  
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                            |         |   |      |   |          |  
|Proceeds from sale of equipment                                                   |  |                            | 500     |   |      |   |         |  
|Purchases of property and equipment                                               |  |                            | (18,425 | ) |      |   | (2,574   | )
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|Net cash used in investing activities                                             |  |                            | (17,925 | ) |      |   | (2,574   | )
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                            |         |   |      |   |          |  
|Proceeds from line-of-credit                                                      |  |                            | 40,000  |   |      |   | 210,000  |  
|Principal payments on line-of-credit                                              |  |                            | (40,000 | ) |      |   | (210,000 | )
|Proceeds from equipment notes payable                                             |  |                            |        |   |      |   | 143,554  |  
|Principal payments on notes payable                                               |  |                            | (73,310 | ) |      |   | (21,969  | )
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|Net cash provided by (used in) financing activities                               |  |                            | (73,310 | ) |      |   | 121,585  |  
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                            | 79,701  |   |      |   | 232,014  |  
|                                                                                  |  |                           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    |  |                            | 106,508 |   |      |   | 28,771   |  
|                                                                                  |  |                            |         |   |      |   |          |  
|                                                                                  |  |                           
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                          |  | $                          | 186,209 |   |      | $ | 260,785  |  
|                                                                                  |  |                            |         |   |      |   |          |  



The accompanying notes are an integral
part of the

condensed consolidated financial statements.



7



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL

The condensed consolidated balance sheet of Chase General Corporation (hereinafter referred to as Chase, we, our, and
us) at June 30, 2010 has been taken from audited consolidated financial statements at that date and condensed. The condensed consolidated financial statements as of and for the three months and nine months ended March 31, 2011
and for the three months and nine months ended March 31, 2010 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, 2010. The results of operations for the three and nine months ended
March 31, 2011 and cash flows for the nine months ended March 31, 2011 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2011. Where appropriate, items within the condensed consolidated financial
statements have been reclassified from the previous periods presentation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of
operations and cash flows for the periods have been included.

During the third quarter 2010, Chase adopted FASB ASU No. 2010-06 Fair
Value Measurements and Disclosures (Topic 820). This ASU requires new disclosures for transfers in and out of Levels 1 and 2, and Activity in Level 3 fair value measurements. The update also clarifies the level disaggregation and disclosures about
inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009. The requirement related to Level 3 fair value measurements
is effective for the Company for interim and annual reporting periods beginning after January 28, 2011. The adoption of the effective portions of this new standard did not have a material impact on the Companys condensed consolidated
financial statements and the Company does not expect a material impact on its condensed consolidated financial statements related to the Level 3 fair value disclosures.

In June 2009, the FASB issued new guidance on the consolidation of variable interest entities (VIE) in response to concerns about the application of certain key provisions of pre-existing
guidance, including those regarding the transparency of the involvement with a VIE. Specifically, this new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether
an interest in a VIE makes the holder the primary beneficiary of the VIE and whether an entity is a VIE when a triggering event occurs. In addition, this new guidance requires additional disclosures about the involvement with a VIE and any
significant changes in risk exposure due to that involvement. This new guidance is effective for fiscal years beginning after November 15, 2009. The Company adopted the new guidance in the first quarter of fiscal year 2011, which did not have a
material impact on its condensed consolidated financial statements.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1 - GENERAL (CONTINUED)



Management has performed an evaluation of events that have occurred subsequent to March 31, 2011,
through the date of filing of this Form 10-Q. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the condensed consolidated financial
statements as of or for the nine month period ended March 31, 2011.

NOTE 2 - NET INCOME PER SHARE

The income per share was computed on the weighted average of outstanding common shares during the period. Diluted earnings per share is calculated by
including contingently issuable shares with the weighted average shares outstanding.



|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|-------------------------------------------------- |  | -------------------------- | --------- | - | -------------------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                   |  | Three Months
EndedMarch 31 |           |   | Nine Months
EndedMarch 31  |  
|                                                   |  | 2011                       |           |   | 2010                       |   |           | 2011 |  |   | 2010      | 
|                                                   |  |                            |           |  
|Net income (loss)                                  |  | $                          | (68,849   | ) |                            | $ | (40,622   | )    |  | $ | 106,519   |  |  | $ | 140,807   | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Preferred dividend requirements:                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|6% Prior Cumulative Preferred, $5 par value        |  |                            | 15,000    |   |                            |   | 15,000    |      |  |   | 45,000    |  |  |   | 45,000    | 
|5% Convertible Cumulative Preferred, $20 par value |  |                            | 17,018    |   |                            |   | 17,018    |      |  |   | 51,054    |  |  |   | 51,054    | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Total dividend requirements                        |  |                            | 32,018    |   |                            |   | 32,018    |      |  |   | 96,054    |  |  |   | 96,054    | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Net income (loss) common stockholders              |  | $                          | (100,867  | ) |                            | $ | (72,640   | )    |  | $ | 10,465    |  |  | $ | 44,753    | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                           
|                                                   |  | Nine Months EndedMarch
31  |           |   | Three Months EndedMarch
31 |  
|                                                   |  | 2011                       |           |   | 2010                       |   |           | 2011 |  |   | 2010      | 
|                                                   |  |                            |           |  
|Weighted average shares - basic                    |  |                            | 969,834   |   |                            |   | 969,834   |      |  |   | 969,834   |  |  |   | 969,834   | 
|                                                   |  |                            |           |  
|Dilutive effect of contingently issuable shares    |  |                            | 1,033,334 |   |                            |   | 1,033,334 |      |  |   | 1,033,334 |  |  |   | 1,033,334 | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Weighted Average Shares - diluted                  |  |                            | 2,003,168 |   |                            |   | 2,003,168 |      |  |   | 2,003,168 |  |  |   | 2,003,168 | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Basic earnings per share                           |  | $                          | (.10      | ) |                            | $ | (.07      | )    |  | $ | .01       |  |  | $ | .05       | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 
|                                                   |  |                            |           |  
|Diluted earnings per share                         |  | $                          |          |   |                            | $ |          |      |  | $ | .01       |  |  | $ | .02       | 
|                                                   |  |                            |           |   |                            |   |           |      |  |   |           |  |  |   |           | 



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 2 - NET INCOME PER SHARE (CONTINUED)



Cumulative Preferred Stock dividends in arrears at March 31, 2011 and 2010 totaled $7,276,428 and
$7,148,356, respectively. Total dividends in arrears, on a per share basis, consist of the following at December 31:



|               |  |                           |    |  |      |   |    | 
|-------------- |  | ------------------------- | -- |  | ---- | - | -- | 
|               |  | Nine Months EndedMarch
31 |   
|               |  | 2011                      |    |  | 2010 |  
|               |  |                          
|6% Convertible |  |                           |    |  |      |   |    | 
|Series A       |  | $                         | 16 |  |      | $ | 15 | 
|Series B       |  |                           | 15 |  |      |   | 15 | 
|               |  |                          
|5% Convertible |  |                           |    |  |      |   |    | 
|Series A       |  |                           | 62 |  |      |   | 61 | 
|Series B       |  |                           | 62 |  |      |   | 61 | 

The 6% 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.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



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 established an Irrevocable Standby Letter of Credit in the amount of $25,000 as collateral for this loan, with a maturity date of January 3, 2010. The Company
met the criteria of occupying a 20,000 square foot building and 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 during the five year
term. Notice was received February 6, 2009 from the Buchanan County Commission, that the Company had fulfilled its minimum loan requirements so that the loan was forgiven in full with no further obligations. Since the Company was no longer
legally required to return the monies, the liability was reclassified as deferred revenue and amortized into income over the life of the lease term of the new facility. At June 30, 2009, a total of $25,000 has been reclassified to deferred
revenue. Deferred revenue is recognized on a straight-line basis over the lease term of 20 years. During the nine months ended March 31, 2011 and 2010, deferred revenue of $974 and $973, respectively, was amortized into income for each period.

NOTE 4 - NOTES PAYABLE

The
Companys long-term debt consists of:



|            |  |                                                                                                                                            |  |               |        |  |              |   |        | 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------ |  | ------------ | - | ------ | 
|Payee       |  | Terms                                                                                                                                      |  | March 31,2011 |        |  | June 30,2010 |  
|            |  |                                                                                                                                            | 
|Ford Credit |  | $1,001 monthly payments including interest of 0%; secured by a vehicle. Note was paid in full during the quarter ending December 31, 2010. |  | $             |       |  |              | $ | 9,003  | 
|            |  |                                                                                                                                            | 
|Ford Credit |  | $573 monthly payments including interest of 6.99%; secured by a vehicle. Note was paid in full during quarter ending March 31, 2011.       |  |               |       |  |              |   | 13,636 | 
|            |  |                                                                                                                                            | 
|Ford Credit |  | $679 monthly payments including interest of 0%; final payment due March 2016, secured by a vehicle.                                        |  |               | 40,750 |  |              |   |       | 
|            |  |                                                                                                                                            | 
|Ford Credit |  | $517 monthly payments including interest of 0%; final payment due March 2016, secured by a vehicle.                                        |  |               | 31,000 |  |              |   |       | 



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 4 - NOTES PAYABLE (CONTINUED)



|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 
|------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- |  | ------------ | - | ------- | 
|Payee                                                              |  | Terms                                                                                                        |  | March 31,2011 |         |  | June 30,2010 |  
|                                                                   |  |                                                                                                              | 
|Honda                                                              |  | $508 monthly payments including interest of 1.9%; final payment due December 15, 2011, secured by a vehicle. |  |               | 4,535   |  |              |   | 9,007   | 
|                                                                   |  |                                                                                                              | 
|Nissan                                                             |  | $557 monthly payments including interest of 3.9%; final payment due April 2012, secured by a vehicle.        |  |               | 7,028   |  |              |   | 11,740  | 
|                                                                   |  |                                                                                                              | 
|Nodaway Valley Bank                                                |  | $3,192 monthly payments including interest of 6.25%; final payment due June 2015, secured by equipment.      |  |               | 122,422 |  |              |   | 163,909 | 
|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 
|                                                                   |  |                                                                                                              | 
|                                                                   |  | Total                                                                                                        |  |               | 205,735 |  |              |   | 207,295 | 
|                                                                   |  | Less current portion                                                                                         |  |               | 56,937  |  |              |   | 56,820  | 
|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 
|                                                                   |  | Long-term portion                                                                                            |  | $             | 148,798 |  |              | $ | 150,475 | 
|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 
|                                                                   |  |                                                                                                             
|Future minimum payments for the twelve months ending March 31 are: |  |                                                                                                              |  |               |         |  |              |  
|                                                                   |  | 2012                                                                                                         |  | $             | 56,937  |  |              |   |         | 
|                                                                   |  | 2013                                                                                                         |  |               | 48,441  |  |              |   |         | 
|                                                                   |  | 2014                                                                                                         |  |               | 50,081  |  |              |   |         | 
|                                                                   |  | 2015                                                                                                         |  |               | 35,926  |  |              |   |         | 
|                                                                   |  | 2016                                                                                                         |  |               | 14,350  |  |              |   |         | 
|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 
|                                                                   |  |                                                                                                              | 
|                                                                   |  | Total                                                                                                        |  | $             | 205,735 |  |              |   |         | 
|                                                                   |  |                                                                                                              |  |               |         |  |              |   |         | 

NOTE 5 - NOTE PAYABLE - BANK

Effective June 30, 2009, the Company had a $250,000 line-of-credit agreement which expired on January 3, 2011. The line-of-credit agreement was renewed on that date to extend until
January 3, 2012 with a variable interest rate at prime, which was 5% at March 31, 2011. The line-of-credit is collateralized by certain equipment. At March 31, 2011 and June 30, 2010, there was no outstanding balance on the
line-of-credit.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 6 - INCOME TAXES

The recognition of income tax expense related to uncertain tax positions is determined under the provisions of FASB ASC - 740-10. The Company had no unrecognized tax benefits as of the date of adoption.
The income tax positions taken for open years are appropriately stated and supported for all open years. The Companys federal tax returns for the fiscal years ended 2008, 2009 and 2010 are subject to examination by the IRS taxing authority.

As of March 31, 2011, the Company has unused contributions carryforward of $1,771 of which the Companys profit for the nine months
ended March 31, 2011 fully absorbed this amount.

NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION



|                      |  |                           |        |  |      |   |       | 
|--------------------- |  | ------------------------- | ------ |  | ---- | - | ----- | 
|                      |  | Nine Months EndedMarch 31 |       
|                      |  | 2011                      |        |  | 2010 |  
|                      |  |                          
|Cash paid for:        |  |                           |        |  |      |   |       | 
|Interest              |  | $                         | 8,157  |  |      | $ | 3,346 | 
|Income taxes          |  |                           | 197    |  |      |   | 385   | 
|                      |  |                          
|Non-cash transaction: |  |                           |        |  |      |   |       | 
|Financing of vehicles |  | $                         | 71,750 |  |      | $ |      | 



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY

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

OVERVIEW

Chase General Corporation (Chase) 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.

The Companys
business, like that of many other confectionary product manufacturers, is seasonal. Historically, the Company has realized more of its revenue and earnings in the fiscal second quarter, which includes the majority of the holiday shopping season,
than in any other fiscal quarter.

RESULTS OF OPERATIONS - Three Months Ended March 31, 2011 Compared with Three Months Ended
March 31, 2010 and Nine Months Ended March 31, 2011 Compared with Nine Months Ended March 31, 2010

The following
management comments regarding Chases results of operations and outlook should be read in conjunction with the condensed consolidated financial statements included pursuant to Item 1 of the quarterly report.

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



|                                      |  |                            |     |    |                           |  |     |      |  |  |      |   |  |  |     |  
|------------------------------------- |  | -------------------------- | --- | -- | ------------------------- |  | --- | ---- |  |  | ---- | - |  |  | --- | -
|                                      |  | Three Months EndedMarch 31 |     |    | Nine Months EndedMarch 31 | 
|                                      |  | 2011                       |     |    | 2010                      |  |     | 2011 |  |  | 2010 |  
|                                      |  |                            |     |   
|Net sales                             |  |                            | 100 | %  |                           |  | 100 | %    |  |  | 100  | % |  |  | 100 | %
|Cost of sales                         |  |                            | 88  |    |                           |  | 87  |      |  |  | 71   |   |  |  | 70  |  
|                                      |  |                            |     |    |                           |  |     |      |  |  |      |   |  |  |     |  
|                                      |  |                            |     |   
|Gross profit                          |  |                            | 12  |    |                           |  | 13  |      |  |  | 29   |   |  |  | 30  |  
|                                      |  |                            |     |   
|Operating expenses                    |  |                            | 44  |    |                           |  | 28  |      |  |  | 23   |   |  |  | 21  |  
|                                      |  |                            |     |    |                           |  |     |      |  |  |      |   |  |  |     |  
|Income (loss) from operations         |  |                            | (32 | )  |                           |  | (15 | )    |  |  | 6    |   |  |  | 9   |  
|Net income (loss) before income taxes |  |                            | (32 | )  |                           |  | (15 | )    |  |  | 5    |   |  |  | 9   |  
|Provision (credit) for income taxes   |  |                            | (14 | )  |                           |  | (6  | )    |  |  | 1    |   |  |  | 3   |  
|                                      |  |                            |     |    |                           |  |     |      |  |  |      |   |  |  |     |  
|                                      |  |                            |     |   
|Net income (loss)                     |  |                            | (18 | )% |                           |  | (9  | )%   |  |  | 4    | % |  |  | 6   | %
|                                      |  |                            |     |    |                           |  |     |      |  |  |      |   |  |  |     |  



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY



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



NET SALES

Net sales decreased $65,386 or 15% for the three months ended March 31, 2011 to $376,491 compared to $441,877 for the three months ended March 31, 2010. Gross sales for Chase Candy decreased
$12,987 to $379,545 for the three months ended March 31, 2011 compared to $392,532 for 2010. Gross sales for Seasonal Candy decreased $46,350 to $10,644 for the three months ended March 31, 2011 compared to $56,994 for 2010.

The 3% decrease in gross sales of Chase Candy of $12,987 for the three months ended March 31, 2011 over the same period ended March 31, 2010,
is primarily due to the net effect of increased sales for the Mini Mash Bag and Cherry Mash Merchandisers of approximately $24,000 combined with the discontinuation of the Mini Mash Limited Addition Tin and one customer reducing orders by
approximately $28,000 versus third quarter a year ago. The 81% decrease in gross sales of Seasonal Candy of $46,350 for the three months ended March 31, 2011 over the same period ended March 31, 2010, is primarily due to decreased orders
from one customer totaling approximately $45,000 versus third quarter a year ago.

Net sales increased $88,139 or 4% for the nine months ended
March 31, 2011 to $2,572,029 compared to $2,483,890 for the nine months ended March 31, 2010. Gross sales for Chase Candy decreased $42,614 to $1,247,744 for the nine months ended March 31, 2011 compared to $1,290,358 for 2010. Gross
sales for Seasonal Candy increased $161,936 to $1,385,050 for the nine months ended March 31, 2011 compared to $1,223,114 for 2010.

The
3% decrease in gross sales of Chase Candy of $42,614 for the nine months ended March 31, 2011 over the same period ended March 31, 2010, is primarily due to the discontinuation of the Mini Mash Limited Addition Tin. The 13% increase in
gross sales of Seasonal Candy of $161,936 for the nine months ended March 31, 2011 over the same period ended March 31, 2010, is primarily due to increased orders from two customers.

COST OF SALES

The cost of sales
decreased $52,962 to $329,511 increasing to 88% of related revenues for the three months ended March 31, 2011, compared to $382,473 or 87% of related revenues for the three months ended March 31, 2010.

The 14% decrease in cost of sales of $52,962 is primarily due to and comparable to the 15% decrease in net sales of $65,386. Direct costs of goods for
materials manufactured for the three months ended March 31, 2011, decreased $58,501 to $89,971 as compared to $148,472 for the three months ended March 31, 2010, which is primarily due to decreases in sales. Freight in/out for the three
months ended March 31, 2011 decreased $2,321 to $25,573 as compared to $27,894 for the three months ended March 31, 2010, which is primarily due to a decrease in sales. Direct labor costs for the three months ended March 31, 2011
decreased $24,207 to $67,891 as compared to $92,098 for the three months ended March 31, 2010, which is primarily due to a decrease in sales.



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY



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



The cost of sales increased $100,758 to $1,831,878 or 71% of related revenues for the nine months ended
March 31, 2011, compared to $1,731,120 or 70% of related revenues for the nine months ended March 31, 2010.

Direct costs of goods
for materials manufactured and net change in inventories for the nine months ended March 31, 2011, increased $57,936 to $915,689 as compared to $857,753 for the nine months ended March 31, 2010, which is primarily due to raw material price
increases in chocolate, peanuts, and sugar which were not passed along to customers. Freight in/out for the nine months ended March 31, 2011 increased $3,534 to $122,657 as compared to $119,123 for the nine months ended March 31, 2010 as a
result of having to ship product using refrigeration services as summer temperatures continued to be high into late fall. Direct labor costs for the nine months ended March 31, 2011 increased $8,347 to $347,741 as compared to $339,394 for the
nine months ended March 31, 2010, which is a 2% increase due to increased bonus payments paid at the end of the busy season.

The Company
increased finished goods inventory during the nine months ended March 31, 2011 to $131,532 or 26% from the June 30, 2010 finished goods inventory of $104,022 as a result of building up finished goods for product to be delivered in April
2011. Raw material inventory of $95,921 is 12% lower than the June 30, 2010 inventories of $109,027 raw material as a result of not purchasing excess raw materials inventory to carry into the next quarter, due to higher pricing. Packaging
materials inventory of $207,666 is 11% higher than the June 30, 2010 inventories of $186,420 as a result of purchasing packaging materials inventory to take advantage of favorable pricing, but not all of this inventory was used during the third
quarter ending March 31, 2011.

SELLING EXPENSES

Selling expenses for the three months ended March 31, 2011 increased $20,709 to $79,655, which is 21% of sales, compared to $58,946 or 13% of sales for the three months ended March 31, 2010.

The increase of $20,709 in selling expenses for the three months ended March 31, 2011 is primarily due to higher commissions and premium
promotions being paid, and sample costs for the period in an effort to increase sales volume. Commissions and premium promotions, and sample costs increased $18,464 to $33,048 for this period from $14,584 for the three months ended March 31,
2010.

Selling expenses for the nine months ended March 31, 2011 increased $44,311 to $310,626, which is 12% of sales, compared to
$266,315 or 11% of sales for the nine months ended March 31, 2010.

The increase of $44,311 in selling expenses for the nine months ended
March 31, 2011 is primarily due to higher commissions and premium promotions being paid, and sample costs for the period in an effort to increase sales volume. Commissions and premium promotions, and sample costs increased $35,845 to $174,023
for this period from $138,178 for the nine months ended March 31, 2010.



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##### Table of Contents

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 March 31, 2011 increased $19,247 to $86,093 and increased to 23% of sales, compared to $66,846 or 15% of sales for the three months
ended March 31, 2010. The increased costs are primarily because of a $5,079 increase in insurance expense, a $6,870 increase in professional fees, a $428 increase in office supplies, and a $2,102 increase in website expense.

General and administrative expenses for the nine months ended March 31, 2011 increased $22,556 to $283,362, or 11% of sales, compared to $260,806 or
10% of sales for the nine months ended March 31, 2010. The increased costs are primarily because of a $6,139 increase in insurance expense, a $5,589 increase in professional fees, a $2,405 increase in office supplies, and a $5,087 increase in
website expense.

OTHER INCOME (EXPENSE)

Other income and (expense) increased by $438 for the three months ended March 31, 2011 to $(1,272), compared to $(834) for the three months ended March 31, 2010 primarily due to an increase in
interest expenses. Other income and (expense) increased by $3,360 for the nine months ended March 31, 2011 to $(6,180), compared to $(2,820) for the nine months ended March 31, 2010 primarily due to an increase in interest expenses.

PROVISION (CREDIT) FOR INCOME TAXES

The Company recorded a tax benefit for the three months ended March 31, 2011 of $(51,191) as compared to $(26,600) for the three months ended March 31, 2010. The net tax benefit recorded for the
three months ended March 31, 2011 and 2010 is primarily due to the loss from operations in those periods. The Company recorded tax expense for the nine months ended March 31, 2011 of $33,964 as compared to the tax expense of $82,022 for
the nine months ended March 31, 2010. The net tax expense recorded for the nine months ended March 31, 2011 and 2010 is primarily due to recognizing taxes related to current profitable operations. The net change in deferred taxes for the
three months and nine months ended March 31, 2011 was $27,727 and $19,009, respectively.

NET INCOME (LOSS)

The Company reported a net loss for the quarter ended March 31, 2011 of $68,849, compared to a net loss of $40,622 for the quarter ended
March 31, 2010. This increase of $28,227 is explained above.

The Company reported a net income for the nine months ended March 31,
2011 of $106,519 compared to a net income of $140,807 for the nine months ended March 31, 2010. This decrease of $34,288 is explained above.



17



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##### Table of Contents

CHASE GENERAL CORPORATION AND SUBSIDIARY



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



PREFERRED DIVIDENDS

These amounts reflect additional preferred stock dividends in arrears for the three and six months ended December 31, 2011 and 2010, respectively, on the Companys Series A and Series B $5 par
value preferred stock and its Series A and Series B $20 par value preferred stock.

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

Net loss applicable to common stockholders for the three months ended March 31, 2011 was $100,867 which is an increase of $28,227 as
compared to the three months ended March 31, 2010 of $72,640.

Net income applicable to common stockholders for the nine months ended
March 31, 2011 was $10,465, which is a decrease of $34,288 as compared to the nine months ended March 31, 2010 of $44,753. These items are explained above.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents the summary of cash flow for the
fiscal period indicated.



|                                                    |  |      |         |   |      |   |         |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                    |  | 2011 |         |   | 2010 |  
|                                                    |  |     
|Net cash provided by operating activities           |  | $    | 170,936 |   |      | $ | 113,003 |  
|Net cash used in investing activities               |  | $    | (17,925 | ) |      | $ | (2,574  | )
|Net cash provided by (used in) financing activities |  | $    | (73,310 | ) |      | $ | 121,585 |  

The $17,925 of cash used in investing
activities was the result of capital expenditures. Management has no material commitments for capital expenditures during the remainder of fiscal 2011. The $73,310 of cash used in financing activities is principal payments on equipment and vehicle
loans. Management believes that the projected cash flow from operations, combined with its existing cash balances, will be sufficient to meet its funding requirements for the foreseeable future. Chase does have $250,000 remaining on its bank
line-of-credit, which could be utilized to help fund any working capital requirements.

Management believes that inflation will have only a
minimal effect on future operations since such effects will be offset by sales price increases, which are not expected to have a significant effect upon demand.



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CHASE GENERAL CORPORATION AND SUBSIDIARY



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



CRITICAL ACCOUNTING POLICIES

Use of Estimates

The preparation of the condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates used in preparing these
condensed consolidated financial statements include those assumed in computing the carrying value of equipment and allowance for doubtful trade receivables. Accordingly, actual results could differ from those estimates. Any changes in estimates are
recorded in the period in which they become known.

Disclosures about Fair Value of Financial Instruments

The Companys financial instruments consist principally of cash and cash equivalents, trade receivables and payables, and notes payable. There are
no significant differences between the carrying value and fair value of any of these consolidated financial instruments. As of March 31, 2011, the amount of the Companys long-term debt approximates fair value based on the present value of
estimated future cash flows using a discount rate commensurate with a borrowing rate available to the Company.

Credit Risk

Financial instruments that potentially subject Chase to concentrations of credit risk consist principally of cash and accounts receivable. Chase grants
unsecured credit to substantially all of its customers. Management does not believe that it is exposed to any extraordinary credit risk as a result of this policy. Chase deposits all monies at the Nodaway Valley Bank. These accounts are insured up
to $250,000 by the Federal Deposit Insurance Corporation. Chase has not experienced any losses in such accounts. Management does not believe Chase is exposed to any significant credit risk with respect to its cash and cash equivalents.

Revenue Recognition

The Company
recognizes revenues as product is shipped to the customers. Net sales are comprised of the total sales billed during the period including shipping and handling charges to customers, less the estimated returns, customer allowances and customer
discounts.



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CHASE GENERAL CORPORATION AND SUBSIDIARY



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

CRITICAL ACCOUNTING POLICIES (CONTINUED)



Allowance for Doubtful Accounts

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects managements best estimate of amounts that will not be collected. The allowance for doubtful accounts is
based on managements assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customers credit worthiness or actual defaults are higher than the
historical experience, managements estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible, or to require an excessive collection cost, are written off
to the allowance for doubtful accounts.

Inventories

Inventories are carried at the lower of cost or market value with cost being determined on the first-in, first-out basis of accounting. Finished goods and goods in process include
a provision for manufacturing overhead.

Property and Equipment

Property and equipment are recorded at cost. The Companys property and equipment are being depreciated on straight-line and accelerated methods over the following estimated useful lives:



|                        |  |                                                  
|----------------------- |  | -------------------------------------------------
|Buildings               |  | 39 years                                         
|Machinery and equipment |  | 5  7 years                                      
|Trucks and autos        |  | 5 years                                          
|Office equipment        |  | 5  7 years                                      
|Leasehold improvements  |  | Lesser of estimated useful life or the lease term

Cash Flows

For purposes of the
statements of cash flows, Chase considers all short-term investments purchased with original maturity dates of three months or less to be cash equivalents.



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CHASE GENERAL CORPORATION AND SUBSIDIARY



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

CRITICAL ACCOUNTING POLICIES (CONTINUED)



Impact of New Accounting Pronouncements

During the third quarter 2010, Chase adopted FASB ASU No. 2010-06 Fair Value Measurements and Disclosures (Topic 820). This ASU requires new disclosures for transfers in and out of Levels 1 and 2,
and Activity in Level 3 fair value measurements. The update also clarifies the level disaggregation and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009. The requirement related to Level 3 fair value measurements is effective for the Company for interim and annual reporting periods beginning after January 29, 2011. The adoption of
the effective portions of this new standard did not have a material impact on the Companys condensed consolidated financial statements and the Company does not expect a material impact on its condensed consolidated financial statements related
to the Level 3 fair value disclosures.

In June 2009, the FASB issued new guidance on the consolidation of variable interest entities
(VIE) in response to concerns about the application of certain key provisions of pre-existing guidance, including those regarding the transparency of the involvement with a VIE. Specifically, this new guidance requires a qualitative
approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an interest in a VIE makes the holder the primary beneficiary of the VIE and whether an entity is a VIE when a triggering event occurs. In
addition, this new guidance requires additional disclosures about the involvement with a VIE and any significant changes in risk exposure due to that involvement. This new guidance is effective for fiscal years beginning after November 15,
2009. The Company adopted the new guidance in the first quarter of fiscal year 2011, which did not have a material impact on its condensed consolidated financial statements.

Forward-Looking Information

This report, as well as our other reports filed with the
Securities and Exchange Commission (SEC), contains forward-looking statements made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. The words believe, estimate,
anticipate, project, intend, expect, plan, outlook, forecast, may, will, should, continue, predict and
similar expressions are intended to identify forward-looking statements. This report contains forward-looking statements regarding, among other topics, our expected financial position, results of operations, cash flows, strategy, and
managements plans and objectives. Accordingly, these forward-looking statements are based on assumptions about a number of important factors. While we believe that our assumptions about such factors are reasonable, such factors involve risks
and uncertainties that could cause actual results to be different from what appear here. These risk factors include: the ability to adequately pass through customers unanticipated future increases in raw material costs, decreased demand for
products, expected orders that do not occur, loss of key customers, the impact of competition and price erosion as well as supply and manufacturing constraints, and other risks and uncertainties. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report will prove accurate, and our actual results may differ materially from these forward-looking statements. We assume no obligation to update any forward-looking statements
made herein.



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CHASE GENERAL CORPORATION AND SUBSIDIARY



ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 4T. - CONTROLS AND PROCEDURES



|(a) | Evaluation of Disclosure Controls and Procedures
|--- | ------------------------------------------------

Chases management, with the participation of the Chief Executive Officer, has evaluated the effectiveness of Chases disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, this officer has concluded that Chases disclosure
controls and procedures are effective to provide reasonable assurance that information required to be disclosed in periodic filings under the Exchange Act is accumulated and communicated to management, including those officers, and to members of the
Board of Directors, to allow timely decisions regarding required disclosure.



|(b) | Changes in Internal Control over Financial Reporting
|--- | ----------------------------------------------------

There were no significant changes in Chases internal control over financial reporting or in other factors that in managements estimates are reasonably likely to materially affect Chases
internal control over financial reporting subsequent to the date of the evaluation.



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PART II. OTHER INFORMATION



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



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



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Not applicable to a smaller reporting company.



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



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



| | b. | The total cumulative preferred stock dividends contingency at March 31, 2011 is $7,276,428.
| | -- | -------------------------------------------------------------------------------------------



|ITEM 4. | SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
|------- | -------------------------------------------------

None



|ITEM 6. | EXHIBITS
|------- | --------



| | a. | Exhibits.
| | -- | ---------



Exhibit 31.1

Certification of Chief Executive Officer and Treasurer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.Exhibit 32.1

Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002




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SIGNATURES

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



|             |  |  |  |                                                       |  | 
|------------ |  |  |  | ----------------------------------------------------- |  | 
|             |  |  |  | Chase General Corporation and Subsidiary (Registrant) |  | 
|             |  |  | 
|May 17, 2011 |  |  |  | /s/ Barry M. Yantis                                   |  | 
|Date         |  |  |  | Barry M. Yantis                                       |  | 
|             |  |  |  | Chairman of the Board, Chief Executive Officer and    |  | 
|             |  |  |  | Chief Financial Officer,President and Treasurer       |  | 



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