W

The information furnished herewith reflects all adjustments, which are in the opinion of management necessary to a fair statement of the results for the period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principals generally accepted in the United States of America have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. These unaudited interim financial statements have not been audited by a firm of certified public accountants.

It is the Company's policy to reclassify amounts in the prior year financial statements to conform with the current year presentation.

Note B - New Accounting Standards

In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") 154. SFAS 154 replaces APB 20 and SFAS 3 and changes the requirements for the accounting for and reporting of a change in accounting principle. The Company is required to adopt SFAS 154 for accounting changes and corrections of errors that occur in 2007. The Company's financial condition and results of operations will only be impacted by FSAS 154 if there are any accounting changes or corrections or errors in the future.

In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes." FIN No. 48 heightens the threshold for recognizing and measuring tax benefits and requires enterprises to make explicit disclosures about uncertainties in their income tax positions, including a detailed rollforward of tax benefits taken that do not qualify for financial statement recognition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the potential impact FIN No. 48 will have on the Company's financial position, results of operations and cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standard ("SFAS") No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. The Company is currently evaluating the effect of the guidance contained in SFAS 157 and does not expect the implementation to have a material effect on the Company's financial statements.

In September 2006, the FASB also issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," an amendment of SFAS Nos. 87, 88, 106 and 132R. SFAS No. 158 requires the recognition of the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in the statement of financial position and changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 also requires the funded status of a plan be measured as of the date of its year-end statement of financial position. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company is expecting a liability and deferred debit of approximately $1.8 million (the difference between projected benefit obligation and fair value of plan assets) in 2007.

In February 2007, the FASB issued SFAS 159. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not otherwise required to be measured at fair value under GAAP. A company that elects the fair value option for an eligible item will be required to recognize in current earnings any changes in that item's fair value in reporting periods subsequent to the date of adoption. SFAS 159 is effective as of the Company's first quarter of fiscal 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS 159 will have on its consolidated financial statements.

Note C - Pension and Other Post-retirement Benefit Plans

The Company uses June 30 as the measurement date for its plans.

Components of Net Periodic Benefit Cost:

There is no Company common stock included in the plan assets.

Amounts recognized in the Statement of Financial Position consist of:

The accumulated benefit obligation for all defined benefit pension plans is $11,487,883 at September 30, 2007 and $11,171,030 at September 30, 2006, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets:

The plan objective is to provide real (inflation adjusted) growth in assets vs. benchmark over a complete market cycle. The plan's objective assumes asset growth will meet or exceed 8% of (risk adjusted) growth over a complete market cycle.

Investment guidelines are based upon an investment horizon of greater than five years. There is a requirement to maintain sufficient liquid reserves to provide for payment of retirement benefits.

The asset allocation guidelines for the plan are as follows:

These asset allocation guidelines reflect the plan's desire for investment return. They also reflect the full discretion of the Investment Manager to shift the asset mix within the specified ranges.

The desired investment objective is a long-term rate of return on assets that is approximately 8%. The target rate of return for the plan has been based upon the assumption that future real returns will approximate the long-term rates of return experienced for each asset class of the Investment Policy Statement over a complete business cycle. The plan's overall annualized total return after deducting advisory, money management and custodial fees, as well as total transaction costs should perform above an index comprised of market indices weighted by the strategic asset allocation of the plan.

In order to accomplish the investment goals, the Investment Committee believes that the investments of the plan must be diversified to provide the Investment Manager with the flexibility to invest in various types of assets. The Investment Committee recognizes that a moderate amount of risk must be assumed to achieve the Plan's long-term objectives. The Investment Committee believes that the Company's prospects for the future, current financial conditions, and several other factors suggest collectively that the plan can tolerate some interim fluctuations in market value and rates of return in order to achieve long-term objectives.

The Company expects to contribute $936,017 to its Pension Plan and $61,677 to its Post Retirement Benefit Plan in 2007.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effect:

Note D - Segment Overview

The following table reflects the results of the segments consistent with the Company's internal financial reporting process. The following results are used in part, by management, both in evaluating the performance of, and in allocating resources to, each of these segments.

(1) Before elimination of intercompany interest.

(2) The Appliance Co. discontinued operations in September 2003.

(3) Corning Realty and Corning Mortgage discontinued operations in August 2006.

There were no sales of unregistered securities (debt or equity) during the quarter ended March 31, 2007.

The Company's primary business is natural gas distribution. We serve approximately 14,500 customers through 400 miles of pipeline. Residential growth in our service territory is dependent on overall economic activity. Several significant employers have recently announced expansions. The Company's major growth opportunities exist in the industrial market, as well as connecting to local gas production. Increased focus will be given to efficient operations and improving infrastructure.

Our key performance indicators are net income and stockholder equity.

Three month and six-month earnings ended March 31, 2007 were significantly better than the same periods in 2006. The improvements were the product of improved margins somewhat offset by higher costs and net regulatory true-ups related to 2006 operations. Higher operations expenses were primarily the product of higher amortization of statutory deferred expenses and higher operating and higher maintenance expenses. Regulatory charges were related to disallowance of certain 2006 gas costs ($690,000) partially offset by an interest deferral of $575,683.

As a regulated utility company, shareholders' equity is an important measure for the Company. The New York Public Service Commission allows the Company to earn a just and reasonable return on shareholders' equity. Shareholders' equity is therefore a precursor of future earnings' potential. Shareholders' equity decreased between March 2006 and March 2007 due to one-time charges taken at the end of the fiscal year September 30, 2006. In the six months since then Shareholder's equity has increased from $5.22 a share to $6.45 a share. A focus of the Company going forward is to rebuild shareholders' equity.

Other indicators that are tracked include leak repair, main and service replacements and customer service metrics. During 2006 the Company made a significant effort to improve its infrastructure. More than $1.6 million was invested in line, meter and service replacement. We repaired 282 leaks and replaced 150 services and three miles of gas main.

The Company's Customer Service Group has implemented several changes to positively impact Corning Natural Gas customers. Beginning in 2007, customers have the option of third party payment of their gas bill through their lending institution. This will speed up payments and save customers from having to travel to the office to make payments or mail payment. Corning has also instituted online meter reading which now allows customers three ways to have an actual reading each month (by mail, call in reading or online reading). Bill processing has been consolidated to shorten the time between meter reading and mailing of the customer bill which allows a more direct link between the consumption of gas and the receipt by the customer of the bill. The principal customer service matrix employed by the Company is number of customer complaints. The Company is exploring the feasibility of conducting a customer satisfaction survey.

Gas supply is the largest expense of the Company. The Company signed an asset management agreement with Merrill Lynch Commodities in 2007 to be the Company's agent in managing our upstream storage and pipeline contracts. The Company believes this agreement will result in lower gas supply costs compared to the previous supply arrangement.

Net income amounted to $561,746 or $1.201 per share in the second quarter of 2007 compared to net income of $402,453 or $.794 per share in the second quarter of 2006. Consolidated net income in the six months ended March 31, 2007 was $609,202 or $1.201 per share compared to consolidated net income of $298,962 or $.590 per share in the six months ended March 31, 2006. The increase is the result of the new rates and successful efforts at controlling expenditures.

Utility operating revenue decreased $998,986 or 9 percent in the second quarter of 2007 compared to the second quarter of 2006. Utility operating revenue for the first two quarters of 2007 ("YTD") decreased $2,270,557 or 12 percent compared to YTD 2006 due primarily to lower gas costs. Gas costs are a pass through to customers through the Company's gas adjustment clause.

Our margin increased between 2007 and 2006 due to increase in our rate structure and colder weather.

On October 1, 2006, Corning put in to effect a significant ($2.7 million a year) rate increase which will positively impact revenue and margin. In addition, 2006 was a warm winter; a return to normal weather patterns also increased revenue. Finally, our largest customer, Corning Inc., has added additional manufacturing capacity in the area that has increased our revenues. Looking forward, we anticipate the Company's cost of gas will stabilize because of access to local production and a more favorable gas supply asset management agreement. Margins are also expected to outperform same period 2006 results.

Purchase gas expense decreased $1,949,370 or 22 percent in the second quarter of 2007 compared to the second quarter of 2006 due primarily to the reduced price of gas. Other operating and maintenance expense increased 39 percent in the second quarter of 2007 compared to the second quarter of 2006 due primarily to increased amortization expense related to a previous deferral and increased operating and maintenance expenses. Depreciation expense increased from $132,683 to $155,667 in the second quarter of 2007 due to increased investment in plant property and equipment.

Interest income increased by $90,874 to $129,375 in the second quarter of 2007 versus $38,501 in the second quarter of 2006. The increase in 2007 was due to changes in interest bearing gas cost reconciliation amounts due from customers.

The non utility operations were sold in the fiscal year 2006 and the results were included in "Discontinued Operation" segment. Therefore the periods are not comparable.

Please see Note D to the financial statements, for a discussion of operating segments, which also contain the results by segment for the six months ended March 31, 2007 and 2006.

Internally generated cash from operating activities consists of net income, adjusted for non-cash expenses and changes in operating assets and liabilities. Non-cash items include depreciation and amortization, gain on sale of securities, and deferred income taxes. In the utility segment, over or under recovered gas costs significantly impacts cash flow. In addition, there are significant year-to-year changes in regulatory assets that impact cash flow. Cash flows from investing activities consist primarily of capital expenditures. Capital expenditures have historically exceeded $1 million annually and the same is expected in the coming year. Cash flows from financing activities consist of repayment of long-term debt and borrowings and repayments under our lines-of-credit. For consolidated operations, the Company had $6,600,000 during 2006 available through lines of credit at local banks. The amount outstanding under these lines at March 31, 2007 is $6,150,000. In addition, the lender has a purchase money interest in and to all natural gas purchases by debtor utilizing funds advanced by the bank under the line-of-credit agreement and all proceeds of sale thereof and accounts receivable pertaining to such sale. The Company relies heavily on its credit lines and a large portion is utilized throughout the entire year.

The Company has outstanding $8,663,162 in long term debt as of March 31, 2007.

In order to purchase gas supplies for the winter 2006-2007 season, the Company entered in to a gas asset management contract with Virginia Power Energy Marketing Inc. where VPEM purchased gas on behalf of the Company and injected that gas in to storage. At the request of VPEM on November 30th, 2006 Richard Osborne, Chairman of the Company, posted a letter of credit with VPEM to facilitate the payment for gas. This letter of credit allowed the Company to resume normal payment for its gas purchases. The letter of credit expired on April 30, 2007 and has been extended to June 30, 2007.

The Company has no off balance sheet arrangements.

 Regulatory Matters

On May 22, 2006, the New York Public Service Commission (the "Commission") issued a decision in three proceedings involving the Company: Case 05-G-1359, to examine the Company's October 31, 2005 filing for increased rates; Case 05-G-1268, to review the Company's practices particularly relating to natural gas supply; and Case 04-G-1032 to consider the Company's request for deferral and recovery of costs formerly allocated to the appliance business that has been sold in 2003. The decision, entitled "Order Setting Gas Delivery Service Rates, Adopting Performance Targets and Incentives, Allowing Deferral and Rate Recovery of Certain Costs, and Crediting Customers with $1.4 Million of Prior Gas Commodity Costs" (the "May Order"), resolved the issues presented in the three proceedings.

In its May Order, the Commission authorized the Company to increase its base rates for natural gas service by approximately $2.7 million. The May Order allowed rates to become effective as of June 1, 2006. For financial purposes rates went in to effect October 1, 2006 and revenues collected as a result of early implementation (June1st through September 30th) are subject to refund in 2007. The Commission granted recovery of approximately $2.63 million of deferred costs associated with appliance business, offsetting that against a $1.4 million one time gas supply disallowance expense. This expense was recognized in the quarter and fiscal year ended September 30^th, 2006.

The Company filed a comprehensive regulatory plan with the Commission on March 23, 2007. It filed petitions related to deferring certain interest and uncollectible expenses of $575,683 and $271,090 on January 12, 2007 and November 14, 2006 respectively. It filed a petition to seek authorization to issue additional shares of common stock on April 13, 2007. The Company has also filed a preliminary prospectus with the SEC to issue common stock. The Company believes the New York State Public Service Commission will act on these petitions this spring. In addition, on March 30, 2007 the Commission issued a final order relative to reconciliations of the

Company's 2006 gas adjustment charges (GAC). This order resolved all remaining issues relative to the Company's purchases of gas.

The Company's significant accounting policies are described in the notes to the Consolidated Financial Statements. It is increasingly important to understand that the application of generally accepted accounting principles involve certain assumptions, judgments and estimates that affect reported amounts of assets, liabilities, revenues and expenses. Thus, the application of these principles can result in varying results from company to company. The most significant principles that impact the Company are discussed below.

The Company records revenues from residential and commercial customers based on meters read on a cycle basis throughout each month, while certain large industrial and utility customers' meters are read at the end of each month. The Company does not accrue revenue for gas delivered but not yet billed, as the New York PSC requires that such accounting must be adopted during a rate proceeding, which the Company has not done. The Company does not currently anticipate adopting unbilled revenue recognition and does not believe it would have a material impact in financial results. The Company's tariffs contain mechanisms that provide for the recovery of the cost of gas applicable to firm customers, which includes estimates. Under these mechanisms, the Company periodically adjusts its rates to reflect increases and decreases in the cost of gas. Annually, the Company reconciles the difference between the total gas costs collected from customers and the cost of gas. The Company defers any excess or deficiency and subsequently either recovers it from, or refunds it to, customers over the following twelve-month period. To the extent estimates are inaccurate; a regulatory asset on the balance sheet is increased or decreased.

All of the Company's business is subject to regulation. The Company's regulated utility records the results of its regulated activities in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation", which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS No. 71 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in non-regulated businesses. In certain circumstances, SFAS No. 71 allows entities whose rates are determined by third-party regulators to defer costs as "regulatory" assets in the balance sheet to the extent that the entity expects to recover these costs in future rates. Management believes that currently available facts support the continued application of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory environment.

The amounts reported in the Company's financial statements related to its pension and other post-retirement benefits are determined on an actuarial basis, which uses many assumptions in the calculation of such amounts. These assumptions include the discount rate, the expected return on plan assets, the rate of compensation increase and, for other post-retirement benefits, the expected annual rate of increase in per capita cost of covered medical and prescription benefits. Changes in actuarial assumptions and actuarial experience could have a material impact on the amount of pension and post-retirement benefit costs and funding requirements experienced by the Company. However, the Company expects to recover substantially its entire net periodic pension and other post-retirement benefit costs attributed to employees in its Utility segment in accordance with the applicable regulatory commission authorization. For financial reporting purposes, the difference between the amounts of such costs as determined under applicable accounting principles is recorded as either a regulatory asset or liability.

This report contains statements which, to the extent they are not recitations of historical facts, constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995 (Reform Act). In this respect, the words "estimate", "project", "anticipate", "expect", "intend", "believe" and similar expressions are intended to identify forward-looking statements. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. A number of important factors affecting the Company's business and financial results could cause actual results to differ materially from those stated in the forward-looking statements.

The Company's exposure to interest rate risk arises from borrowing under short-term debt instruments. At March 31, 2007, these instruments consisted of a term loan and bank credit line borrowings outstanding of $6,150,000. The interest rate (prime rate) on this loan and these lines was 8.25 percent at March 31, 2007.

a. Disclosure Controls and Procedures. As of the end of the period covered by this quarterly report on Form 10-Q the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the evaluation date, our disclosure controls and procedures were effective to ensure that material information relating to us and our consolidated subsidiaries is recorded, processed, summarized and reported in a timely manner.

b. Changes in Internal Controls. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In late October and November 2006, the law firm of Rich May requested that we issue two notes to the firm for legal fees in the principal amounts of $275,364.28 and $53,503.53, and sign a letter agreement regarding payment of the fees. At the time, Corning was in the midst of negotiating several significant transactions and the prior board decided to issue the notes to retain Rich May's representation. The current board had concerns about the propriety of the notes when it learned of them and entered into discussions with Rich May to resolve the matter. Because of these concerns, we have not made all payments required by both notes and on February 13, 2007, Rich May filed suit against Corning in Suffolk Superior Court in Suffolk County, Massachusetts, to collect on the notes (Civil Action No. 07-0666 B.L.S.). We filed to remove the case to the United States District Court of Massachusetts on March 5, 2007 (Case No. 1:07-CV-10443-WGY). We intend to defend this suit vigorously and on March 27, 2007 filed our answer and counterclaim alleging several affirmative defenses to Rich May's claim and bringing counterclaims against the firm for legal malpractice and breach of fiduciary duty. Although we feel strongly that we have valid defenses and counterclaims to Rich May's claims, litigation is inherently uncertain and we cannot predict the outcome of this dispute.

In December 2003, Corning entered into an agreement with Aramar Capital Group, LLC appointing Aramar as its financial advisor in connection with the potential sale of the company. As Corning's financial advisor, Aramar was responsible for preparing the necessary selling documents, contacting potential buyers and assisting Corning with negotiations. In May 2006, Corning entered into a merger agreement with C&T Enterprises, Inc., pursuant to which C&T agreed to purchase all of Corning's outstanding shares, subject to approval of the merger by Corning's shareholders. At a special meeting of Corning's shareholders on October 11, 2006, the company failed to secure the requisite number of affirmative votes for the merger. C&T terminated the merger on October 16, 2006 citing three provisions in the merger agreement.

After terminating the merger agreement, C&T demanded that Corning pay C&T a termination fee in the amount of $250,000. We do not believe that we owe C&T the termination fee and on April 25, 2007, we filed a Summons with Notice in the Supreme Court of New York, Steuben County (Index No. 96686), seeking a judgment declaring whether Corning owes C&T the aforementioned termination fee under the terms of the merger agreement. As of the date of this filing, C&T has not entered an appearance or filed a response to our Summons.

Following the failed merger, Aramar demanded additional fees under the terms of the agreement between Aramar and Corning. We do not believe we owe Aramar any further fees under the agreement and on April 25, 2007, we filed a Summons with Notice in the Supreme Court of New York, Steuben County (Index No. 96685) seeking a judgment declaring whether Corning owes Aramar the aforementioned fees. On April 26, 2007, Aramar filed suit against Corning for fees in excess of $550,000 in the Supreme Court of New York, New York County (Index No. 601380-07). We intend to defend this suit vigorously and on May 11, 2007, we filed our answer alleging several defenses to Aramar's claims. In addition, we filed a demand that the case be removed to Steuben County.

The risk factors included in our Quarterly Report on Form 10-Q for the period ended December 31, 2006 as filed with the SEC on February 14, 2007 have not materially changed with the exception of the addition of a risk factor related to our pending litigation arising from the proposed merger with C&T Enterprises, Inc. that was terminated in October 2006.

As more fully described in Part II, Item 1 - Legal Proceedings of this Quarterly Report on Form 10-Q, we are currently involved in litigation arising from the proposed merger with C&T that was terminated in October 2006. We cannot predict the outcome of any of these proceedings. In the event that there is an adverse ruling in any of the legal proceedings, we may be required to make payments to third parties that could harm our business or financial results. Furthermore, regardless of the merits of any claim, the continued maintenance of these legal proceedings may result in substantial legal expense and could also result in the diversion of our management's time and attention away from our other business operations, which could harm our business.

The Company has nothing to report under this item.

The Company has nothing to report under this item.

The Company has nothing to report under this item.

The Company has nothing to report under this item.

31.1* Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed or furnished herewith

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.