U.S. SECURITIES AND EXCHANGE COMMISSION

                       Washington, D.C.  20549

                            FORM 10-KSB

         ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

           For the Fiscal Year Ended December 31, 1996
               Commission File Number 0-21609

                    CHASE PACKAGING CORPORATION
   (Name of small business issuer in its charter)

            Texas                    93-1216127
(State or other jurisdiction of    (I.R.S. Employer
incorporation or organization)      Identification No.)

      2550 NW Nicolai Street
          Portland, OR                  97210
(Address of principal executive     (Zip Code)
 offices)







Issuer's telephone number: (503) 228-4366
Securities registered under Section 12(b) of the Exchange Act:  NONE
Securities registered under Section 12(g) of the Exchange Act:

                Common Stock ($.10 Par Value)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

                                        Yes   X     No

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB.   (X)

State issuer's revenues for its most recent fiscal year:  $9,733,520

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold on March 10,
1997:                                                     $   205,124

                         Not Applicable

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

          Class                               Outstanding at March 25, 1996
Common Stock ($.10 Par Value)                            7,002,964





                                    PART I


ITEM 1.  DESCRIPTION OF BUSINESS.

Chase Packaging Corporation ("Chase" or the "Company"), is a Texas
corporation engaged in the specialty packaging business, primarily as a
supplier of packaging products to the agricultural industry.  The principal
business office of Chase is located at 2550 NW Nicolai Street, Portland,
Oregon 97210 (Telephone:  503/228-4366).

History

Chase Packaging Corporation (the "Company") was established in July of 1993
as a wholly owned subsidiary of TGC Industries, Inc. ("TGC") of Plano, Texas.
On July 30, 1993, the Company purchased certain assets of Union Camp
Corporation's Chase Packaging division ("Chase Bag"), for a purchase price of
approximately $6.14 million.  The assets purchased included substantially all
of the business of weaving and constructing Saxolin (R) paper mesh and
polypropylene plastic mesh bagging material for agricultural and industrial
applications and substantially all of the properties related to Chase Bag.
The properties acquired by Chase consisted of Union Camp's plant facilities
located in Portland, Oregon, and Idaho Falls, Idaho, and all machinery,
equipment, and inventories connected with these facilities.  Union Camp
retained all accounts receivable owing as of the July 30, 1993 closing date.

The Company financed the acquisition through a combination of debt and equity
financing.  The debt portion of the financing was provided by means of a
purchase money mortgage note ("Union Camp Note") from Chase Packaging to
Union Camp Corporation, and guaranteed by TGC, in the principal amount of
$3,761,537.  The Union Camp Note provided for a five-year maturity with
monthly principal payments of $31,346 amortized over a period of ten years
and commenced on August 1, 1994.  Interest accrued at the rate of 8% for the
first three years, at 3% above the prime rate for the fourth year and 4%
above the prime rate for the fifth year, and was payable semi-annually in the
first year and monthly thereafter.  Under the terms of the Union Camp Note,
Chase could not take any of the following actions, among others, without
obtaining the prior written consent of Union Camp Corporation: (i) except in
the ordinary course of business, consolidate with, merge with, or acquire the
stock or assets of another person, firm or entity, whether by merger,
consolidation, purchase of stock or otherwise; (ii) except in the ordinary
course of business, make loans to any person, firm or entity unless such
loans are, in the aggregate, less than $50,000; (iii) incur, create, or
permit to exist any other mortgage, assignment, hypothecation, security
interest, lien, or other encumbrances of the assets securing such note,
except for a subordinated security interest therein to the Company's
principal lender, Congress Financial Corporation; and (iv) change, alter,
modify or amend its Articles of Incorporation or Bylaws or other governing
documents.  The equity portion of the financing resulted in cash of
$2,955,000 being raised by TGC through the private placement of its
securities in 1993.


Of such proceeds, $2,383,000 were utilized to purchase inventory (and certain
miscellaneous assets) and the balance of $572,000 has been utilized by the
Company for working capital.  The private financing consisted of the issuance
and sale by TGC of 3,068,750 shares of its $.10 par value Common Stock at
$.80 per share and 500,000 shares of Convertible Preferred Stock at $1.00 per
share (which was convertible into a maximum of 1,530,000 shares of Common
Stock).  Also on July 30, 1993, Chase obtained from its primary bank a
$2,500,000 working capital revolving line of credit (which was guaranteed by
TGC) which is secured primarily by a first and prior security interest
covering all of Chase's inventory and accounts receivable.  On September 19,
1994 the maximum credit on the revolving line of credit was increased by
Chase's primary bank to $4,000,000.

On May 25, 1994, the Company acquired, for approximately $1.77 million, from
Fisher Bag Company, Inc. ("Fisher Bag") of Seattle, Washington, substantially
all of its business of manufacturing and marketing agricultural and
industrial bags and other packaging materials.  The business and assets
acquired from Fisher Bag consist of all operating assets of Fisher Bag,
including all equipment, inventories, accounts receivable, and proprietary
information, but excluding all real property and interests in real estate.
During the fourth quarter of 1994 the manufacturing operation of Fisher Bag
was phased into Chase's Portland facility.  Substantially all of the
machinery and equipment and a major portion of the inventory was transferred
to the Portland plant.

The purchase price paid by Chase amounted to a total of approximately $1.77
million, which amount was determined on the basis of the fair market value of
the current assets acquired, the appraised value of the fixed and other
assets acquired, and goodwill in the amount $785,149.  The goodwill included
$60,751 for legal and accounting fees related to the purchase that were
recorded in July of 1994.  The Company financed the acquisition through a
combination of purchase money debt and bank debt financing as follows: (1)
Two purchase money notes payable by Chase to Fisher Bag in the aggregate
principal amount of $537,500; and (2) with respect to the balance of the
purchase price, which was paid by delivery of $1,083,145 cash at closing and
the assumption of $93,500 in liabilities of Fisher Bag, the cash portion was
financed under Chase's revolving credit agreement with its principal lender
(which debt was guaranteed by TGC).

With respect to the purchase money notes, the first note in the amount of
$137,500 (the "First Fisher Note") bore interest at the rate of ten percent
(10%) per annum with monthly payments of interest only which commenced June
30, 1994, and with the entire balance of principal and accrued interest paid
on the due date of January 2, 1995.  The second note in the amount of
$400,000 (the "Second Fisher Note") bore interest at the rate of ten percent
(10%) per annum with monthly payments of interest only which commenced June
30, 1994, and continued through September 30, 1994.  Thereafter, the Second
Fisher Note was payable in consecutive monthly installments of $13,333
principal plus interest on the declining principal balance which commenced
with the payment on October 31, 1994, and was paid in full in July, 1996.
Both the First Fisher Note and the Second Fisher Note were guaranteed by TGC
and were secured by a security interest in all of the equipment included in
the assets acquired from Fisher Bag, which security interest was, in part,
subordinate to a first lien security interest granted by Chase to its senior
lender.  In July, 1996, as part of the recapitalization of Chase as discussed
below, Chase received a capital contribution of $2,716,403 from TGC which was
used, in part, to pay off the outstanding balance due to Fisher Bag.

On January 26, 1996, Chase Packaging was informed by Union Camp Corporation
that it was in default under the terms of the Union Camp Note dated July 30,
1993 for non-payment of principal and interest and violation of certain debt
covenants.  On February 9, 1996, Chase was notified by its primary bank that
it was in default on the revolving line of credit due to the default on the
Union Camp Note and due to violation of the tangible net worth covenant in
the Accounts Financing Agreement with the bank.  As noted above, the Company
received a capital contribution of $2,716,403 from TGC in July, 1996, which
was utilized to pay down bank balances with lenders and to make payments to
trade creditors.  As a result of payments made to Union Camp and the bank in
July, 1996, payment defaults were cured and TGC was released as a guarantor
of the Company's obligations to Union Camp and the bank.  Also, in July,
1996, Chase's primary bank reduced the maximum credit on the revolving line
of credit to $2,500,000.  Loan defaults remained, however, for violation of
the tangible net worth covenant under the terms of the Union Camp Note and
the bank revolving line of credit as a result of a cross-default related to
the Union Camp default.

On July 9, 1996, the Board of Directors of TGC Industries, Inc., declared a
distribution (the "Distribution") to its shareholders in conjunction with the
spin-off (the "Spin-Off") of TGC's wholly-owned subsidiary, Chase Packaging
Corporation, formerly New Chase Corporation ("Chase"), which was effective on
July 31, 1996.  Prior to the spin-off, TGC liquidated its wholly-owned
subsidiary, Chase Packaging Corporation ("Old Chase"), with TGC receiving all
of Old Chase's properties and liabilities in cancellation of the Old Chase
stock held by TGC.  TGC then formed Chase as a new wholly-owned subsidiary
and transferred to Chase all the properties and liabilities previously
received by TGC as a result of the liquidation of Old Chase, except TGC
retained the Portland, Oregon facility of Old Chase and canceled all inter-
company debt owed by Old Chase to TGC.

Effective July 31, 1996, TGC spun-off Chase as a dividend to the holders of
TGC's Common Stock and, on an as-if-converted basis, to the holders of TGC's
Series C 8% Convertible Exchangeable Preferred Stock (the "Preferred Stock"),
which was sold in a private placement.  The record date for the TGC Common
Stock and Preferred Stock was July 15, 1996 and July 31, 1996, respectively
("Record Date"); however, since the TGC Common Stock and Preferred Stock
traded with "due bills" from the Record Date and continued to do so through
the distribution date of the Chase Common Stock, which date was March 7, 1997
("Distribution Date"), any sales of TGC Common Stock or Preferred Stock after
the Record Date but before the Distribution Date conveyed the right to
receive the distribution of Chase Common Stock.  Thus, the record holders of
the TGC Common Stock and Preferred Stock as of the March 7, 1997 Distribution
Date received Chase Common Stock.  An additional 539,837 shares of Chase
Common Stock have been placed in escrow to be distributed upon the exercise,
if any, of outstanding Warrants and options of TGC that were held as of the
July 15, 1996 record date.  Due to the exercise of 84,500 TGC options in the
fourth quarter of 1996, 42,250 shares of Chase Common Stock were released
from escrow and issued, leaving a total of 497,587 shares of Common Stock in
escrow.  Since the effective date of the Spin-Off on July 31, 1996, the
Company has operated, and will continue to operate, in the specialty
packaging business independently of TGC.

On March 18, 1997 TGC sold the Portland, Oregon facility for $2,430,000 with
$1,780,000 of the proceeds applied against Chase's outstanding mortgage
indebtedness to Union Camp with respect to such facility and the balance of
the proceeds applied in satisfaction of a debt obligation owing by TGC to
Chase to pay to Chase any such proceeds in excess of the amount of the
mortgage indebtedness.  Chase Packaging executed an absolute net lease with
the buyer of the facility and will remain in 60,000 square feet of the 87,000
square foot Portland facility as a tenant and, as such, the balance of real
estate proceeds were utilized as follows:  (1) $280,000 was placed into
escrow and, as long as Chase Packaging has not been in default under terms of
the lease, $4,667 per month will be paid by the buyer of the property to TGC
and TGC will forward the escrow payments to Chase to reduce Chase's monthly
rent expense; (2) $65,000 was placed into escrow to cover potential reletting
expenses to the buyer for lost rent and other expenses related to the 27,000
square feet of the Portland facility that Chase is not leasing; (3) $131,000
of property taxes on the Portland facility were paid; (4) $126,500 in real
estate commissions were paid; (5) $38,500 for prepaid rent and miscellaneous
closing expenses were paid; and (6) approximately $9,000 was retained by TGC
and paid to Chase for working capital purposes.  The $1,780,000 payment to
Union Camp, when combined with a principal payment of $350,000 made to Union
Camp on January 7, 1997 from the sale proceeds of Chase's polypropylene
weaving equipment, resulted in the Union Camp Note being declared paid in
full as of March 19, 1997.  Union Camp subsequently released its security
interest in all remaining real estate and machinery and equipment, thereby
curing all default conditions with Union Camp.  Chase's primary bank remains
as a secured party with respect to the remaining real and personal property,
and Chase continues to be in violation of the tangible net worth covenant
with the bank.

General Description of the Company's Business

Chase Packaging Corporation is engaged in the specialty packaging business,
primarily as a supplier of packaging products to the agricultural industry.

As of December 31, 1996, Chase employed 116 employees with 38 employees at
the Idaho Falls, Idaho facility and 78 employees at the Portland, Oregon
facility.  Sixty-two (62) employees in Portland are represented by a
collective bargaining unit.  The Company believes its relationship with its
employees to be satisfactory.

Since the purchase of Chase Bag in 1993 and until the third quarter of 1995,
the Company manufactured Saxolin (R) paper mesh material for conversion to
potato and other agricultural product bags.  Saxolin (R) is created by
slitting, treating, and twisting paper into individual threads before weaving
and dyeing the mesh.  Predominantly used for consumer size Idaho potato bags
in past years, Chase has extended the use of biodegradable Saxolin (R) paper
mesh to new areas, including covers for rail cars carrying wood chips and
erosion control blankets.  Due to declining demand for Saxolin (R) paper mesh
potato bags, the Company curtailed weaving Saxolin (R) potato fabric in the
1995 third quarter but continued to utilize 3 looms for the weaving of
industrial and environmental Saxolin (R) fabric.  Chase's operations have
also included the capability to extrude and weave polypropylene mesh
materials.  Chase expended approximately $650,000 during 1993-95 to upgrade
the Company's weaving machines enabling 41 of the 44 looms to weave
polypropylene mesh to meet the demand for agricultural and industrial
polypropylene woven products.

Prior to its acquisition by the Company, Chase Bag had failed to adequately
respond to the needs of the market and the challenges of competition,
resulting in a loss of market share of the Idaho potato market.  During the
past several years, label quality has been improved and product lines
expanded to include polyknit mesh bags and woven polypropylene mesh bags.
New customers have been gained from Chase's improved product offerings;
however, Chase's net market share of the Idaho potato market has continued to
decline due to competition from alternative forms of packaging, such as the
use by Chase's customers of cheaper poly film bags for smaller potatoes and
cartons for larger sized potatoes.  In the onion and citrus markets, Chase's
market share of woven polypropylene bags initially increased due to the
success of its high quality pre-print onion bags; however, the size of the
overall market decreased during 1995.  Onion bag revenues for 1995 were down
from 1994 levels due to a large decline in the Pacific Rim export market.
The reduced exports created an oversupply of domestic onions which lowered
U.S. market prices and reduced shipments in the 1995 fourth quarter.  This
weak export market carried into 1996, resulting in a continuation of reduced
onion bag shipments for Chase in the first half of 1996.  Also, increased
competition from imports during 1996, particularly from Mexico, eroded
Chase's market share of sales of woven polypropylene fabric and bag sales to
various onion and citrus markets.  The competitive pressures from such
imports contributed to a continuation of depressed bag and fabric sales to
these markets in the second half of 1996.  Many of Chase's customers
increased their purchases of cheaper import packaging for the 1996-1997 onion
season which further reduced woven polypropylene fabric and bag revenues in
the third and fourth quarters of 1996.

Sales by the Portland and Idaho Falls locations are currently handled on a
direct basis through seven sales people covering California, Oregon, Idaho,
Washington, Colorado, and Texas.  At the present time, about 80% of the sales
of the field representatives are Chase Packaging's products, with the balance
being consumer and industrial multiwall packaging, corrugated containers, as
well as cotton and circular woven polypropylene bags produced by other
companies.

Chase Packaging's top twenty customers accounted for approximately 58% of
Chase Packaging's revenues in 1996 with one customer accounting for 12% of
revenue during this period.  In 1995, the top twenty customers accounted for
approximately 49% of revenues with one customer accounting for 10% of Chase's
revenues during this period.  Management does not believe that any one of
such customers is material or that Chase's business is dependent upon one or
a few major customers.  Sales are generally made to customers pursuant to the
terms of standard purchase orders or order confirmations.

To meet the challenges of increased competition from imports and alternative
forms of packaging, Chase initiated a business plan in the 1995 fourth
quarter centered upon three objectives -- (1) expense/inventory reduction,
(2) debt reduction by disposition of under-utilized assets (weaving equipment
and Portland real estate), and (3) repositioning the business to a
conversion, distribution, brokerage operation.  As part of the business plan,
Chase discontinued the manufacture of Saxolin (R) paper mesh for Idaho potato
bags but continued the production of paper mesh for industrial applications.
Due to increased competition from manufacturers of alternative materials and
the general market conditions, the Company's weaving machines were operating
at only 40% capacity during 1996.  In furtherance of the Company's business
plan to reduce debt by disposing of under-utilized assets, the Company
discontinued its polypropylene weaving operations in December 1996.  On
January 6, 1997, the Company closed the sale of its polypropylene weaving
equipment (38 of 44 looms) for $550,000.  A principal payment of $350,000 was
made to Union Camp on January 7, 1997 with Chase retaining $200,000 for
working capital purposes.  On March 25, 1997 Chase closed the sale of its
extrusion line with the net proceeds of $310,000 retained by the Company for
working capital purposes.  The Company retained six looms for continuing the
Company's paper mesh weaving for industrial applications.

Prior to the implementation of its business plan described above, Chase
Packaging had (1) two principal suppliers of paper from which it manufactures
Saxolin (R) paper mesh: P.L. Thomas, Inc. and Mosinee Paper Corp., and (2)
three principal suppliers of polypropylene resin from which it manufactured
polypropylene mesh: Fina Oil & Chemical Co., Solvay Polymers, Inc., and
Techmer PM.  The Company did not experience any material disruption in supply
of either of such raw materials.  Chase had experienced a 50% increase in the
price of polypropylene resin in the last three years.  Since the Company has
discontinued its polypropylene extrusion and weaving operations, the Company
will no longer have a need for polypropylene resin.

The Company will continue its operations of converting woven polypropylene
fabric.  In anticipation of closing its polypropylene weaving operations, the
Company currently has approximately a two month inventory of woven
polypropylene fabric for its conversion operations.  Thereafter, the Company
will purchase the fabric from various manufacturers, including Wayne-Tex,
Inc. and Amoco Fabric & Fibers Co.

Chase management anticipates the loss of fabric sales to other bag converters
following the disposition of the Company's extrusion and weaving equipment.
Sales to these customers were approximately $1,438,000 for the year ended
December 31, 1996.  It is also anticipated that expenses will be reduced
following these asset sales due to a decrease in cash requirements for raw
materials, labor, repairs and equipment maintenance.  The lower cash
requirements will be partially offset by the previously mentioned purchase of
fabric from outside suppliers (domestic and foreign) to satisfy future fabric
requirements.  The expected net reduction in cash outlays should result in
decreased unfavorable manufacturing variances that have historically been
generated by the under-utilization of the Company's weaving capacity.  In
addition, other operating expenses have been reduced substantially during
1996 (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations"), and inventory has decreased from $3,516,344 as of
December 31, 1995 to $2,353,427 as of December 31, 1996.  The Company plans
to continue operating as a bag converter and distributor of packaging
products manufactured by other companies.  New strategic alliances have been
struck with suppliers of various products that should reduce the impact of
weather and imports on Chase's core business.  However, due to competitive
pressures from within and outside the U.S. and the uncertain nature of
predicting agricultural markets, there can be no assurance that Management's
plans will achieve the intended results.


ITEM 2.  DESCRIPTION OF PROPERTY.

Chase Packaging Corporation currently leases the following properties:

1.  60,000 square feet of office, manufacturing and warehouse space with
parking lot in Portland, Oregon.  This space is part of the 87,000 square
foot property previously owned by TGC and sold on March 19, 1997.  This
facility houses the main offices of Chase Packaging Corporation and the
conversion and warehousing operations of Chase.  Effective March 18, 1997
Chase entered into a 5-year absolute net lease for the 60,000 square foot
portion with monthly rent of $15,000.

2.  80,000 square feet of manufacturing/warehouse space with a four bay
loading dock in Portland, Oregon.  The monthly rent is $14,811, and Chase is
responsible for property taxes, insurance, and routine maintenance.  20,000
square feet of this facility is used for Chase Packaging's printing,
warehousing and delivery operations.  60,000 square feet is sub-leased to one
tenant for $15,000 per month.

3.  12,000 square feet of warehouse space in Idaho Falls, Idaho.  The monthly
rent is $2,150.  This facility is used for storage of material and finished
goods for Chase's Idaho operations.  The Company is not responsible for
taxes, insurance, and maintenance on this property.

Chase Packaging Corporation owns the following property purchased as part of
the $3,761,537 purchase money note payable to Union Camp that was paid in
full as of March 19, 1997.  The property remains encumbered by the Company's
primary bank which retains a security interest in the property until such
time as the bank loan is paid in full.

1.  24,000 square feet of office, manufacturing and warehouse space in Idaho
Falls, Idaho.  This facility is used for bag conversion, storage and delivery
for Chase's Idaho operations.

The condition of all the above facilities is good, and Chase management
believes that these properties are suitable and adequate for the Company's
foreseeable needs.  Also, the Company's Management believes the properties
are adequately covered by insurance.


ITEM 3.  LEGAL PROCEEDINGS.

The Company is a defendant in various legal actions that arose out of the
normal course of business.  In the opinion of Management, none of the actions
will result in any significant loss to the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted by the Company during the fourth quarter of the
fiscal year ended December 31, 1996 to a vote of the Company's security
holders, through the solicitation of proxies or otherwise.


                                PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock was eligible to commence trading under the symbol
"CPKA" on March 10, 1997.  The Chase Common Stock is traded in the over-the-
counter market, and the Company anticipates it will be quoted on the OTC
Bulletin Board.  The first trade of the Company's Common Stock occurred on
March 10, 1997, at $.04 per share.  The number of shareholders of record as
of March 10, 1997 was 521.  Due to the number of shares held in nominee or
street name, the Company believes that there is a significantly greater number
of beneficial owners of its Common Stock.  As of such date, CEDE & Co. held
417,253 shares in street name.  As of the date of this Form 10-KSB, a trading
market has not yet developed and there can be no assurance that a liquid market
for the stock will develop, or, if so, as to the price and trading volume of
such market.

Dividends are payable on Chase's Common Stock at the discretion of the Board
of Directors.  Chase has paid no cash dividends, and, in light of the working
capital needs of Chase, it is unlikely that cash dividends will be declared
and paid on Chase's Common Stock in the foreseeable future.  In addition,
under the terms of the Accounts Financing Agreement with Chase's primary
bank, the payment of dividends by Chase is restricted until the bank loan is
paid in full.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

Results of Operation

For the year ending December 31, 1996, revenues were $9,733,520 compared to
revenues of $14,278,261 for the same period of 1995.  Net loss for the year
ending December 31, 1996 was $2,718,769 as compared to net loss of $2,717,255
for the same period of the prior year.

Chase's primary products, mesh bags for the potato, onion and citrus
industries amounted to approximately 59% of total packaging revenues in 1996
as compared to 51% of total revenue in 1995.  Saxolin (R) and woven
polypropylene mesh yardage sold to other converters for potato, onion,
citrus, industrial, and environmental applications decreased to 19% of total
sales from 23% in 1995.  Sales of lower margin burlap bags for bulk potatoes,
and circular woven polypropylene bags for grass seed, animal feed and beans
decreased to 13% of total revenue from 22% in 1995.  The remaining revenue
was generated by sales of cartons, multi-wall bags and other miscellaneous
items.

The bag markets served by Chase are Northwest potato, Northwest onion,
Northwest grass seed and California onion.  Chase's mesh yardage goes to
converters serving the Idaho potato market, the Colorado, Texas, California,
New Mexico and Arizona onion markets; and the California and Texas citrus
markets.  As discussed below, future yardage sales to other converters will
be negligible as a result of the discontinuance of the Company's
polypropylene extrusion and weaving operations for agricultural bags.

Due to the seasonal nature of agricultural crops, sales of Chase's products
to the various markets mentioned above fluctuated during the Company's fiscal
year.  Historically, the Northwest onion and potato harvests commence late in
the third quarter with sales of Chase's products reaching a peak during the
fourth quarter and first quarter of the following year.  The California onion
season peaks in April and May with the Northwest grass seed season running
from May through July.

Factors that contributed to the lower revenues and higher operating losses at
Chase in 1996 were a weak export market for domestic onions and increased
competition from an influx of cheap import fabric and bags from Mexico.  An
oversupply of domestic onions from both the 1995 and the 1996 harvests
reduced market prices and curtailed onion shipments throughout 1996.  These
reduced shipments, when combined with a loss of market share to import fabric
and bags, resulted in a continuation of low onion bag sales volume (annual
sales of $3.1 million in both 1996 and 1995) and a $1.1 million decrease in
sales of Chase's woven polypropylene fabric to other bag converters for 1996
when compared to 1995.  Also, unfavorable market pricing had a negative
impact on sales of Chase's consumer-size mesh potato bags, reducing sales of
such bags by $635,000 when comparing 1996 with 1995.  High prices paid by
potato processors to potato growers in the first half of 1996 required
packers to match the high prices when purchasing their potatoes from the
growers.  This created very narrow margins for the potato packers and
resulted in the use of cheaper film bags supplied by competitors for a large
percentage of potato shipments to the fresh market.  A record Northwest
potato harvest in the second half of 1996 further depressed demand for
Chase's mesh potato bags late in the year.  Market prices for the 1996-1997
season have declined 80% from the 1995-1996 season, resulting in increased
bulk sales to potato processors as the cost of shipping potatoes in bags has
become unattractive for many packers.  In addition, the outsourcing on a
commission basis of certain circular woven polypropylene bag orders for the
grass seed market reduced revenues for this product line by $1,383,000 during
1996 when compared to 1995.

The 1996 losses also include a write-down for asset impairment of $480,599 on
weaving equipment that was held for sale as of December 31, 1996.  The
equipment was subsequently sold in January, 1997 for $550,000 as part of the
Company's business plan for disposition of under-utilized assets.  The
continued drop in demand for Chase's core products during 1996 required
Management to expand its program of inventory reduction and below-standard
production levels to balance plant operations with market demand.  Although
variable, indirect, and overhead expenses have been reduced during the year,
the curtailment of weaving, printing and sewing operations resulted in
underabsorbed manufacturing overhead which increased the cost of units
produced.  These unfavorable manufacturing variances combined with downward
pressure on selling prices for Chase's products resulted in negative margins
for the woven polypropylene (onion/citrus) product line and reduced margins
for the other product lines.

Benefits of the cost reduction program were realized during the second half
of 1996, however, as losses were reduced dramatically when compared to the
last half of 1995.  Although revenue for the last six months of 1996 declined
25% when compared to the same period of 1995, net loss before asset
impairment for the second half of 1996 was reduced by $678,326 to $799,990
when compared to net loss before goodwill impairment of $1,478,316 for the
second half of 1995.

The table below sets forth Chase's total revenues, major cost of goods sold
categories and total gross profit margin (total revenues less total cost of
goods sold) for the twelve months ended December 31, 1996 as compared to the
same period of 1995.  The table reflects the results of decreased sales,
lower production levels, and reduced expense absorption in 1996 with the
corresponding negative effect on total gross profit margin.

<TABLE>
<S>                       <C>                  <C>        <C>       <C>

In thousands              YTD 12/31/96     YTD 12/31/95    Change   % Change

Revenues                        9,733           14,278    (4,545)    (32%)
Payroll expense (incl. taxes
 & benefits)                    3,725            4,984    (1,259)    (25%)
Raw materials purchases         2,944            6,742    (3,798)    (56%)
Operating supplies                 59              147       (88)    (60%)
Repairs to bldg/equip             140              295      (155)    (53%)
Other indirect/manufacturing
 overhead expenses (incl.
unabsorbed costs)               2,656              901     1,755     195%
Gross profit margin               209            1,209    (1,000)    (83%)
Gross profit margin as
  a % of sales                      2%               8%

</TABLE>

As previously discussed, Chase initiated a business plan in the 1995 fourth
quarter centered upon three objectives -- (1) expense/inventory reduction,
(2) debt reduction by disposition of under-utilized assets (weaving
equipment, extrusion line and Portland real estate), and (3) repositioning
the business to a conversion, distribution, brokerage operation.  Chase
Management will continue its plan of lowering the operations' break-even
level by bringing manufacturing costs in line with the level of sales being
generated by current agricultural markets.  To compete with the inroads being
made by imports, Chase will continue its program of expense reduction and
efficiency improvement to become a lower-cost producer of fabric and bags.
Chase will actively pursue expansion of sales efforts into other geographic
markets, search for new product opportunities, eliminate unprofitable product
lines and sell-off under performing assets.  The Company will increase its
focus on various distribution and brokerage arrangements with other
manufacturing concerns.  Chase will also expand efforts to become a supplier
of import bags to compliment the Company's domestic products capabilities.

The business plan included the sale of the Portland real estate retained by
TGC after the spin-off of Chase and Chase's polypropylene extrusion and
weaving equipment.  In December 1996, the Company discontinued its
polypropylene extrusion and weaving operations, and on January 6, 1997, the
Company closed the sale of its polypropylene weaving equipment (38 of 44
looms) for $550,000.  A principal payment of $350,000 was made to Union Camp
on January 7, 1997 with Chase retaining $200,000 for working capital
purposes.  The Company retained six looms for continuing the Company's paper
mesh weaving for industrial applications.  On March 18, 1997 TGC sold the
facility located in Portland, Oregon for $2,430,000 with $1,780,000 of the
proceeds paid to Union Camp as a final principal payment on the $3,761,537
Promissory Note.  Union Camp subsequently declared the note paid in full and
released its security interest in the remaining real estate and machinery and
equipment owned by Chase.  Chase Packaging executed an absolute net lease
with the buyer of the facility and will remain in 60,000 square feet of the
87,000 square foot Portland facility as a tenant, and, as such, the balance
of real estate proceeds were utilized as follows:  (1) $280,000 was placed
into escrow and as long as Chase Packaging has not been in default under
terms of the lease, $4,667 per month will be paid by the buyer of the
property to TGC.  TGC will forward the escrow payments to Chase to reduce
Chase's monthly rent expense; (2) $65,000 was placed into escrow to cover
potential reletting expenses to the buyer for lost rent and other expenses
related to the 27,000 square feet of the Portland facility that Chase is not
leasing; (3) $131,000 of property taxes on the Portland facility were paid;
(4) $126,500 in real estate commissions were paid; (5) $38,500 for prepaid
rent and miscellaneous closing expenses; and (6) approximately $9,000 was
retained by TGC and paid to Chase for working capital purposes. On March 25,
1997 Chase closed the sale of its polypropylene extrusion equipment for
$310,000.  These proceeds were retained by Chase for future working capital
purposes.  Chase will continue to operate as a producer of paper mesh fabric
for industrial and environmental applications and as a converter and
distributor of agricultural bags and other specialty packaging.  Accounts
payable status will be monitored closely with vendor communication a high
priority to ensure that plant production continues at the most efficient
level possible.  Due to competitive pressures from within and outside the
U.S. and the uncertain nature of predicting agricultural crops and their
impact on Chase's products, no assurance can be given that Chase's business
plan will achieve the intended result.

Financial Condition

Cash of $707,532 was used in operations for the twelve months ended December
31, 1996 as compared to cash used in operating activities of $1,065,926 for
the same period of the prior year.  The funds used during 1996 were primarily
attributable to Chase's net loss for the year of $2,718,769, partially offset
by non-cash depreciation and amortization charges of $619,423, by a write-
down for asset impairment of $480,599 and by cash generated from inventory
reductions of $1,163,097.  Cash used in investing activities of $145,258 was
primarily additions to plant machinery and equipment.  Cash provided by
financing activities of $849,045 represents funds received from TGC
Industries, Inc. (the Company's former parent) partially offset by principal
payments of Chase's debt obligations.  Net payments on Chase's line of credit
were $1,021,732 resulting in a loan balance on the Company's line of credit
of $1,865,738 as of December 31, 1996.

As part of the previously discussed recapitalization of Chase, the Company
received a capital contribution of $2,716,403 in cash form TGC.  The proceeds
were utilized to pay down loan balances with lenders and to make payments to
trade creditors.  As a result of July, 1996 payments made to Union Camp and
the bank from these proceeds, payment defaults were cured and TGC was
released as a guarantor of these obligations.  Loan defaults remained,
however, for violation of the tangible net worth covenant under the terms of
the Union Camp Promissory Note and under the terms of the bank revolving line
of credit as a result of a cross-default related to the Union Camp default.
As previously discussed, Chase sold its polypropylene weaving equipment (38
of 44 looms) in January, 1997 for $550,000.  Proceeds of $350,000 from the
weaving equipment sale were used to pay down the Union Camp Note with the
remaining $200,000 retained by Chase for working capital purposes.  Also, as
disclosed previously, TGC (the former parent) sold the Portland, Oregon
facility on March 18, 1997 for $2,430,000 with $1,780,000 of the proceeds
applied against the mortgage indebtedness of Chase to Union Camp.  Upon
receipt of these funds, Union Camp declared the $3,761,537 promissory note
paid and released its security interest in the remaining real and personal
property owned by Chase, thereby curing all remaining default conditions with
Union Camp.  Chase's primary bank retained its position as a secured party in
real and personal property still owned by Chase, and Chase continues to be in
violation of the tangible net worth covenant with the bank.  On March 25,
1997 Chase closed the sale of its extrusion line with the net proceeds of
$310,000 retained by Chase for working capital purposes.  The Company's
liquidity position should benefit from the retirement of the Union Camp debt
as cash outlays of approximately $55,000 per month for principal and interest
on such debt will no longer be required.

Chase Management anticipates the loss of fabric sales to other bag converters
due to the discontinuance of the Company's polypropylene extrusion and
weaving operations.  Sales to these customers were approximately $1,438,000
for the year ended December 31, 1996.  It is also anticipated that expenses
will be reduced following these asset sales due to a decrease in cash
requirements for raw materials, labor, repairs and equipment maintenance.
The lower cash requirements will be partially offset by the previously
mentioned purchase of fabric from outside suppliers (domestic and foreign) to
satisfy future fabric requirements.  The expected net reduction in cash
outlays should improve liquidity as a result of a decrease in unfavorable
manufacturing variances that have historically been generated by the under-
utilization of the Company's weaving capacity.

Chase Management will continue to work very closely with suppliers to ensure
that any disruption in the flow of raw materials and other key items is
minimized.  A clear line of communication with vendors is a priority and, to
date, Chase has continued to meet the demands of its market.  Chase will
continue its plan to diversify into additional geographical markets, expand
product offerings through broker/distributor agreements, aggressively reduce
inventory, cut expenses, reduce trade payables, and improve supply terms with
vendors.  The objective of this plan will be to bring manufacturing expenses
in line with projected levels of sales, thereby generating a positive cash
flow.  However, due to competitive pressures and the uncertain nature of
predicting agricultural crops, no assurance can be given that management's
plan will achieve the intended results.



ITEM 7.  FINANCIAL STATEMENTS.

                      Financial Statements.

                   December 31, 1996 and 1995

                            CONTENTS


                                                                    Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                  F-1

FINANCIAL STATEMENTS

     BALANCE SHEET                                                  F-2

     STATEMENTS OF OPERATIONS                                       F-3

     STATEMENT OF STOCKHOLDERS' EQUITY                              F-4

     STATEMENTS OF CASH FLOWS                                       F-5

     NOTES TO FINANCIAL STATEMENTS                                  F-7


                Report of Independent Certified Public Accountants

Board of Directors
Chase Packaging Corporation

We have audited the accompanying balance sheet of Chase Packaging Corporation
(a Texas corporation) as of December 31, 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two year period ended December 31, 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chase Packaging Corporation
as of December 31, 1996, and the results of its operations and its cash flows
for each of the years in the two year period ended December 31, 1996, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note C to the financial
statements, the Company incurred a net loss of $2,718,769 during the year
ended December 31, 1996 and is in default on certain loan covenants and is
delinquent on interest payments which could result in termination of the
Company's credit agreements raising substantial doubt about the Company's
ability to continue as a going concern.  Management's plans in regard to
these matters are also described in Note C.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

We have also audited Schedule II for each of the years in the two year period
ended December 31, 1996.  In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.




Portland, Oregon
February 13, 1997 (except for Note O,
  as to which the date is March 25, 1997)


                                  F-1

                      Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)


                            BALANCE SHEET

                         December 31, 1996
<TABLE>
              ASSETS
     <S>                                                         <C>
CURRENT ASSETS
     Cash                                                         $   21,378
     Accounts receivable, net of allowance
          for doubtful accounts of $85,853                         1,329,924
     Inventories                                                   2,353,247
     Prepaid expenses                                                 58,793


               Total current assets                                3,763,342



PROPERTY AND EQUIPMENT - at cost
     Machinery and equipment                                       2,492,945
     Buildings                                                       380,999

                                                                   2,873,944

     Less accumulated depreciation                                (1,025,934)

                                                                   1,848,010
     Land                                                             72,890

                                                                   1,920,900


ASSETS HELD FOR SALE                                                 576,250

OTHER ASSETS                                                           9,779

                                                                  $6,270,271

</TABLE>
<TABLE>
                    LIABILITIES AND STOCKHOLDERS' EQUITY


     <S>                                                         <C>

CURRENT LIABILITIES
     Trade accounts payable                                      $1,337,183
     Accrued liabilities                                            591,506
     Advance billings                                               114,331
     Current maturities of long-term obligations                  4,000,120

          Total current liabilities                               6,043,140

LONG-TERM OBLIGATIONS, less current maturities                        -

STOCKHOLDERS' EQUITY
     Preferred stock, $1.00 par value; 4,000,000 shares authorized    -
     Common stock, $.10 par value; 25,000,000 shares authorized     700,296
     Additional paid-in capital                                     629,833
     Accumulated deficit                                         (1,102,998)

                                                                    227,131


                                                                 $6,270,271
The accompanying notes are an integral part of this statement.

                                   F-2

</TABLE>

                      Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

<TABLE>
                          STATEMENTS OF OPERATIONS

                           Year ended December 31,

<S>  <C>                                        <C>              <C>


                                                   1996            1995


Sales                                            $9,733,520      $14,278,261

Cost and expenses
     Cost of sales                                9,524,548       13,068,812
     Selling, general and administrative          1,799,836        2,385,493
     Write-down for impairment of goodwill            -              701,378
     Write-down for impairment of
       assets held for sale                         480,599            -
     Interest expense                               647,306          839,833


                                                 12,452,289       16,995,516

          Loss before income taxes              (2,718,769)       (2,717,255)

Income tax expense                                   -                 -


          NET LOSS                             $(2,718,769)      $(2,717,255)

Loss per common share
     Weighted average shares outstanding         6,971,277         6,960,714

     Per share amount                            $  (0.39)         $  (0.39)


The accompanying notes are an integral part of these statements.

                                   F-3
</TABLE>

                      Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                       STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<C>               <C>       <C>      <C>           <C>            <C>

                                       Additional
                    Common Stock        Paid-In     Accumulated
                  Shares    Amount      Capital       Deficit        Total


Balance at
January 1, 1995     1,000   $ 100    $2,371,145    $(1,083,283)  $1,287,962

Net loss for          -       -           -         (2,717,255)  (2,717,255)
the year

Balance at
December 31, 1995   1,000     100     2,371,145     (3,800,538)  (1,429,293)

Net loss through
July 31, 1996         -        -          -         (1,615,771)  (1,615,771)

Balance at
July 31, 1996       1,000     100     2,371,145     (5,416,309)  (3,045,064)

Liquidation of
Company            (1,000)   (100)   (2,371,145)     5,416,309    3,045,064

Reorganization    6,960,714  696,071    450,308         -         1,146,379


Balance at
August 1, 1996    6,960,714  696,071    450,308         -         1,146,379

Contribution by
former parent          -         -       75,000         -            75,000

Contributed rent -
Portland Facility      -         -      108,750         -           108,750

Stock issued         42,250    4,225     (4,225)        -               -

Net loss through
December 31, 1996      -         -         -        (1,102,998)  (1,102,998)

Balance at
December 31,     $7,002,964  $700,296  $629,833    $(1,102,998)  $  227,131
1996

The accompanying notes are an integral part of this statement.

                                   F-4
</TABLE>

                      Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

<TABLE>
                       STATEMENTS OF CASH FLOWS

                       Year ended December 31,
     <S>                                  <C>                  <C>


                                              1996                 1995

Increase (Decrease) in Cash
Cash flows from operating activities
     Net loss                             $(2,718,769)         $(2,717,255)
     Adjustments to reconcile net loss
     to net cash used in operating
     activities
       Depreciation and amortization          619,423              579,275
       Loss (Gain) on disposal of
         property and equipment                 8,629                  (13)
       Write-down for impairment of assets    480,599              701,378
       Noncash expenses                       112,350                 -
       Change in assets and liabilities
          Accounts receivable                  28,978              924,209
          Inventories                       1,163,097             (723,455)
          Prepaid expenses                     14,979               30,276
          Accounts payable                   (509,727)              77,478
          Accrued liabilities                  87,331              166,548
          Advance billings                      5,578             (104,367)

          Net cash used in
             operating activities           (707,532)          (1,065,926)

Cash flows from investing activities
     Capital expenditures                   (153,983)            (693,281)
     Proceeds from sale of
      property and equipment                   9,000                  810
     Other assets                               (275)              (2,095)


     Net cash used in investing activities  (145,258)            (694,566)



Cash flows from financing activities
     Principal payments of debt
      obligations                         (1,704,168)            (784,591)
     Net proceeds from (payments on)
      line of credit                      (1,021,732)             406,218
     Receivable from/payable to parent       858,542            2,123,266
     Capital contributed by parent         2,716,403                 -

        Net cash provided by
            financing activities             849,045            1,744,893

        NET DECREASE IN CASH                  (3,745)             (15,599)


Cash at beginning of year                     25,123               40,722

Cash at end of year                          $21,378              $25,123



                                   F-5
</TABLE>

                         Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

<TABLE>
                    STATEMENTS OF CASH FLOWS - CONTINUED
     <S>                                      <C>                 <C>

                          Year ended December 31,

                                                1996                 1995

Supplemental cash flow information
     Cash paid during the year for
     Interest                                 $523,228            $636,190

</TABLE>
     Noncash investing and financing activities

     During 1996, under a plan of liquidation and reorganization, Chase's
manufacturing facility located in Portland, Oregon with a book value of
$1,329,000, was transferred to TGC.  In addition, TGC converted $2,879,040 of
net receivables from Chase to equity in Chase.  Also as a result of the plan,
6,960,714 shares of Chase common stock were issued.  (See Note B.)

     During 1996, Chase incurred rent expense of $108,750 for use of the
manufacturing facility owned by TGC. TGC converted the rent receivable to
equity in Chase.

     During the fourth quarter of 1996, Chase issued 42,250 shares of common
stock as a result of TGC options which were exercised (Note N).  Chase did
not receive any proceeds as a result of the stock issuance.

The accompanying notes are an integral part of these statements.

                                   F-6


                        Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                         NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1995

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:

1.  Nature of Operations

Chase Packaging Corporation (Chase or the Company), a Texas corporation,
manufactures woven paper mesh for industrial applications, polypropylene mesh
fabric bags for agricultural use and distributes agricultural packaging
manufactured by other companies.

2.  Inventories

Inventories are stated at the lower of cost or market using the first-in,
first-out method.

3.  Property and Equipment

Property and equipment are stated at cost.  Depreciation is provided using
the straight-line method over the estimated useful lives (3 to 10 years for
equipment and 30 years for buildings) of the individual assets.

4.  Income Taxes

Deferred income taxes reflect the impact of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes.

5.  Advance Billings

Certain customers pay in advance.  The related payment is included in advance
billings and recognized when earned.

6.  Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

                                   F-7


                        Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                 NOTES TO FINANCIAL STATEMENTS - Continued

NOTE B - REORGANIZATION PLAN AND BASIS OF PRESENTATION

In May 1996, a formal plan was adopted to reorganize TGC Industries, Inc.
(TGC) and Chase.  Pursuant to the plan, the following actions were taken:

1.  TGC liquidated Chase (Old Chase) with TGC receiving all of Old Chase's
assets and liabilities in cancellation of the Old Chase stock held by TGC.
TGC formed a new wholly-owned subsidiary, New Chase, and transferred to it
all of the assets and liabilities received in the liquidation of
Old Chase, except TGC retained the manufacturing facility located in
Portland, Oregon and canceled Old Chase's net payable to TGC.

2.  TGC contributed $2,716,403 as additional capital to New Chase.

3.  Effective July 31, 1996, TGC spun-off New Chase by a dividend
distribution to the stockholders of record of TGC common and preferred stock.
At the same time, the name was changed from New Chase to Chase Packaging
Corporation (Chase).

The financial statements are presented on the basis that the principal
operations of Old Chase continued with the formation of New Chase and the
statements of operations and cash flows for the year ended December 31, 1996
consist of seven months of operations of Old Chase and five months of
operations of New Chase.


NOTE C - GOING CONCERN ISSUES

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern.  However, the Company incurred substantial
losses during 1996 and 1995, and was delinquent on required payments of a
note payable to Union Camp.  In addition, the Company is not in compliance
with certain debt covenants of the Union Camp note and a bank revolving line
of credit.  During 1996, these conditions of default resulted in Union Camp
and the bank calling the notes due and payable.  Management entered into
negotiations with Union Camp in an effort to restructure the note and to
remedy the conditions of default.  The Company continued to utilize the bank
revolving line of credit under the same terms as existed prior to the notice
of default and demand.  From January through December 31, 1996, Chase made
principal payments of $1,250,000 plus partial interest payments to Union
Camp.  In addition, principal payments of $891,612 and all interest payments
were made on the bank note.  However, at December 31, 1996, Chase remained in
default on the tangible net worth covenants of both notes.  Management
believes it will satisfactorily resolve the Union Camp note and the bank
revolving line of credit issues.


                                   F-8

                            Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                     NOTES TO FINANCIAL STATEMENTS - Continued

                       December 31, 1996 and 1995


NOTE C - GOING CONCERN ISSUES - Continued

In an attempt to bring the notes current, cure the violation of loan
covenants and to provide working capital, Chase has undertaken a plan to sell
certain operating assets.  Subsequent to year end, Chase sold certain of its
weaving equipment (see Note O).  The plan also includes the sale of its
extrusion equipment and the sale of the manufacturing facility owned by TGC.
TGC has agreed that upon the sale of the facility, they will pay the net
proceeds to Union Camp to be applied against Chase's outstanding mortgage
indebtedness. Any remaining proceeds will be paid by TGC to Chase.
Currently, the Company is occupying the facility rent free.  The planned
sales are anticipated to occur in 1997.  In order to continue its operations,
Chase would concentrate its downsized operations in a leased facility and
purchase woven material from outside vendors.  The sale of the above
operating assets is anticipated to provide sufficient funds to pay off the
Union Camp debt, reduce accounts payable and provide needed working capital.

The Company's continued existence as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to comply with the terms and covenants of its financing agreements and
to obtain additional financing or refinancing as may be required.  Although
it cannot be assured that the Company will be able to continue as a going
concern in view of its financial condition and the uncertain timing and
strength of recovery in its markets, management has adopted a plan to
reorganize the Company (note B) and believes that continued diversification
into additional geographical markets and successful completion of cost
savings efforts should enable the Company to meet its obligations and sustain
its operations.


NOTE D - INVENTORIES
<TABLE>
     Inventories at December 31, 1996 consist of the following:
     <S>                                                 <C>

     Raw materials                                       $  217,755
     Work-in-process                                          6,398
     Finished goods                                       2,129,094

                                                         $2,353,247
</TABLE>

NOTE E - ACCRUED LIABILITIES

     Accrued liabilities at December 31, 1996 consist of the following:
<TABLE>
     <S>                                                 <C>
     Compensation and payroll taxes                      $ 104,284
     Pension plan                                          136,681
     Professional services                                  69,491
     Interest                                              149,500
     Other                                                 131,550

                                                         $ 591,506
</TABLE>
                                   F-9


                          Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)
<TABLE>
                      NOTES TO FINANCIAL STATEMENTS - Continued

NOTE F - LONG-TERM OBLIGATIONS
     <S>                                               <C>

Long-term obligations at December 31, 1996 consist of the following:

     Note payable to Union Camp, interest at 8% through
     July 30, 1996, prime plus 3% from July 31, 1996 to
     July 30, 1997, prime plus 4% from July 31, 1997 to
     maturity on January 30, 1998, monthly principal
     payments of $31,346 plus interest                  $2,134,382

     Note payable to a bank, revolving line of credit,
     interest rate of prime plus 2.5%, expires
     July 30, 1997                                       1,865,738


                                                         4,000,120
     Less current maturities                            (4,000,120)


                                                        $     -
</TABLE>
The note payable to Union Camp is collateralized by all real, intangible and
personal property of Chase and contains certain loan covenants.  Among other
things, the covenants restrict Chase's ability to pay dividends, require
Chase to maintain a certain level of tangible net worth and require prior
written consent to acquire stock or assets of another company.

As a result of the reorganization plan described in Note B, Chase's line of
credit was reduced to $2,500,000 in July, 1996 with a maximum available of
$1,911,461 as of December 31, 1996 due to collateral base limitations.  The
line of credit is secured by all inventory and accounts receivable of Chase.
The line of credit also contains certain loan covenants similar to those of
the Union Camp note.

At December 31, 1996, Chase was current on principal and interest payments to
the bank and on principal payments to Union Camp.  However, Chase was
delinquent on interest payments to Union Camp and was in violation of the
tangible net worth covenants on both notes.  These obligations are classified
as current liabilities at December 31, 1996.

Both of the above obligations were guaranteed by TGC prior to the spin-off of
Chase.  As a result of the capital contribution of $2,716,403, payments were
made to Union Camp and to the bank in July 1996 that cured principal and
interest payment defaults at that time.  TGC was released as a guarantor of
these obligations.

                                   F-10


                          Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                    NOTES TO FINANCIAL STATEMENTS - Continued
<TABLE>
NOTE G - INCOME TAXES

     The income tax provision reconciled to the tax computed at the statutory
Federal rate is as follows:
     <S>                                      <C>               <C>

                                                1996              1995

     Federal tax benefit at statutory rate    $ 924,000         $ 924,000
     State tax benefit net of
      federal tax effect                        118,000           118,000
     Permanent differences                      (11,000)          (15,000)
     Other                                           -            (39,000)
     Change in valuation allowance - retained
       by TGC in reorganization                (612,000)         (988,000)
     Change in valuation allowance             (419,000)            -

                                                $    -          $    -
</TABLE>
     Deferred tax assets and liabilities consist of the following:

<TABLE>
     <S>                                       <C>               <C>
                                                   1996               1995

Deferred tax assets
     Net operating loss carry forwards          $ 196,000        $1,399,000
     Goodwill                                       -               269,000
     Other                                         48,000            51,000
     Impairment of assets held for sale           185,000              --

Deferred tax liabilities
     Depreciation of property and equipment       (10,000)         (332,000)

                                                  419,000         1,387,000

     Less valuation allowance                   ( 419,000)      ( 1,387,000)

                                                 $    -         $      -
</TABLE>

At December 31, 1995, Chase had net operating loss carryforwards (NOL's) of
approximately $3,650,000 and approximately $5,260,000 at July 31, 1996 which
expired at various dates through 2011.  The NOL's accumulated through July
31, 1996 remained with TGC upon completion of the spin-off of New Chase as
discussed in note B and are not available to offset future taxable income of
Chase.  At December 31, 1996, Chase had approximately $510,000 of NOL
available which expires in 2011.

                                   F-11

                         Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                    NOTES TO FINANCIAL STATEMENTS - Continued

NOTE H - COMMITMENTS AND CONTINGENCIES

The Company conducts a portion of its operations utilizing leased facilities
and vehicles.  The approximate minimum rental commitments, net of subleases,
under operating leases are as follows:
<TABLE>
       <C>                                                <C>
     Year ending
     December 31,
       1997                                               $ 261,000
       1998                                                 239,000
       1999                                                 210,000
       2000                                                 209,000
       2001                                                 137,000


                                                         $1,056,000
</TABLE>
Rent expense was approximately $144,000 and $139,000 in 1996 and 1995,
respectively.

The Company is a defendant in various legal actions in the normal course of
business.  In the opinion of management, none of the litigation is expected
to result in any significant loss to the Company.


NOTE I - EMPLOYEE BENEFIT PLANS

The Company has a 401(k) salary deferral plan which covers all non-union
employees who have reached the age of 20.5 years and have been employed by
the Company for at least one year.  The covered employees may elect to have
an amount deducted from their wages for investment in a retirement plan.  The
Company matches contributions to the plan at the following rates: (1) 75% of
each participant's salary reduction contributions to the plan up to a maximum
of 3% of the participant's compensation; and (2) 50% of each participant's
salary reduction contributions to the plan which are in excess of 3% of the
participant's compensation but not in excess of 8% of the participant's
compensation. The Company's matching contribution to the plan was
approximately $49,000 and $44,000 for the years ended December 31, 1996 and
1995, respectively.

During 1995 and the first four months of 1996, the Company had a defined
benefit pension plan.  The Company incurred approximately $78,000 and
$147,000 for pension costs during 1995 and 1996. Effective May 6, 1996 the
pension plan was terminated.  The participants became fully vested and the
Company recognized an additional liability of $120,000 for estimated past
service costs.  Also on May 6, 1996, the Company created an additional 401(k)
plan for hourly union employees previously covered under the pension plan.
Under the new plan, the Company will contribute 1% of each employee's wages
and will also contribute $.20 for each dollar contributed by the employees up
to 2% of the employee's wages.  During 1996, the Company contributed $14,000
to the 401(k) plan.
                                   F-12

                         Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

NOTE J - IMPAIRMENT OF ASSETS (FOURTH QUARTER ADJUSTMENTS)

The Company reviews for asset impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Goodwill arose from an acquisition and the Company estimates the sum of
expected future undiscounted net cash flows from operations acquired.  If the
estimated net cash flows are less than the carrying amount of the goodwill,
the Company recognizes an impairment loss in an amount necessary to write
down the goodwill to fair value as determined from expected future cash
flows.  At December 31, 1995, the Company had a $701,378 write-down for
impairment of goodwill as a result of the review process.

During December 1996, the Company recognized a write-down of $480,599 on
weaving equipment that was held for sale.  The equipment was subsequently
sold in January 1997 (Note O).


NOTE K - FINANCIAL INSTRUMENTS

The carrying values of the Company's financial instruments consisting of
cash, accounts receivable, and accounts payable approximate fair values
because of their short-term maturities.  The fair market value of the
Company's notes payable is not determinable due to the default conditions as
explained in Notes C and F.


NOTE L - MAJOR CUSTOMERS

One customer accounted for 12% of sales during 1996. A different customer
account for 10% of sales during 1995.


NOTE M - LOSS PER COMMON SHARE

Loss per common share for 1996 and 1995 is based upon the assumption that the
6,960,714 shares of common stock issued under the reorganization plan were
issued at the beginning 1995.

NOTE N - STOCK OPTION PLAN AND STOCK HELD IN ESCROW

On July 10, 1996, the Company adopted the 1996 Stock Option Plan.  The Plan
provides for the granting of incentive stock options to certain key employees
of the Company to purchase shares of the Company's common stock.  The Plan
authorizes the granting of options to acquire up to 600,000 shares of common
stock.  No options have been issued under the Plan.

Effective with the reorganization plan, 539,837 shares of common stock were
placed in escrow to be distributed to stockholders of TGC upon the exercise,
if any, of the outstanding warrants and options of TGC.  Upon the issuance of
these shares, the Company will not receive any proceeds.  During the fourth
quarter of 1996, 42,250 shares were issued as a result of TGC stock options
which were exercised.  The remaining unissued shares have not been included
in the loss per share calculation as they would be antidilutive.

                                   F-13

                          Chase Packaging Corporation
             (a wholly-owned subsidiary of TGC Industries, Inc.
                     through July 31, 1996 - See Note B)

                    NOTES TO FINANCIAL STATEMENTS - Continued



NOTE O - SUBSEQUENT EVENT

On January 6, 1997, Chase sold its weaving equipment for $550,000 with
$350,000 of the proceeds utilized to reduce the principal balance of the
Union Camp note.  The remaining $200,000 was retained by Chase and used for
working capital.

On March 18, 1997, TGC sold the Portland, Oregon facility occupied by Chase,
for $2,430,000.  Proceeds of $1,780,000 from the sale were applied against
the mortgage indebtedness to Union Camp.  As a result, Union Camp declared
the note paid.  The remaining proceeds were used for commissions, back
property taxes, and miscellaneous costs.  Chase entered into a five year
lease with the new owner for approximately 70% of the building space. The
monthly payments of $15,000 will commence in April 1997.

On March 25, 1997 Chase sold its polypropylene extrusion equipment for
$310,000, resulting in a gain on sale of approximately $135,000.  The net
proceeds were retained by Chase.

                                   F-14



ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.

         Not applicable.


                             PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

The Board of Directors of the Company consists of five persons who will serve
until the next annual meeting of shareholders of the Company.  The following
table sets forth certain information concerning the individuals serving as
Directors of the Company:

               Date Since
               Which
               Continuously a
               Director
               of the
Name and Age   Company            Business Experience and Other Directorships

Herbert M.      1993              Senior Vice President of Janney Montgomery
Gardner, 57                       Scott, Inc. investment bankers, since 1978;
                                  Director of TGC Industries, since 1986;
                                  Chairman of the Board and a Director of
                                  Supreme Industries, Inc., a manufacturer of
                                  specialized truck bodies and shuttle buses,
                                  since 1979 and President since 1992; a
                                  Director of Shelter Components Corporation,
                                  a supplier to the manufactured housing
                                  industry; Director of Nu Horizons
                                  Electronics Corp., an electronic component
                                  distributor; Director of Transmedia
                                  Network, Inc., a company that markets a
                                  charge card offering savings to the
                                  Company's cardmembers at participating
                                  restaurants and also provides savings on
                                  the purchase of certain other products
                                  and services; Director of Hirsch
                                  International Corp., an importer of
                                  computerized embroidery machine application
                                  software; Director of The Western Systems
                                  Corporation, a company seeking to redeploy
                                  its cash assets through suitable
                                  investments and business combinations.

William J.       1993             Senior Vice President of Janney Montgomery
Barrett, 57                       Scott Inc., investment bankers, since 1978;
                                  Secretary of TGC Industries, Inc. since
                                  1979 and a Director of TGC Industries, Inc.
                                  since 1986; Secretary, Assistant Treasurer,
                                  and a Director of Supreme Industries, Inc.,
                                  a manufacturer of specialized truck bodies
                                  and shuttle buses, since 1979; Director of
                                  Fredericks of Hollywood, Inc., an apparel
                                  marketing company; Director of Shelter
                                  Components Corporation, a supplier to the
                                  manufactured housing industry; Chief
                                  Executive Officer and Director of the
                                  Western Systems Corporation, a company
                                  seeking to redeploy its cash assets through
                                  suitable investments and business
                                  combinations.

Allen T.         1993             Chairman of the Board of TGC Industries,
McInnes, 59                       Inc. since 1993 and Chief Executive
                                  Officer from August, 1993 to March 31,
                                  1996; Executive Vice President and
                                  Director of Tenneco, Inc. 1960-1992;
                                  Director of Tetra Technologies, President
                                  and CEO since April 1, 1996; Director of
                                  NationsBank Texas 1990-1993.

Lewis W.         1996             President and Chief Operating Officer of
Lovell, 60                        Chase Packaging Corporation since October,
                                  1995; Divisional President of Williams
                                  Holdings, Inc. From 1988 to 1993; Senior
                                  Vice-President of Packaging Corporation of
                                  America from 1984 to 1988; Vice President
                                  and General Manager of Tenneco West from
                                  1976 to 1984.

Doug             1996             Vice President, Chief Financial Officer,
Kirkpatrick, 44                   and Assistant Secretary of Chase Packaging
                                  Corporation since 1993; Controller of
                                  Tidelands Geophysical Company from 1982 to
                                  1993; Vice President of Finance and
                                  Treasurer of TGC Industries, Inc. from
                                  1986 to 1996.


Unaffiliated Directors of the Company are not paid fees, but will be
reimbursed for expenses in connection with meetings of the Board of Directors
attended by them.

Executive Officers

The following table sets forth certain information concerning the persons who
serve as executive officers of the Company, and will continue to serve in
such positions, as the discretion of the Board of Directors.  For those
persons who are also Directors of the Company, additional information appears
above.

        Name              Age                              Position

Lewis W. Lovell           60           Chief Operating Officer and President
                                       since October, 1995; Director since
                                       July, 1996.

Doug Kirkpatrick          44           Vice President, Chief Financial
                                       Officer, and Assistant Secretary since
                                       July, 1993; Director since July, 1996.

William J. Barrett        57           Secretary and Director since 1993.


COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

To the best of the Company's knowledge all directors, executive officers, and
beneficial owners have complied with the requirements of Section 16(a) of the
Exchange Act.


ITEM 10.           EXECUTIVE COMPENSATION.

The table below sets forth on an accrual basis all cash and cash equivalent
remuneration paid by the Company during the year ended December 31, 1994,
1995, and 1996 to the Chief Executive Officer and any other executives whose
salary and bonus exceeded $100,000, if any.

                       Summary Compensation Table

                          Annual Compensation
<TABLE>
<S>                <C>        <C>            <C>
Name and                                       Other
Principal                                     Annual
Position            Year       Salary       Compensation



Lewis W. Lovell (1)  1996      $80,973.99 (1)  $4,297.49 (2)
President and Chief
Executive Officer

Allen T. McInnes (3) 1995       99,539.00 (3)  $5,260.00 (2)
Chief Executive      1994       99,339.00 (3)     575.00 (2)
Officer
</TABLE>

<TABLE>
                                    Long-Term Compensation
<S>                <C>      <S>            <C>          <C>

                            Restricted                       All
                              Stock        Options/         Other
                              Awards        SAR's       Compensation


Lewis W. Lovell     1996        -0-           -0-           -0-

Allen T. McInnes    1995        -0-           -0-        $4,384 (4)
                    1994        -0-           -0-         4,919 (5)

</TABLE>

(1)   Mr. Lovell became Chief Executive Officer of the Company in July, 1996.
      Prior to July, 1996, Mr. Lovell was President and Chief Operating
      Officer of the Company from October, 1995.  For the year ended December
      31, 1995, Mr. Lovell's compensation from salary was $23,105.83 and from
      use of a company vehicle was $50.29.

(2)   Represents personal use of company vehicle.


(3)   Mr. McInnes resigned as Chief Executive Officer of the Company in March,
      1996.  Prior to that time, Mr. McInnes was President and Chief
      Executive Officer of TGC Industries, Inc. (the Company's former parent)
      and Chief Executive Officer of the Company.  The compensation set forth
      in the table includes the compensation to Mr. McInnes in his capacity
      as Chief Executive Officer of both TGC and the Company.  From
      January 1, 1996 to March, 1996, Mr. McInnes received the following
      compensation:  $24,964.65 from salary; $351.00 for insurance; and
      $1,197.29 from TGC's contribution to its 401(k).

(4)   Represents life insurance premiums in the amount of $900 and TGC's
      contribution to its 401(k) program in the amount of $3,484.

(5)   Represents life insurance premiums in the amount of $900 and TGC's
      contribution to its 401(k) in the amount of $4,019.

1996 Stock Option Plan

On July 10, 1996, the Company's Board of Directors and sole shareholder
approved and adopted the Company's 1996 Stock Option Plan.  The following
paragraphs summarize certain provisions of the 1996 Stock Option Plan and are
qualified in their entirety by reference thereto.

The 1996 Stock Option Plan provides for the granting of Incentive Stock
Options (collectively, the "Options") to purchase shares of the Company's
Common Stock to certain key employees of the Company and non-statutory stock
options to certain key employees of the Company, affiliates of the Company,
and certain individuals who are not employees of the Company or its
affiliates.  The 1996 Stock Option Plan authorizes the granting of options to
acquire up to 600,000 shares of Common Stock, subject to certain adjustments
described below, to be outstanding at any time.  Subject to the foregoing,
there is no limit on the absolute number of awards that may be granted during
the life of the 1996 Stock Option Plan.  At the present time, there are
approximately 116 employees of the Company, including 2 officers of the
Company (all of whom are also directors), who, in management's opinion, would
be considered eligible to receive grants under the 1996 Stock Option Plan,
although fewer employees may actually receive grants.

Authority to administer the 1996 Stock Option Plan has been delegated to a
committee (the "Committee") of the Board of Directors.  Except as expressly
provided by the 1996 Stock Option Plan, the Committee has the authority, in
its sole discretion, to award Options and to determine the terms and
conditions (which need not be identical) of such Options, including the
persons to whom, and the time or times at which, Options will be awarded, the
number of Options to be awarded to each such person, the exercise price of
any such Options, and the form, terms, and provisions of any agreement
pursuant to which such Options are awarded.  The 1996 Stock Option Plan also
provides that the Committee may be authorized by the Board of Directors to
make cash awards as specified by the Board of Directors to the holder of an
Option in connection with the exercise thereof.  Subject to the limitations
set forth below, the exercise price of the shares of stock covered by each
1996 Option will be determined by the Committee on the date of award.

Unless a Holder's option agreement provides otherwise, the following
provisions will apply to exercises by the Holder of his or her option:  No
options may be exercised during the first twelve months following grant.
During the second year following the date of grant, options covering up to
one-third of the shares covered thereby may be exercised, and during the
third year options covering up to two-thirds of such shares may be exercised.
Thereafter, and until the options expire, the optionee may exercise options
covering all of the shares.  Persons over sixty-five on the date of grant may
exercise options covering up to one-half of the shares during the first year
and thereafter may exercise all optioned shares.  Subject to the limitations
just described, options may be exercised as to all or any part of the shares
covered thereby on one or more occasions, but, as a general rule, options
cannot be exercised as to less than one hundred shares at any one time.

The exercise price of the shares of stock covered by each incentive stock
option ("ISO"), within the meaning of Sec. 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), will not be less than the greater of: (a)
the par value per share of the stock; or (b) one hundred percent (100%) of
the fair market value per share of the Company's stock on the date of award
of such ISO, except that an ISO may not be awarded to any person who is not
an employee of the Company and/or affiliate of the Company or to any person
who owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or an affiliate of the
Company, unless the exercise price is at least one hundred ten percent (110%)
of the fair market value of the stock at the time the ISO is awarded and the
ISO is not exercisable after the expiration of five years from the date it is
awarded.  The exercise price of the shares of Common Stock covered by each
Option that is not an ISO (NSO) will not be less than fifty percent (50%) of
the fair market value of the stock on the date of award.

Payment for Common Stock issued upon the exercise of an Option may be made in
cash or, with the consent of the Committee, in whole shares of Common Stock
owned by the holder of the Option for at least six months prior to the date
of exercise or, with the consent of the Committee, partly in cash and partly
in such shares of Common Stock.  If payment is made, in whole or in part,
with previously owned shares of Common Stock, the Committee may issue to such
holder a new Option for a number of shares equal to the number of shares
delivered by such holder to pay the exercise price of the previous Option
having an exercise price equal to not less than one hundred percent (100%) of
the fair market value of the Common Stock on the date of such exercise.  An
Option so issued will not be exercisable until the later of the date
specified in an individual option agreement or six months after the date of
grant.

The duration of each Option will be for such period as the Committee
determines at the time of award, but not for more than ten years from the
date of award in the case of an ISO, and in either case may be exercised in
whole or in part at any time or only after a period of time or in
installments, as determined by the Committee at the time of award, except
that after the date of award, the Committee may accelerate the time or times
at which an Option may be exercised.

In the event of any change in the number of outstanding shares of Common
Stock effected without receipt of consideration therefor by the Company by
reason of a stock dividend, or split, combination, exchange of shares or
other recapitalization, merger, or otherwise, in which the Company is the
surviving Corporation, the aggregate number and class of reserved shares, the
number and class of shares subject to each outstanding Option, and the
exercise price of each outstanding Option will be automatically adjusted to
reflect the effect thereon of such change.  Unless a holder's option
agreement, provides otherwise, a dissolution or liquidation of the Company,
certain sales of all or substantially all of the assets of the Company, or
certain mergers or consolidations in which the Company is not the surviving
corporation will cause such holder's Options then outstanding to terminate,
but such holder may, immediately prior to such transaction, exercise such
Options without regard to the period and installments of exercise ability
applicable pursuant to such holder's option agreement.

The 1996 Stock Option Plan will terminate on July 10, 2006, or on such
earlier date as the Board of Directors may determine.  Any stock option
outstanding at the termination date will remain outstanding until it has been
exercised, terminated, or has expired.

The 1996 Stock Option Plan may be terminated, modified, or amended by the
Board of Directors at any time without further shareholder approval, except
that shareholder approval is required for any amendment which:  (a) changes
the number of shares of Common Stock subject to the 1996 Stock Option Plan
other than by adjustment provisions provided therein, (b) changes the
designation of the class of employees eligible to receive Options, (c)
decreases the price at which ISO's may be granted, (d) removes the
administration of the 1996 Stock Option Plan from the Committee, or (e)
without the consent of the affected holder, causes the ISO's granted under
the 1996 Stock Option Plan and outstanding at such time that satisfied the
requirements of Sec. 422 of the Code no longer to satisfy such requirements.


401(k) Plan

On August 1, 1996 the Company implemented a 401(k) salary deferral plan (the
"Plan") which covers all non-union employees who have reached the age of 20-
1/2 years and have been employed by the Company for at least one year.  Years
of service with TGC Industries (the former parent) are recognized for the
purpose of this plan.  The covered employees may elect to have an amount
deducted from their wages for investment in a retirement plan.  The Company
has the option, at its discretion, to make contributions to the Plan.
Effective with implementation of the Plan, the Company makes a matching
contribution to the Plan equal to the sum of seventy-five percent (75%) of
each Participant's salary reduction contributions to the Plan for such Plan
year which are not in excess of three percent (3%) of the Participant's
compensation for such Plan year, and fifty percent (50%) of each
Participant's salary reduction contributions to the Plan for such Plan year
which are in excess of three percent (3%) of the Participant's compensation
but not in excess of eight percent (8%) of the Participant's compensation for
such Plan year.

Prior to August 1, 1996 Chase Packaging, as a wholly-owned subsidiary of TGC
Industries, Inc., was a participating employer in the TGC 401(k) Plan.  The
TGC Plan contained the same eligibility requirements and Company matching
features as described above.

The total amount of the Company's contribution during 1996 for the one
executive officer participating in the 401(k) Plan was $2,672.75 to Doug
Kirkpatrick.


ITEM 11.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT.

The following table sets forth the names of those persons known to Management
to be beneficial owners of more than five percent of the Company's $.10 par
value Common Stock as of March 12, 1997.  The table also sets forth
information with respect to the Company's Common Stock which is beneficially
owned by each director and executive officer of the Company, and by all
directors and officers of the Company as a group, as of March 12, 1997
(including shares beneficially owned by such persons, pursuant to the rules
of beneficial ownership, as a result of the ownership of certain warrants or
options) according to data furnished by the persons named.  Persons having
direct beneficial ownership of the Company's Common Stock possess the sole
voting and dispositive power in regard to such stock.
<TABLE>
<S>                  <C>                   <C>                   <C>

                                             Amount and
                                              Nature of     Approximate
                     Title of                Beneficial      Percentage
Name and Address      Class                    Owner         of Class (1)


Lewis W. Lovell       Common                 90,482 (2)            1.29%

Doug Kirkpatrick      Common                 31,148 (2)                *

Allen T. McInnes      Common                816,143 (2)           11.17%

Herbert J. Gardner    Common                400,645 (2) (3)        5.57%

William J. Barrett    Common                536,455 (2) (4)        7.42%

Gerlach & Co. (5)     Common                466,666                6.66%
111 Wall Street, 8th Fl.
New York, NY  10005

Special Situations(6) Common                499,999                7.14%
Fund III L.P.
153 E. 53rd Street, 51st Fl.
New York, NY  10022

All directors &       Common              1,874,873 (2)           24.12%
officers as a group
(5 persons)
</TABLE>
* Represents less than 1% of Class

(1) The percentage calculations have been made in accordance with Rule 13d-
3(d) (1) promulgated under the Securities Exchange Act of 1934.  In making
these calculations, shares beneficially owned by a person as a result of
ownership of certain options and warrants of TGC, which upon exercise will
entitle the holder to distribution of Chase Common Stock escrowed in the
event of such exercise, were deemed to be currently outstanding with respect
to the holders of such options and warrants at TGC.

(2) Includes the number of shares of Common Stock set forth opposite the
person's name in the following table, which shares are beneficially owned as
a result of the ownership of options and warrants of TGC, which upon exercise
will entitle the holder to distribution of Chase Common Stock escrowed in the
event of such exercise.

<TABLE>
<S>                                    <C>                  <C>
                                    Stock Options          Warrants

Lewis W. Lovell                        52,083                 -0-

Doug Kirkpatrick                       12,500                 -0-

Allen T. McInnes                         -0-                 84,337

Herbert M. Gardner                       -0-                 55,925

William J. Barrett                       -0-                 55,925*

All Directors and Officers             64,583               196,187
as a group (5 persons)

</TABLE>
     * Excludes 3,750 shares of Common Stock distributable to Mr. Barrett's
wife upon the exercise of 7,500 Warrants of TGC owned by Ms. Barrett.  Mr.
Barrett disclaims beneficial ownership of such Warrants.

(3) Excludes 48,590 shares of Common Stock owned by Herbert M. Gardner's
wife.  Mr. Gardner has disclaimed beneficial ownership of these shares.

(4) Excludes 62,970 shares of Common Stock owned by William J. Barrett's
wife.  Mr. Barrett has disclaimed beneficial ownership of these shares.

(5) Gerlach & Co. is the record owner as nominee for the Redemptorist Fathers
of N.Y. #100.

(6) MGP Advisors Limited Partnership ("MGP") is the general partner of
Special Situations Fund III, L.P. ("Special Situations").  AWM Investment
Company, Inc. ("AWM") is the sole general partner of MGP.  Austin W. Marxe is
the principal limited partner of MGP and is the President and Chief Executive
Officer of AWM.



ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

To the best of the Company's knowledge there have been no transactions with
management or other related parties to which the Company has been a party.

ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K.

a)   Exhibits


 2.1  Form of Agreement for Spin-Off of Subsidiary
      Stock filed as Exhibit 2.1 to the Company's Form 10-SB,
      as amended, dated October 24, 1996 filed with the
      Commission and incorporated herein by reference.

 2.2  Form of Escrow Agreement filed as Exhibit 2.2 to the
      Company's Form 10-SB, as amended, dated October 24, 1996
      filed with the Commission and incorporated herein by
      reference.

 3.1  Form of Articles of Incorporation, as amended, of the
      Company filed as Exhibit 3.1 to the Company's Form 10-SB,
      as amended, dated October 24, 1996 filed with the
      Commission and incorporated herein by reference.

 3.2  Form of Bylaws of the Company filed as Exhibit 3.2 to the
      Company's Form 10-SB, as amended, dated October 24, 1996
      filed with the Commission and incorporated herein by
      reference.

 4.1  Specimen Certificate for Company's Common Stock filed as
      Exhibit 4.1 to the Company's Form 10-SB, as amended, dated
      October 24, 1996 filed with the Commission and incorporated
      herein by reference.

10.1  Form of 1996 Stock Option Plan of the Company filed as
      Exhibit 10.1 to the Company's Form 10-SB, as amended,
      dated October 24, 1996 filed with the Commission and
      incorporated herein by reference.

10.2  Purchase and Sale Agreement Between Union Camp Corporation
      and Chase Packaging Corporation dated June 27, 1993, filed
      as Exhibit 1 to TGC's Form 8-K (Commission and incorporated
      herein by reference.

10.3  Asset Purchase Agreement among Fisher Bag Company, Inc. and
      all of its shareholders and Chase Packaging Corporation dated
      April 25, 1994, filed as Exhibit 1 to TGC's Form 8-K
      (Commission File No. 0-14908) dated May 25, 1994, filed with
      the Commission and incorporated herein by reference.

10.4  Closing Agreement among Fisher Bag Company, Inc. and all of
      its shareholders and Chase Packaging Corporation dated May 25,
      1994, amending and supplementing the Asset Purchase Agreement,
      filed as Exhibit 2 to TGC's Form 8-K (Commission File No.
      0-14908) dated May 25, 1994, filed with the Commission and
      incorporated herein by reference.

10.5  Promissory Note dated July 30, 1993 in the principal amount
      of $3,761,537 payable by Chase Packaging Corporation to Union
      Camp Corporation, filed as Exhibit 3 to TGC's Form 8-K
      (Commission File No. 0-14908) dated July 30, 1993, filed with
      the Commission and incorporated herein by reference.

10.6  Accounts Financing Agreement [Security Agreement] dated
      July 30, 1993 between Congress Financial Corporation
      (Northwest) and Chase Packaging Corporation, filed as Exhibit
      4 to TGC's Form 8-K (Commission File No. 0-14908) dated
      July 30, 1993, filed with the Commission and incorporated
      herein by reference.

10.7  First Amendment to Accounts Financing Agreement [Security
      Agreement] dated May 25, 1994, between Congress Financial
      Corporation (Northwest) and Chase Packaging Corporation,
      filed as Exhibit 4.3 to TGC's annual report on Form 10-SB-K
      for the fiscal year ended December 31, 1994 and incorporated
      herein by reference.

10.8  Letter Agreement dated July 25, 1994, amending Accounts
      Financing Agreement [Security Agreement], between Congress
      Financial Corporation (Northwest) and Chase Packaging
      Corporation, filed as Exhibit 4.4 to TGC's annual report on
      Form 10-K for the fiscal year ended December 31, 1994 and
      incorporated herein by reference.

10.9  Second Amendment to Accounts Financing Agreement [Security
      Agreement] dated September 19, 1994, between Congress
      Financial Corporation (Northwest) and Chase Packaging
      Corporation, filed as Exhibit 4.5 to TGC's annual report on
      Form 10-K for the fiscal year ended December 31, 1994 and
      incorporated herein by reference.

10.10 Third Amendment to Accounts Financing Agreement [Security
      Agreement] dated February 27, 1995, between Congress Financial
      Corporation (Northwest) and Chase Packaging Corporation,
      filed as Exhibit 4.6 to TGC's annual report on Form 10-K
      for the fiscal year ended December 31, 1994 and incorporated
      herein by reference.

10.11 Fourth Amendment to Accounts Financing Agreement [Security
      Agreement] dated July 26, 1995, between Congress Financial
      Corporation (Northwest) and Chase Packaging Corporation,
      filed as Exhibit 4.7 to TGC's annual report on Form 10-K
      for the fiscal year ended December 31, 1995 and incorporated
      herein by reference.

10.12 Bill of Sale dated July 31, 1996, between TGC Industries,
      Inc. and Chase Packaging Corporation filed as Exhibit 10.12
      to the Company's Form 10-SB, as amended, dated October 24, 1996
      filed with the Commission and incorporated herein by reference.

27    Financial Data Schedule.

99    Valuation and Qualifying Accounts for Years ended December 31,
      1996 and 1995


b)   Reports -- No reports on Form 8-K have been filed during the fourth
     quarter ended December 31, 1996.




                              SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                          CHASE PACKAGING CORPORATION

Date:  March 27, 1997                      By:  /s/ L. W. Lovell
                                                Lewis W. Lovell, President
                                                and Chief Operating Officer

Date:  March 27, 1997                      By:  /s/ Doug Kirkpatrick
                                                Doug Kirkpatrick
                                                Vice-President and Director
                                                (Principal Financial and
                                                Accounting Officer)

Date:  March 27, 1997                      By:  /s/ William J. Barrett
                                                William J. Barrett
                                                Secretary and Director

Date:  March 27, 1997                      By:  /s/ Allen T. McInnes
                                                Allen T. McInnes
                                                Director

Date:  March 27, 1997                      By:  /s/ Herbert M. Gardner
                                                Herbert M. Gardner
                                                Director


                              EXHIBIT 99

                   Valuation and Qualifying Accounts
<TABLE>
               Years ended December 31, 1996 and 1995

<S>   <C>                        <C>              <C>             <C>            <C>

                                                   Additions-
                                     Balance        Charges                      Balances
                                    Beginning      to Cost and     Deductions     at End
       Description                   of Year        Expenses       Write-Offs     of Year


Allowance for doubtful
  accounts

Year ended Dec. 31, 1996           $  84,618       $  24,000       $  22,765     $  85,853

Year ended Dec. 31, 1995              54,500          32,000           1,882        84,618

</TABLE>
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