**Table of Contents**

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**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

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

 

**For the quarterly periodended September 30, 2008**

 

**OR**

 
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE** |
|------------|------------|-------------------------------------------------------------------------|
| ** ** | ** ** | **SECURITIES  EXCHANGE ACT OF 1934**                                    |

 

**For the transition periodfrom                    to                  **

 

**Commission File Number: 0-21609**

 

# **CHASE PACKAGING CORPORATION**

(Exact name of registrant asspecified in its charter)

 

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

 

# **636 River Road, Fair Haven,New Jersey  07704**

(Address of principalexecutive offices)   (Zip Code)

 

**(732) 741-1500**

(Registrant’s telephonenumber, including area code)

 

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

YES  x  NO  o

 

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

 

| Large  accelerated filer  o          |   | Accelerated  filer  o         |
|------------------------------------------------|--------|-----------------------------------------|
| Non-accelerated  filer  o            |   | Smaller  reporting company  x |
| (Do  not check if a smaller reporting company) |   |                                    |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act. YES   x   NO   o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 
| **Class**                               | ** ** | **Outstanding  at November 4, 2008** | ** ** |
|-----------------------------------------|------------|-------------------------------------------|------------|
| Common  Stock, par value $.10 per share |       | 15,536,275 shares                         |       |

 

 

 

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**- INDEX -**

 
| ** **     | ** **                                                                                                                                                                                                                | **Page(s)** |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|           |                                                                                                                                                                                                                      |        |
| PART I    | Financial Information:                                                                                                                                                                                                    |        |
|           |                                                                                                                                                                                                                      |        |
| ITEM 1         | Financial Statements:                                                                                                                                                                                                     |        |
|           |                                                                                                                                                                                                                      |        |
|           | Condensed Balance Sheets –  September 30, 2008 (Unaudited) and  December 31, 2007                                                                                                                          | 1           |
|           |                                                                                                                                                                                                                      |        |
|           | Condensed Statements of  Operations (Unaudited) - Cumulative Period During the Development Stage (January 1, 1999 to  September 30, 2008) and  the Nine and Three Months Ended September 30, 2008 and 2007 | 2           |
|           |                                                                                                                                                                                                                      |        |
|           | Condensed Statements of Cash  Flows (Unaudited) - Cumulative Period During the Development Stage  (January 1, 1999 to September 30, 2008) and the Nine Months Ended September 30, 2008 and 2007            | 3           |
|           |                                                                                                                                                                                                                      |        |
|           | Notes to  Interim Condensed Financial Statements (Unaudited)                                                                                                                                                              | 4           |
|           |                                                                                                                                                                                                                      |        |
| ITEM 2         | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                               | 7           |
|           |                                                                                                                                                                                                                      |        |
| ITEM 3         | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                               | 8           |
|           |                                                                                                                                                                                                                      |        |
| ITEM 4         | Controls and  Procedures                                                                                                                                                                                                  | 9           |
|           |                                                                                                                                                                                                                      |        |
| PART II   | Other Information                                                                                                                                                                                                         | 9           |
|           |                                                                                                                                                                                                                      |
| EXHIBITS INDEX | 10                                                                                                                                                                                                                        |
|           |                                                                                                                                                                                                                      |
| SIGNATURES     | 12                                                                                                                                                                                                                        |
|           |                                                                                                                                                                                                                      |
| EXHIBITS       |                                                                                                                                                                                                                      |

 

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**PART I. FINANCIAL INFORMATION**

 

**Item 1. FinancialStatements.**

 

**CHASE PACKAGING CORPORATION(A Development Stage Company)CONDENSED BALANCE SHEETS**

 

**- ASSETS -**

** **
| ** **                | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| **CURRENT ASSETS:**       |       |                         |       |                        |       |
| Cash and cash equivalents |       | $                            | 1,855,626  |                        | $          | 1,960,333 |   |
|                      |       |                         |       |                        |       |
| **TOTAL ASSETS**          |       | $                            | 1,855,626  |                        | $          | 1,960,333 |   |

 

**- LIABILITIES AND SHAREHOLDERS’ EQUITY -**

 
| **CURRENT LIABILITIES:**                                                                                                                                                               |       |       |       |       |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| Accrued expenses                                                                                                                                                                       |       | $          | 26,321     |       | $          | 18,607 |   |
|                                                                                                                                                                                   |       |       |       |       |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                                          |       | 26,321     |       | 18,607     |       |
|                                                                                                                                                                                   |       |       |       |       |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                                                                                                                                                   |       |       |       |       |       |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                                         |       |       |       |       |       |
| Preferred Stock $1.00 par value; 4,000,000  shares authorized: Series A 10% Convertible; 50,000 shares authorized; 14,812  and 13,818 shares issued and outstanding, respectively |       | 14,812     |       | 13,818     |       |
| Common stock, $.10 par value, 200,000,000  authorized; 15,536,275 shares issued and outstanding                                                                                        |       | 1,553,628  |       | 1,553,628  |       |
| Additional paid-in capital                                                                                                                                                             |       | 4,085,030  |       | 4,087,515  |       |
| Accumulated deficit                                                                                                                                                                    |       | (3,626,121 | )          | (3,626,121 | )          |
| Deficit accumulated during the development  stage                                                                                                                                      |       | (198,044   | )          | (87,114    | )          |
| **TOTAL SHAREHOLDERS’ EQUITY**                                                                                                                                                    |       | 1,829,305  |       | 1,941,726  |       |
|                                                                                                                                                                                   |       |       |       |       |       |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                    |       | $          | 1,855,626  |       | $          | 1,960,333 |   |

## ** **

See notes to interim condensed financial statements.

 

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## **Table of Contents**

 

## **CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

## **CONDENSED STATEMENTS OFOPERATIONS**

**(Unaudited)**

 
| ** **                                                               | ** ** | **Cumulative  During the  Development  Stage  (January 1,  1999 to  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** | **Three Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                               | ** ** | ** 2008)**                                                                                         | ** ** | **2008**                                            | ** ** | **2007**                                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                     | ** ** | ** **                                                                                              | ** ** | ** **                                          |       |                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                                                            |       | $                                                                                                       | —     |                                                | $          | —                                               |       | $ | — |   | $ | — |   | $ | — |   |
|                                                                     |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **COSTS AND EXPENSES:**                                                  |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| General and administrative expenses                                      |       | 241,404                                                                                                 |       | 138,564                                             |       | 21,447                                               |       | 51,331 |   | 7,150 |   |
| **LOSS FROM OPERATIONS**                                                 |       | (241,404                                                                                                | )          | (138,564                                            | )          | (21,447                                              | )          | (51,331 | ) | (7,150 | ) |
|                                                                     |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **OTHER INCOME (EXPENSE)**                                               |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| ** **                                                               |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| Interest expense                                                         |       | (8,591                                                                                                  | )          | —                                              |       | (4,200                                               | )          | — |   | (2,708 | ) |
| Interest and other income                                                |       | 51,951                                                                                                  |       | 27,634                                              |       | 6,672                                                |       | 7,658 |   | 6,607 |   |
| **TOTAL OTHER INCOME (EXPENSE)**                                         |       | 43,360                                                                                                  |       | 27,634                                              |       | 2,472                                                |       | 7,658 |   | 3,899 |   |
|                                                                     |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                             |       | (198,044                                                                                                | )          | (110,930                                            | )          | (18,975                                              | )          | (43,673 | ) | (3,251 | ) |
|                                                                     |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| Provision for income taxes                                               |       | —                                                                                                  |       | —                                              |       | —                                               |       | — |   | — |   |
| ** **                                                               |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **NET LOSS**                                                             |       | $                                                                                                       | (198,044   | )                                                   | $          | (110,930                                             | )          | $ | (18,975 | ) | $ | (43,673 | ) | $ | (3,251 | ) |
| ** **                                                               |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **BASIC AND DILUTED LOSS PER COMMON SHARE**                              |       |                                                                                                    |       | $                                                   | —     |                                                 | $          | — |   | $ | — |   | $ | — |   |
| ** **                                                               |       |                                                                                                    |       |                                                |       |                                                 |       |   |   |   |   |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –  BASIC AND DILUTED** |       |                                                                                                    |       | 15,536,275                                          |       | 9,209,352                                            |       | 15,536,275 |   | 10,354,525 |   |

 

See notes to interim condensed financialstatements.

 

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## **CHASE PACKAGING CORPORATION**

## **(A Development StageCompany)**

## **CONDENSED STATEMENTS OF CASHFLOWS**

## **(Unaudited)**

## ** **

| ** **                                                                                                                                        | ** ** | **Cumulative During  the Development  Stage (January 1,  1999 to** | ** ** | **Nine Months Ended****September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                                                        | ** ** | **September 30, 2008)**                                                           | ** ** | **2008**                                              | ** ** | **2007** | ** ** |
| ** **                                                                                                                                        | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                                                         | ** ** | ** **                                                                                  | ** ** | ** **                                            |       |   |   |
| Net (loss)                                                                                                                                        |       | $                                                                                           | (198,044   | )                                                     | $          | (110,930 | ) | $ | (18,975 | ) |
|                                                                                                                                              |       |                                                                                        |       |                                                  |       |   |   |
| Change in operating assets and liabilities:                                                                                                       |       |                                                                                        |       |                                                  |       |   |   |
| Accrued expenses                                                                                                                                  |       | 11,142                                                                                      |       | 7,714                                                 |       | 21,287 |   |
| **Net cash (used in) provided by operating  activities**                                                                                          |       | (186,902                                                                                    | )          | (103,216                                              | )          | 2,312 |   |
|                                                                                                                                              |       |                                                                                        |       |                                                  |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                                                          |       | —                                                                                      |       | —                                                |       | — |   |
| ** **                                                                                                                                        |       |                                                                                        |       |                                                  |       |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                                                         |       |                                                                                        |       |                                                  |       |   |   |
| ** **                                                                                                                                        |       |                                                                                        |       |                                                  |       |   |   |
| Proceeds from private placement/exercise of  stock warrants                                                                                       |       | 5,500                                                                                       |       | —                                                |       | — |   |
| Conversion of debt into equity                                                                                                                    |       | 56,500                                                                                      |       | —                                                |       | 9,500 |   |
| Capital contribution                                                                                                                              |       | 8,000                                                                                       |       | —                                                |       | — |   |
| Proceeds from private placement                                                                                                                   |       | 1,962,358                                                                                   |       | —                                                |       | 1,982,030 |   |
| Cash dividends paid on Preferred Stock                                                                                                            |       | (1,491                                                                                      | )          | (1,491                                                | )          | — |   |
| **Net cash provided by (used in) financing  activities**                                                                                          |       | 2,030,867                                                                                   |       | (1,491                                                | )          | 1,991,530 |   |
| ** **                                                                                                                                        |       |                                                                                        |       |                                                  |       |   |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS**                                                                                         |       | 1,843,965                                                                                   |       | (104,707                                              | )          | 1,993,842 |   |
| ** **                                                                                                                                        |       |                                                                                        |       |                                                  |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT BEGINNING OF  PERIOD**                                                                                            |       | 11,661                                                                                      |       | 1,960,333                                             |       | 2,691 |   |
| **CASH AND CASH EQUIVALENTS, AT END OF PERIOD**                                                                                                   |       | $                                                                                           | 1,855,626  |                                                  | $          | 1,855,626 |   | $ | 1,996,533 |   |
| ** **                                                                                                                                        |       |                                                                                        |       |                                                  |       |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION**                                                                                                            |       |                                                                                        |       |                                                  |       |   |   |
| Cash paid during the period for:                                                                                                                  |       |                                                                                        |       |                                                  |       |   |   |
| Interest                                                                                                                                          |       | $                                                                                           | —     |                                                  | $          | — |   | $ | — |   |
| Income taxes                                                                                                                                      |       | $                                                                                           | —     |                                                  | $          | — |   | $ | — |   |
|                                                                                                                                              |       |                                                                                        |       |                                                  |       |   |   |   |   |   |
| **SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING  AND FINANCING ACTIVITIES:**                                                                        |       |                                                                                        |       |                                                  |       |   |   |
|                                                                                                                                              |       |                                                                                        |       |                                                  |       |   |   |
| 994 Shares Preferred Stock Series A 10%  Convertible – issued as a stock dividend with a fair value of $99,400 and a  par value of $994 |       | $                                                                                           | 994        |                                                  | $          | 994 |   | $ | — |   |
| 416 Private Placement Units were issued in  exchange for $56,500 of convertible notes plus $5,900 of accrued interest                             |       | $                                                                                           | 62,400     |                                                  | $          | — |   | $ | 62,400 |   |
| 68 Private Placement Units were issued in  exchange for $8,000 of stock subscriptions plus $2,200 of accrued interest                             |       | $                                                                                           | 10,200     |                                                  | $          | — |   | $ | 10,200 |   |

 

See notes to interim condensed financial statements.

 

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## **CHASEPACKAGING CORPORATION**

## **(ADevelopment Stage Company)**

## **NOTESTO INTERIM CONDENSED FINANCIAL STATEMENTS**

## **SEPTEMBER30, 2008**

## **(Unaudited)**

## ** **

**NOTE 1 - BASIS OF PRESENTATION:**

 

Chase Packaging Corporation (the “Company”),a Texas Corporation, manufactured woven paper mesh for industrial applicationsand polypropylene mesh fabric bags for agricultural use and distributedagricultural packaging manufactured by other companies.  The Company was a wholly-owned subsidiary ofTGC Industries, Inc. through July 31, 1996.

 

The Company had experienced losses for pastyears, and the Company’s secured lender decided not to renew the Company’soperating line of credit.  As a result, theCompany’s Board of Directors (the “Board”) determined that it was in the bestinterest of the Company and all of its creditors to liquidate in an orderlyfashion.

 

On June 25, 1997, the Company announcedto employees and creditors that it would begin an orderly liquidation of allits assets beginning at the close of business on June 30, 1997.  On July 25, 1997, the Company notifiedits creditors by mail that it would commence an orderly liquidation of all itsremaining assets, outside of a formal bankruptcy or receivership proceeding ina manner intended to maximize asset values. Liquidation of the Company’s assets was completed as of December 31,1997.

 

Since January 1, 1999, the Board hasbeen devoting its efforts to establishing a new business and, accordingly, theCompany is being treated as a development stage company in accordance withStatement of Financial Accounting Standards No. 7.

 

Management’s plans for the Company include securing a merger oracquisition, raising additional capital, or other strategies designed tooptimize shareholder value.  However, noassurance can be given that management will be successful in its efforts.  The failure to achieve these plans will havea material adverse effect on the Company’s financial position, results ofoperations, and ability to continue as a going concern.

 

The accompanying interim condensed financial statements of the Companyhave been prepared in accordance with accounting principles generally acceptedin the United States (“US GAAP”) for interim financial information and theinstructions to Form 10-Q. Accordingly, they do not include all of the information and footnotesrequired by US GAAP for complete financial statements.  In the opinion of the Company’s management, alladjustments (consisting only of normal recurring accruals) considered necessaryfor a fair presentation have been included. Operating results for the nine and three month periods ended September 30,2008, are not necessarily indicative of the results that may be expected forthe full fiscal year ending December 31, 2008.  The accompanying interim condensed financialstatements should be read in conjunction with the audited financial statementsof the Company for the fiscal year ended December 31, 2007.

 

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**NOTE 2 - LOSS PER COMMON SHARE:**

 

Lossper common share, both basic and diluted, was calculated by dividing net lossby the weighted average number of shares outstanding for each reportingperiod.  The diluted loss per share isthe same as the basic loss per share because the Company has incurred a netloss in all periods presented.  Theoutstanding common stock equivalents, which consist of warrants and convertiblepreferred stock, that could potentially dilute basic loss per share in thefuture, and that were not included in diluted loss per share because theireffect on the periods presented was antidilutive, were 21,721,000 and 20,727,000as of September 30, 2008 and 2007, respectively.

 

**NOTE 3 - RECENT ACCOUNTING PRONOUCEMENTS:**

 

The accounting policies followed by theCompany are set forth in Note 2 to the Company’s financial statementsincluded in its Annual Report on Form 10-KSB for the year ended December 31,2007, which is incorporated herein by reference.  Specific reference is made to that report fora description of the Company’s securities and the notes to financialstatements.

 

In September 2006, the FASB issued SFAS No. 157,*Fair Value Measurements*, which definesfair value, establishes a framework for measuring fair value in generallyaccepted accounting principles, and expands disclosures about fair valuemeasurements. This statement does not require any new fair value measurements,but provides guidance on how to measure fair value by providing a fair valuehierarchy used to classify the source of the information. SFAS No. 157 iseffective for fiscal years beginning after November 15, 2007, and allinterim periods within those fiscal years. In February 2008, the FASBreleased FASB Staff Position (FSP FAS 157-2 – *EffectiveDate of FASB Statement No. 157*) which delays the effective dateof SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities,except those that are recognized or disclosed at fair value in the financialstatements on a recurring basis (at least annually), to fiscal years beginningafter November 15, 2008 and interim periods within those fiscal years. Theimplementation of SFAS No. 157 for financial assets and liabilities,effective January 1, 2008, did not have an impact on the Company’sfinancial position and results of operations. The Company is currently evaluating the impact of adoption of thisstatement on its non-financial assets and liabilities in the first quarter offiscal 2009.

 

In December 2007, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 141 (revised 2007), Business Combinations, whichreplaces SFAS No. 141. The statement retains the purchase method ofaccounting for acquisitions, but requires a number of changes, includingchanges in the way assets and liabilities are recognized in the purchaseaccounting. It also changes the recognition of assets acquired and liabilitiesassumed arising from contingencies, requires the capitalization of in-processresearch and development at fair value, and requires the expensing ofacquisition-related costs as incurred. SFAS No. 141R is effective forbusiness combinations for which the acquisition date is on or after thebeginning of the first annual reporting period beginning on or after December 15,2008. The Company is currently evaluating the impact of adopting SFAS No. 141on its financial statements.

 

In December 2007, the FASB issued SFAS No. 160.  “Noncontrolling Interests in ConsolidatedFinancial Statements-and Amendment of ARB No. 51.”  SFAS 160 establishes accounting and reportingstandards pertaining to ownership interests in subsidiaries held by partiesother than the parent, the amount of net income attributable to the parent andto the noncontrolling interest, changes in a parent’s ownership interest, andthe valuation of any retained noncontrolling equity investment when asubsidiary is deconsolidated.  Thisstatement also establishes disclosure requirements that clearly identify anddistinguish between the interests of the parent and the interests of thenoncontrolling owners.  SFAS 160 iseffective for fiscal years beginning on

 

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or after December 15, 2008.  The adoption of SFAS 160 is not currentlyexpected to have a material effect on the Company’s financial position, resultsof operations, or cash flows.

 

In March 2008, the Financial AccountingStandards Board (FASB) issued FASB Statement No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities*. The newstandard is intended to improve financial reporting about derivativeinstruments and hedging activities by requiring enhanced disclosures to enableinvestors to better understand their effects on an entity’s financial position,financial performance, and cash flows. It is effective for financial statementsissued for fiscal years and interim periods beginning after November 15,2008, with early application encouraged. The Company is currently evaluatingthe impact of adopting SFAS. No. 161 on its financial statements.

 

**NOTE 4 - 2007 PRIVATE PLACEMENT UNITS (“UNIT”):**

 

The Company closed a private placement of 13,334 Units on September 7,2007.  Each Unit was sold for $150 andconsists of: one share of Series A 10% Convertible Preferred Stock ($100stated value), convertible into 1,000 shares of Common Stock; 500 shares ofCommon Stock; and 500 5-year warrants, each of which is exercisable for oneshare of Common Stock at $0.15 per share. There was no beneficial conversion feature recorded since the CommonStock was selling for less than $0.10 per share at the time of the closingwhich approximates fair value.  Grossproceeds from the offering were $2,000,100, less approximately $38,000 ofoffering expenses, resulting in net proceeds of approximately $1,962,000.

 

Dividends on the Series A Preferred Stock are payable semi-annuallyin cash or in kind at the discretion of the Board.

 

**NOTE 5 – DIVIDENDS:**

 

On May 8, 2008, the Company announcedthat the Board of Directors had declared a five percent stock dividend on itsoutstanding Series A 10% Convertible Preferred Stock for the periodcommencing September 7, 2007. Shareholders of record as of May 23, 2008 received the stockdividend for each share of Series A Preferred Stock owned on that date,payable May 30, 2008.  As of May 8,2008, the Company had 13,818 shares of Series A Preferred Stockoutstanding; the total dividend paid consisted of 994 shares of Series APreferred Stock with a fair value of $99,400 and $1,491 cash in lieu offractional shares.  Due to the absence ofRetained Earnings, the cash and $994 par value of Preferred Stock dividendtotaling $2,485 was charged against Additional Paid-in Capital.

 

**NOTE 6 - SHAREHOLDERS’ EQUITY:**

 

The Company’s 2008 Stock Awards Plan (the “2008 Plan”) was approved atthe Company’s annual meeting of shareholders held on June 3, 2008.  The 2008 Plan became effective April 9,2008 and will terminate on April 8, 2018. Subject to certain adjustments, the number of shares of Common Stockthat may be issued pursuant to awards under the 2008 Plan is 2,000,000shares.  A maximum of 80,000 shares maybe granted in any one year in any form to any one participant, of which amaximum of (i) 50,000 shares may be granted to a participant in the formof stock options and (ii) 30,000 shares may be granted to a participant inthe form of Common Stock or restricted stock. The 2008 Plan will be administered by a committee of the Board ofDirectors.  Employees, including anyemployee who is also a director or an officer, consultants, and outsidedirectors of the Company are eligible to participate in the 2008 Plan.  ** **As of September 30, 2008 no options had been issued under the 2008Plan.

 

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**Item 2.**       **Management’s****Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

**Forward-Looking Statements**

 

*The information in this report on Form 10-Q containsforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995.  This Actprovides a “safe harbor” for forward-looking statements to encourage companiesto provide prospective information about themselves provided they identifythese statements as forward looking and provide meaningful cautionarystatements identifying important factors that could cause actual results todiffer from the projected results.  Allstatements other than statements of historical fact made in this report areforward looking.  In particular, thestatements herein regarding industry prospects and future results of operationsor financial position are forward-looking statements. Forward-lookingstatements reflect management’s current expectations and are inherentlyuncertain.  The Company’s actual resultsmay differ significantly from management’s expectations as a result of manyfactors.*

 

*You should read the following discussion and analysis in conjunctionwith the financial statements of the Company and notes thereto, includedherewith.  This discussion should not beconstrued to imply that the results discussed herein will necessarily continueinto the future, or that any conclusion reached herein will necessarily beindicative of actual operating results in the future.  Such discussion represents only the bestpresent assessment of management.  TheCompany assumes no obligations to update any of these forward-lookingstatements.*

 

**Results of Operations**

 

During the quarter ended September 30, 2008, the Company had nooperations and its only income was from interest income on its short-terminvestments which are classified as cash and cash equivalents. General andadministrative expenses for the nine-month and three-month periods ending September 30,2008 were $138,564 and $51,331, respectively, compared to $21,447 and $7,150for the comparable periods of 2007; the increases of $117,117 and $44,181 wereprimarily due to increased professional fees and salaries.  The Company had interest income of $27,634and a net loss of $110,930 during the nine-month period ended September 30,2008, compared with interest income of $6,672 and a net loss of $18,975 duringthe comparable period of 2007.  TheCompany had interest income of $7,658 and a net loss of $43,673 during thethree-month period ended September 30, 2008, compared with interest incomeof $6,607 and a net loss of $3,251 during the comparable period of 2007. Theinterest income increases were due to interest earned on cash balances investedin cash equivalents.

 

Commencing November 1, 2007, the Company’s Board agreed to pay theCompany’s Chief Financial Officer an annual salary of $17,000.  No other officers or directors of the Companyreceive compensation other than reimbursement of out-of-pocket expensesincurred in connection with Company business and development.

 

Due to the closing of a private placement of the Company’s securitiesin the third quarter 2007, the Company’s cash and cash equivalents balance asof September 30, 2008 was $1,855,626. The proceeds from the 2007private placement will assist management with its plans to secure a suitablemerger partner wishing to go public or attempt to acquire private companies tocreate investment value for the Company.

 

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**Liquidity and Capital Resources**

 

At September 30, 2008,the Company had cash and cash equivalents of approximately $1,856,000.  Cash and cash equivalents consist of cashheld in banks and brokerage firms. Working capital at September 30, 2008 was approximately$1,829,000.  Management believes that itscash and cash equivalents are sufficient for its business activities for atleast the next 12 months and for the costs of acquiring an operating business.

 

Net cash used in operating activities amounted to approximately$103,000 for the nine-month period ended September 30, 2008, andapproximately $2,300 for the nine-month period ended September 30, 2007.The increase of approximately $105,500 was due primarily to the increase in thenet loss.

 

No cash flows were used or provided by investing activities for each ofthe periods presented.

 

During the second quarter of 2008, the Company recorded $1,491 in cashdividends paid on preferred stock. During the second quarter of 2007, theCompany recorded $9,500 in debt converted into equity.

 

In September of 2007, approximately $1,982,000 of net proceeds wasraised through the sale of 13,334 units in a private placement offering.

 

**Factors Which May Affect Future Results**

 

Future earnings of the Company are dependent on interest rates earnedon the Company’s invested balances and expenses incurred.  The Company expects to incur significantexpenses in connection with its objective of identifying a merger partner oracquiring an operating business.

 

**Recent Accounting Pronouncements**

 

See Note 3 “Recent Accounting Pronouncements” in the Notes to FinancialStatements in Item 1 for a full description of recent accountingpronouncements, including the expected dates of adoption and estimated effectson results of operations and financial condition, which is incorporated herein.

 

**Item 3.**       **Quantitative and QualitativeDisclosures About Market Risk.**

 

Not applicable.

 

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**Item 4.**       **Controls and Procedures.**

 

(a) Evaluationof Disclosure Controls and Procedures.

 

Underthe supervision and with the participation of our management, including ourprincipal executive officer and principal financial officer, we conducted anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures, as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principalexecutive officer and principal financial officer concluded that, as of theperiod covered by this report, our disclosure controls and procedures wereeffective to provide reasonable assurance that the information required to beincluded in our Securities and Exchange Commission (“SEC”) reports is recorded,processed, summarized, and reported within the time periods specified in SEC rules andforms.

 

(b) Changesin Internal Controls over Financial Reporting.

 

Inconnection with the evaluation required by paragraph (d) of Rule 13a-15under the Exchange Act, there was no change identified in our internal controlover financial reporting that occurred during the last fiscal quarter that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.

 

**PART II. OTHER INFORMATION**

 

**Item 1.**           **Legal Proceedings.**

 

None

 

**Item 2.**           **Unregistered Sales of EquitySecurities and Use of Proceeds.**

 

None

 

**Item 3.**           **Defaults upon Senior Securities.**

 

None

 

**Item 4.**           **Submission of Matters to a Voteof Security Holders.**

 

None

 

**Item 5.**           **Other Information.**

 

None

 

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**Item 6.**           **Exhibits.**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                             |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1        |       | 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 Securities and Exchange Commission and  incorporated herein by reference.                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2        |       | Articles of Amendment to the Articles of Incorporation of the Company  filed as Exhibit 3.1 to the Company’s Form 8-K filed with the  Securities and Exchange Commission on June 9, 2008, and incorporated  herein by reference.                                                                                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.3        |       | Amended and Restated Bylaws of the Company dated March 28, 2008,  filed as Exhibit 3.1 to the Company’s Form 8-K filed with the  Securities and Exchange Commission on April 3, 2008, and incorporated  herein by reference*.*                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.1        |       | Form of Registration Rights Amendment, dated as of  September 7, 2007, by and among the Company and certain purchasers named  therein, filed as Exhibit 4.1 to the Company’s Form 10-QSB/A for  the quarterly period ended September 30, 2007, filed with the Securities  and Exchange Commission on May 5, 2008, and incorporated herein by  reference. |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.2        |       | Form of Amendment Number One to Registration Rights Agreement,  dated as of April 30, 2008, by and among the Company and certain  purchasers named therein, filed as Exhibit 4.1 to the Company’s  Form 8-K filed with the Securities and Exchange Commission on  May 5, 2008, and incorporated herein by reference.                                          |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.3        |       | Form of Securities Purchase and Subscription Agreement, dated as  of September 7, 2007, by and among the Company and certain purchasers  named therein, filed as Exhibit 10.1 to the Company’s Form 8-K  filed with the Securities and Exchange Commission on September 11, 2007,  and incorporated herein by reference.                                      |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.4        |       | Statement of Resolution Establishing Series A 10% Convertible  Preferred Stock of the Company, filed as Exhibit 10.3 to the Company’s  Form 8-K filed with the Securities and Exchange Commission on  September 11, 2007, and incorporated herein by reference.                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.5        |       | Form of Warrant Agreement and Warrant Certificate dated as of  September 7, 2007, filed as Exhibit 10.4 to the Company’s  Form 8-K filed with the Securities and Exchange Commission on  September 11, 2007, and incorporated herein by reference.                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.6        |       | Statement of Resolution Regarding Series of Preferred Stock of  the Company dated November 9, 2007, filed as Exhibit 4.6 to the  Company’s Form 10-Q for the quarterly period ended June 30, 2008,  filed with the Securities and Exchange Commission on August 13, 2008,  and incorporated herein by reference.                                         |

 

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| 4.7    |   | Statement of Resolution Regarding Series of Preferred Stock of  the Company, filed as Exhibit 4.1 to the Company’s Form 8-K filed  with the Securities and Exchange Commission on May 21, 2008, and  incorporated herein by reference. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                            |
| 31.1*  |   | Certification of the Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                            |
| 31.2*  |   | Certification of the Principal Financial and Accounting Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                            |
| 32.1*  |   | Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                                                              |
|   |   |                                                                                                                                                                                                                                                            |
| 32.2*  |   | Certification of the Principal Financial Officer pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                          |

 

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*filed herewith

 

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**SIGNATURES**

** **

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

 

 
| ** **                    | ** ** | **CHASE  PACKAGING CORPORATION**                 |
|-------------------------------|------------|--------------------------------------------------|
| ** **                    | ** ** | ** **                                       |
|                          |       |                                             |
| Date:  November 13, 2008 |       | /s/  Allen T. McInnes                            |
|                          |       | Allen  T. McInnes                                |
|                          |       | Chairman  of the Board, President and Treasurer  |
|                          |       |                                             |
|                          |       |                                             |
| Date:  November 13, 2008 |       | /s/  Ann W. Green                                |
|                          |       | Ann  C. W. Green                                 |
|                          |       | Chief  Financial Officer and Assistant Secretary |
|                          |       | (Principal  Financial and Accounting Officer)    |

 

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