Table of Contents

 

 

 

**SECURITIES AND EXCHANGECOMMISSION**

**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 period ended June 30, 2008**

** **

**OR**

 

| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES  EXCHANGE ACT OF 1934** | ** ** |
|-------|---------------------------------------------------------------------------------------------------------------|------------|

 

**For the transition period from                    to                    **

 

**Commission File Number: 0-21609**

 

# **CHASEPACKAGING CORPORATION**

(Exact name of registrant as specified 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 principal executive offices)   (Zip Code)

 

**(732) 741-1500**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

YES x    NO o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated 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 |

(Donot check if a smaller reporting company)

 

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

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.

 

| **Class**                              | ** ** | **Outstanding  at August 1, 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 — June 30, 2008 (Unaudited) and December 31, 2007                                                                                                                            | 1           |
|            |                                                                                                                                                                                                                  |        |
|            | Condensed  Statements of Operations (Unaudited) — Cumulative Period During the  Development Stage   (January 1, 1999 to June 30, 2008) and the Six and Three Months  Ended June 30, 2008 and 2007 | 2           |
|            |                                                                                                                                                                                                                  |        |
|            | Condensed  Statements of Cash Flows (Unaudited) — Cumulative Period During the  Development Stage   (January 1, 1999 to June 30, 2008) and the Six Months Ended  June 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 4T         | Controls and  Procedures                                                                                                                                                                                              | 8           |
|            |                                                                                                                                                                                                                  |        |
| PART II    | Other Information                                                                                                                                                                                                     | 10          |
|            |                                                                                                                                                                                                                  |        |
| EXHIBITS  INDEX | 11                                                                                                                                                                                                                    |
|            |                                                                                                                                                                                                                  |
| SIGNATURES      | 13                                                                                                                                                                                                                    |
|            |                                                                                                                                                                                                                  |
| EXHIBITS        |                                                                                                                                                                                                                  |

 

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**PART I.  FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

 

**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSEDBALANCE SHEETS**

 

 
| ** **                                                                                                                                                               | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                               | ** ** | **2008**          | ** ** | **2007**              | ** ** |
| ** **                                                                                                                                                               | ** ** | **(unaudited)**   | ** ** | ** **            | ** ** |
| **- ASSETS  -**                                                                                                                                                          | ** ** | ** **        | ** ** | ** **            | ** ** |
| **CURRENT ASSETS:**                                                                                                                                                      | ** ** | ** **        | ** ** | ** **            | ** ** |
| Cash and cash equivalents                                                                                                                                                |       | $                 | 1,904,341  |                  | $          | 1,960,333 |   |
| ** **                                                                                                                                                               | ** ** | ** **        | ** ** | ** **            | ** ** |
| **TOTAL ASSETS**                                                                                                                                                         |       | $                 | 1,904,341  |                  | $          | 1,960,333 |   |
|                                                                                                                                                                     |       |              |       |                  |       |
| **- LIABILITIES AND SHAREHOLDERS’  EQUITY -**                                                                                                                       |       |              |       |                  |       |
| **CURRENT LIABILITIES:**                                                                                                                                                 | ** ** | ** **        | ** ** | ** **            | ** ** |
| Accrued expenses                                                                                                                                                         |       | $                 | 31,364     |                  | $          | 18,607 |   |
| ** **                                                                                                                                                               | ** ** | ** **        | ** ** | ** **            | ** ** |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                            |       | 31,364            |       | 18,607                |       |
| ** **                                                                                                                                                               | ** ** | ** **        | ** ** | ** **            | ** ** |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                        | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                                                                               | ** ** | ** **        | ** ** | ** **            | ** ** |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                           | ** ** | ** **        | ** ** | ** **            | ** ** |
| Preferred Stock $1.00 par value; 4,000,000 authorized:  Series A 10% Convertible; 50,000 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                                                                                                                         |       | (154,372          | )          | (87,114               | )          |
| **TOTAL SHAREHOLDERS’ EQUITY**                                                                                                                                      |       | 1,872,977         |       | 1,941,726             |       |
|                                                                                                                                                                     |       |              |       |                  |       |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                      |       | $                 | 1,904,341  |                  | $          | 1,960,333 |   |

## ** **

See notes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

## **CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                               | ** **         | **Cumulative**

**During the**

**Development**

**Stage**

**(January 1,**

**1999 to** | ** **         | **Six Months Ended  June 30,** | ** **         | **Three Months Ended  June 30,** | ** **         |
|--------------------------------------------------------------------------|--------------------|-----------------------------------------------------------------------------------------------|--------------------|-------------------------------------|--------------------|---------------------------------------|--------------------|
| ** **                                                               | ** **         | **June 30, 2008)**                                                                       | ** **         | **2008**                            | ** **         | **2007**                              | ** **         | **2008** | ** ** | **2007** | ** ** |
|                                                                     |     |                                                                                          |     |                                |     |                                  |     |   |     |   |   |
| **NET SALES**                                                            |               | $                                                                                             | —             |                                | $                  | —                                |               | $ | — |   | $ | — |   | $ | — |   |
|                                                                     |               |                                                                                          |               |                                |               |                                  |               |   |   |   |   |
| **COSTS AND EXPENSES:**                                                  | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| General and administrative expenses                                      |               | 190,073                                                                                       |               | 87,233                              |               | 14,297                                |               | 53,636 |   | 6,597 |   |
| **LOSS FROM OPERATIONS**                                                 |               | (190,073                                                                                      | )                  | (87,233                             | )                  | (14,297                               | )                  | (53,636 | ) | (6,597 | ) |
|                                                                     |               |                                                                                          |               |                                |               |                                  |               |   |   |   |   |
| **OTHER INCOME (EXPENSE)**                                               | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| ** **                                                               | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| Interest expense                                                         |               | (8,591                                                                                        | )                  | —                              |               | (1,492                                | )                  | — |   | (794 | ) |
| Interest and other income                                                |               | 44,292                                                                                        |               | 19,975                              |               | 65                                    |               | 7,857 |   | 25 |   |
| **TOTAL OTHER INCOME (EXPENSE)**                                         |               | 35,701                                                                                        |               | 19,975                              |               | (1,427                                | )                  | 7,857 |   | (769 | ) |
|                                                                     |               |                                                                                          |               |                                |               |                                  |               |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                             |               | (154,372                                                                                      | )                  | (67,258                             | )                  | (15,724                               | )                  | (45,779 | ) | (7,366 | ) |
|                                                                     |               |                                                                                          |               |                                |               |                                  |               |   |   |   |   |
| Provision for income taxes                                               |               | —                                                                                        |               | —                              |               | —                                |               | — |   | — |   |
| ** **                                                               | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| **NET LOSS**                                                             |               | $                                                                                             | (154,372           | )                                   | $                  | (67,258                               | )                  | $ | (15,724 | ) | $ | (45,779 | ) | $ | (7,366 | ) |
| ** **                                                               | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| **BASIC AND DILUTED LOSS PER COMMON SHARE**                              |               |                                                                                          |               | $                                   | —             |                                  | $                  | — |   | $ | — |   | $ | — |   |
| ** **                                                               | ** **         | ** **                                                                                    | ** **         | ** **                          | ** **         | ** **                            | ** **         | ** ** | ** ** | ** ** | ** ** |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING —  BASIC AND DILUTED** |               |                                                                                          |               | 15,536,275                          |               | 8,627,275                             |               | 15,536,275 |   | 8,627,275 |   |

 

See notes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

## **(A Development Stage Company)**

## **CONDENSED STATEMENTS OF CASH FLOWS**

## **(Unaudited)**

## ** **

| ** **                                                                                                                                       | ** ** | **Cumulative**

**During the**

**Development**

**Stage**

**(January 1,**

**1999 to** | ** ** | **Six Months Ended****June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                                       | ** ** | **June 30, 2008)**                                                                       | ** ** | **2008**                              | ** ** | **2007** | ** ** |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                                                        |       |                                                                                          |       |                                  |       |   |   |
| Net (loss)                                                                                                                                       |       | $                                                                                             | (154,372   | )                                     | $          | (67,258 | ) | $ | (15,724 | ) |
|                                                                                                                                             |       |                                                                                          |       |                                  |       |   |   |
| Change in operating assets and liabilities:                                                                                                      |       |                                                                                          |       |                                  |       |   |   |
| Accrued expenses                                                                                                                                 |       | 16,184                                                                                        |       | 12,756                                |       | 4,045 |   |
| **Net cash utilized by operating activities**                                                                                                    |       | (138,188                                                                                      | )          | (54,502                               | )          | (11,679 | ) |
|                                                                                                                                             |       |                                                                                          |       |                                  |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                                                         |       | —                                                                                        |       | —                                |       | — |   |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                                                        | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| Proceeds from private placement/exercise of stock warrants                                                                                       |       | 5,500                                                                                         |       | —                                |       | — |   |
| Proceeds from convertible debt                                                                                                                   |       | 56,500                                                                                        |       | —                                |       | 9,500 |   |
| Capital contribution                                                                                                                             |       | 8,000                                                                                         |       | —                                |       | — |   |
| Proceeds from private placement                                                                                                                  |       | 1,962,358                                                                                     |       | —                                |       | — |   |
| Cash dividends in lieu of Preferred Stock                                                                                                        |       | (1,490                                                                                        | )          | (1,490                                | )          | — |   |
| **Net cash provided by (used in) financing  activities**                                                                                         |       | 2,030,868                                                                                     |       | (1,490                                | )          | 9,500 |   |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS**                                                                                        |       | 1,892,680                                                                                     |       | (55,992                               | )          | (2,179 | ) |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **CASH AND CASH EQUIVALENTS, AT BEGINNING OF  PERIOD**                                                                                           |       | 11,661                                                                                        |       | 1,960,333                             |       | 2,691 |   |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **CASH AND CASH EQUIVALENTS, AT END OF PERIOD**                                                                                                  |       | $                                                                                             | 1,904,341  |                                  | $          | 1,904,341 |   | $ | 512 |   |
| ** **                                                                                                                                       | ** ** | ** **                                                                                    | ** ** | ** **                            | ** ** | ** ** | ** ** |
| **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     |                                  | $          | — |   | $ | — |   |
| 68 Private Placement Units were issued in exchange for $8,000 of  stock subscriptions plus $2,200 of accrued interest                            |       | $                                                                                             | 10,200     |                                  | $          | — |   | $ | — |   |

 

See notes to interim condensed financial statements.

 

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## **Table of Contents**

 

## **CHASE PACKAGING CORPORATION**

## **(A Development Stage Company)**

## **NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS**

## **JUNE 30, 2008**

## **(Unaudited)**

## ** **

**NOTE 1 - BASIS OF PRESENTATION:**

 

ChasePackaging Corporation (the “Company”), a Texas Corporation, manufactured wovenpaper mesh for industrial applications and polypropylene mesh fabric bags foragricultural use and distributed agricultural packaging manufactured by othercompanies.  The Company was awholly-owned subsidiary of TGC Industries, Inc. through July 31,1996.

 

TheCompany had experienced losses for past years, and the Company’s secured lenderdecided not to renew the Company’s operating line of credit.  As a result, the Company’s Board of Directors(the “Board”) determined that it was in the best interest of the Company andall of its creditors to liquidate in an orderly fashion.

 

OnJune 25, 1997, the Company announced to employees and creditors that itwould begin an orderly liquidation of all its assets beginning at the close ofbusiness on June 30, 1997.  On July 25,1997, the Company notified its creditors by mail that it would commence with anorderly liquidation of all its remaining assets outside of a formal bankruptcyor receivership proceeding in a manner intended to maximize asset values.  Liquidation of the Company’s assets wascompleted as of December 31, 1997.

 

SinceJanuary 1, 1999, the Board has been devoting its efforts to establishing anew business and accordingly, the Company is being treated as a developmentstage company in accordance with Statement of Financial Accounting Standards No. 7.

 

Management’splans for the Company include securing a merger or acquisition, raisingadditional capital and other strategies designed to optimize shareholdervalue.  However, no assurance can begiven 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 of operationsand ability to continue as a going concern.

 

Theaccompanying condensed financial statements of the Company have been preparedin accordance with accounting principles generally accepted in the UnitedStates (“US GAAP”) for interim financial information and the instructions to Form 10-Q.  Accordingly, they do not include all of theinformation and footnotes required by US GAAP for complete financialstatements.  In the opinion of theCompany’s management, all adjustments (consisting only of normal recurringaccruals) considered necessary for a fair presentation have been included.  Operating results for the six and three monthperiods ended June 30, 2008, are not necessarily indicative of the resultsthat may be expected for the full fiscal year ending December 31,2008.  The accompanying condensedfinancial statements should be read in conjunction with the audited financialstatements of the Company for the fiscal year ended December 31, 2007.

 

**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 

 

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stockequivalents which consist of warrants that could potentially dilute basic lossper share in the future that were not included in diluted loss per sharebecause their effect on the periods presented was antidilutive were 21,721,000and 1,365,000 as of June 30, 2008 and 2007, respectively.

 

**NOTE 3 - RECENT ACCOUNTING PRONOUCEMENTS:**

 

The accounting policies followed by the Company areset forth in Note 2 to the Company’s financial statements included in itsAnnual Report on Form 10-KSB for the year ended December 31, 2007,which is incorporated herein by reference. Specific reference is made to this report for a description of theCompany’s securities and the notes to financial statements.

 

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 allnonfinancial assets and nonfinancial liabilities, except those that arerecognized or disclosed at fair value in the financial statements on arecurring basis (at least annually), to fiscal years beginning after November 15,2008 and interim periods within those fiscal years. The implementation of SFAS No. 157for financial assets and liabilities, effective January 1, 2008, did nothave an impact on the Company’s financial position and results ofoperations.  The Company is currentlyevaluating the impact of adoption of this statement on its  non-financial assets and liabilities in the firstquarter of fiscal 2009.

 

In December 2007, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141.The statement retains the purchase method of accounting for acquisitions, butrequires a number of changes, including changes in the way assets andliabilities are recognized in the purchase accounting. It also changes therecognition of assets acquired and liabilities assumed arising fromcontingencies, requires the capitalization of in-process research anddevelopment at fair value, and requires the expensing of acquisition-relatedcosts as incurred. SFAS No. 141R is effective for business combinationsfor which the acquisition date is on or after the beginning of the first annualreporting period beginning on or after December 15, 2008.

 

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 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 

 

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cash flows. It is effective for financial statementsissued for fiscal years and interim periods beginning after  November 15, 2008, with early applicationencouraged. The Company is currently evaluating the impact of adopting SFAS. No. 161on its financial statements.

 

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

 

TheCompany 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 as the Common Stockwas selling for less than $0.10 per share at the time of the closing whichapproximates fair value.  Gross proceedsfrom the offering were $2,000,100, less approximately $38,000 of offeringexpenses, resulting in net proceeds of approximately $1,962,000.

 

Dividendson the Series A Preferred Stock are payable semi-annually in cash or inkind at the discretion of the Board.

 

**NOTE 5 - DIVIDENDS:**

 

On May 8, 2008, the Company announced that theBoard 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 A Preferred Stockwith a fair value of $99,400 and $1,491 cash in lieu of fractional shares.  Due to the absence of Retained Earnings, thecash and $994 par value of Preferred Stock dividend totaling $2,485 was chargedagainst Additional Paid-in Capital.

 

**NOTE 6 - SHAREHOLDERS’ EQUITY:**

 

TheCompany’s 2008 Stock Awards Plan (the “2008 Plan”) was approved at the Company’sannual 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 the form of any award to any one participant, ofwhich a maximum of (i) 50,000 shares may be granted to a participant inthe form of stock options and (ii) 30,000 shares may be granted to aparticipant in the form of Common Stock or restricted stock.  The 2008 Plan will be administered by acommittee of the Board of Directors. Employees, including any employee who is also a director or an officer,consultants and outside directors of the Company are eligible to participate inthe 2008 Plan.  ** **As of June 30, 2008 no options wereissued under the 2008 Plan.

 

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

 

**Forward-Looking Statements**

 

*The information in this report on Form 10-Q contains forward-lookingstatements within the meaning of the Private Securities Litigation Reform Actof 1995.  This Act provides a “safeharbor” for forward-looking statements to encourage companies to provideprospective information about themselves provided they identify thesestatements as forward looking and provide meaningful cautionary statementsidentifying important factors that could cause actual results to differ fromthe projected results.  All statementsother than statements of historical fact made in this report are forwardlooking.  In particular, the statementsherein regarding industry prospects and future results of operations orfinancial position are forward-looking statements. Forward-looking statementsreflect management’s current expectations and are inherently uncertain.  The Company’s actual results may differsignificantly from management’s expectations as a result of many factors.*

 

*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**

 

Duringthe quarter ended June 30, 2008, the Company had no operations and itsonly income was from interest income on its short-term investments which areclassified as cash and cash equivalents. General and administrative expensesfor the six-month and three-month periods ending June 30, 2008 were$87,233 and $53,636, respectively, compared to $14,297 and $6,597 for thecomparable periods of 2007; the increases of $72,936 and $47,039 were primarilydue to increased professional fees.  TheCompany had interest income of $19,975 and a net loss of $67,258 during thesix-month period ended June 30, 2008, compared with interest income of $65and a net loss of $15,724 during the comparable period of 2007.  The Company had interest income of $7,857 anda net loss of $45,779 during the three-month period ended June 30, 2008,compared with interest income of $25 and a net loss of $7,366 during thecomparable period of 2007. The interest income increases were due to interestearned on cash balances invested in cash equivalents.

 

CommencingNovember 1, 2007, the Company’s Board agreed to pay the Company’s ChiefFinancial Officer an annual salary of $17,000. No other officers or directors of the Company receive compensation otherthan reimbursement of out-of-pocket expenses incurred in connection withCompany business and development.

 

Dueto the closing of a private placement of the Company’s securities in the thirdquarter 2007, the Company’s cash and cash equivalents balance as of June 30,2008 was $1,904,341.  The proceeds from the 2007 private placementwill assist management with its plans to secure a suitable merger partnerwishing to go public or attempt to acquire private companies to createinvestment value for the Company.

 

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**Liquidity and Capital Resources**

 

AtJune 30, 2008, the Company had cash and cash equivalents of approximately$1,904,000.  Cash and cash equivalentsconsist of cash held in banks and brokerage firms.  Working capital at June 30, 2008 wasapproximately $1,873,000.  Managementbelieves that its cash and cash equivalents are sufficient for its businessactivities for at least the next 12 months and for the costs of seeking anacquisition of an operating business.

 

Netcash of approximately $54,500 and $11,700 were used in operations during thesix-month period ending June 30, 2008 and 2007, respectively. The increaseof approximately $42,800 was primarily due to professional fees incurred.

 

Nocash flows were used or provided by investing activities for each of theperiods presented.

 

TheCompany recorded $1,490 of cash distributions as cash used by  financing activities during the secondquarter of 2008; $9,500 of cash was provided by financing activities during thesecond quarter of 2007 from proceeds of convertible debt.

 

**Factors Which May Affect Future Results**

 

Futureearnings of the Company are dependent on interest rates earned on the Company’sinvested balances and expenses incurred. The Company expects to incur significant expenses in connection with itsobjective of identifying a merger partner or acquiring an operating business.

 

**Recent Accounting Pronouncements**

 

SeeNote 3 “Recent Accounting Pronouncements” in the Notes to Financial Statementsin Item 1 for a full description of recent accounting pronouncements, includingthe expected dates of adoption and estimated effects on results of operationsand financial condition, which is incorporated herein.

 

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

 

Notapplicable.

 

**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.

 

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(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.

 

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**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.**

 

TheCompany’s annual meeting of shareholders was held on June 3, 2008.  The following four matters were voted uponand approved by the Company’s shareholders:

 

(1)          The shareholders approvedthe election of the following individuals as directors of the Company:

 
| **Name**           | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|--------------------|------------|------------|------------|--------------|------------|
| Allen T. McInnes   |       | 24,588,224 |       | 92,144       |       |
| William J. Barrett |       | 24,600,725 |       | 79,643       |       |
| Herbert M. Gardner |       | 24,600,725 |       | 79,643       |       |
| Edward L. Flynn    |       | 24,619,807 |       | 60,561       |       |

 

(2)          The shareholders approved,with 24,607,422 affirmative votes, 19,022 negative votes, and 53,924abstentions, the proposal to increase the authorized shares of Company’s CommonStock to 200,000,000.

 

(3)          The shareholders approved,with 22,727,695 affirmative votes, 205,419 negative votes, 15,289 abstentionsand 1,731,965 broker non-votes, the proposal to adopt the 2008 Stock AwardsPlan.

 

(4)          The shareholders approved,with 24,626,199 affirmative votes, 326 negative votes, and 53,923 abstentions,the proposal to ratify the selection of Lazar Levine & Felix LLP asthe Company’s independent registered public accounting firm for the year endingDecember 31, 2008.

 

**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.                                                                                                                                                                                                                                                                              |
|       |       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
|       | 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.                                                                                                                            |

 

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|   | 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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*filedherewith

 

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**SIGNATURES**

** **

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 

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

 

 

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