Table of Contents

 

 

 

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended September 30, 2010**

 

**OR**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                    to                    **

 

**Commission File Number: 0-21609**

 

**CHASE PACKAGING CORPORATION**

(Exact name of registrant as specified in itscharter)

 

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

 

**636 River Road, Fair Haven, NewJersey  07704**

(Address of principal executive offices)  (ZipCode)

 

**(732) 741-1500**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes x   Noo

 

Indicate by check mark whetherthe registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).  Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “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) |   |                              |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act.  Yes x   No o

 

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

 

| **Class**                               | ** ** | **Outstanding at November 12,  2010** |
|-----------------------------------------|------------|---------------------------------------|
| 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, 2010 (Unaudited) and December 31, 2009                                                                                                                      |       | 1           |
|       |       |                                                                                                                                                                                                       |       |        |
|       |       | Condensed  Statements of Operations (Unaudited) - Cumulative Period During the  Development Stage (January 1, 1999 to September 30, 2010) and the Nine and  Three Months Ended September 30, 2010 and 2009 |       | 2           |
|       |       |                                                                                                                                                                                                       |       |        |
|       |       | Condensed  Statements of Cash Flows (Unaudited) - Cumulative Period During the  Development Stage (January 1, 1999 to September 30, 2010) and the Nine Months  Ended September 30, 2010 and 2009           |       | 3           |
|       |       |                                                                                                                                                                                                       |       |        |
|       |       | Notes to Interim Condensed Financial Statements  (Unaudited)                                                                                                                                               |       | 4           |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 2     |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                |       | 9           |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 3     |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                |       | 10          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 4     |       | Controls and  Procedures                                                                                                                                                                                   |       | 10          |
|       |       |                                                                                                                                                                                                       |       |        |
| PART II    |       | Other Information                                                                                                                                                                                          |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 1.    |       | Legal Proceedings.                                                                                                                                                                                         |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 2.    |       | Unregistered  Sales of Equity Securities and Use of Proceeds.                                                                                                                                              |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 3.    |       | Defaults  upon Senior Securities.                                                                                                                                                                          |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 4.    |       | Reserved.                                                                                                                                                                                                  |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 5.    |       | Other Information.                                                                                                                                                                                         |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| ITEM 6.    |       | Exhibits.                                                                                                                                                                                                  |       | 11          |
|       |       |                                                                                                                                                                                                       |       |        |
| SIGNATURES |       | 13                                                                                                                                                                                                         |
|       |       |                                                                                                                                                                                                       |
| EXHIBITS   |       |                                                                                                                                                                                                       |

 

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**PARTI.  FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

 

**CHASEPACKAGING CORPORATION**

**(ADevelopment Stage Company)**

**CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                                                                  | ** ** | **September 30,********2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                                                  | ** ** | **(unaudited)**                    | ** ** | ** **                  | ** ** |
| **- ASSETS -**                                                                                                                                                                                                                              | ** ** | ** **                         |       |                        |       |
| ** **                                                                                                                                                                                                                                  | ** ** | ** **                         |       |                        |       |
| **CURRENT ASSETS:**                                                                                                                                                                                                                         | ** ** | ** **                         |       |                        |       |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| Cash  and cash equivalents                                                                                                                                                                                                                  |       | $                                  | 1,600,031  |                        | $          | 1,671,574 |   |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **TOTAL ASSETS**                                                                                                                                                                                                                            |       | $                                  | 1,600,031  |                        | $          | 1,671,574 |   |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **- LIABILITIES AND SHAREHOLDERS’  EQUITY -**                                                                                                                                                                                          | ** ** | ** **                         |       |                        |       |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **CURRENT LIABILITIES:**                                                                                                                                                                                                                    | ** ** | ** **                         |       |                        |       |
| Accounts  payable and accrued expenses                                                                                                                                                                                                      |       | $                                  | 4,172      |                        | $          | 2,509 |   |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                                                                                               |       | 4,172                              |       | 2,509                       |       |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                                                                                           |       |                               |       |                        |       |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                                                                                              |       |                               |       |                        |       |
| Preferred  Stock $1.00 par value; 4,000,000 authorized: Series A 10% Convertible  Preferred Stock; 50,000 shares authorized; 17,078 shares issued and  outstanding in 2010 and 2009; liquidation preference of $1,707,800 in 2010  and 2009 |       | 17,078                             |       | 17,078                      |       |
| Common  stock, $.10 par value, 200,000,000 authorized: 15,536,275 shares issued and  outstanding in 2010 and 2009                                                                                                                           |       | 1,553,628                          |       | 1,553,628                   |       |
| Additional  paid-in capital                                                                                                                                                                                                                 |       | 4,079,945                          |       | 4,079,945                   |       |
| Accumulated  deficit                                                                                                                                                                                                                        |       | (3,626,121                         | )          | (3,626,121                  | )          |
| Deficit  accumulated during the development stage                                                                                                                                                                                           |       | (428,671                           | )          | (355,465                    | )          |
| **TOTAL  SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                        |       | 1,595,859                          |       | 1,669,065                   |       |
|                                                                                                                                                                                                                                        |       |                               |       |                        |       |
| **TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                        |       | $                                  | 1,600,031  |                        | $          | 1,671,574 |   |

 

Seenotes to interim condensed financial statements.

 

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**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                 | ** ** | **Cumulative  During the  Development  Stage (January 1,  1999 to  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** | **Three Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2010)**                                                                                                   | ** ** | **2010**                                            | ** ** | **2009**                                             | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                 | ** ** | ** **                                                                                                  | ** ** | ** **                                          | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                                                              |       | $                                                                                                           | —     |                                                | $          | —                                               |       | $ | — |   | $ | — |   | $ | — |   |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **EXPENSES:**                                                              |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| General  and administrative expenses                                       |       | 479,219                                                                                                     |       | 73,832                                              |       | 77,840                                               |       | 15,096 |   | 14,776 |   |
| **LOSS FROM OPERATIONS**                                                   |       | (479,219                                                                                                    | )          | (73,832                                             | )          | (77,840                                              | )          | (15,096 | ) | (14,776 | ) |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **OTHER  INCOME (EXPENSE)**                                                |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| Interest  expense                                                          |       | (8,591                                                                                                      | )          | —                                              |       | —                                               |       | — |   | — |   |
| Interest  and other income                                                 |       | 59,139                                                                                                      |       | 626                                                 |       | 2,510                                                |       | 212 |   | 236 |   |
| **TOTAL  OTHER INCOME**                                                    |       | 50,548                                                                                                      |       | 626                                                 |       | 2,510                                                |       | 212 |   | 236 |   |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                               |       | (428,671                                                                                                    | )          | (73,206                                             | )          | (75,330                                              | )          | (14,884 | ) | (14,540 | ) |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| Provision  for income taxes                                                |       | —                                                                                                      |       | —                                              |       | —                                               |       | — |   | — |   |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **NET LOSS**                                                               |       | $                                                                                                           | (428,671   | )                                                   | $          | (73,206                                              | )          | $ | (75,330 | ) | $ | (14,884 | ) | $ | (14,540 | ) |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **BASIC AND DILUTED LOSS PER COMMON SHARE**                                |       |                                                                                                        |       | $                                                   | —     |                                                 | $          | — |   | $ | — |   | $ | — |   |
|                                                                       |       |                                                                                                        |       |                                                |       |                                                 |       |   |   |   |   |
| **WEIGHTED AVERAGE COMMON SHARES****OUTSTANDING – BASIC AND DILUTED** |       |                                                                                                        |       | 15,536,275                                          |       | 15,536,275                                           |       | 15,536,275 |   | 15,536,275 |   |

 

Seenotes to interim condensed financial statements.

 

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**CHASEPACKAGING CORPORATION**

**(ADevelopment Stage Company)**

**CONDENSEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                                            | ** ** | **Cumulative  During the  Development  Stage (January 1,  1999 to  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                            | ** ** | **2010)**                                                                                                   | ** ** | **2010**                                            | ** ** | **2009** | ** ** |
| ** **                                                                                                            | ** ** | ** **                                                                                                  | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                             | ** ** | ** **                                                                                                  | ** ** | ** **                                          |       |   |   |
| Net  loss                                                                                                             |       | $                                                                                                           | (428,671   | )                                                   | $          | (73,206 | ) | $ | (75,330 | ) |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **Change  in assets and liabilities**:                                                                                |       |                                                                                                        |       |                                                |       |   |   |
| Accounts  payable and accrued expenses                                                                                |       | (11,007                                                                                                     | )          | 1,663                                               |       | (6,904 | ) |
| **Net cash (used in) operating activities**                                                                           |       | (439,678                                                                                                    | )          | (71,543                                             | )          | (82,234 | ) |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                              |       | —                                                                                                      |       | —                                              |       | — |   |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                             |       |                                                                                                        |       |                                                |       |   |   |
| Proceeds from convertible debt                                                                                        |       | 56,500                                                                                                      |       | —                                              |       | — |   |
| Proceeds  from private placement/exercise of stock warrants                                                           |       | 5,500                                                                                                       |       | —                                              |       | — |   |
| Capital contribution                                                                                                  |       | 8,000                                                                                                       |       | —                                              |       | — |   |
| Proceeds from private placement                                                                                       |       | 1,962,358                                                                                                   |       | —                                              |       | — |   |
| Cash dividends in lieu of preferred stock                                                                             |       | (4,310                                                                                                      | )          | —                                              |       | — |   |
| **Net cash provided by financing activities**                                                                         |       | 2,028,048                                                                                                   |       | —                                              |       | — |   |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**                                                              |       | 1,588,370                                                                                                   |       | (71,543                                             | )          | (82,234 | ) |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD**                                                                 |       | 11,661                                                                                                      |       | 1,671,574                                           |       | 1,769,739 |   |
|                                                                                                                  |       |                                                                                                        |       |                                                |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT END OF PERIOD**                                                                       |       | $                                                                                                           | 1,600,031  |                                                | $          | 1,600,031 |   | $ | 1,687,505 |   |
| ** **                                                                                                            |       |                                                                                                        |       |                                                |       |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION**                                                                                |       |                                                                                                        |       |                                                |       |   |   |
| Cash  paid for:                                                                                                       |       |                                                                                                        |       |                                                |       |   |   |
| Interest                                                                                                              |       | $                                                                                                           | —     |                                                | $          | — |   | $ | — |   |
| Income  taxes                                                                                                         |       | $                                                                                                           | —     |                                                | $          | — |   | $ | — |   |
| ** **                                                                                                            |       |                                                                                                        |       |                                                |       |   |   |
| **NON-CASH INVESTING AND FINANCING ACTIVITIES:**                                                                      |       |                                                                                                        |       |                                                |       |   |   |
| Preferred stock issued as stock dividend                                                                              |       | $                                                                                                           | 3,260      |                                                | $          | — |   | $ | — |   |
| 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     |                                                | $          | — |   | $ | — |   |

 

Seenotes to interim condensed financial statements.

 

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**CHASE PACKAGINGCORPORATION**

**(ADevelopment Stage Company)**

**NOTES TOINTERIM CONDENSED FINANCIAL STATEMENTS**

**September 30,2010**

**(Unaudited)**

 

**NOTE 1 –OPERATIONS AND BASIS OF PRESENTATION:**

 

Chase Packaging Corporation(“the Company”), a Texas corporation, previously manufactured woven paper meshfor industrial applications, manufactured polypropylene mesh fabric bags foragricultural use, and distributed agricultural packaging manufactured by othercompanies.

 

Since January 1, 1999,the Board of Directors of the Company has been devoting its efforts toestablish a new business and, accordingly, the Company is considered to be adevelopment stage company in accordance with the Financial Accounting StandardsBoard’s (“FASB”) Accounting Standards Codification (“ASC”) 915.

 

Management’s plans for theCompany include securing a merger or acquisition, raising additional capital,and/or other strategies designed to optimize shareholder value. However, noassurance can be given that management will be successful in its efforts. Thefailure to achieve these plans will have a material adverse effect on theCompany’s financial position, results of operations, and ability to continue asa going concern.

 

The interim condensedfinancial statements included herein have been prepared by the Company, withoutaudit, pursuant to the rules and regulations of the Securities andExchange Commission (the “SEC”). Certain information and footnote disclosuresnormally included in the financial statements prepared in accordance withgenerally accepted accounting principles (“U.S. GAAP”) have been condensed oromitted pursuant to such rules and regulations, although we believe thatthe disclosures made are adequate to provide for fair presentation and areasonable understanding of the information presented. The Interim CondensedFinancial Statements and Management’s Discussion and Analysis of FinancialCondition and Results of Operations included in this Form 10-Q should beread in conjunction with the financial statements and the related notes, aswell as Management’s Discussion and Analysis of Financial Condition and Resultsof Operations, included in the Company’s Annual Report on Form 10-K forthe fiscal year ended December 31, 2009, previously filed with the SEC.

 

In the opinion ofmanagement, all adjustments (which include normal recurring adjustments)necessary to present a fair statement of financial position as of September 30,2010, results of operations for the three- and nine-month periods ended September 30, 2010 and 2009, and cashflows for the nine-month periods ended September 30, 2010 and 2009, asapplicable, have been made. The results of operations for the three-  and nine-month periods endedSeptember 30, 2010 are not necessarily indicative of the operating resultsfor the full fiscal year or any future periods.

 

Theaccounting policies followed by the Company are set forth in Note 2 to theCompany’s financial statements included in its Annual Report on Form 10-Kfor the year ended December 31, 2009, which is incorporated herein byreference.  Specific reference is made tothat report for a description of the Company’s securities and the notes tofinancial statements.

 

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**NOTE 2 –BASIC AND DILUTED NET LOSS PER COMMON SHARE:**

 

Basic net loss per commonshare is computed by dividing the net loss by the weighted-average number ofcommon shares outstanding.  Diluted net loss per share is computed bydividing the net loss by the sum of the weighted-average number of commonshares outstanding plus the dilutive effect of shares issuable through the exerciseof common stock equivalents.

 

We have excluded 23,987,000and 22,445,000 common stock equivalents (warrants) from the calculation ofdiluted loss per share for the periods ended September 30, 2010 and 2009,respectively, which, if included, would have an antidilutive effect.

 

**NOTE 3 -RECENT ACCOUNTING PRONOUNCEMENTS:**

 

In January of 2010, theFASB issued guidance which clarified that the stock portion of a distributionto shareholders that allows them to elect to receive cash or stock with apotential limitation on the total amount of cash that all shareholders canelect to receive in the aggregate is considered a share issuance that isreflected in earnings (loss) per share prospectively and is not a stockdividend.  This update is effective forinterim and annual periods ending on or after December 15, 2009, andshould be applied on a retrospective basis. The adoption of this guidance had no impact on the Company’s interimcondensed financial statements.

 

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

 

On September 7, 2007,the Company completed a private placement pursuant to which 13,334 units (the “Units”)were sold at a per Unit cash purchase price of $150, for a total subscribedamount of $2,000,100. Each Unit consists of: (1) one share of Series A10% convertible preferred stock, par value $1.00, stated value $100 (the “PreferredStock”); (2) 500 shares of the Company’s common stock, par value $0.10(the “Common Stock”); and (3) 500 warrants (the “Warrants”) exercisableinto Common Stock on a one-for-one basis.

 

Each Warrant contained in aUnit has a term of five years during which such Warrant may be exercised, at$0.15 per share, for one share of the Common Stock. A total of 6,605 Units werepurchased by related parties, including significant shareholders. The exerciseprice of the Warrants is subject to adjustment to reflect recapitalizations,stock dividends, mergers, stock splits, and similar events that would otherwisedilute the relative number of shares of Common Stock for which the Warrants maybe exercised.

 

Each share of PreferredStock contained in a Unit has a stated value of $100 and is convertible at anytime into Common Stock at a rate of $0.10 per share. The conversion price ofthe Preferred Stock is subject to adjustment to reflect recapitalizations,stock dividends, mergers, stock splits, and similar events that would otherwisedilute the relative number of shares of Common Stock into which the PreferredStock may be converted.

 

There are 4,000,000 sharesof Preferred Stock currently authorized for issuance. At the discretion of theCompany’s Board of Directors, the Company may pay to the holders of thePreferred Stock a semi-annual dividend of ten percent payable in cash or inkind (i.e., in additional shares of Preferred Stock) or any combinationthereof. The holder of each share of Preferred Stock has one vote for eachunderlying share of Common Stock as if such Preferred Stock had been converted.At any time prior to conversion, the Company’s Board of Directors may redeemany portion or all of the Preferred Stock at a price of $100 per share ofPreferred Stock. Each share of Preferred Stock will have a liquidation value of$100 per share. At any time after August 2, 2011, the holders of 66 2/3%or more of the shares of Preferred Stock then outstanding may request theliquidation of their Preferred Stock. In the event that, at the time of suchrequested liquidation, the Company’s

 

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cash funds (in excess of a$50,000 reserve fund) then available to effect such liquidation are inadequatefor such purpose, the requested liquidation shall take place (on a pro-ratabasis) only to the extent such excess cash funds are available for suchpurpose. In the event of a merger transaction approved by the holders of theCommon Stock, the holders of the Preferred Stock will have the right to a cashpayment of $100 per share in connection with such merger, or the PreferredStock will be automatically converted at the then applicable conversion rate.

 

There was no beneficialconversion feature recorded since the Common Stock was selling for less than$0.10 per share (which approximated fair value) at the time of the closing.

 

Legal and professional feesof approximately $38,000 were incurred in connection with this privateplacement transaction resulting in net proceeds of approximately $1,962,000.

 

**NOTE 5 –DIVIDENDS:**

 

OnNovember 2, 2009, the Company announced that the Board of Directors haddeclared a ten percent stock dividend on its outstanding Series A 10%Convertible Preferred Stock. Shareholders of record as of November 16, 2009, received the stockdividend for each share of Series A Preferred Stock owned on that date,payable December 1, 2009.   As of November 2,2009, the Company had 15,536 shares of Preferred Stock outstanding; the totaldividend paid consisted of 1,542 shares of Series A Preferred Stock with afair value of $154,200 and $1,160 cash in lieu of fractional shares.  Due to the absence of Retained Earnings, the$1,160 of cash and $1,542 par value of Preferred Stock dividend totaling $2,702were charged against Additional Paid-in Capital.

 

**NOTE 6 -SHAREHOLDERS’ EQUITY:**

 

The Company’s 2008 StockAwards Plan (the “2008 Plan”) was approved at the Company’s annual meeting ofshareholders held on June 3, 2008. The 2008 Plan became effective April 9, 2008, and will terminate onApril 8, 2018.  Subject to certainadjustments, 2,000,000 shares of Common Stock may be issued pursuant to awardsunder the 2008 Plan.  A maximum of 80,000shares may be granted in any one year in any form to any one participant, ofwhich a maximum of:  (i) 50,000shares may be granted to a participant in the form of stock options; and (ii) 30,000shares may be granted to a participant in the form of Common Stock orrestricted stock.  The 2008 Plan will beadministered by a committee of the Board of Directors.  Employees, including any employee who is alsoa director or an officer, consultants, and outside directors of the Company,are eligible to participate in the 2008 Plan. ** **As of September 30, 2010, no options had been issued under the 2008Plan.

 

**NOTE 7 -FAIR VALUE MEASUREMENTS:**

 

TheCompany adopted FASB’s ASC 820 “Fair Value Measurements” as it applies to itsfinancial instruments, and FASB’s ASC 820 “The Fair Value Option for FinancialAssets and Financial Liabilities” (including an amendment which defines fairvalue), which outline a framework for measuring fair value and detail therequired disclosures about fair value measurements, which permits companies toirrevocably choose to measure certain financial instruments and other items atfair value. ASC 820 also establishes presentation and disclosure requirementsdesigned to facilitate comparison between entities that choose differentmeasurement attributes for similar types of assets and liabilities.

 

UnderASC 820, fair value is defined as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date in the principal or most advantageousmarket. ASC 820 establishes a hierarchy in determining the fair value of anasset or liability. The

 

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fairvalue hierarchy has three levels of inputs, both observable and unobservable.ASC 820 requires the utilization of the lowest possible level of input todetermine fair value. Level 1 inputs include quoted market prices in an activemarket for identical assets or liabilities. Level 2 inputs are market data,other than Level 1, that are observable either directly or indirectly. Level 2inputs include quoted market prices for similar assets or liabilities, quotedmarket prices in an inactive market, and other observable information that canbe corroborated by market data. Level 3 inputs are unobservable andcorroborated by little or no market data.

 

Exceptfor those assets and liabilities which are required by authoritative accountingguidance to be recorded at fair value in the Company’s balance sheets, theCompany has elected not to record any other assets or liabilities at fairvalue, as permitted by ASC 820. No events occurred during the six months ended June 30,2010 which would require adjustment to the recognized balances of assets orliabilities which are recorded at fair value on a nonrecurring basis.

 

TheCompany determines fair values for its investment assets as follows:

 

Cashequivalents at fair value — the Company’s cash equivalents, at fair value,consist of money market funds and treasury bills — marked to market. TheCompany’s money market funds and treasury bills are classified within Level 1of the fair value hierarchy since they are valued using quoted market pricesfrom an exchange.

 

Thefollowing table provides information on those assets and liabilities measuredat fair value on a recurring basis.

 
| ** **         | ** ** | **Carrying Amount********In Balance Sheet********September 30,  2010** | ** ** | **Fair Value********September 30,  2010** | ** ** | **Fair Value Measurement Using** | ** ** |
|--------------------|------------|--------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **         | ** ** | **(unaudited)**                                                                            | ** ** | **(unaudited)**                                     | ** ** | **Level 1**                                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:            |       |                                                                                       |       |                                                |       |                                            |       |   |   |   |   |
| Money Market Funds |       | $                                                                                          | 1,587,000  |                                                | $          | 1,587,000                                       |       | $ | 1,587,000 |   | $ | — |   | $ | — |   |
|                    |            |                                                                                            |            |                                                     |            |                                                 |            |  |  |  |  |  |  |  |  |  |

 
| ** **         | ** ** | **Carrying Amount********In Balance Sheet********December 31,** | ** ** | **Fair Value********December 31,** | ** ** | **Fair Value Measurement Using** | ** ** |
|--------------------|------------|-------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **         | ** ** | **2009**                                                                            | ** ** | **2009**                                     | ** ** | **Level 1**                                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:            |       |                                                                                |       |                                         |       |                                            |       |   |   |   |   |
| Money Market Funds |       | $                                                                                   | 633,000    |                                         | $          | 633,000                                         |       | $ | 633,000 |   | $ | — |   | $ | — |   |
| Treasury Bills     |       | $                                                                                   | 1,033,000  |                                         | $          | 1,033,000                                       |       | $ | 1,033,000 |   | $ | — |   | $ | — |   |

 

**NOTE 8 -COMMITMENTS AND CONTINGENCIES:**

 

CommencingNovember 1, 2007, the Company’s Board of Directors agreed to pay theCompany’s Chief Financial Officer an annual salary of $17,000. No otherofficers or directors of the Company receive compensation other thanreimbursement of out-of-pocket expenses incurred in connection with Companybusiness and development.

 

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**NOTE 9 -SUBSEQUENT EVENT:**

 

OnNovember 1, 2010, the Company announced that the Board of Directors haddeclared a ten percent stock dividend on its outstanding Series A 10%Convertible Preferred Stock. Shareholders of record as of November 15, 2010, will receive thestock dividend for each share of Series A Preferred Stock owned on thatdate, payable December 1, 2010.   Asof November 1, 2010, the Company had 17,078 shares of Preferred Stockoutstanding; the total dividend to be paid consists of 1,697 shares of Series APreferred Stock with a fair value of $169,700 and $1,080 cash in lieu offractional shares.  Due to the absence ofRetained Earnings, the $1,080 of cash and $1,697 par value of Preferred Stockdividend totaling $2,777 will be charged against Additional Paid-in Capital.

 

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

 

**Forward-LookingStatements**

 

*Theinformation 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 statements(other 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.*

 

*Youshould read the following discussion and analysis in conjunction with thefinancial statements of the Company and notes thereto, included herewith.  This discussion should not be construed toimply that the results discussed herein will necessarily continue into thefuture or that any conclusion reached herein will necessarily be indicative ofactual operating results in the future. Such discussion represents only the best present assessment ofmanagement.  The Company assumes noobligations to update any of these forward-looking statements.*

 

**Resultsof Operations**

 

Duringthe nine months and three months ended September 30, 2010, the Company hadno operations and its only income was from interest income on its money marketfund classified as cash and cash equivalents. General and administrativeexpenses for the nine-month and three-month periods ended September 30,2010 were $73,832 and $15,096, respectively, compared to $77,840 and $14,776for the comparable periods of 2009.  TheCompany had interest income of $626 and a net loss of $73,206 during thenine-month period ended September 30, 2010, compared with interest incomeof $2,510 and a net loss of $75,330 during the comparable period of 2009.  The Company had interest income of $212 and anet loss of $14,884 during the three-month period ended September 30,2010, compared with interest income of $236 and a net loss of $14,540 duringthe comparable period of 2009.  Theinterest income decrease was due to lower interest rates and a decrease in cashand cash equivalent balances.

 

Dueto the closing of a private placement of the Company’s securities in the thirdquarter 2007, the Company had a cash and cash equivalents balance as of September 30,2010 of $1,600,031.  The proceeds from the 2007 private placementwill assist management with its plans to attempt to secure a suitable mergerpartner wishing to go public or attempt to acquire private companies to createinvestment value for the Company’s shareholders.

 

**Liquidityand Capital Resources**

 

AtSeptember 30, 2010, the Company had cash and cash equivalents ofapproximately $1,600,000.  Cash and cashequivalents consist of cash held in a bank and at a brokerage firm.  Working capital at September 30, 2010was approximately $1,596,000.  Managementbelieves that the Company’s cash 

 

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andcash equivalents are sufficient to meet its business development activities anddeclaration of dividends for at least the next 12 months and for the costs ofacquiring an operating business.

 

Netcash of approximately $71,500 and $82,200 were used in operations during thenine-month periods ended September 30, 2010 and 2009, respectively.

 

Nocash flows were used or provided by investing activities during the nine-monthperiods ended September 30, 2010 and 2009, respectively

 

Nocash proceeds were provided by or used in financing activities during thenine-month periods ended September 30, 2010 and 2009, respectively

 

**FactorsWhich 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.

 

**RecentAccounting Pronouncements**

 

SeeNote 3 “*Recent Accounting Pronouncements*” in theNotes to Financial Statements in Item 1 for a full description of recentaccounting pronouncements, including the expected dates of adoption andestimated effects on results of operations and financial condition, which isincorporated herein.

 

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk.**

 

Notapplicable.

 

**Item 4.  Controls and Procedures.**

 

(a) Evaluationof Disclosure Controls and Procedures.

 

Under the supervision andwith the participation of our management, including our principal executiveofficer and principal financial and accounting 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 thisreport.  Based on this evaluation, ourprincipal executive officer and principal financial and accounting officerconcluded that, as of the period covered by this report, our disclosurecontrols and procedures were effective to provide reasonable assurance that theinformation required to be included in our SEC reports is recorded, processed,summarized, and reported within the time periods specified in SEC rules andforms.

 

(b) Changes in InternalControls over Financial Reporting.

 

In connection with theevaluation required by paragraph (d) of Rule 13a-15 under theExchange Act, there was no change identified in our internal control overfinancial reporting that occurred during the quarter that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

 

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**PART II. OTHER INFORMATION**

 

**Item 1.****                                     ****LegalProceedings.**

 

None.

 

**Item 2.****                                     ****UnregisteredSales of Equity Securities and Use of Proceeds.**

 

None.

 

**Item 3.****                                     ****Defaultsupon Senior Securities.**

 

None.

 

**Item 4.****                                     ****Reserved.**

 

**Item 5.****                                     ****OtherInformation.**

 

**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.                                         |

 

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| 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.                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1*  |   | Certification of the  Principal 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  Principal 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 and Accounting 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: November 12,  2010 | /s/ Allen T. McInnes                             |
|                          | Allen T. McInnes                                 |
|                          | Chairman of the Board,  President and Treasurer  |
|                          | (Principal Executive  Officer)                   |
|                          |                                             |
|                          |                                             |
| Date: November 12,  2010 | /s/ Ann C. W. Green                              |
|                          | Ann C. W. Green                                  |
|                          | Chief Financial Officer  and Assistant Secretary |
|                          | (Principal Financial and Accounting  Officer)    |

 

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