**Table of Contents**

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**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

** **

**x****  QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the quarterly period ended September 30, 2009**

 

**OR**

 

**o****   TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the transition period from                    to                    **

 

**Commission File Number:0-21609**

 

# **CHASE PACKAGING 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)

 

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark 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) duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes o  No o

 

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

 

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

 

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

 

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

 
| **Class**                               | ** ** | **Outstanding at November 12, 2009** |
|-----------------------------------------|------------|-------------------------------------------|
| 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, 2009 (Unaudited) and December 31, 2008                                                                                                                           | 1           |
|         |                                                                                                                                                                                                                      |        |
|         | Condensed Statements of  Operations (Unaudited) - Cumulative Period During the Development Stage  (January 1, 1999 to September 30, 2009) and the Nine and Three  Months Ended September 30, 2009 and 2008 | 2           |
|         |                                                                                                                                                                                                                      |        |
|         | Condensed Statements of Cash  Flows (Unaudited) - Cumulative Period During the Development Stage  (January 1, 1999 to September 30, 2009) and the Nine Months Ended  September 30, 2009 and 2008           | 3           |
|         |                                                                                                                                                                                                                      |        |
|         | Notes to  Interim Condensed Financial Statements (Unaudited)                                                                                                                                                              | 4           |
|         |                                                                                                                                                                                                                      |        |
| ITEM 2       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                               | 11          |
|         |                                                                                                                                                                                                                      |        |
| ITEM 3       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                               | 12          |
|         |                                                                                                                                                                                                                      |        |
| ITEM 4       | Controls and  Procedures                                                                                                                                                                                                  | 12          |
|         |                                                                                                                                                                                                                      |        |
| PART II | Other Information                                                                                                                                                                                                         | 13          |
|         |                                                                                                                                                                                                                      |
| EXHIBITS     | 14                                                                                                                                                                                                                        |
|         |                                                                                                                                                                                                                      |
| SIGNATURES   | 16                                                                                                                                                                                                                        |

 

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**PART I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

 

**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSED BALANCE SHEETS**

 
| ** **                                                                                                                                                                            | ** ** | **September 30,********2009** | ** ** | **December 31,   2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                                            | ** ** | **(unaudited)**                    | ** ** | ** **                   | ** ** |
| **- ASSETS  -**                                                                                                                                                                       |       |                               |       |                         |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **CURRENT ASSETS:**                                                                                                                                                                   |       |                               |       |                         |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| Cash and cash equivalents                                                                                                                                                             |       | $                                  | 1,687,505  |                         | $          | 1,769,739 |   |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **TOTAL ASSETS**                                                                                                                                                                      |       | $                                  | 1,687,505  |                         | $          | 1,769,739 |   |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **-  LIABILITIES AND SHAREHOLDERS’ EQUITY -**                                                                                                                                    |       |                               |       |                         |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **CURRENT LIABILITIES:**                                                                                                                                                              |       |                               |       |                         |       |
| Accounts payable and accrued expenses                                                                                                                                                 |       | $                                  | 450        |                         | $          | 7,354 |   |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                                         |       | 450                                |       | 7,354                        |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                                     |       |                               |       |                         |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                                        |       |                               |       |                         |       |
| Preferred Stock $1.00 par value; 4,000,000 authorized: Series A  10% Convertible; 50,000 authorized; 15,536 shares issued and outstanding;  liquidation preference of $1,553,600 |       | 15,536                             |       | 15,536                       |       |
| 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                                                                                                                                                            |       | 4,082,647                          |       | 4,082,647                    |       |
| Accumulated deficit                                                                                                                                                                   |       | (3,626,121                         | )          | (3,626,121                   | )          |
| Deficit accumulated during the development stage                                                                                                                                      |       | (338,635                           | )          | (263,305                     | )          |
| **TOTAL SHAREHOLDERS’ EQUITY**                                                                                                                                                   |       | 1,687,055                          |       | 1,762,385                    |       |
|                                                                                                                                                                                  |       |                               |       |                         |       |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                   |       | $                                  | 1,687,505  |                         | $          | 1,769,739 |   |

 

Seenotes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

## **CONDENSED STATEMENTS OFOPERATIONS**

**(Unaudited)**

 
| ** **                                                                  | ** ** | **Cumulative   During the   Development   Stage (January 1,  1999 to  September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** | **Three Months Ended********September 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2009)**                                                                                       | ** ** | **2009**                                        | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                                        | ** ** | ** **                                                                                      | ** ** | ** **                                      |       |                                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                                                               |       | $                                                                                               | —     |                                            | $          | —                                           |       | $ | — |   | $ | — |   | $ | — |   |
|                                                                        |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **EXPENSES:**                                                               |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| General and  administrative expenses                                        |       | 388,348                                                                                         |       | 77,840                                          |       | 138,564                                          |       | 14,776 |   | 51,331 |   |
| **LOSS  FROM OPERATIONS**                                                   |       | (388,348                                                                                        | )          | (77,840                                         | )          | (138,564                                         | )          | (14,776 | ) | (51,331 | ) |
|                                                                        |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **OTHER  INCOME (EXPENSE)**                                                 |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| Interest expense                                                            |       | (8,591                                                                                          | )          | —                                          |       | —                                           |       | — |   | — |   |
| Interest and  other income                                                  |       | 58,304                                                                                          |       | 2,510                                           |       | 27,634                                           |       | 236 |   | 7,658 |   |
| **TOTAL  OTHER INCOME**                                                     |       | 49,713                                                                                          |       | 2,510                                           |       | 27,634                                           |       | 236 |   | 7,658 |   |
|                                                                        |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                                |       | (338,635                                                                                        | )          | (75,330                                         | )          | (110,930                                         | )          | (14,540 | ) | (43,673 | ) |
|                                                                        |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| Provision for  income taxes                                                 |       | —                                                                                          |       | —                                          |       | —                                           |       | — |   | — |   |
| ** **                                                                  |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **NET  LOSS**                                                               |       | $                                                                                               | (338,635   | )                                               | $          | (75,330                                          | )          | $ | (110,930 | ) | $ | (14,540 | ) | $ | (43,673 | ) |
| ** **                                                                  |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **BASIC  AND DILUTED LOSS PER COMMON SHARE**                                |       |                                                                                            |       | $                                               | —     |                                             | $          | (.01 | ) | $ | — |   | $ | — |   |
| ** **                                                                  |       |                                                                                            |       |                                            |       |                                             |       |   |   |   |   |
| **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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## **CHASE PACKAGING CORPORATION**

## **(A Development StageCompany)**

## **CONDENSED STATEMENTS OF CASHFLOWS**

## **(Unaudited)**

## ** **

| ** **                                                                                                             | ** ** | **Cumulative   During the   Development   Stage (January 1,  1999 to  September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                             | ** ** | **2009)**                                                                                       | ** ** | **2009**                                        | ** ** | **2008** | ** ** |
| ** **                                                                                                             | ** ** | ** **                                                                                      | ** ** | ** **                                      | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                              | ** ** | ** **                                                                                      | ** ** | ** **                                      |       |   |   |
| Net loss                                                                                                               |       | $                                                                                               | (338,635   | )                                               | $          | (75,330 | ) | $ | (110,930 | ) |
|                                                                                                                   |       |                                                                                            |       |                                            |       |   |   |
| **Change in assets and liabilities**:                                                                                  |       |                                                                                            |       |                                            |       |   |   |
| Accounts payable and accrued expenses                                                                                  |       | (14,729                                                                                         | )          | (6,904                                          | )          | 7,714 |   |
| **Net cash (used in) operating activities**                                                                            |       | (353,364                                                                                        | )          | (82,234                                         | )          | (103,216 | ) |
|                                                                                                                   |       |                                                                                            |       |                                            |       |   |   |
| **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                                                                              |       | (3,150                                                                                          | )          | —                                          |       | (1,491 | ) |
| **Net cash provided by (used in) financing activities**                                                                |       | 2,029,208                                                                                       |       | —                                          |       | (1,491 | ) |
| ** **                                                                                                             |       |                                                                                            |       |                                            |       |   |   |
| **NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**                                                               |       | 1,675,844                                                                                       |       | (82,234                                         | )          | (104,707 | ) |
| ** **                                                                                                             |       |                                                                                            |       |                                            |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD**                                                                  |       | 11,661                                                                                          |       | 1,769,739                                       |       | 1,960,333 |   |
| ** **                                                                                                             |       |                                                                                            |       |                                            |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT END OF PERIOD**                                                                        |       | $                                                                                               | 1,687,505  |                                            | $          | 1,687,505 |   | $ | 1,855,626 |   |
| ** **                                                                                                             |       |                                                                                            |       |                                            |       |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION**                                                                                 |       |                                                                                            |       |                                            |       |   |   |
| Cash paid for:                                                                                                         |       |                                                                                            |       |                                            |       |   |   |
| Interest                                                                                                               |       | $                                                                                               | —     |                                            | $          | — |   | $ | — |   |
| Income taxes                                                                                                           |       | $                                                                                               | —     |                                            | $          | — |   | $ | — |   |
|                                                                                                                   |       |                                                                                            |       |                                            |       |   |   |   |   |   |
| **NONCASH INVESTING AND FINANCING ACTIVITIES:**                                                                        |       |                                                                                            |       |                                            |       |   |   |
| Preferred stock issued as stock dividend                                                                               |       | $                                                                                               | 1,718      |                                            | $          | — |   | $ | 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     |                                            | $          | — |   | $ | — |   |

 

Seenotes to interim condensed financial statements.

 

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## **Table of Contents**

 

## **CHASE PACKAGING CORPORATION**

## **(A Development StageCompany)**

## **NOTES TO INTERIM CONDENSEDFINANCIAL STATEMENTS**

## **September 30, 2009**

## **(Unaudited)**

## ** **

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

 

Chase Packaging Corporation (the “Company”),a Texas Corporation, previously manufactured woven paper mesh for industrialapplications, manufactured polypropylene mesh fabric bags for agricultural use,and distributed agricultural packaging manufactured by other companies.

 

SinceJanuary 1, 1999, the Board of Directors of the Company has been devotingits efforts to establish a new business and is considered to be a developmentstage company.

 

Management’s plans for the Company includesecuring a merger or acquisition, raising additional capital, and/or otherstrategies designed to optimize shareholder value. However, no assurance can begiven that management will be successful in its efforts. The failure to achievethese plans will have a material adverse effect on the Company’s financialposition, results of operations, and ability to continue as a going concern.

 

The interim condensed financial statementsincluded herein have been prepared by the Company, without audit, pursuant to therules and regulations of the Securities and Exchange Commission (the “SEC”).Certain information and footnote disclosures normally included in financialstatements prepared in accordance with generally accepted accounting principles(“U.S. GAAP”) have been condensed or omitted pursuant to such rules andregulations, although we believe that the disclosures made are adequate toprovide for fair presentation and a reasonable understanding of the informationpresented. The Condensed Financial Statements and Management’s Discussion andAnalysis of Financial Condition and Results of Operations included in this Form 10-Qshould be read in conjunction with the financial statements and the relatednotes, as well as Management’s Discussion and Analysis of Financial Conditionand Results of Operations, included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2008, previously filed with theSEC.

 

In the opinion of management, all adjustments(which include normal recurring adjustments) necessary to present a fairstatement of financial position as of September 30, 2009, and results ofoperations for the three and nine months ended September 30, 2009 and 2008and cash flows for the nine months ended September 30, 2009 and 2008, asapplicable, have been made. The results of operations for the three and ninemonths ended September 30, 2009 and 2008 are not necessarily indicative ofthe operating results for the full fiscal year or any future periods. We haveevaluated subsequent events for recognition or disclosure through November 16,  2009, which was the date we filed this Form 10-Qwith the SEC.

 

**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 theexercise of common stock equivalents.

 

We have excluded 22,445,000and 21,721,000 common stock equivalents (warrants) from the calculation ofdiluted loss per share for the periods ended September 30, 2009 and 2008,respectively, which, if included, would have an antidilutive effect.

 

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**NOTE 3 -RECENT ACCOUNTING PRONOUNCEMENTS:**

 

Effective July 1, 2009, the Companyadopted the Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall(“ASC 105-10”). ASC 105-10 establishes the FASB Accounting StandardsCodification (the “Codification”) as the source of authoritative accountingprinciples recognized by the FASB to be applied by nongovernmental entities inthe preparation of financial statements in conformity with U.S. GAAP. Rules andinterpretive releases of the SEC under authority of federal securities laws arealso sources of authoritative U.S. GAAP for SEC registrants. All guidancecontained in the Codification carries an equal level of authority. TheCodification superseded all existing non-SEC accounting and reportingstandards. All other non-grandfathered, non-SEC accounting literature notincluded in the Codification is non-authoritative. The FASB will not issue newstandards in the form of Statements, FASB Staff Positions or Emerging IssuesTask Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”).The FASB will not consider ASUs as authoritative in their own right. ASUs willserve only to update the Codification, provide background information about theguidance and provide the bases for conclusions on the change(s) in theCodification. References made to FASB guidance throughout this document havebeen updated for the Codification.

 

Effective January 1, 2008, the Companyadopted FASB ASC 820-10, Fair Value Measurements and Disclosures – Overall (“ASC820-10”) with respect to its financial assets and liabilities. In February 2008,the FASB issued updated guidance related to fair value measurements, which isincluded in the Codification in ASC 820-10-55, Fair Value Measurements andDisclosures – Overall – Implementation Guidance and Illustrations. The updatedguidance provided a one year deferral of the effective date of ASC 820-10 fornon-financial assets and non-financial liabilities, except those that arerecognized or disclosed in the financial statements at fair value at leastannually. Therefore, the Company adopted the provisions of ASC 820-10 fornon-financial assets and non-financial liabilities effective January 1,2009, and such adoption did not have a material impact on the Company’s resultsof operations or financial condition.

 

Effective April 1, 2009, the Companyadopted FASB ASC 320-10-65, Investments – Debt and Equity Securities – Overall –Transition and Open Effective Date Information (“ASC 320-10-65). ASC 320-10-65amends the other-than-temporary impairment (“OTTI”) guidance in U.S. GAAP tomake the guidance more operational and to improve the presentation ofother-than-temporary impairments in the financial statements. Prior to ASC320-10-65, if OTTI was determined to exist, the Company recognized an OTTI chargeinto earnings in an amount equal to the difference between the investment’samortized cost basis and its fair value as of the balance sheet date of thereporting period. Under ASC 320-10-65, if OTTI has been incurred, and it ismore likely than not that the Company will not sell the investment securitybefore the recovery of its amortized cost basis, then the OTTI is separatedinto (a) the amount representing the credit loss and (b) the amountrelated to all other factors. The amount of the total OTTI related to thecredit loss is recognized in earnings. The amount of the total OTTI related toother factors is recognized in accumulated other comprehensive income (“AOCI”).The total OTTI, which includes both credit and non-credit losses, is presentedgross in the Company’s statements of operations and is reduced by thenon-credit loss amount of the total OTTI that is recognized in AOCI. There wasno initial effect of adoption on April 1, 2009 as the Company has nosecurities other than temporarily impaired.

 

Effective April 1, 2009, the Companyadopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures – Overall –Transition and Open Effective Date Information (“ASC 820-10-65”). ASC 820-10-65provides additional guidance for estimating fair value in accordance with ASC820-10 when the volume and level of activity for an asset or liability havesignificantly decreased. ASC 820-10-65 also includes guidance on identifyingcircumstances that indicate a transaction is not orderly. The adoption of ASC 820-10-65did not have an impact on the Company’s results of operations or financialcondition.

 

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**NOTE 3 -RECENT ACCOUNTING PRONOUNCEMENTS (Continued):**

 

Effective April 1, 2009, the Companyadopted FASB ASC 825-10-65, Financial Instruments – Overall – Transition andOpen Effective Date Information (“ASC 825-10-65”). ASC 825-10-65 amends ASC825-10 to require disclosures about fair value of financial instruments ininterim financial statements as well as in annual financial statements and alsoamends ASC 270-10 to require those disclosures in all interim financialstatements. The adoption of ASC 825-10-65 did not have a material impact on theCompany’s results of operations or financial condition. See Note 9 foradditional disclosures included in accordance with ASC 825-10-65.

 

Effective April 1, 2009, the Companyadopted FASB ASC 855-10, Subsequent Events – Overall (“ASC 855-10”). ASC 855-10establishes general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before financial statements are issuedor are available to be issued. It requires the disclosure of the datethrough which an entity has evaluated subsequent events and the basis for thatdate – that is, whether that date represents the date the financial statementswere issued or were available to be issued. This disclosure should alertall users of financial statements that an entity has not evaluated subsequentevents after that date in the set of financial statements being presented.Adoption of ASC 855-10 did not have a material impact on the Company’s resultsof operations or financial condition. The Company has evaluated subsequentevents through November 16, 2009, the date the financial statements wereissued.

 

InJune 2009, the FASB issued authoritative guidance amending the accountingfor the transfers of financial assets. Key provisions include (i) theremoval of the concept of qualifying special purpose entities, (ii) theintroduction of the concept of a participating interest, in circumstancesin which a portion of a financial asset has been transferred, and (iii) therequirement that to qualify for sale accounting, the transferor mustevaluate whether it maintains effective control over transferred financialassets either directly or indirectly. Furthermore, this guidance requiresenhanced disclosures about transfers of financial assets and a transferor’s continuinginvolvement. This guidance is effective for the Company beginning January 1,2010, and is required to be applied prospectively. The Company is currentlyassessing the impact this may have on its financial statements, if any.

 

In June 2009, the FASB issuedauthoritative guidance to amend the manner in which entities evaluate whetherconsolidation is required for variable interest entities (“VIEs”). The modelfor determining which enterprise has a controlling financial interest and isthe primary beneficiary of a VIE has changed significantly under the newguidance. Furthermore, this guidance requires that companies continuallyevaluate VIEs for consolidation, rather than assessing based upon theoccurrence of triggering events. This revised guidance also requires enhanceddisclosures about how a company’s involvement with a VIE affects its financialstatements and exposure to risks. This guidance is effective for the Companybeginning January 1, 2010. The Company is currently assessing the impactthis may have on its financial statements, if any.

 

Effective July 1, 2009, the Companyadopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures(Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10,Fair Value Measurements and Disclosures – Overall, for the fair valuemeasurement of liabilities. ASU 2009-05 provides clarification that incircumstances in which a quoted price in an active market for the identicalliability is not available, a reporting entity is required to measure fairvalue using certain techniques. ASU 2009-05 also clarifies that when estimatingthe fair value of a liability, a reporting entity is not required to include aseparate input or adjustment to other inputs relating to the existence of arestriction that prevents the transfer of a liability. ASU 2009-05 alsoclarifies that both a quoted price in an active market for the identicalliability at the measurement date and the quoted price for the identicalliability when traded as an asset in an active market when no adjustments tothe quoted price of the asset are required are Level 1 fair value measurements.Adoption of ASU 2009-05 did not have a material impact on the Company’s resultsof operations or financial condition.

 

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

#### ** **

On September 7, 2007, the Companycompleted a private placement pursuant to which 13,334 units (the “Units”) weresold at a per Unit cash purchase price of $150, for a total subscribed amountof $2,000,100. Each Unit consists of: (1) one share of Series A 10%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 a Unit has a termof five years during which such Warrant may be exercised, at $0.15 per share,for one share of the Company’s 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 Preferred Stock contained in aUnit has a stated value of $100 and is convertible at any time into CommonStock at a rate of $0.10 per share. The conversion price of the Preferred Stockis subject to adjustment to reflect recapitalizations, stock dividends,mergers, stock splits, and similar events that would otherwise dilute therelative number of shares of Common Stock into which the Preferred Stock may beconverted.

 

There are 4,000,000 shares of Preferred Stockcurrently authorized for issuance. At the discretion of the Company’s Board ofDirectors, the Company may pay to the holders of the Preferred Stock asemi-annual dividend of ten percent payable in cash or in kind (i.e., inadditional shares of Preferred Stock) or any combination thereof. The holder ofeach share of Preferred Stock has one vote for each underlying share of CommonStock as if such Preferred Stock had been converted. At any time prior toconversion, the Company’s Board of Directors may redeem any portion or all ofthe Preferred Stock at a price of $100 per share of Preferred Stock. Each shareof Preferred Stock will have a liquidation value of $100 per share. At any timeafter August 2, 2011, the holders of 66 2/3% or more of the shares ofPreferred Stock then outstanding may request the liquidation of their PreferredStock. In the event that, at the time of such requested liquidation, theCompany’s cash funds (in excess of a $50,000 reserve fund) then available toeffect such liquidation are inadequate for such purpose, the requestedliquidation shall take place (on a pro-rata basis) only to the extent suchexcess cash funds are available for such purpose. In the event of a mergertransaction approved by the holders of the Common Stock, the holders of thePreferred Stock will have the right to a cash payment of $100 per share in connectionwith such merger, or the Preferred Stock will be automatically converted at thethen applicable conversion rate.

 

There was no beneficial conversion featurerecorded 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 fees of approximately$38,000 were incurred in connection with this private placement transactionresulting in net proceeds of approximately $1,962,000.

 

**NOTE 5 –DIVIDENDS:**

 

On May 8,2008, the Company announced that the Board of Directors had declared a fivepercent stock dividend on its outstanding Series A 10% ConvertiblePreferred Stock for the period commencing September 7, 2007.  Shareholders of record as of May 23,2008 received the stock dividend for each share of Series A PreferredStock owned on that date, payable May 30, 2008.  As of May 8, 2008, the Company had13,818

 

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**NOTE 5 –DIVIDENDS (Continued):**

 

shares of Series APreferred Stock outstanding as a result of which the total dividend paidconsisted of 994 shares of Series A Preferred Stock with a fair value of$99,400 and $1,490 cash in lieu of fractional shares.  Due to the absence of Retained Earnings, thecash and $994 par value of Preferred Stock dividend totaling $2,484 was chargedagainst Additional Paid-in Capital.

 

On November 7,2008, the Company announced that the Board of Directors had declared a fivepercent stock dividend on its outstanding Series A 10% ConvertiblePreferred Stock. Shareholders of record as of November 17, 2008 receivedthe stock dividend for each share of Series A Preferred Stock owned onthat date, payable December 1, 2008. As of November 6, 2008, the Company had 14,812 shares of Series APreferred Stock outstanding as a result of which the total dividend paidconsisted of 724 shares of Series A Preferred Stock with a fair value of$72,400 and $1,660 cash in lieu of fractional shares.  Due to the absence of Retained Earnings, thecash and $724 par value of Preferred Stock dividend totaling $2,384 werecharged against Additional Paid-in Capital.

 

**NOTE 6 - PRIOR STOCK SUBSCRIPTION:**

 

#### **In July of 2002, the Company received $8,000($0.01 per share) as payment for 800,000 shares of Common Stock which werenever issued.  Through September 7,2007 (the date of the closing of the private placement), the $8,000 accrued$2,200 in compounded interest, which management recorded due to thenon-issuance of shares for a five-year period. The Board of Directors of theCompany approved the issuance on September 7, 2007 of 68 Private PlacementUnits (see Note 4) in exchange for the $10,200 of cash previously received andaccrued interest.**

#### ** **

**NOTE 7 - CONVERTIBLE DEBT - RELATED PARTY:**

 

Prior to June 30, 2007,the Company had issued 5% Convertible Notes aggregating $56,500 (“the Notes”).The holders of the Notes are directors and an officer of the Company.  The Notes were convertible into Common Stockat par value ($0.10 per share).  TheCompany and the holders of the Notes had the option to mutually extend the termof the Notes if the par value had not been reduced to $0.01.

 

The Notes aggregating$62,400 (including accrued interest of $5,900), were converted into 416 PrivatePlacement Units (see Note 4) on September 7, 2007.

 

**NOTE 8 -SHAREHOLDERS’ EQUITY:**

 

The Company’s 2008 Stock Awards Plan (the “2008Plan”) was approved at the Company’s annual meeting of shareholders held on June 3,2008.  The 2008 Plan became effective April 9,2008 and will terminate on April 8, 2018. Subject to certain adjustments, the number of shares of Common Stockthat may be issued pursuant to awards under the 2008 Plan is 2,000,000shares.  A maximum of 80,000 shares maybe granted in any one year in any form to any one participant, of which amaximum of (i) 50,000 shares may be granted to a participant in the formof stock options and (ii) 30,000 shares may be granted to a participant inthe form of Common Stock or restricted stock. The 2008 Plan will be administered by a committee of the Board ofDirectors.  Employees, including anyemployee who is also a director or an officer, consultants, and outsidedirectors of the Company, are eligible to participate in the 2008 Plan.  ** **As of September 30, 2009, no options had been issued under the 2008Plan.

 

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**NOTE 8 -SHAREHOLDERS’ EQUITY (Continued):**

 

On June 3, 2008, the Company’sshareholders approved an amendment to the Articles of Incorporation andincreased the number of authorized shares of the Common Stock from 25,000,000to 200,000,000.

 

**NOTE 9 - FAIR VALUE MEASUREMENTS:**

 

EffectiveJanuary 1, 2008, the Company adopted ASC 820-10, *Fair ValueMeasurements*, as it applies to its financial instruments. ASC 820-10defines fair value, outlines a framework for measuring fair value, and detailsthe required disclosures about fair value measurements. ASC820-10 permitscompanies to irrevocably choose to measure certain financial instruments andother items at fair value. It also establishes presentation and disclosurerequirements designed to facilitate comparison between entities that choosedifferent measurement attributes for similar types of assets andliabilities.  Except for those assets andliabilities which are required by authoritative accounting guidance to berecorded at fair value in the Company’s Balance Sheets, the Company has electednot to record any other assets or liabilities at fair value as permitted.

 

UnderASC 820-10, fair value is defined as the price that would be received to sellan asset, or paid to transfer a liability, in an orderly transaction betweenmarket participants at the measurement date in the principal or mostadvantageous market. ASC 820-10 establishes a hierarchy in determining the fairvalue of an asset or liability. The fair value hierarchy has three levels ofinputs, both observable and unobservable. ASC 820-10 requires the utilizationof the lowest possible level of input to determine fair value. Level 1 inputsinclude quoted market prices in an active market for identical assets orliabilities. Level 2 inputs are market data, other than Level 1, that areobservable either directly or indirectly. Level 2 inputs include quoted marketprices for similar assets or liabilities, quoted market prices in an inactivemarket, and other observable information that can be corroborated by marketdata. Level 3 inputs are unobservable and corroborated by little or no marketdata.

 

Thefollowing table provides information on those assets measured at fair value ona recurring basis.

 
| ** **         | ** ** | ** **                                                                 | ** **    | **Fair Value Measurement at Reporting Date Using**                                | ** ** |
|--------------------|------------|----------------------------------------------------------------------------|---------------|-----------------------------------------------------------------------------------|------------|
| ** **         | ** ** | **Carrying Amount********In Balance Sheet********September 30, 2009** | ** **    | **Quoted Prices   in Active   Markets for   Identical   Assets********(Level 1)** | ** ** | **Significant   Other   Observable   Inputs********(Level 2)** | ** ** | **Significant   Unobservable   Inputs********(Level 3)** | ** ** |
| Assets:            | ** ** | ** **                                                                 | ** **    | ** **                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Money Market  Fund | ** ** | **$**                                                                      | **1,675,362** | ** **                                                                        | **$**      | **1,675,362** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |
|                    |            |                                                                            |               |                                                                                   |            |  |  |  |  |  |  |  |  |

 

The fair value of theMoney Market Fund was based upon the net asset value of shares held by theCompany as of September 30, 2009.

 

**NOTE 10 – SUBSEQUENT EVENT:**

 

On November 2,2009, the Company’s Board of Directors announced a ten percent stock dividendon its outstanding Series A 10% Convertible Preferred Stock.  Shareholders of record as of November 16,2009 will

 

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**NOTE 10 –SUBSEQUENT EVENT (Continued):**

 

receive 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 as a resultof which the total dividend to be paid will consist of 1,542 shares of Series APreferred Stock with a fair value of $154,200 and $1,160 cash in lieu offractional shares.  Due to the absence ofRetained Earnings, the $1,160 of cash and $1,542 par value of Preferred Stockdividend totaling $2,702 will be charged against Additional Paid-in Capital.

 

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

 

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

 

**Results of Operations**

 

Duringthe nine months and three months ended September 30, 2009, 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 30,2009 were $77,840 and $14,776, respectively, compared to $138,564 and $51,331for the comparable periods of 2008; the decreases were primarily due todecreased professional fees.  The Companyhad interest income of $2,510 and a net loss of $75,330 during the nine-monthperiod ended September 30, 2009, compared with interest income of $27,634and a net loss of $110,930 during the comparable period of 2008.  The Company had interest income of $236 and anet loss of $14,540 during the three-month period ended September 30,2009, compared with interest income of $7,658 and a net loss of $43,673 duringthe comparable period of 2008.  Theinterest income decrease was due to lower interest rates and a decrease in cashand cash equivalent balances.

 

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 had a cash and cash equivalents balance as of September 30,2009 of $1,687,505.  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.

 

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**Liquidity and Capital Resources**

 

AtSeptember 30, 2009, the Company had cash and cash equivalents ofapproximately $1,687,500.  Cash and cashequivalents consist of cash held in a bank and at a brokerage firm.  Working capital at September 30, 2009was approximately $1,687,000.  Managementbelieves that the Company’s cash and cash equivalents are sufficient for itsbusiness development activities for at least the next 12 months and for thecosts of acquiring an operating business.

 

Netcash of approximately $82,200 and $103,200 were used in operations during thenine-month periods ended September 30, 2009 and 2008, respectively.

 

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

 

Nocash proceeds were provided by or used in financing activities during thenine-month period ended September 30, 2009.  During the nine-month period ended September 30,2008, $1,491 was used to pay cash dividends in lieu of fractional shares ofPreferred Stock.

 

**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 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 QualitativeDisclosures About Market Risk.**

 

Notapplicable.

 

**Item 4.      Controlsand Procedures.**

 

(a) Evaluationof Disclosure Controls and Procedures.

 

Underthe supervision and with the participation of our management, including ourprincipal executive officer and principal financial and accounting officer, weconducted an evaluation of the effectiveness of the design and operation of ourdisclosure controls and procedures, as defined in Rules 13a-15(e) and15d-15(e) under the Securities Act of 1934, as of the end of the periodcovered by this report.  Based on thisevaluation, our principal executive officer and principal financial andaccounting officer concluded that, as of the period covered by this report, ourdisclosure controls and procedures were effective to provide reasonableassurance that the information required to be included in our SEC reports isrecorded, processed, summarized, and reported within the time periods specifiedin SEC rules and forms.

 

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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.

 

**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.****                                  ****Submissionof Matters to a Vote of Security Holders.**

 

None.

 

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

 

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

 

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| 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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*filed herewith

 

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**SIGNATURES**

** **

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

 

 
|                          |   | **CHASE PACKAGING CORPORATION**                  |
|-------------------------------|--------|--------------------------------------------------|
|                          |   |                                             |
|                          |   |                                             |
| Date: November 16,  2009 |   | /s/ Allen T. McInnes                             |
|                          |   | Allen T. McInnes                                 |
|                          |   | Chairman of the Board,  President and Treasurer  |
|                          |   | (Principal Executive  Officer)                   |
|                          |   |                                             |
|                          |   |                                             |
| Date: November 16,  2009 |   | /s/ Ann C. W. Green                              |
|                          |   | Ann C. W. Green                                  |
|                          |   | Chief Financial Officer  and Assistant Secretary |
|                          |   | (Principal Financial and  Accounting Officer)    |

 

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