Table of Contents

 

 

 

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

| **x**                                                  | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
|                                                   |       |                                                                                                    |   |   |
| **For the quarterly period ended June 30,  2009** |
|                                                   |       |                                                                                                    |   |   |
| **OR**                                                 |
|                                                   |       |                                                                                                    |   |   |
| **o**                                                  | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom             to            **

 

**CommissionFile Number: 0-21609**

 

# **CHASE PACKAGING CORPORATION**

(Exact name of registrant asspecified in its charter)

 

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

 

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

(Address of principalexecutive offices)  (Zip Code)

 

**(732) 741-1500**

(Registrant’s telephonenumber, including area code)

 

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

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required 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 July 15, 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 – June 30, 2009 (Unaudited) and December 31, 2008                                                                                                                     | 1           |
|         |                                                                                                                                                                                                           |        |
|         | Condensed  Statements of Operations (Unaudited) - Cumulative Period During the Development Stage  (January 1, 1999 to June 30, 2009) and the Six and Three Months  Ended June 30, 2009 and 2008 | 2           |
|         |                                                                                                                                                                                                           |        |
|         | Condensed  Statements of Cash Flows (Unaudited) - Cumulative Period During the Development Stage  (January 1, 1999 to June 30, 2009) and the Six Months Ended  June 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                                                                                                                    | 9           |
|         |                                                                                                                                                                                                           |        |
| ITEM 3       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                    | 10          |
|         |                                                                                                                                                                                                           |        |
| ITEM 4       | Controls and  Procedures                                                                                                                                                                                       | 10          |
|         |                                                                                                                                                                                                           |        |
| PART II | Other Information                                                                                                                                                                                              | 11          |
|         |                                                                                                                                                                                                           |        |
| EXHIBITS     |                                                                                                                                                                                                           | 12          |
|         |                                                                                                                                                                                                           |        |
| SIGNATURES   | 14                                                                                                                                                                                                             |

 

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**PART I. FINANCIAL INFORMATION**

 

**Item1.  Financial Statements.**

 

**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSED BALANCE SHEETS**

 
| ** **                                                                                                                                                                            | ** ** | **June 30,********2009** | ** ** | **December 31,   2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                                            | ** ** | **(unaudited)**               | ** ** | ** **                   | ** ** |
| **- ASSETS  -**                                                                                                                                                                       |       |                          |       |                         |       |
| ** **                                                                                                                                                                            |       |                          |       |                         |       |
| **CURRENT ASSETS:**                                                                                                                                                                   |       |                          |       |                         |       |
|                                                                                                                                                                                  |       |                          |       |                         |       |
| Cash and cash equivalents                                                                                                                                                             |       | $                             | 1,712,469  |                         | $          | 1,769,739 |   |
|                                                                                                                                                                                  |       |                          |       |                         |       |
| **TOTAL ASSETS**                                                                                                                                                                      |       | $                             | 1,712,469  |                         | $          | 1,769,739 |   |
| ** **                                                                                                                                                                            |       |                          |       |                         |       |
| **-  LIABILITIES AND SHAREHOLDERS’ EQUITY -**                                                                                                                                    |       |                          |       |                         |       |
| ** **                                                                                                                                                                            |       |                          |       |                         |       |
| **CURRENT LIABILITIES:**                                                                                                                                                              |       |                          |       |                         |       |
| Accounts payable and accrued expenses                                                                                                                                                 |       | $                             | 10,874     |                         | $          | 7,354 |   |
|                                                                                                                                                                                  |       |                          |       |                         |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                                         |       | 10,874                        |       | 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                                                                                                                                      |       | (324,095                      | )          | (263,305                     | )          |
| **TOTAL SHAREHOLDERS’ EQUITY**                                                                                                                                                   |       | 1,701,595                     |       | 1,762,385                    |       |
|                                                                                                                                                                                  |       |                          |       |                         |       |
| **TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY**                                                                                                                                  |       | $                             | 1,712,469  |                         | $          | 1,769,739 |   |

 

See notes 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** | ** ** | **Six Months Ended********June 30,** | ** ** | **Three Months Ended********June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                  | ** ** | **June 30, 2009)**                                                   | ** ** | **2009**                                  | ** ** | **2008**                                    | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                  | ** ** | ** **                                                                | ** ** | ** **                                | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                                                               |       | $                                                                         | —     |                                      | $          | —                                      |       | $ | — |   | $ | — |   | $ | — |   |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| **EXPENSES:**                                                               |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| General  and administrative expenses                                        |       | 373,572                                                                   |       | 63,065                                    |       | 87,233                                      |       | 30,415 |   | 53,636 |   |
| **LOSS FROM OPERATIONS**                                                    |       | (373,572                                                                  | )          | (63,065                                   | )          | (87,233                                     | )          | (30,415 | ) | (53,636 | ) |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| **OTHER INCOME (EXPENSE)**                                                  |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| Interest  expense                                                           |       | (8,591                                                                    | )          | —                                    |       | —                                      |       | — |   | — |   |
| Interest  and other income                                                  |       | 58,068                                                                    |       | 2,275                                     |       | 19,975                                      |       | 2,075 |   | 7,857 |   |
| **TOTAL OTHER INCOME**                                                      |       | 49,477                                                                    |       | 2,275                                     |       | 19,975                                      |       | 2,075 |   | 7,857 |   |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                                |       | (324,095                                                                  | )          | (60,790                                   | )          | (67,258                                     | )          | (28,340 | ) | (45,779 | ) |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| Provision  for income taxes                                                 |       | —                                                                    |       | —                                    |       | —                                      |       | — |   | — |   |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| **NET LOSS**                                                                |       | $                                                                         | (324,095   | )                                         | $          | (60,790                                     | )          | $ | (67,258 | ) | $ | (28,340 | ) | $ | (45,779 | ) |
|                                                                        |       |                                                                      |       |                                      |       |                                        |       |   |   |   |   |
| **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 |   |

 

See notes 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** | ** ** | **Six Months Ended********June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                             | ** ** | **June 30, 2009)**                                                  | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| ** **                                                                                                             | ** ** | ** **                                                               | ** ** | ** **                                | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                                             |       |                                                                     |       |                                      |       |   |   |
| Net loss                                                                                                               |       | $                                                                        | (324,095   | )                                         | $          | (60,790 | ) | $ | (67,258 | ) |
|                                                                                                                   |       |                                                                     |       |                                      |       |   |   |
| **Change in assets and  liabilities**:                                                                                 |       |                                                                     |       |                                      |       |   |   |
| Accounts payable and accrued expenses                                                                                  |       | (4,305                                                                   | )          | 3,520                                     |       | 12,756 |   |
| **Net cash (used in) operating  activities**                                                                           |       | (328,400                                                                 | )          | (57,270                                   | )          | (54,502 | ) |
|                                                                                                                   |       |                                                                     |       |                                      |       |   |   |
| **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                                                                   | )          | —                                    |       | (1,490 | ) |
| **Net cash provided by (used in)  financing activities**                                                               |       | 2,029,208                                                                |       | —                                    |       | (1,490 | ) |
|                                                                                                                   |       |                                                                     |       |                                      |       |   |   |
| **NET (DECREASE) INCREASE IN CASH  AND CASH EQUIVALENTS**                                                              |       | 1,700,808                                                                |       | (57,270                                   | )          | (55,992 | ) |
|                                                                                                                   |       |                                                                     |       |                                      |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT  BEGINNING OF PERIOD**                                                                 |       | 11,661                                                                   |       | 1,769,739                                 |       | 1,960,333 |   |
|                                                                                                                   |       |                                                                     |       |                                      |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT END  OF PERIOD**                                                                       |       | $                                                                        | 1,712,469  |                                      | $          | 1,712,469 |   | $ | 1,904,341 |   |
| ** **                                                                                                             |       |                                                                     |       |                                      |       |   |   |
| **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          |       | $                                                                        | 62,400     |                                      | $          | — |   | $ | — |   |
| 68  Private Placement Units were issued in exchange for $8,000 of stock  subscriptions plus $2,200 of accrued interest |       | $                                                                        | 10,200     |                                      | $          | — |   | $ | — |   |

 

See notes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

## **(A Development StageCompany)**

## **NOTES TO INTERIM CONDENSEDFINANCIAL STATEMENTS**

## **June 30, 2009**

## **(Unaudited)**

 

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

 

ChasePackaging Corporation (“the Company”), a Texas Corporation, previouslymanufactured woven paper mesh for industrial applications, manufacturedpolypropylene mesh fabric bags for agricultural use, and distributedagricultural packaging manufactured by other companies.

 

Since January 1, 1999, the Board of Directors of the Company hasbeen devoting its efforts to establish a new business and is considered to be adevelopment stage company.

 

Management’splans for the Company include securing a merger or acquisition, raisingadditional capital, and/or other strategies designed to optimize shareholdervalue. However, no assurance can be given that management will be successful inits efforts. The failure to achieve these plans will have a material adverseeffect on the Company’s financial position, results of operations, and abilityto continue as a going concern.

 

The accompanying interim condensed financial statements of the Companyhave been prepared in accordance with the Rules and Regulations of theSecurities and Exchange Commission (“SEC”) for interim financial reporting andthe instructions to Form 10-Q. Accordingly, they do not include all of the information and disclosuresrequired by generally accepted accounting principles (“GAAP”) in the UnitedStates for complete financial statements. In the opinion of the Company’s management, all adjustments (consistingonly of normal recurring accruals) considered necessary for a fair presentationhave been included.  Operating resultsfor the six and three month periods ended June 30, 2009, are notnecessarily indicative of the results that may be expected for the full fiscalyear ending December 31, 2009.  Theaccompanying interim condensed financial statements should be read in conjunctionwith the audited financial statements of the Company for the fiscal year ended December 31,2008.  We have evaluated subsequentevents for recognition or disclosure through August 6, 2009, which was thedate we filed this Form 10-Q with the SEC.

 

The accounting policies followed by theCompany are set forth in Note 2 to the Company’s financial statementsincluded in its Annual Report on Form 10-K for the year ended December 31,2008, which is incorporated herein by reference.  Specific reference is made to that report fora description of the Company’s securities and the notes to financialstatements.

 

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

 

Basicnet loss per common share is computed by dividing the net loss by theweighted-average number of common shares outstanding.  Diluted netloss per share is computed by dividing the net loss by the sum of theweighted-average number of common shares outstanding plus the dilutive effectof shares issuable through the exercise of common stock equivalents.

 

Wehave excluded 22,445,000 and 20,727,000 common stock equivalents (warrants)from the calculation of diluted loss per share for the periods ended June 30,2009 and 2008, respectively, which, if included, would have an antidilutiveeffect.

 

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**NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS:**

 

InJune of 2009, the Financial Accounting Standards Board (“FASB”) issued SFASNo. 168, *The FASB Accounting Standards Codificationand the Hierarchy of Generally Accepted Accounting Principles — a replacementof FASB Statement No. 162* (“SFAS 168”).  SFAS 168provides for the FASB Accounting Standards Codification (the “Codification”) tobecome the single official source of authoritative, nongovernmental U.S.generally accepted accounting principles (GAAP).  The Codificationdid not change GAAP but reorganizes the literature.  SFAS 168 iseffective for interim and annual periods ending after September 15, 2009.The Company does not expect that adoption of this statement will have amaterial impact on its financial statements

 

InJune of 2009, the FASB issued SFAS No. 167 *Amendmentsto FASB Interpretation No. 46(R)*. This statement amends theconsolidation guidance applicable to variable interest entities and iseffective as of the beginning of an entity’s first fiscal year that beginsafter November 15, 2009. The Company is evaluating the impact, if any,that SFAS No. 167 will have on its financial statements.

 

InJune of 2009, the FASB issued Statement of Financial Accounting Standards(“SFAS”) No. 166 *Accounting for Transfersof Financial Assets—an amendment of FASB Statement No. 140*.This standard eliminates the concept of a qualifying special purpose entity (“QSPE”)and modifies the derecognition provisions contained in SFAS No. 140. Thisstatement is effective for financial asset transfers occurring after thebeginning of an entity’s first fiscal year that begins after November 15,2009. The Company is evaluating the impact that SFAS No. 166 will have onits financial statements, if any.

 

Effectivethis quarter, the Company implemented Statement of Financial AccountingStandards No. 165, *Subsequent Events*,or SFAS 165. This standard establishes general standards of accounting for, anddisclosure of, events that occur after the balance sheet date but beforefinancial statements are issued. The adoption of SFAS 165 did not impact ourfinancial position or results of operations.

 

InApril of 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, *Interim Disclosures about Fair Value of FinancialInstruments*. This FSP amends FASB Statement No. 107, *Disclosures about Fair Value of FinancialInstruments,* to require disclosures about fair value of financialinstruments for interim reporting periods of publicly traded companies as wellas in annual financial statements. This FSP also amends APB Opinion No. 28,*Interim Financial Reporting,* torequire those disclosures in summarized financial information at interimreporting periods. This FSP is effective for interim reporting periods endingafter June 15, 2009. The adoption of this FSP had no material effect onthe Company’s financial statements.

 

InApril of 2009, the FASB issued FASB Staff Position (“FSP”) No. FAS115-2 and FAS 124-2, *Recognition andPresentation of Other-Than-Temporary Impairments*. This FSP amendsthe other-than-temporary impairment guidance in U.S. GAAP for debt securitiesto make the guidance more operational and to improve the presentation anddisclosure of other-than-temporary impairments on debt and equity securities inthe financial statements. This FSP does not amend existing recognition andmeasurement guidance related to other-than-temporary impairments of equity securities.This FSP is effective for interim and annual reporting periods ending after June 15,2009.  The adoption of this FSP had nomaterial effect on the Company’s financial statements, since the Companycurrently does not have any assets that are other-than-temporary impaired.

 

#### **In April of 2009, the FASB issued FSP No. FAS157-4, *Determining Fair Value When the Volume and Level ofActivity for the Asset or Liability Have Significantly Decreased andIdentifying Transactions That Are Not Orderly*, to provide additionalguidance for estimating fair value when the volume and level of activity forthe asset or liability have significantly decreased.  This FSP is effective for interim and annualreporting periods ending after June 15, 2009.  The adoption of this FSP had no materialeffect on the Company’s financial statements. See Note 9 for additional disclosures on fair value measurements.**

 

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

 

OnSeptember 7, 2007, the Company completed a private placement pursuant towhich 13,334 units (the “Units”) were sold at a per Unit cash purchase price of$150, for a total subscribed amount of $2,000,100. Each Unit consists of: (1) oneshare of Series A 10% convertible preferred stock, par value $1.00, statedvalue $100 (the “Preferred Stock”); (2) 500 shares of the Company’s commonstock, par value $0.10 (the “Common Stock”); and (3) 500 warrants (the “Warrants”)exercisable into the Company’s Common Stock on a one-for-one basis.

 

EachWarrant contained in a Unit has a term of five years during which such Warrantmay be exercised, at $0.15 per share, into one share of the Company’s CommonStock. A total of 6,605 Units were purchased by related parties, includingsignificant shareholders. The exercise price of the Warrants is subject toadjustment to reflect recapitalizations, stock dividends, mergers, stocksplits, and similar events that would otherwise dilute the relative number ofshares of Common Stock into which the Warrants may be exercised.

 

Eachshare of Preferred Stock contained in a Unit has a stated value of $100 and isconvertible at any time into Common Stock at a rate of $0.10 per share. Theconversion price of the Preferred Stock is subject to adjustment to reflectrecapitalizations, stock dividends, mergers, stock splits, and similar eventsthat would otherwise dilute the relative number of shares of Common Stock intowhich the Preferred Stock may be converted.

 

Thereare 4,000,000 shares of Preferred Stock currently authorized for issuance. Atthe discretion of the Company’s Board of Directors, the Company may pay to theholders of the Preferred Stock a semi-annual dividend of ten percent payable incash or in kind (i.e., in additional shares of Preferred Stock) or anycombination thereof. The holder of each share of Preferred Stock has one votefor each underlying 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 cash funds (in excess of a $50,000 reservefund) then available to effect such liquidation are inadequate for suchpurpose, the requested liquidation shall take place (on a pro-rata basis) onlyto the extent such excess cash funds are available for such purpose. In theevent of a merger transaction approved by the holders of the Company’s CommonStock, the holders of the Preferred Stock will have the right to a cash paymentof $100 per share in connection with such merger, or the Preferred Stock willbe automatically converted at the then applicable conversion rate.

 

Therewas no beneficial conversion feature recorded since the Common Stock wasselling for less than $0.10 per share (which approximated fair value) at thetime of the closing.

 

Legaland professional fees of approximately $38,000 were incurred in connection withthis private placement transaction resulting in net proceeds of approximately$1,962,000.

 

**NOTE 5 – DIVIDENDS:**

 

On May 8, 2008, the Company announced that theBoard of Directors had declared a five percent stock dividend on itsoutstanding Series A 10% Convertible Preferred Stock for the periodcommencing September 7, 2007. Shareholders of record as of May 23, 2008 received the stockdividend for each share of Series A Preferred Stock owned on that date,payable May 30, 2008.  As of May 8,2008, the Company had 13,818 

 

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shares of Series A Preferred Stock outstandingas a result of which the total dividend paid consisted of 994 shares of Series APreferred Stock with a fair value of $99,400 and $1,490 cash in lieu offractional shares.  Due to the absence ofRetained Earnings, the cash and $994 par value of Preferred Stock dividendtotaling $2,484 was charged against Additional Paid-in Capital.

 

On November 7, 2008, the Company announced thatthe Board of Directors had declared a five percent stock dividend on itsoutstanding Series A 10% Convertible Preferred Stock. Shareholders ofrecord as of November 17, 2008 received the stock dividend for each shareof Series A Preferred Stock owned on that date, payable December 1,2008.  As of November 6, 2008, theCompany had 14,812 shares of Series A Preferred Stock outstanding as aresult of which the total dividend paid consisted of 724 shares of Series APreferred Stock with a fair value of $72,400 and $1,660 cash in lieu offractional shares.  Due to the absence ofRetained Earnings, the cash and $724 par value of Preferred Stock dividendtotaling $2,384 were charged 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 the nonissuance 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:**

 

Priorto 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 ofthe Company.  The Notes were convertibleinto Common Stock at par value ($0.10 per share).  The Company and the holders of the Notes hadthe option to mutually extend the term of the Notes if the par value had notbeen reduced to $0.01.

 

TheNotes aggregating $62,400 (including accrued interest of $5,900), wereconverted into 416 Private Placement Units (see Note 4) on September 7,2007.

 

**NOTE 8 - SHAREHOLDERS’ EQUITY:**

 

TheCompany’s 2008 Stock Awards Plan (the “2008 Plan”) was approved at the Company’sannual meeting of shareholders held on June 3, 2008.  The 2008 Plan became effective April 9,2008 and will terminate on April 8, 2018. Subject to certain adjustments, the number of shares of Common Stockthat may be issued pursuant to awards under the 2008 Plan is 2,000,000shares.  A maximum of 80,000 shares maybe granted in any one year in 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 June 30, 2009, no options had been issued under the 2008 Plan.

 

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On June 3, 2008, theCompany’s shareholders approved an amendment to the Articles of Incorporationand increased the number of authorized shares of the Common Stock from25,000,000 to 200,000,000.

 

**NOTE 9 - FAIR VALUE MEASUREMENTS:**

 

EffectiveJanuary 1, 2008, the Company adopted Statement of Financial AccountingStandard No. 157, *Fair Value Measurements*(SFAS 157), as it applies to its financial instruments, and Statement ofFinancial Accounting Standard No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities — including an amendment of FASBStatement No. 115* (SFAS 159). SFAS 157 defines fair value,outlines a framework for measuring fair value, and details the requireddisclosures about fair value measurements. SFAS 159 permits companies toirrevocably choose to measure certain financial instruments and other items atfair value. SFAS 159 also establishes presentation and disclosure requirementsdesigned to facilitate comparison between entities that choose differentmeasurement attributes for similar types of assets and liabilities.  Except for those assets and liabilities whichare required by authoritative accounting guidance to be recorded at fair valuein the Company’s Balance Sheets, the Company has elected not to record anyother assets or liabilities at fair value, as permitted by SFAS 159.

 

UnderSFAS 157, fair value is defined as the price that would be received to sell anasset, or paid to transfer a liability, in an orderly transaction betweenmarket participants at the measurement date in the principal or mostadvantageous market. SFAS 157 establishes a hierarchy in determining the fairvalue of an asset or liability. The fair value hierarchy has three levels ofinputs, both observable and unobservable. SFAS 157 requires the utilization ofthe 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  June 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 | ** ** | **$**                                                        | ** 1,685,150** | ** **                                                                | **$**      | ** 1,686,150** | ** ** | **$** | ** —** | ** ** | **$** | ** —** | ** ** |
|                    |            |                                                              |                     |                                                                           |            |  |  |  |  |  |  |  |  |

 

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

 

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

 

**Forward-Looking Statements**

 

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

 

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

 

**Results of Operations**

 

During the six months and three months ended June 30, 2009, theCompany had no operations and its only income was from interest income on itsmoney market fund and short-term investments which are classified as cash andcash equivalents. General and administrative expenses for the six-month andthree-month periods ending June 30, 2009 were $63,065 and $30,415,respectively, compared to $87,233 and $53,636 for the comparable periods of2008; the decreases were primarily due to decreased professional fees.  The Company had interest income of $2,275 anda net loss of $60,790 during the six-month period ended June 30, 2009,compared with interest income of $19,975 and a net loss of $67,258 during thecomparable period of 2008.  The Companyhad interest income of $2,075 and a net loss of $28,340 during the three-monthperiod ended June 30, 2009, compared with interest income of $7,857 and anet loss of $45,779 during the comparable period of 2008.  The interest income decrease was due to lowerinterest rates and a decrease in cash and cash equivalent balances.

 

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

 

Due to the closing of a private placement of the Company’s securitiesin the third quarter 2007, the Company had a cash and cash equivalents balanceas of June 30, 2009 of $1,712,469. The proceeds from the 2007private placement will assist management with its plans to attempt to secure asuitable merger partner wishing to go public or attempt to acquire privatecompanies to create investment value for the Company’s shareholders.

 

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**Liquidity and CapitalResources**

 

At June 30, 2009, the Company had cash and cashequivalents of approximately $1,712,500. Cash and cash equivalents consist of cash held in banks and brokeragefirms.  Working capital at June 30,2009 was approximately $1,701,600. Management believes that its cash and cash equivalents are sufficientfor its business development activities for at least the next 12 months and forthe costs of acquiring an operating business.

 

 

Net cash of approximately $57,300 and $54,500 were used in operationsduring the six-month periods ended June 30, 2009 and 2008, respectively.

 

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

 

No cash proceeds were provided by financing activities during thesix-month period ended June 30, 2009. During the six-month period ended June 30, 2008, $1,500 was used topay cash dividends in lieu of fractional shares of Preferred Stock.

 

**Factors Which May AffectFuture Results**

 

Future earnings of theCompany are dependent on interest rates earned on the Company’s investedbalances and expenses incurred.  TheCompany expects to incur significant expenses in connection with its objectiveof identifying a merger partner or acquiring an operating business.

 

**Recent Accounting Pronouncements**

 

See Note 3 “*Recent AccountingPronouncements*” in the Notes to Financial Statements in Item 1 for afull description of recent accounting pronouncements, including the expecteddates of adoption and estimated effects on results of operations and financialcondition, which is incorporated herein.

 

**Item 3.    Quantitative and Qualitative Disclosures AboutMarket Risk.**

 

Not applicable.

 

**Item 4.    Controlsand Procedures.**

 

(a) Evaluation of 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.

 

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

 

**PART II.  OTHERINFORMATION**

 

**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.**

 

The Company’s annual meetingof shareholders was held on June 2, 2009. The following two matters were voted upon and approved by the Company’sshareholders:

 

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

 
| **Name**           | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|--------------------|------------|------------|------------|--------------|------------|
| Allen T. McInnes   |       | 21,669,961 |       | 119,114      |       |
| William J. Barrett |       | 21,742,462 |       | 46,613       |       |
| Herbert M. Gardner |       | 21,742,462 |       | 46,613       |       |
| Edward L. Flynn    |       | 21,715,860 |       | 73,215       |       |

 

(2)                                  Theshareholders approved, with 21,716,395 affirmative votes, 154 negative votes,and 72,526 abstentions, the proposal to ratify the selection of ParenteRandolph, LLC as the Company’s independent registered public accounting firmfor the year ending December 31, 2009.

 

**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:  August 6, 2009 | /s/  Allen T. McInnes                            |
|                       | Allen  T. McInnes                                |
|                       | Chairman  of the Board, President and Treasurer  |
|                       | (Principal  Executive Officer)                   |
|                       |                                             |
|                       |                                             |
| Date:  August 6, 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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