Table of Contents

 

 

 

**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 thequarterly period ended June 30, 2010**

 

**OR**

 

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

 

**For thetransition period from                  to                  **

 

**CommissionFile Number: 0-21609**

 

**CHASE PACKAGING CORPORATION**

(Exact name of registrant as specified in itscharter)

 

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

 

| **636 River Road, Fair Haven, New Jersey** | ** ** | **07704**   |
|--------------------------------------------|------------|-------------|
| (Address  of principal executive offices)  |       | (Zip  Code) |

 

(Registrant’s telephone number, including area code): **(732) 741-1500**

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).  Yes o No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act.

 

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

 

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

 

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

 

| **Class**                               | ** ** | **Outstanding at July 28,  2010** |
|-----------------------------------------|------------|----------------------------------------|
| Common  Stock, par value $.10 per share |       | 15,536,275  shares                     |

 

 

 

----

Table of Contents

 

**- INDEX -**

 
| ** **   | ** **                                                                                                                                                                                                     | **Page No** |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|
|         |                                                                                                                                                                                                           |             |
| PART I  | Financial  Information:                                                                                                                                                                                        |             |
|         |                                                                                                                                                                                                           |             |
| ITEM 1.      | Financial  Statements:                                                                                                                                                                                         |             |
|         |                                                                                                                                                                                                           |             |
|         | Condensed Balance  Sheets — June 30, 2010 (Unaudited) and December 31, 2009                                                                                                                     | 1                |
|         |                                                                                                                                                                                                           |             |
|         | Condensed Statements of Operations (Unaudited) -  Cumulative Period During the Development Stage (January 1, 1999 to  June 30, 2010) and the Six and Three Months Ended June 30, 2010 and  2009 | 2                |
|         |                                                                                                                                                                                                           |             |
|         | Condensed Statements of Cash Flows (Unaudited) -  Cumulative Period During the Development Stage (January 1, 1999 to  June 30, 2010) and the Six Months Ended June 30, 2010 and 2009            | 3                |
|         |                                                                                                                                                                                                           |             |
|         | Notes to Interim Condensed Financial Statements  (Unaudited)                                                                                                                                                   | 4                |
|         |                                                                                                                                                                                                           |             |
| ITEM 2.      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations.                                                                                                                   | 8                |
|         |                                                                                                                                                                                                           |             |
| ITEM 3.      | Quantitative  and Qualitative Disclosures About Market Risk.                                                                                                                                                   | 9                |
|         |                                                                                                                                                                                                           |             |
| ITEM 4.      | Controls and  Procedures.                                                                                                                                                                                      | 9                |
|         |                                                                                                                                                                                                           |             |
| PART II | Other Information                                                                                                                                                                                              | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 1.      | Legal Proceedings.                                                                                                                                                                                             | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 2.      | Unregistered Sales of Equity  Securities and Use of Proceeds.                                                                                                                                                  | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 3.      | Defaults upon Senior Securities.                                                                                                                                                                               | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 4.      | Reserved.                                                                                                                                                                                                      | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 5.      | Other Information.                                                                                                                                                                                             | 10               |
|         |                                                                                                                                                                                                           |             |
| ITEM 6.      | Exhibits.                                                                                                                                                                                                      | 10               |
|         |                                                                                                                                                                                                           |             |
| SIGNATURES   | 12                                                                                                                                                                                                             |
|              |                                                                                                                                                                                                                |                  |  |

 

----

Table of Contents

 

**PART I.  FINANCIALINFORMATION**

 

**Item 1.  Financial Statements.**

 

**CHASEPACKAGING CORPORATION**

**(ADevelopment Stage Company)**

**CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                                                                       | ** ** | **June 30,********2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                                                       | ** ** | **(unaudited)**               | ** ** | ** **                  | ** ** |
| **- ASSETS -**                                                                                                                                                                                                                                   | ** ** | ** **                    |       |                        |       |
| ** **                                                                                                                                                                                                                                       | ** ** | ** **                    |       |                        |       |
| **CURRENT ASSETS:**                                                                                                                                                                                                                              | ** ** | ** **                    |       |                        |       |
|                                                                                                                                                                                                                                             |       |                          |       |                        |       |
| Cash  and cash equivalents                                                                                                                                                                                                                       |       | $                             | 1,620,302  |                        | $          | 1,671,574 |   |
| ** **                                                                                                                                                                                                                                       |       |                          |       |                        |       |
| **TOTAL ASSETS**                                                                                                                                                                                                                                 |       | $                             | 1,620,302  |                        | $          | 1,671,574 |   |
| ** **                                                                                                                                                                                                                                       |       |                          |       |                        |       |
| **- LIABILITIES AND SHAREHOLDERS’  EQUITY -**                                                                                                                                                                                               | ** ** | ** **                    |       |                        |       |
| ** **                                                                                                                                                                                                                                       | ** ** | ** **                    |       |                        |       |
| **CURRENT LIABILITIES:**                                                                                                                                                                                                                         | ** ** | ** **                    |       |                        |       |
| Accounts  payable and accrued expenses                                                                                                                                                                                                           |       | $                             | 9,559      |                        | $          | 2,509 |   |
| ** **                                                                                                                                                                                                                                       |       |                          |       |                        |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                                                                                                    |       | 9,559                         |       | 2,509                       |       |
| ** **                                                                                                                                                                                                                                       |       |                          |       |                        |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                                                                                                |       |                          |       |                        |       |
| ** **                                                                                                                                                                                                                                       |       |                          |       |                        |       |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                                                                                                   |       |                          |       |                        |       |
| Preferred  Stock $1.00 par value; 4,000,000 authorized: Series A 10% Convertible  Preferred Stock; 50,000 shares authorized; 17,078 shares issued and  outstanding in 2010 and 2009; liquidation preference of $1,707,800 in 2010  and 2009 |       | 17,078                        |       | 17,078                      |       |
| Common  stock, $.10 par value, 200,000,000 shares authorized; 15,536,275 shares  issued and outstanding in 2010 and 2009                                                                                                                         |       | 1,553,628                     |       | 1,553,628                   |       |
| Additional  paid-in capital                                                                                                                                                                                                                      |       | 4,079,945                     |       | 4,079,945                   |       |
| Accumulated  deficit                                                                                                                                                                                                                             |       | (3,626,121                    | )          | (3,626,121                  | )          |
| Deficit  accumulated during the development stage                                                                                                                                                                                                |       | (413,787                      | )          | (355,465                    | )          |
| **TOTAL  SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                             |       | 1,610,743                     |       | 1,669,065                   |       |
|                                                                                                                                                                                                                                             |       |                          |       |                        |       |
| **TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                             |       | $                             | 1,620,302  |                        | $          | 1,671,574 |   |

 

Seenotes to interim condensed financial statements.

 

1

----

Table of Contents

 

**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                 | ** ** | **Cumulative  During the  Development  Stage (January 1,  1999 to** | ** ** | **Six Months Ended  June 30,** | ** ** | **Three Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| ** **                                                                 | ** ** | **June 30,  2010)**                                            | ** ** | **2010**                       | ** ** | **2009**                         | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                 | ** ** | ** **                                                          | ** ** | ** **                     | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET SALES**                                                              |       | $                                                                   | —     |                           | $          | —                           |       | $ | — |   | $ | — |   | $ | — |   |
|                                                                       |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **EXPENSES:**                                                              |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| General  and administrative expenses                                       |       | 464,123                                                             |       | 58,736                         |       | 63,065                           |       | 31,520 |   | 30,415 |   |
| **LOSS FROM OPERATIONS**                                                   |       | (464,123                                                            | )          | (58,736                        | )          | (63,065                          | )          | (31,520 | ) | (30,415 | ) |
|                                                                       |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **OTHER  INCOME (EXPENSE)**                                                |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| Interest  expense                                                          |       | (8,591                                                              | )          | —                         |       | —                           |       | — |   | — |   |
| Interest  and other income                                                 |       | 58,927                                                              |       | 414                            |       | 2,275                            |       | 207 |   | 2,075 |   |
| **TOTAL  OTHER INCOME**                                                    |       | 50,336                                                              |       | 414                            |       | 2,275                            |       | 207 |   | 2,075 |   |
|                                                                       |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **LOSS BEFORE INCOME TAXES**                                               |       | (413,787                                                            | )          | (58,322                        | )          | (60,790                          | )          | (31,313 | ) | (28,340 | ) |
|                                                                       |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| Provision  for income taxes                                                |       | —                                                              |       | —                         |       | —                           |       | — |   | — |   |
| ** **                                                                 |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **NET LOSS**                                                               |       | $                                                                   | (413,787   | )                              | $          | (58,322                          | )          | $ | (60,790 | ) | $ | (31,313 | ) | $ | (28,340 | ) |
| ** **                                                                 |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **BASIC AND DILUTED LOSS PER COMMON SHARE**                                |       |                                                                |       | $                              | —     |                             | $          | — |   | $ | — |   | $ | — |   |
| ** **                                                                 |       |                                                                |       |                           |       |                             |       |   |   |   |   |
| **WEIGHTED AVERAGE COMMON SHARES****OUTSTANDING — BASIC AND DILUTED** |       |                                                                |       | 15,536,275                     |       | 15,536,275                       |       | 15,536,275 |   | 15,536,275 |   |

 

Seenotes to interim condensed financial statements.

 

2

----

Table ofContents

 

**CHASEPACKAGING CORPORATION**

**(ADevelopment Stage Company)**

**CONDENSEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                                            | ** ** | **Cumulative  During the  Development  Stage (January 1,  1999 to** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                            | ** ** | **June 30,  2010)**                                            | ** ** | **2010**                       | ** ** | **2009** | ** ** |
| ** **                                                                                                            | ** ** | ** **                                                          | ** ** | ** **                     | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                             | ** ** | ** **                                                          | ** ** | ** **                     |       |   |   |
| Net  loss                                                                                                             |       | $                                                                   | (413,787   | )                              | $          | (58,322 | ) | $ | (60,790 | ) |
|                                                                                                                  |       |                                                                |       |                           |       |   |   |
| **Change  in assets and liabilities**:                                                                                |       |                                                                |       |                           |       |   |   |
| Accounts  payable and accrued expenses                                                                                |       | (5,620                                                              | )          | 7,050                          |       | 3,520 |   |
| **Net cash (used in) operating activities**                                                                           |       | (419,407                                                            | )          | (51,272                        | )          | (57,270 | ) |
|                                                                                                                  |       |                                                                |       |                           |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                              |       | —                                                              |       | —                         |       | — |   |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                             |       |                                                                |       |                           |       |   |   |
| Proceeds from convertible debt                                                                                        |       | 56,500                                                              |       | —                         |       | — |   |
| Proceeds  from private placement/exercise of stock warrants                                                           |       | 5,500                                                               |       | —                         |       | — |   |
| Capital contribution                                                                                                  |       | 8,000                                                               |       | —                         |       | — |   |
| Proceeds from private placement                                                                                       |       | 1,962,358                                                           |       | —                         |       | — |   |
| Cash dividends in lieu of preferred stock                                                                             |       | (4,310                                                              | )          | —                         |       | — |   |
| **Net cash provided by financing activities**                                                                         |       | 2,028,048                                                           |       | —                         |       | — |   |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**                                                              |       | 1,608,641                                                           |       | (51,272                        | )          | (57,270 | ) |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD**                                                                 |       | 11,661                                                              |       | 1,671,574                      |       | 1,769,739 |   |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT END OF PERIOD**                                                                       |       | $                                                                   | 1,620,302  |                           | $          | 1,620,302 |   | $ | 1,712,469 |   |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION**                                                                                |       |                                                                |       |                           |       |   |   |
| Cash  paid for:                                                                                                       |       |                                                                |       |                           |       |   |   |
| Interest                                                                                                              |       | $                                                                   | —     |                           | $          | — |   | $ | — |   |
| Income  taxes                                                                                                         |       | $                                                                   | —     |                           | $          | — |   | $ | — |   |
| ** **                                                                                                            |       |                                                                |       |                           |       |   |   |
| **NON-CASH INVESTING AND FINANCING ACTIVITIES:**                                                                      |       |                                                                |       |                           |       |   |   |
| Preferred stock issued as stock dividend                                                                              |       | $                                                                   | 3,260      |                           | $          | — |   | $ | — |   |
| 416 Private Placement Units were issued in  exchange for $56,500 of convertible notes plus $5,900 of accrued          |       | $                                                                   | 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.

 

3

----

Table of Contents

 

**CHASEPACKAGING CORPORATION**

**(ADevelopment Stage Company)**

**NOTES TOINTERIM CONDENSED FINANCIAL STATEMENTS**

**June 30,2010**

**(Unaudited)**

 

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

 

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

 

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

 

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

 

The interim condensedfinancial statements included herein have been prepared by the Company, withoutaudit, pursuant to the rules and regulations of the Securities andExchange Commission (the “SEC”). Certain information and footnote disclosuresnormally included in the financial statements prepared in accordance with generallyaccepted accounting principles (“U.S. GAAP”) have been condensed or omittedpursuant to such rules and regulations, although we believe that thedisclosures made are adequate to provide for fair presentation and a reasonableunderstanding of the information presented. The Condensed Financial Statementsand Management’s Discussion and Analysis of Financial Condition and Results ofOperations included in this Form 10-Q should be read in conjunction withthe financial statements and the related notes, as well as Management’sDiscussion and Analysis of Financial Condition and Results of Operations,included in the Company’s Annual Report on Form 10-K for the fiscal yearended December 31, 2009, previously filed with the SEC.

 

In the opinion of management,all adjustments (which include normal recurring adjustments) necessary topresent a fair statement of financial position as of June 30, 2010,results of operations for the three- and six- month periods ended June 30,2010 and 2009, and cash flows for the six-month periods ended June 30,2010 and 2009, as applicable, have been made. The results of operations for thethree- and six-month periods ended June 30, 2010 are not necessarilyindicative of the operating results for the full fiscal year or any futureperiods.

 

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

 

4

----

Table of Contents

 

**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 23,987,000and 22,445,000 common stock equivalents (warrants) from the calculation ofdiluted loss per share for the six and three months ended June 30, 2010and 2009, respectively, which, if included, would have an antidilutive effect.

 

**NOTE 3 -RECENT ACCOUNTING PRONOUNCEMENTS:**

 

In January of 2010, theFASB issued guidance which clarified that the stock portion of a distributionto shareholders that allows them to elect to receive cash or stock with apotential limitation on the total amount of cash that all shareholders canelect to receive in the aggregate is considered a share issuance that isreflected in earnings per share prospectively and is not a stock dividend.  This update is effective for interim andannual periods ending on or after December 15, 2009, and should be appliedon a retrospective basis.  The adoptionof this guidance had no impact on the Company’s financial statements.

 

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

 

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

 

Each Warrant contained in aUnit has a term of five years during which such Warrant may be exercised, at$0.15 per share, into one share of the Common Stock. A total of 6,605 Unitswere purchased by related parties, including significant shareholders. Theexercise price of the Warrants 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 Warrants may be exercised.

 

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

 

There are 4,000,000 sharesof Preferred Stock currently authorized for issuance. At the discretion of theCompany’s Board of Directors, the Company may pay to the holders of the PreferredStock a semi-annual dividend of ten percent payable in cash or in kind (i.e.,in additional shares of Preferred Stock) or any combination thereof. The holderof each share of Preferred Stock has one vote for each underlying share ofCommon Stock as if such Preferred Stock had been converted. At any time priorto conversion, the Company’s Board of Directors may redeem any portion or allof the Preferred Stock at a price of $100 per share of Preferred Stock. Eachshare of Preferred Stock will have a liquidation value of $100 per share. Atany time after August 2, 2011, the holders of 66 2/3% or more of theshares of Preferred Stock then outstanding may request the liquidation of theirPreferred Stock. In the event that, at the time of such requested liquidation,the Company’s cash funds (in excess of a $50,000 reserve fund) then availableto effect 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 

 

5

----

Table of Contents

 

Stock, the holders of thePreferred Stock will have the right to a cash payment of $100 per share inconnection with such merger, or the Preferred Stock will be automaticallyconverted at the then applicable conversion rate.

 

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

 

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

 

**NOTE 5 —DIVIDENDS:**

 

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

 

**NOTE 6 -SHAREHOLDERS’ EQUITY:**

 

The Company’s 2008 StockAwards Plan (the “2008 Plan”) was approved at the Company’s annual meeting ofshareholders held on June 3, 2008. The 2008 Plan became effective April 9, 2008, and will terminate onApril 8, 2018.  Subject to certainadjustments, 2,000,000 shares of Common Stock may be issued pursuant to awardsunder the 2008 Plan.  A maximum of 80,000shares may be granted in any one year in any form to any one participant, ofwhich a maximum of:  (i) 50,000shares may be granted to a participant in the form of stock options; and (ii) 30,000shares may be granted to a participant in the form of Common Stock orrestricted stock.  The 2008 Plan will beadministered by a committee of the Board of Directors.  Employees, including any employee who is alsoa director or an officer, consultants, and outside directors of the Company,are eligible to participate in the 2008 Plan. As of June 30, 2010, nooptions had been issued under the 2008 Plan.

 

**NOTE 7 -FAIR VALUE MEASUREMENTS:**

 

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

 

UnderASC 820, fair value is defined as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date in the principal or most advantageousmarket. ASC 820 establishes a hierarchy in determining the fair value of anasset or liability. The fair value hierarchy has three levels of inputs, bothobservable and unobservable. ASC 820 requires the utilization of the lowestpossible level of input to determine fair value. Level 1 inputs include quotedmarket prices in an active market for identical assets or liabilities. Level 2inputs are market data, other than Level 1, that are observable either directlyor indirectly. Level 2 inputs include quoted market prices for similar assetsor liabilities, quoted market prices in an inactive market, and otherobservable information that can be corroborated by market data. Level 3 inputsare unobservable and corroborated by little or no market data.

 

6

----

Table ofContents

 

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

 

TheCompany determines fair values for its investment assets as follows:

 

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

 

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

 
| ** **         | ** ** | **Carrying Amount  In Balance Sheet  June 30,  2010** | ** ** | **Fair Value  June 30,  2010** | ** ** | **Fair Value Measurement Using** | ** ** |
|--------------------|------------|-------------------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| ** **         | ** ** | **(unaudited)**                                       | ** ** | **(unaudited)**                | ** ** | **Level 1**                      | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:            |       |                                                  |       |                           |       |                             |       |   |   |   |   |
| Money Market Funds |       | $                                                     | 1,615,000  |                           | $          | 1,615,000                        |       | $ | 1,615,000 |   | $ | — |   | $ | — |   |
|                    |            |                                                       |            |                                |            |                                  |            |  |  |  |  |  |  |  |  |  |

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

 

**NOTE 8 -COMMITMENTS AND CONTINGENCIES:**

 

CommencingNovember 1, 2007, the Company’s Board of Directors agreed to pay the Company’sChief Financial Officer an annual salary of $17,000. No other officers ordirectors of the Company receive compensation other than reimbursement ofout-of-pocket expenses incurred in connection with Company business anddevelopment.

 

7

----

Table ofContents

 

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

 

**Forward-LookingStatements**

 

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

 

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

 

**Resultsof Operations**

 

Duringthe six months and three months ended June 30, 2010, the Company had nooperations, and its only income was from interest income on its money marketfund and short-term investments which are classified as cash and cashequivalents. General and administrative expenses for the six-month andthree-month periods ending June 30, 2010 were $58,736 and $31,520,respectively, compared to $63,065 and $30,415 for the comparable periods of2009.  The Company had interest income of $414and a net loss of $58,322 during the six-month period ended June 30, 2010,compared with interest income of $2,275 and a net loss of $60,790 during thecomparable period of 2009.  The Companyhad interest income of $207 and a net loss of $31,313 during the three-month periodended June 30, 2010, compared with interest income of $2,075 and a netloss of $28,340 during the comparable period of 2009.  The interest income decrease was due to lowerinterest rates and a decrease in cash and cash equivalent balances.

 

Dueto the closing of a private placement of the Company’s securities in the thirdquarter of 2007, the Company had a cash and cash equivalents balance as of June 30,2010 of $1,620,302.  The proceeds from the 2007 private placementwill assist management with its plans to attempt to secure a suitable mergerpartner wishing to go public or attempt to acquire private companies to createinvestment value for the Company’s shareholders.

 

**Liquidityand Capital Resources**

 

AtJune 30, 2010, the Company had cash and cash equivalents of approximately$1,620,000.  Cash and cash equivalentsconsist of cash held in banks and brokerage firms.  Working capital at June 30, 2010 wasapproximately $1,611,000.  Managementbelieves that its cash and cash equivalents are sufficient for its businessdevelopment activities for at least the next 12 months and for the costs ofsecuring a merger or acquisition.

 

8

----

Table ofContents

 

Netcash of approximately $51,300 and $57,300 were used in operations during thesix-month periods ended June 30, 2010 and 2009, respectively.

 

Nocash flows were used or provided by investing activities during the first andsecond quarters of 2010 or during the first and second quarters of 2009.

 

Nocash proceeds were provided by financing activities during the six-month periodended June 30, 2010 or during the six-month period ended June 30, 2009.

 

**FactorsWhich May Affect Future Results**

 

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

 

**RecentAccounting Pronouncements**

 

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

 

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

 

Notapplicable.

 

**Item 4.  Controls and Procedures.**

 

(a)Evaluation of Disclosure Controls and Procedures.

 

Under the supervision andwith the participation of our management, including our principal executiveofficer and principal financial and accounting officer, we conducted anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principalexecutive officer and principal financial and accounting officer concludedthat, as of the period covered by this report, our disclosure controls andprocedures were effective to provide reasonable assurance that the informationrequired to be included in our SEC reports is recorded, processed, summarized,and reported within the time periods specified in SEC rules and forms.

 

(b) Changes in InternalControls over Financial Reporting.

 

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

 

9

----

Table of Contents

 

**PART II.  OTHERINFORMATION**

 
| **Item 1.** | **Legal Proceedings.**                                            |
|-------------|-------------------------------------------------------------------|
|        |                                                              |
|        | None.                                                             |
|        |                                                              |
| **Item 2.** | **Unregistered Sales of Equity  Securities and Use of Proceeds.** |
|        |                                                              |
|        | None.                                                             |
|        |                                                              |
| **Item 3.** | **Defaults upon Senior  Securities.**                             |
|        |                                                              |
|        | None.                                                             |
|        |                                                              |
| **Item 4.** | **Reserved.**                                                     |
|        |                                                              |
| **Item 5.** | **Other Information.**                                            |
|        |                                                              |
|        | None.                                                             |
|        |                                                              |
| **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.                                           |

 

10

----

Table of Contents

 
|   | 4.4    |   | Statement of Resolution  Establishing Series A 10% Convertible Preferred Stock of the Company, filed  as Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and  Exchange Commission on September 11, 2007, and incorporated herein by  reference. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 4.5    |   | Form of Warrant Agreement  and Warrant Certificate dated as of September 7, 2007, filed as Exhibit 10.4  to the Company’s Form 8-K filed with the Securities and Exchange Commission  on September 11, 2007, and incorporated herein by reference.               |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 4.6    |   | Statement of Resolution  Regarding Series of Preferred Stock of the Company dated November 9, 2007.                                                                                                                                                                   |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 4.7    |   | Statement of Resolution  Regarding Series of Preferred Stock of the Company, filed as Exhibit 4.1 to  the Company’s Form 8-K filed with the Securities and Exchange Commission on  May 21, 2008, and incorporated herein by reference.                           |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 31.1*  |   | Certification of the  Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002.                                                                                                                                                         |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 31.2*  |   | Certification of the  Principal Financial and Accounting Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 32.1*  |   | Certification of the  Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                  |
|   | 32.2*  |   | Certification of the  Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                           |

 

----

*filedherewith

 

11

----

Table of Contents

 

**SIGNATURES**

 

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

 

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

 

12

----