**Table of Contents**

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**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

** **

**x****     ****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE****SECURITIESEXCHANGE ACT OF 1934**

 

**For thequarterly period ended March 31, 2010**

 

**OR**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE****SECURITIESEXCHANGE ACT OF 1934**

 

**For thetransition period from                    to                    **

 

**Commission File Number: 0-21609**

 

# **CHASE PACKAGING CORPORATION**

(Exactname of registrant as specified in its charter)

 

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

# ** **

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

(Addressof principal executive offices)   (ZipCode)

 

**(732)741-1500**

(Registrant’stelephone number, including area code)

 

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

 

Indicate by check mark whether the registranthas submitted electronically and posted on its corporate Web site, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o   No o

 

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

 

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

 

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

 

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

 

| **Class**                               | ** ** | **Outstanding at May 5, 2010** |
|-----------------------------------------|------------|----------------------------------------------------|
| Common Stock, par value  $.10 per share |       | 15,536,275 shares                                  |

 

 

 

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**- INDEX -**

 
| ** **     | ** **                                                                                                                                                                                               | **Page(s)** |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|           |                                                                                                                                                                                                     |        |
| PART I    | Financial Information:                                                                                                                                                                                   |        |
|           |                                                                                                                                                                                                     |        |
| ITEM 1         | Financial Statements:                                                                                                                                                                                    |        |
|           |                                                                                                                                                                                                     |        |
|           | Condensed  Balance Sheets - March 31, 2010 (Unaudited) and December 31, 2009                                                                                                                   | 1           |
|           |                                                                                                                                                                                                     |        |
|           | Condensed  Statements of Operations (Unaudited) - Cumulative Period During the  Development Stage (January 1, 1999 to March 31, 2010) and the Three  Months Ended March 31, 2010 and 2009 | 2           |
|           |                                                                                                                                                                                                     |        |
|           | Condensed  Statements of Cash Flows (Unaudited) - Cumulative Period During the  Development Stage (January 1, 1999 to March 31, 2010) and the Three  Months Ended March 31, 2010 and 2009 | 3           |
|           |                                                                                                                                                                                                     |        |
|           | Notes to Interim Condensed Financial Statements  (Unaudited)                                                                                                                                             | 4           |
|           |                                                                                                                                                                                                     |        |
| ITEM 2         | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                              | 9           |
|           |                                                                                                                                                                                                     |        |
| ITEM  3        | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                              | 11          |
|           |                                                                                                                                                                                                     |        |
| ITEM 4         | Controls  and Procedures                                                                                                                                                                                 | 11          |
|           |                                                                                                                                                                                                     |        |
| PART II   | Other  Information                                                                                                                                                                                       | 11          |
|           |                                                                                                                                                                                                     |        |
| EXHIBITS INDEX | 12                                                                                                                                                                                                       |
|           |                                                                                                                                                                                                     |        |
| SIGNATURES     |                                                                                                                                                                                                     | 14          |
|           |                                                                                                                                                                                                     |        |
| EXHIBITS       |                                                                                                                                                                                                     | 15          |

 

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**PART I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

 

**CHASE PACKAGING CORPORATION**

**(A Development Stage Company)**

**CONDENSED BALANCE SHEETS**

** **
| ** **                                                                                                                                                                             | ** ** | **March 31,********2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                             | ** ** | **(unaudited)**                | ** ** | ** **                  | ** ** |
| **- ASSETS -**                                                                                                                                                                         | ** ** | ** **                     |       |                        |       |
| **CURRENT  ASSETS:**                                                                                                                                                                   | ** ** | ** **                     |       |                        |       |
| Cash and cash equivalents                                                                                                                                                              |       | $                              | 1,658,682  |                        | $          | 1,671,574 |   |
| ** **                                                                                                                                                                             |       |                           |       |                        |       |
| **TOTAL  ASSETS**                                                                                                                                                                      |       | $                              | 1,658,682  |                        | $          | 1,671,574 |   |
| ** **                                                                                                                                                                             |       |                           |       |                        |       |
| ** **                                                                                                                                                                             | ** ** | ** **                     |       |                        |       |
| **- LIABILITIES AND SHAREHOLDERS’ EQUITY -**                                                                                                                                      | ** ** | ** **                     |       |                        |       |
| ** **                                                                                                                                                                             | ** ** | ** **                     |       |                        |       |
| **CURRENT  LIABILITIES:**                                                                                                                                                              | ** ** | ** **                     |       |                        |       |
| Accounts payable and  accrued expenses                                                                                                                                                 |       | $                              | 16,626     |                        | $          | 2,509 |   |
| ** **                                                                                                                                                                             |       |                           |       |                        |       |
| **TOTAL  CURRENT LIABILITIES**                                                                                                                                                         |       | 16,626                         |       | 2,509                       |       |
| ** **                                                                                                                                                                             |       |                           |       |                        |       |
| **COMMITMENTS AND  CONTINGENCIES**                                                                                                                                                     |       |                           |       |                        |       |
| ** **                                                                                                                                                                             |       |                           |       |                        |       |
| **SHAREHOLDERS’  EQUITY:**                                                                                                                                                        |       |                           |       |                        |       |
| Preferred stock $1.00 par  value; 4,000,000 shares 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                                                                                                                                      |       | (382,474                       | )          | (355,465                    | )          |
| **TOTAL SHAREHOLDERS’  EQUITY**                                                                                                                                                   |       | 1,642,056                      |       | 1,669,065                   |       |
|                                                                                                                                                                                   |       |                           |       |                        |       |
| **TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY**                                                                                                                                   |       | $                              | 1,658,682  |                        | $          | 1,671,574 |   |

 

See notes to interim condensed financial statements.

 

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## **Table of Contents**

 

## **CHASE PACKAGING CORPORATION**

**(ADevelopment Stage Company)**

## **CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                  | ** ** | **Cumulative During the  Development Stage  (January 1, 1999 to** | ** ** | **Three Months Ended********March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                  | ** ** | **March 31, 2010)**                                               | ** ** | **2010**                                     | ** ** | **2009** | ** ** |
|                                                                        | ** ** | ** **                                                             | ** ** | ** **                                   |       |   |   |
| **NET SALES**                                                               |       | $                                                                      | —     |                                         | $          | — |   | $ | — |   |
|                                                                        |       |                                                                   |       |                                         |       |   |   |
| **EXPENSES:**                                                               |       |                                                                   |       |                                         |       |   |   |
| General and administrative expenses                                         |       | 432,603                                                                |       | 27,216                                       |       | 32,650 |   |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **LOSS FROM OPERATIONS**                                                    |       | (432,603                                                               | )          | (27,216                                      | )          | (32,650 | ) |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **OTHER INCOME (EXPENSE)**                                                  |       |                                                                   |       |                                         |       |   |   |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| Interest expense                                                            |       | (8,591                                                                 | )          | —                                       |       | — |   |
| Interest and other income                                                   |       | 58,720                                                                 |       | 207                                          |       | 200 |   |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **TOTAL OTHER INCOME**                                                      |       | 50,129                                                                 |       | 207                                          |       | 200 |   |
|                                                                        |       |                                                                   |       |                                         |       |   |   |
| **LOSS BEFORE INCOME TAXES**                                                |       | (382,474                                                               | )          | (27,009                                      | )          | (32,450 | ) |
|                                                                        |       |                                                                   |       |                                         |       |   |   |
| Provision for income taxes                                                  |       | —                                                                 |       | —                                       |       | — |   |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **NET LOSS**                                                                |       | $                                                                      | (382,474   | )                                            | $          | (27,009 | ) | $ | (32,450 | ) |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **BASIC AND DILUTED NET LOSS PER  COMMON SHARE**                            |       |                                                                   |       | $                                            | —     |   | $ | — |   |
| ** **                                                                  |       |                                                                   |       |                                         |       |   |   |
| **WEIGHTED AVERAGE COMMON SHARES****OUTSTANDING  — BASIC AND DILUTED** |       |                                                                   |       | 15,536,275                                   |       | 15,536,275 |   |

 

See notes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

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

## **CONDENSED STATEMENTS OF CASH FLOWS**

## **(Unaudited)**

## ** **

| ** **                                                                                                            | ** ** | **Cumulative During  the Development  Stage (January 1,  1999 to** | ** ** | **Three  Months Ended********March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                            | ** ** | **March 31, 2010)**                                                | ** ** | **2010**                                      | ** ** | **2009** | ** ** |
| ** **                                                                                                            | ** ** | ** **                                                              | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                                            | ** ** | ** **                                                              | ** ** | ** **                                    |       |   |   |
| Net loss                                                                                                              |       | $                                                                       | (382,474   | )                                             | $          | (27,009 | ) | $ | (32,450 | ) |
|                                                                                                                  |       |                                                                    |       |                                          |       |   |   |
| **Change in assets and liabilities:**                                                                                 |       |                                                                    |       |                                          |       |   |   |
| Accounts payable and accrued expenses                                                                                 |       | 1,447                                                                   |       | 14,117                                        |       | 18,179 |   |
| **Net cash (used in) operating  activities**                                                                          |       | (381,027                                                                | )          | (12,892                                       | )          | (14,271 | ) |
|                                                                                                                  |       |                                                                    |       |                                          |       |   |   |
| **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 paid on  preferred stock                                                                               |       | (4,310                                                                  | )          | —                                        |       | — |   |
| **Net cash provided by financing  activities**                                                                        |       | 2,028,048                                                               |       | —                                        |       | — |   |
| ** **                                                                                                            |       |                                                                    |       |                                          |       |   |   |
| **NET (DECREASE) INCREASE IN CASH AND  CASH EQUIVALENTS**                                                             |       | 1,647,021                                                               |       | (12,892                                       | )          | (14,271 | ) |
| ** **                                                                                                            |       |                                                                    |       |                                          |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT  BEGINNING OF PERIOD**                                                                |       | 11,661                                                                  |       | 1,671,574                                     |       | 1,769,739 |   |
| ** **                                                                                                            |       |                                                                    |       |                                          |       |   |   |
| **CASH AND CASH EQUIVALENTS, AT END  OF PERIOD**                                                                      |       | $                                                                       | 1,658,682  |                                          | $          | 1,658,682 |   | $ | 1,755,468 |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION:**                                                                               |       |                                                                    |       |                                          |       |   |   |
|                                                                                                                  |       |                                                                    |       |                                          |       |   |   |
| Cash paid for:                                                                                                        |       |                                                                    |       |                                          |       |   |   |
| Interest                                                                                                              |       | $                                                                       | —     |                                          | $          | — |   | $ | — |   |
| **Income taxes**                                                                                                      |       | $                                                                       | —     |                                          | $          | — |   | $ | — |   |
| ** **                                                                                                            |       |                                                                    |       |                                          |       |   |   |
| **NON-CASH INVESTING AND FINANCING ACTIVITIES:**                                                                      |       |                                                                    |       |                                          |       |   |   |
| Preferred stock issued as stock dividend                                                                              |       | $                                                                       | 3,260      |                                          | $          | — |   | $ | — |   |
| 416 Private Placement Units were issued in exchange  for $56,500 of convertible notes plus $5,900 of accrued interest |       | $                                                                       | 62,400     |                                          | $          | — |   | $ | — |   |
| 68 Private Placement Units were issued in exchange  for $8,000 of stock subscriptions plus $2,200 of accrued interest |       | $                                                                       | 10,200     |                                          | $          | — |   | $ | — |   |

 

See notes to interim condensed financial statements.

 

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## **CHASE PACKAGING CORPORATION**

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

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

## **MARCH 31, 2010**

## **(Unaudited)**

## ** **

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

 

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

 

Since January 1, 1999,the Board of Directors of the Company has devoted its efforts to establishing anew business and, accordingly, the Company is considered to be a developmentstage company in accordance with the Financial Accounting Standards Board’s (“FASB”)Accounting Standards Codification (“ASC”) 915.

 

Management’s plans for the Company include securing a merger or acquisition,raising additional capital, and/or other strategies designed to optimizeshareholder value. However, no assurance can be given that management will besuccessful in its efforts. The failure to achieve these plans will have amaterial adverse effect on the Company’s financial position, results ofoperations, and ability to continue as a going concern.

 

The interim condensed financial statements included herein have beenprepared by the Company, without audit, pursuant to the rules andregulations of the Securities and Exchange Commission (the “SEC”). Certaininformation and footnote disclosures normally included in the financialstatements prepared in accordance with generally accepted accounting principles(“U.S. GAAP”) have been condensed or omitted pursuant to such rules andregulations, although we believe that the disclosures made are adequate toprovide for fair presentation and a reasonable understanding of the informationpresented. The Condensed Financial Statements and Management’s Discussion andAnalysis of Financial Condition and Results of Operations included in this Form 10-Qshould be read in conjunction with the financial statements and the relatednotes, as well as Management’s Discussion and Analysis of Financial Conditionand Results of Operations, included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2009, previously filed with theSEC.

 

In the opinion of management, all adjustments (which include normalrecurring adjustments) necessary to present a fair statement of financialposition as of March 31, 2010, results of operations for the three monthsended March 31, 2010 and 2009, and cash flows for the three months ended March 31,2010 and 2009, as applicable, have been made. The results of operations for thethree months ended March 31, 2010 and 2009 are not necessarily indicativeof the operating results for the full fiscal year or any future periods.

 

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

 

Basic net loss per common share is computed bydividing the net loss by the weighted-average number of common sharesoutstanding.  Diluted net loss per share is computed by dividing thenet loss by the sum of the weighted-average number of common shares outstandingplus the dilutive effect of shares issuable through the exercise of commonstock equivalents.

 

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We have excluded 23,987,000 and 22,445,000 commonstock equivalents (warrants) from the calculation of diluted loss per share forthe three months ended March 31, 2010 and 2009, respectively, which, ifincluded, would have an antidilutive effect.

 

**NOTE 3-   RECENT ACCOUNTING PRONOUNCEMENTS:**

 

*FairValue Measurements*

 

TheCompany has adopted the provisions of FASB’s ASU 2010-06, Fair ValueMeasurements and Disclosures (Topic 820): Improving Disclosures about FairValue Measurements. This ASU requires some new disclosures and clarifies someexisting disclosure requirements about fair value measurement as set forth inCodification Subtopic 820-10. The FASB’s objective is to improve thesedisclosures and, thus, increase the transparency in financial reporting.Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require:

 

·                  A reporting entity to disclose separately theamounts of significant transfers in and out of Level 1 and Level 2 fair valuemeasurements and describe the reasons for the transfers; and

·                  In the reconciliation for Level 3 fair valuemeasurements using significant unobservable inputs, a reporting entity shouldpresent separately information about purchases, sales, issuances, andsettlements.

 

In addition, ASU 2010-06 clarifies the requirementsof the following existing disclosures:

 

·                  For purposes of reporting fair value measurementfor each class of assets and liabilities, a reporting entity needs to usejudgment in determining the appropriate classes of assets and liabilities; and

·                  A reporting entity should provide disclosures aboutthe valuation techniques and inputs used to measure fair value for bothrecurring and nonrecurring fair value measurements.

 

ASU2010-06 is effective for interim and annual reporting periods beginning after December 15,2009, except for the disclosures about purchases, sales, issuances, andsettlements in the roll forward of activity in Level 3 fair value measurements.Those disclosures are effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years. Early adoption ispermitted.  The adoption of the firstpart of the guidance had no material effect on the Company’s financialposition, results of operations, or cash flows.  The guidance relatedto presentation of Level 3 fair value measurements is not expected to have amaterial effect on the Company’s financial position, results of operations, orcash flows.

 

*Subsequent Events*

 

The Company has also adopted the provisions of the FASB ASU 2010-09,Subsequent Events (Topic 855): Amendments to Certain Recognition and DisclosureRequirements. The amendments in the ASU remove the requirement for an SEC filerto disclose a date through which subsequent events have been evaluated in bothissued and revised financial statements. Revised financial statements includefinancial statements revised as a result of either correction of an error orretrospective application of U.S. GAAP. The FASB also clarified that if thefinancial statements have been revised, then an entity that is not an SEC filershould disclose both the date that the financial statements were issued oravailable to be issued and the date the revised financial statements wereissued or available to be issued. The FASB believes that these amendmentsremove potential conflicts with the SEC’s literature.

 

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In addition, the amendments in the ASU require an entity that is aconduit bond obligor for conduit debt securities that are traded in a publicmarket to evaluate subsequent events through the date of issuance of itsfinancial statements and must disclose such date.  This guidance waseffective immediately.  The adoption of this guidance had no materialeffect on the Company’s financial position, results of operations, or cashflows.

 

*Consolidation of Variable Interest Entities*

 

In June 2009, FASB updated its guidance regarding “Consolidation —Consolidation of Variable Interest Entities.” Among other things, the updatereplaces the calculation for determining which entities, if any, have acontrolling financial interest in a variable interest entity (VIE) from aquantitative based risks and rewards calculation, to a qualitative approachthat focuses on identifying which entities have the power to direct theactivities that most significantly impact the VIE’s economic performance andthe obligation to absorb losses of the VIE or the right to receive benefitsfrom the VIE. The update also requires ongoing assessments as to whether anentity is the primary beneficiary of a VIE (previously, reconsideration wasonly required upon the occurrence of specific events), modifies thepresentation of consolidated VIE assets and liabilities, and requiresadditional disclosures about a Company’s involvement in VIEs. This updatebecame effective for the Company on January 1, 2010.  The adoption of this guidance had no materialeffect on the Company’s financial position, results of operations, or cashflows.

 

*Transfer of Financial Assets*

 

In June 2009, the FASB issued authoritative guidance amending theaccounting for the transfers of financial assets. Key provisions include:  (i) the removal of the concept ofqualifying special purpose entities; (ii) the introduction of the conceptof a participating interest in circumstances in which a portion of a financialasset has been transferred; and (iii) the requirement that to qualify forsale accounting, the transferor must evaluate whether it maintains effectivecontrol over transferred financial assets either directly or indirectly.Furthermore, this guidance requires enhanced disclosures about transfers offinancial assets and a transferor’s continuing involvement. This guidance iseffective for the Company beginning January 1, 2010, and is required to beapplied prospectively. The adoption of this guidance had no material effect onthe Company’s financial position, results of operations, or cash flows.

 

**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 cashpurchase price of $150, for a total subscribed amount of $2,000,100. Each Unitconsists of: (1) one share of Series A 10% convertible preferredstock, par value $1.00, stated value $100 (the “Preferred Stock”); (2) 500shares of the Company’s common stock, par value $0.10 (the “Common Stock”); and(3) 500 warrants (the “Warrants”) exercisable into Common Stock on aone-for-one basis.

 

Each Warrant contained in a Unit has a term of five years during whichsuch Warrant may be exercised, at $0.15 per share, into one share of 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.

 

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Each share of Preferred Stock contained in a Unit has a stated value of$100 and is convertible at any time into Common Stock at a rate of $0.10 pershare. The conversion price of the Preferred Stock is subject to adjustment toreflect recapitalizations, stock dividends, mergers, stock splits, and similarevents that would otherwise dilute the relative number of shares of CommonStock into which the Preferred Stock may be converted.

 

There are 4,000,000 shares of Preferred Stock currently authorized forissuance. At the discretion of the Company’s Board of Directors, the Companymay pay to the holders of the Preferred Stock a semi-annual dividend of tenpercent payable in cash or in kind (i.e., in additional shares of PreferredStock) or any combination thereof. The holder of each share of Preferred Stockhas one vote for each underlying share of Common Stock as if such PreferredStock had been converted. At any time prior to conversion, the Company’s Boardof Directors may redeem any portion or all of the Preferred Stock at a price of$100 per share of Preferred Stock. Each share of Preferred Stock has aliquidation value of $100 per share. At any time after August 2, 2011, theholders of 66 2/3% or more of the shares of Preferred Stock then outstandingmay request the liquidation of their Preferred Stock. In the event that, at thetime of such requested liquidation, the Company’s cash funds (in excess of a$50,000 reserve fund) then available to effect such liquidation are inadequatefor such purpose, the requested liquidation shall take place (on a pro-ratabasis) only to the extent such excess cash funds are available for suchpurpose. In the event of a merger transaction approved by the holders of theCommon Stock, the holders of the Preferred Stock will have the right to a cashpayment of $100 per share in connection with such merger, or the PreferredStock will be automatically converted at the then applicable conversion rate.There was no beneficial conversion feature recorded since the Common Stock wasselling for less than $0.10 per share at the time of the closing (whichapproximated fair value).

 

Legal and professional fees of approximately $38,000 were incurred inconnection with this private placement transaction resulting in net proceeds ofapproximately $1,962,000.

 

**NOTE 5 — DIVIDENDS:**

 

On November 2, 2009, the Companyannounced that the Board of Directors had declared a ten percent stock dividendon its outstanding Series A 10% Convertible Preferred Stock.  Shareholders of record as of November 16,2009, received the stock dividend for each share of Series A PreferredStock owned on that date, payable December 1, 2009.   As of November 2, 2009, the Company had15,536 shares of Preferred Stock outstanding; the total dividend paid consistedof 1,542 shares of Series A Preferred Stock with a fair value of $154,200and $1,160 cash in lieu of fractional shares. Due to the absence of Retained Earnings, the $1,160 of cash and $1,542par value of Preferred Stock dividend totaling $2,702 were charged againstAdditional Paid-in Capital.

 

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**NOTE 6 - SHAREHOLDERS’ EQUITY:**

 

The Company’s 2008 Stock Awards Plan (the “2008 Plan”) was approved atthe Company’s annual meeting of shareholders held on June 3, 2008.  The 2008 Plan became effective April 9,2008, and will terminate on April 8, 2018. Subject to certain adjustments, 2,000,000 shares of Common Stock may beissued pursuant to awards under the 2008 Plan. A maximum of 80,000 shares may be granted in any one year in any form toany one participant, of which a maximum of: (i) 50,000 shares may be granted to a participant in the form ofstock 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 March 31, 2010, no options had been issued under the 2008Plan.

 

**NOTE 7 - FAIRVALUE 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.

 

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 three monthsended March 31, 2010 which would require adjustment to the recognizedbalances of assets or liabilities which are recorded at fair value on anonrecurring 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.

 

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

 
| ** **         | ** ** | **Carrying Amount********In Balance Sheet********March 31,********2010** | ** ** | **Fair Value********March 31,********2010** | ** ** | **Fair Value Measurement Using** | ** ** |
|--------------------|------------|-------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------|------------|
| ** **         | ** ** | **(unaudited)**                                                               | ** ** | **(unaudited)**                                  | ** ** | **Level 1**                      | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| Assets:            |       |                                                                          |       |                                             |       |                             |       |   |   |   |   |
| Money Market Funds |       | $                                                                             | 1,656,000  |                                             | $          | 1,656,000                        |       | $ | 1,656,000 |   | $ | — |   | $ | — |   |
|                    |            |                                                                               |            |                                                  |            |                                  |            |  |  |  |  |  |  |  |  |  |

 
| ** **         | ** ** | **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:**

 

Commencing November 1, 2007, the Company’s Board of Directorsagreed to pay the Company’s Chief Financial Officer an annual salary of$17,000. No other officers or directors of the Company receive compensationother than reimbursement of out-of-pocket expenses incurred in connection withCompany business and development.

 

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

 

**Forward-Looking Statements**

 

*The information in thisreport on Form 10-Q contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995.  This Act provides a “safe harbor” forforward-looking statements to encourage companies to provide prospectiveinformation about themselves provided they identify these statements as forwardlooking and provide meaningful cautionary statements identifying importantfactors that could cause actual results to differ from the projectedresults.  All statements other thanstatements of historical fact made in this report are forward looking.  In particular, the statements hereinregarding industry prospects and future results of operations or financialposition are forward-looking statements. Forward-looking statements reflectmanagement’s current expectations and are inherently uncertain.  The Company’s actual results may differsignificantly from management’s expectations as a result of many factors.*

 

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*You should read thefollowing discussion and analysis in conjunction with the financial statementsof 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.*

 

**Results of Operations**

 

During the quarter ended March 31,2010, the Company had no operations, and its only income was from interestincome on its money market funds classified as cash and cash equivalents.General and administrative expenses for the three-month periods ended March 31,2010 and 2009 were $27,216**and $32,650,respectively.  The Company had interestincome of $207 and a net loss of $27,009 during the three-month period ended March 31,2010, compared with interest income of $200 and a net loss of $32,450 duringthe comparable period of 2009.  The lowinterest income was due to lower interest rates.

 

Due to the closing of aprivate placement of the Company’s securities in the third quarter 2007, theCompany had a cash and cash equivalents balance as of March 31, 2010 of $1,658,682.  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.

 

**Liquidity and CapitalResources**

 

At March 31, 2010, theCompany had cash and cash equivalents of approximately $1,659,000.  Cash and cash equivalents consist of cashheld in banks and brokerage firms. Working capital at March 31, 2010 was approximately$1,642,000.  Management believes that itscash and cash equivalents are sufficient for its business activities for atleast the next 12 months and for the costs of acquiring an operating business.

 

Net cash used in operatingactivities amounted to approximately $12,900 for the three-month period ended March 31,2010 and approximately $14,300 for the three-month period ended March 31,2009.

 

No cash flows were used orprovided by investing activities during the first quarter of 2010 or during thefirst quarter of 2009.

 

No cash proceeds wereprovided by financing activities during the first quarter of 2010 or during thefirst quarter of 2009.

 

**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.

 

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**Recent AccountingPronouncements**

 

See Note 3 “RecentAccounting Pronouncements” 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.****                    ****Quantitativeand Qualitative Disclosures About Market Risk.**

 

Not applicable.

 

**Item 4.****                     ****Controlsand Procedures.**

 

(a) Evaluation ofDisclosure Controls and Procedures.

 

Under the supervision and with theparticipation of our management, including our principal executive officer andprincipal financial and accounting officer, we conducted an evaluation of theeffectiveness of the design and operation of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principalexecutive officer and principal financial 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 Internal Controls overFinancial Reporting.

 

In connection with the evaluation required byparagraph (d) of Rule 13a-15 under the Exchange Act, there was nochange identified in our internal control over financial reporting thatoccurred during the last fiscal quarter that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

**PART II.  OTHER INFORMATION**

 

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

 

None.

 

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

 

None.

 

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

 

None.

 

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

 

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

 

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.                                      |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                        |
| 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.                                                                                                                                                                                                                                                                               |

 

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| 4.7    |   | Statement of Resolution Regarding Series of Preferred Stock of  the Company, filed as Exhibit 4.1 to the Company’s Form 8-K filed  with the Securities and Exchange Commission on May 21, 2008, and  incorporated herein by reference. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                            |
| 31.1*  |   | Certification of the Principal Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                            |
| 31.2*  |   | Certification of the Principal Financial and Accounting Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                            |
| 32.1*  |   | Certification of the Principal Executive Officer pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                          |
|   |   |                                                                                                                                                                                                                                                            |
| 32.2*  |   | Certification of the Principal Financial and Accounting Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                           |

 

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*filedherewith

 

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**SIGNATURES**

** **

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

 

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