-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DCEqEOypPgH6UMpnvx8X/Q2SR0UAioGxfmYvHjqYBHpPMSIIVB6gedGMe3ohn5s5 DHYnSt6Le9uWdrrFyS156A== 0001144204-02-000308.txt : 20020528 0001144204-02-000308.hdr.sgml : 20020527 20020528143943 ACCESSION NUMBER: 0001144204-02-000308 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 20020528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE PACKAGING CORP CENTRAL INDEX KEY: 0001025771 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE SERVICES [0700] IRS NUMBER: 931216127 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21609 FILM NUMBER: 02663404 BUSINESS ADDRESS: STREET 1: 26 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10004 MAIL ADDRESS: STREET 1: 2550 NW NICOLAI STREET CITY: PORTLAND STATE: OR ZIP: 97210 10KSB 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 Commission File Number 0-21609 CHASE PACKAGING CORPORATION (Exact name of registrant as specified in its charter) Texas 93-1216127 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) c/o Ann W. Green 26 Broadway, 8th Floor New York, NY 10004 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-510-0686 Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10 par value (Title of Class) - ------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of registrants= knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] Issuers revenues for the most recent fiscal year - $4,403,023. The aggregate market value of voting stock held by non-affiliates of the registrant as of December 31, 1997 was $ N/A ------ Indicate by check mark whether the registrant has filed all documents and reports required by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No --- --- As of December 31, 1997, the registrant had outstanding 7,002,964 shares of Common Stock ($.10 par value) PART I ITEM 1. BUSINESS. Chase Packaging Corporation ("Chase" or the "Company"), is a Texas corporation which was engaged in the specialty packaging business, primarily as a supplier of packaging products to the agricultural industry. During 1997, the Company commenced an orderly liquidation of its assets as described below. HISTORY Chase Packaging Corporation (the "Company") was established in July of 1993 as a wholly owned subsidiary of TGC Industries, Inc. ("TGC") of Plano, Texas. On July 30, 1993, the Company purchased certain assets of Union Camp Corporation's Chase Packaging division ("Chase Bag"), for a purchase price of approximately $6.14 million. The assets purchased included substantially all of the business of weaving and constructing Saxolin paper mesh and polypropylene plastic mesh bagging material for agricultural and industrial applications and substantially all of the properties related to Chase Bag. The properties acquired by Chase consisted of Union Camp's plant facilities located in Portland, Oregon, and Idaho Falls, Idaho, and all machinery, equipment, and inventories connected with these facilities. On March 18, 1997 TGC sold the Portland, Oregon facility for $2,430,000 with $1,780,000 of the proceeds applied against Chase's outstanding mortgage indebtedness to Union Camp with respect to such facility and the balance of the proceeds applied in satisfaction of a debt obligation owing by TGC to Chase to pay to Chase any such proceeds in excess of the amount of the mortgage indebtedness. The Company has experienced losses for the previous four years, and the Company's secured lender decided not to renew the Company's operating line of credit. The Company's Board of Directors therefore determined that it was in the best interest of the Company and all of its creditors to liquidate in an orderly fashion. Effective July 21, 1997, the Company sold its operations at Idaho Falls, Idaho, to Lockwood Packing Corporation ("Lockwood"), as a going concern. The assets sold included substantially all of the Company's equipment, furniture, fixtures, and other assets located in the Idaho Falls, Idaho facility for a total of $75,000. In addition, the Company sold inventory from the Idaho Falls operation to Lockwood for $255,000. The total proceeds of $330,000 were deposited with the bank to pay down the Company's loan balance. On July 25, 1997, the Company notified its creditors by mail that the Company would begin an orderly liquidation of all of its remaining assets outside of a formal bankruptcy or receivership proceeding in a manner which is intended to maximize the asset values. The Company retained the firm of Edward Hostmann, Inc. to assist the Company in such liquidation. Although it is difficult to determine the return to creditors from such liquidation, the Company estimates that the general creditors will receive a distribution equal to ten to fifteen (10-15%) of each creditor's claim. ITEM 2. DESCRIPTION OF PROPERTY. None. ITEM 3. LEGAL PROCEEDINGS. The Company is a defendant in various legal actions that arose out of the normal course of business. In the opinion of Management, none of the actions will result in any significant loss to the Company. -2- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted by the Company during the fourth quarter of the fiscal year ended December 31, 1997 to a vote of the Company's security holders, through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock was eligible to commence trading under the symbol "CPKA" on March 10, 1997 and the first trade occurred on March 10, 1997, at $.04 per share. The number of shareholders of record as of December 31, 1997 was not known. As a result of the events detailed above, no trading market was ever developed. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATION For the operating period January 1, 1997 to June 30, 1997, (a six month period), revenues were $4,403,023 compared to revenues of $9,733,520 for the twelve month period ended December 31, 1996. Net loss for the 1997 period was $846,006 as compared to net loss of $2,718,769 for the 1996 year. As discussed earlier, and further discussed below, the Company began an orderly liquidation of its assets effective with the close of business on June 30, 1997. The 1996 losses include a write-down for asset impairment of $480,599 on weaving equipment that was held for sale as of December 31, 1996. The equipment was sold in January, 1997 for $550,000 as part of the Company's business plan for disposition of under-utilized assets. Although the Company attempted to reduce its operating costs in 1997, the expense reductions could not offset rapidly declining revenues. The continuation in operating losses, when combined with the decision of the Company's secured lender not to renew the Company's operating line of credit, resulted in the decision of Chase's Board of Directors to liquidate the Company in an orderly fashion. FINANCIAL CONDITION: Chase Packaging experienced cash losses for the past four years in spite of numerous infusions of working capital and an aggressive program of inventory and expense reduction. The Board of Directors therefore determined that an orderly liquidation of Chase was in the best interest of the Company and all of its creditors and retained the firm of Edward Hostmann, Inc. to assist the Company in such liquidation. As part of the liquidation process, effective July 21, 1997, Chase sold most of its assets in Idaho Falls, Idaho (excluding real estate) to Lockwood Packaging Corporation Idaho for $330,000. The Company also sold the Idaho Falls real estate (land and building). During July and August of 1997 Chase sold most of its inventory in Portland to other packaging companies. The Company also sold its band label extruder for $125,000 with remaining inventory and machinery and equipment sold at an August 14 auction for gross proceeds of approximately $340,000. As a result of the orderly liquidation, the loan balance with the Company's secured lender has been paid down from a June 30, 1997 balance of $1,517,551. Although it is difficult to determine the final return to unsecured creditors from such liquidation, the Company estimates at the present time that general creditors will receive a distribution equal to ten to fifteen percent (10-15%) of each creditor's claim. -3- ITEM 7. FINANCIAL STATEMENTS. CHASE PACKAGING CORPORATION --------------------------- FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 ---------------------------------------------- - INDEX TO FINANCIAL STATEMENTS -
PAGE(S) ------------ Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Financial Statements: Statement of Net Assets (Liabilities) in Liquidation as of December 31, 1997 . . . . F-3 Statements of Operations for the Six Months Ended June 30, 1997 and the Year Ended 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 Statements of Changes in Net Assets in Liquidation for the Period from July 1, 1997 to December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5 Statements of Shareholder's Equity for the Two Years Ended December 31, 1997 . . . . F-6 Statements of Cash Flows for the Years Ended December 31, 1997 and 1996. . . . . . . F-7 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
F-1 INDEPENDENT AUDITORS' REPORT To The Shareholders Chase Packaging Corporation We have audited the statement of net assets (liabilities) in liquidation of Chase Packaging Corporation as of December 31, 1997 and the related statement of operations for the period from January 1, 1997 to June 30, 1997 and the statement of changes in net assets in liquidation for the period from July 1, 1997 to December 31, 1997 (see Note 3). In addition, we have audited the statements of shareholders' equity (deficit) and cash flows for the period from January 1, 1997 to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 3 to the financial statements, the shareholders of Chase Packaging Corporation approved a plan of liquidation on June 30, 1997 and the Company commenced liquidation shortly thereafter. As a result, the Company has changed its basis of accounting for periods subsequent to June 30, 1997 from the going-concern basis to the liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Chase Packaging Corporation as of December 31, 1997, the changes in the results of its operations and its cash flows for the period from January 1, 1997 to June 30, 1997, and its net assets in liquidation for the period from July 1, 1997 to December 31, 1997 and in conformity with generally accepted accounting principles applied on the basis described in the preceding paragraph. -------------------------------- LAZAR LEVINE & FELIX LLP New York, New York November 18, 1999 F-2 CHASE PACKAGING CORPORATION --------------------------- STATEMENT OF NET ASSETS (LIABILITIES) IN LIQUIDATION ---------------------------------------------------- AS OF DECEMBER 31, 1997 ----------------------- - ASSETS -
CURRENT ASSETS: Cash and cash equivalents $ 126,408 Accounts receivable 57,012 ----------- TOTAL ASSETS $ 183,420 =========== - LIABILITIES AND SHAREHOLDERS' EQUITY - CURRENT LIABILITIES: Accounts payable $ 134,037 Accrued expenses 23,279 ----------- TOTAL CURRENT LIABILITIES 157,316 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock $1.00 par value; 4,000,000 shares authorized $ - Common stock $.10 par value, 25,000,000 shares authorized, 7,002,964 shares issued and outstanding 700,296 Additional paid-in capital 2,914,207 Accumulated deficit (3,588,399) 26,104 ------------ ---------- $ 183,420 ===========
See notes to financial statements. F-3 CHASE PACKAGING CORPORATION --------------------------- STATEMENTS OF OPERATIONS ------------------------
For the Period January 1, 1997 For the Year To June 30, 1997 Ended December (See Note 3) 31, 1996 ------------ ------------ NET SALES $ 4,403,023 $ 9,733,520 ------------ ------------ COSTS AND EXPENSES: Cost of sales 4,250,127 9,524,548 Selling, general and administrative expense 1,058,629 1,799,836 Interest expense 114,166 647,306 Write down for impairment of assets held for sale - 480,599 ------------ ------------ TOTAL COSTS AND EXPENSES: 5,422,922 12,452,289 ------------ ------------ LOSS BEFORE EXTRAORDINARY ITEM (1,019,899) (2,718,769) Extraordinary item - gain from extinguishment of debt 173,893 - ------------ ------------ LOSS BEFORE INCOME TAXES (846,006) (2,718,769) Provision for income taxes - - ------------ ------------ NET LOSS $ (846,006) $(2,718,769) ============ ============ LOSS PER SHARE: Loss per share before extraordinary item $ (.15) $ (.39) Extraordinary item .03 - ============ ============ INCOME (LOSS) PER SHARE $ (.12) $ (.39) ============ ============
See notes to financial statements. F-4 CHASE PACKAGING CORPORATION --------------------------- STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION ------------------------------------------------- FOR THE PERIOD FROM JULY 1, 1997 TO DECEMBER 31, 1997 -----------------------------------------------------
SALES $ - ------------ COSTS AND EXPENSES: Cost of sales (230,023) Selling, general and administrative (93,116) Write-down of assets in liquidation 1,962,534 ------------ 1,639,395 ------------ ACCUMULATED LOSS ON ASSETS IN LIQUIDATION $(1,639,395) ============
See notes to financial statements. F-5 CHASE PACKAGING CORPORATION --------------------------- STATEMENT OF STOCKHOLDERS' EQUITY ---------------------------------
Common Stock ------------ Additional Accumulated Shares Amount Paid-in capital Deficit Total ---------- --------- ----------------- ------------ ----------- Balance at December 31, 1995 1,000 $ 100 $ 2,371,145 $(3,800,538) $(1,429,293) Net loss through July 31, 1996 - - - (1,615,771) (1,615,771) Liquidation of Company (1,000) (100) (2,371,145) 5,416,309 3,045,064 Reorganization 6,960,714 696,071 450,308 - 1,146,379 ---------- --------- ----------------- ------------ ------------ Balance at August 1, 1996 6,960,714 696,071 450,308 - 1,146,379 Contribution by former parent - - 75,000 - 75,000 Contributed rent - Portland Facility - - 108,750 - 108,750 Stock issued 42,250 4,225 (4,225) - - Net loss through December 31, 1996 - - - (1,102,998) (1,102,998) ---------- --------- ----------------- ------------ ------------ Balance at December 31, 1996 7,002,964 700,296 629,833 (1,102,998) 227,131 Cash contribution by former parent - - 9,318 - 9,318 Contributed rent - Portland facility - - 55,427 - 55,427 Contribution by former parent - - 2,219,629 - 2,219,629 Net loss through June 30, 1997 - - - (846,006) (846,006) Deficit in assets in liquidation - - - (1,639,395) (1,639,395) ---------- --------- ----------------- ------------ ------------ Balance at December 31, 1997 7,002,964 $700,296 $ 2,914,207 $(3,588,399) $ 26,104 ========== ========= ================= ============ ============
See notes to financial statements. F-6 CHASE PACKAGING CORPORATION --------------------------- STATEMENTS OF CASH FLOWS ------------------------
FOR THE YEAR ENDED DECEMBER 31, ------------ 1997 1996 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (846,006) $(2,718,769) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 180,481 619,423 (Gain) loss on disposal of property and equipment (20,808) 8,629 Write-down for impairment of assets - 480,599 Gain from extinguishment of debt (173,893) - Non-cash expenses 62,428 112,350 CHANGE IN ASSETS AND LIABILITIES: Accounts receivable 1,577,373 28,978 Inventories 764,664 1,163,097 Prepaid expenses 79,320 14,979 Accounts payable (553,184) (509,727) Accrued liabilities (258,340) 87,331 Advance billings (37,382) 5,578 ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 774,653 (707,532) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (113,360) (153,983) Proceeds from sale of property and equipment 1,176,461 9,000 Other assets (1,650) (275) ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,061,451 (145,258) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of debt obligations (350,000) (1,704,168) Repayments on line of credit (1,390,392) (1,021,732) Receivable from parent - 858,542 Capital contributed by parent 9,318 2,716,403 ------------ ------------ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,731,074) 849,045 ------------ ------------ NET INCREASE (DECREASE) IN CASH EQUIVALENTS 105,030 (3,745) Cash and cash equivalents, at beginning of year 21,378 25,123 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF YEAR $ 126,408 $ 21,378 ============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES: During the 1997 first quarter, Chase incurred rent expense of $55,427 for use of the manufacturing facility owned by TGC (its former parent). TGC converted the rent receivable to equity in Chase. On March 18, 1997 TGC sold the Portland, Oregon facility occupied by Chase. Proceeds of $1,780,000 were applied against Chase's outstanding mortgage indebtedness to Union Camp Corporation. Proceeds of $284,500 were placed into escrow for future repairs and rental payments and recorded as a prepaid expense. Proceeds of $22,000 were utilized to repay Chase's rent on the Portland facility from the date of closing through April 30, 1997 and proceeds of $133,129 were applied against property taxes on the Portland facility. See notes to financial statements. F-7 CHASE PACKAGING CORPORATION --------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1997 AND 1996 -------------------------- NOTE 1 - DESCRIPTION OF COMPANY: Chase Packaging Corporation ("the Company"), a Texas Corporation, manufactured woven paper mesh for industrial applications, polypropylene mesh fabric bags for agricultural use and distributed agricultural packaging manufactured by other companies. The company was a wholly-owned subsidiary of TGC Industries, Inc. (TGC) through July 31, 1996. In July 1996, TGC liquidated its wholly-owned subsidiary, Chase Packaging Corporation ("Old Chase"), with TGC receiving all of Old Chase's properties and liabilities in cancellation of the Old Chase stock held by TGC. TGC then formed New Chase Corporation ("New Chase") as a new wholly-owned subsidiary and transferred to New Chase certain of the properties and liabilities received in the liquidation of Old Chase and canceled all intercompany debt owed by Old Chase to TGC. Effective July 31, 1996, TGC spun off New Chase by a dividend distribution to the stockholders of record of TGC common and preferred stock. At the same time, the name was changed from New Chase Corporation to Chase Packaging Corporation. The financial statements for 1996 are presented on the basis that the principal operations of Old Chase continued with the formation of New Chase and the statements of operations and cash flows for the year ended December 31, 1996 consists of seven months of operations of Old Chase and five months of operations of New Chase. The Company has experienced losses for the past four years, and the Company's secured lender decided not to renew the Company's operating line of credit. As a result, the Company's Board of Directors determined that it was in the best interest of the Company and all of its creditors to liquidate in an orderly fashion. On June 25, 1997, the Company announced to employees and creditors that it would begin an orderly liquidation of all its assets beginning at the close of business on June 30, 1997. On July 25, 1997, the Company notified its creditors by mail that it would commence with an orderly liquidation of all its remaining assets outside of a formal bankruptcy or receivership proceeding in a manner intended to maximize asset values. As a result of the plan of liquidation, the accompanying financial statements reflect a change in the basis of accounting used to determine the amounts at which assets and liabilities are carried from a going concern basis to a liquidation basis as of June 30, 1997. The statement of changes in net assets in liquidation contains only the write-down of assets as of the close of operations on June 30, 1997. F-8 CHASE PACKAGING CORPORATION --------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1997 AND 1996 -------------------------- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company's accounting policies are in accordance with generally accepted accounting policies. Outlined below are those policies which are considered particularly significant. (A) LIQUIDATION BASIS: On June 27, 1997 the Company decided to liquidate effective with the close of business on June 30, 1997, and accordingly revalued its assets and liabilities to the amounts expected to be collected and paid during the liquidation. Up through that date, the Company recorded its results of operations using accounting principles applicable to going concern entities. (B) USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (C) LOSS PER COMMON SHARE: Loss per common share before and after extraordinary gain were calculated by dividing the net loss by the number of shares outstanding. Loss per common share for the 1996 year was based on the assumption that the 6,960,714 shares of common stock issued under the reorganization plan were issued at the beginning of the period. NOTE 3 - LIQUIDATION: As part of the Company's plan of liquidation, effective July 21, 1997, Chase sold to Lockwood Packaging Corporation Idaho (Lockwood) the Company's operation at Idaho Falls, Idaho, as a going concern. The assets sold included substantially all of the Company's equipment, furniture, fixtures, and other assets located in the Company's Idaho Falls, Idaho facility for a total of $75,000. In addition, the Company sold inventory from the Idaho Falls operation to Lockwood for $255,000. The total proceeds of $330,000 were deposited with the Company's bank to pay down the Company's loan balances with the bank. Lockwood then entered into a lease with the Company for the Company's Idaho Falls facility. On July 25, 1997, the Company notified its creditors by mail that the Company would commence with an orderly liquidation of all its remaining assets outside of a formal bankruptcy or receivership, proceeding in a manner intended to maximize asset values. Inventory and equipment were sold to other packaging concerns and an auction was held on August 14, 1997 to liquidate the remaining inventory, equipment and supplies at the Company's Portland, Oregon facility. The Company received net proceeds of $305,562 from this auction. F-9 CHASE PACKAGING CORPORATION --------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1997 AND 1996 -------------------------- NOTE 3 - LIQUIDATION (CONTINUED): The table below sets forth the assets of Chase on a going concern basis as of June 30, 1997 and the corresponding write-down to the estimated net realizable value at time of disposal:
Net realizable Going concern basis Liquidation value as of as of June 30, 1997 write-down June 30, 1997 -------------------- --------------- ---------------- Cash $ 10,975 $ - $ 10,975 Accounts receivable (net) 830,511 - 830,511 Inventories 1,875,919 870,995 1,004,924 Prepaid expenses 292,068 266,389 25,679 Land and building (net book value) 405,209 80,209 325,000 Machinery & equipment (net book value) 1,181,654 739,254 442,400 Other assets 9,181 5,687 3,494 -------------------- ----------- -------------- TOTAL $ 4,605,517 $ 1,962,534 $ 2,642,983 ==================== =========== ==============
NOTE 4 - EXTRAORDINARY ITEM - GAIN FROM EXTINGUISHMENT OF DEBT: On March 18, 1997, TGC sold its Portland, Oregon facility for $2,430,000 with $1,780,000 of the proceeds applied against the Company's outstanding mortgage indebtedness to Union Camp Corporation with respect to such facility. The $1,780,000 payment to Union Camp, when combined with a principal payment of $350,000 made to Union Camp on January 7, 1997, from the sale proceeds of Chase's polypropylene weaving equipment, resulted in the Union Camp note being declared paid in full as of March 19, 1997. A gain from debt extinguishment of $173,893 was recognized as a result of these payments. The gain consisted of $4,383 in principal and $169,510 in interest carried on the Company's financial statements and forgiven by Union Camp. Due to the Company's net operating loss position there is no income tax applicable to the gain. F-10 CHASE PACKAGING CORPORATION --------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1997 AND 1996 -------------------------- NOTE 5 - INCOME TAXES: The income tax provision reconciled to the tax computed at the statutory federal rate is as follows.
FOR THE YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 ------------ ---------- Federal tax benefit at statutory rate $ 950,000 $ 924,000 State tax benefit net of Federal tax effect 170,000 118,000 Permanent differences - (11,000) Retained by TCG in reorganization - (612,000) Change in valuation allowance (1,120,000) (419,000) ------------ ---------- $ - $ - ============ ========== Deferred tax assets and liabilities consist of the following: DEFERRED TAX ASSETS: Net operating loss carry forwards $ 1,120,000 $ 196,000 Other - 48,000 Impairment of property and equipment - 185,000 DEFERRED TAX LIABILITIES: Depreciation of property and equipment - (10,000) ------------ ---------- 1,120,000 419,000 Less valuation allowance (1,120,000) (419,000) ------------ ---------- $ - $ - ============ ==========
The NOL's accumulated through July 31, 1996, aggregating $5,260,000, remained with TGC upon completion of the spin-off of New Chase as discussed in Note 1 and are not available to offset future taxable income of Chase. At December 31, 1997, Chase had approximately $3,300,000 of net operating loss carry forwards available which expire in years beginning in 2011. F-11 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. The Board of Directors of the Company consists of three persons who will serve until the next annual meeting of shareholders of the Company. The following table sets forth certain information concerning the individuals serving as Directors of the Company:
Date Since Which Continuously a Director of the Name and Age Company Business Experience and Other Directorships Allen T. McInnes, 59 1993 Chairman of the Board of TGC Industries,Inc. since 1993 and Chief Executive Officer from August, 1993 to March 31, 1996;Executive Vice President and Director of Tenneco, Inc. 1960-1992; Director of Tetra Technologies, President and CEO since April 1, 1996; Director of NationsBank Texas 1990-1993. Lewis W. Lovell, 60 1996 President and Chief Operating Officer of Chase Packaging Corporation from October, 1995 to 1997; Divisional President of Williams Holdings, Inc. From 1988 to 1993; Senior Vice-President of Packaging Corporation of America from 1984 to 1988; Vice President and General Manager of Tenneco West from 1976 to 1984. Doug Kirkpatrick, 44 1996 Vice President, Chief Financial Officer, and Assistant Secretary of Chase Packaging Corporation from 1993 to 1997; Controller of Tidelands Geophysical Company from 1982 to 1993; Vice President of Finance and Treasurer of TGC Industries, Inc. from 1986 to 1996.
Unaffiliated Directors of the Company are not paid fees, but will be reimbursed for expenses in connection with meetings of the Board of Directors attended by them. EXECUTIVE OFFICERS The following table sets forth certain information concerning the persons who serve as executive officers of the Company, and will continue to serve in such positions, as the discretion of the Board of Directors. Name Age Position Allen T. McInnes 59 Chief Operating Officer, President, Secretary, Treasurer -4- COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. To the best of the Company's knowledge all directors, executive officers, and beneficial owners have complied with the requirements of Section 16(a) of the Exchange Act. ITEM 10. EXECUTIVE COMPENSATION. The table below sets forth on an accrual basis all cash and cash equivalent remuneration paid by the Company during the years ended December 31, 1995 and 1996 to the Chief Executive Officer and any other executives whose salary and bonus exceeded $100,000, if any. No compensation was paid for 1997. Summary Compensation Table Annual Compensation Name and Principal Position Year Salary Other Anuual Compensation Lewis W. Lovell (1) 1996 $80,973.99 (1) $4,297,49 (2) President and Chief Executive Officer Allen T. McInnes (3) 1995 $99,539.00 (3) $5,260.00 (2) Chief Executive Officer
Long-Term Compensation Name Year Restricted Stock Awards Options All Other SAR's Compensation Lewis W. Lovell 1996 -0- -0- -0- Allen T. McInnes 1995 -0- -0- $4,384 (4)
(1) Mr. Lovell became Chief Executive Officer of the Company in July, 1996. Prior to July, 1996, Mr. Lovell was President and Chief Operating Officer of the Company from October, 1995. For the year ended December 31, 1995, Mr. Lovell's compensation from salary was $23,105.83 and from use of a company vehicle was $50.29. (2) Represents personal use of company vehicle. (3) Mr. McInnes resigned as Chief Executive Officer of the Company in March, 1996. Prior to that time, Mr. McInnes was President and Chief Executive Officer of TGC Industries, Inc. (the Company's former parent) and Chief Executive Officer of the Company. The compensation set forth in the table includes the compensation to Mr. McInnes in his capacity as Chief Executive Officer of both TGC and the Company. From January 1, 1996 to March, 1996, Mr. McInnes received the following compensation: $24,964.65 from salary; $351.00 for insurance; and $1,197.29 from TGC's contribution to its 401(k). (4) Represents life insurance premiums in the amount of $900 and TGC's contribution to its 401(k) program in the amount of $3,484. -5- 1996 STOCK OPTION PLAN On July 10, 1996, the Company's Board of Directors and sole shareholder approved and adopted the Company's 1996 Stock Option Plan. The following paragraphs summarize certain provisions of the 1996 Stock Option Plan and are qualified in their entirety by reference thereto. The 1996 Stock Option Plan provides for the granting of Incentive Stock Options (collectively, the "Options") to purchase shares of the Company's Common Stock to certain key employees of the Company and non-statutory stock options to certain key employees of the Company, affiliates of the Company, and certain individuals who are not employees of the Company or its affiliates. The 1996 Stock Option Plan authorizes the granting of options to acquire up to 600,000 shares of Common Stock, subject to certain adjustments described below, to be outstanding at any time. Subject to the foregoing, there is no limit on the absolute number of awards that may be granted during the life of the 1996 Stock Option Plan. At the present time, there are approximately 116 employees of the Company, including 2 officers of the Company (all of whom are also directors), who, in management's opinion, would be considered eligible to receive grants under the 1996 Stock Option Plan, although fewer employees may actually receive grants. Authority to administer the 1996 Stock Option Plan has been delegated to a committee (the "Committee") of the Board of Directors. Except as expressly provided by the 1996 Stock Option Plan, the Committee has the authority, in its sole discretion, to award Options and to determine the terms and conditions (which need not be identical) of such Options, including the persons to whom, and the time or times at which, Options will be awarded, the number of Options to be awarded to each such person, the exercise price of any such Options, and the form, terms, and provisions of any agreement pursuant to which such Options are awarded. The 1996 Stock Option Plan also provides that the Committee may be authorized by the Board of Directors to make cash awards as specified by the Board of Directors to the holder of an Option in connection with the exercise thereof. Subject to the limitations set forth below, the exercise price of the shares of stock covered by each 1996 Option will be determined by the Committee on the date of award. Unless a Holder's option agreement provides otherwise, the following provisions will apply to exercises by the Holder of his or her option: No options may be exercised during the first twelve months following grant. During the second year following the date of grant, options covering up to one-third of the shares covered thereby may be exercised, and during the third year options covering up to two-thirds of such shares may be exercised. Thereafter, and until the options expire, the optionee may exercise options covering all of the shares. Persons over sixty-five on the date of grant may exercise options covering up to one-half of the shares during the first year and thereafter may exercise all optioned shares. Subject to the limitations just described, options may be exercised as to all or any part of the shares covered thereby on one or more occasions, but, as a general rule, options cannot be exercised as to less than one hundred shares at any one time. The exercise price of the shares of stock covered by each incentive stock option ("ISO"), within the meaning of Sec. 422 of the Internal Revenue Code of 1986, as amended (the "Code"), will not be less than the greater of: (a) the par value per share of the stock; or (b) one hundred percent (100%) of the fair market value per share of the Company's stock on the date of award of such ISO, except that an ISO may not be awarded to any person who is not an employee of the Company and/or affiliate of the Company or to any person who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an affiliate of the Company, unless the exercise price is at least one hundred ten percent (110%) of the fair market value of the stock at the time the ISO is awarded and the ISO is not exercisable after the expiration of five years from the date it is awarded. The exercise price of the shares of Common Stock covered by each Option that is not an ISO (NSO) will not be less than fifty percent (50%) of the fair market value of the stock on the date of award. Payment for Common Stock issued upon the exercise of an Option may be made in cash or, with the consent of the Committee, in whole shares of Common Stock owned by the holder of the Option for at least six months prior to the date of exercise or, with the consent of the Committee, partly in cash and partly in such shares of Common Stock. If payment is made, in whole or in part, with previously owned shares of Common Stock, the Committee may issue to such holder a new Option for a number of shares equal to the number of shares delivered by such holder to pay the exercise price of the previous Option having an exercise price equal to not less than one hundred percent (100%) of the fair market value of the Common Stock on the date of such exercise. An Option so issued will not be exercisable until the later of the date specified in an individual option agreement or six months after the date of grant. -6- The duration of each Option will be for such period as the Committee determines at the time of award, but not for more than ten years from the date of award in the case of an ISO, and in either case may be exercised in whole or in part at any time or only after a period of time or in installments, as determined by the Committee at the time of award, except that after the date of award, the Committee may accelerate the time or times at which an Option may be exercised. In the event of any change in the number of outstanding shares of Common Stock effected without receipt of consideration therefore by the Company by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Company is the surviving Corporation, the aggregate number and class of reserved shares, the number and class of shares subject to each outstanding Option, and the exercise price of each outstanding Option will be automatically adjusted to reflect the effect thereon of such change. Unless a holder's option agreement, provides otherwise, a dissolution or liquidation of the Company, certain sales of all or substantially all of the assets of the Company, or certain mergers or consolidations in which the Company is not the surviving corporation will cause such holder's Options then outstanding to terminate, but such holder may, immediately prior to such transaction, exercise such Options without regard to the period and installments of exercise ability applicable pursuant to such holder's option agreement. The 1996 Stock Option Plan will terminate on July 10, 2006, or on such earlier date as the Board of Directors may determine. Any stock option outstanding at the termination date will remain outstanding until it has been exercised, terminated, or has expired. The 1996 Stock Option Plan may be terminated, modified, or amended by the Board of Directors at any time without further shareholder approval, except that shareholder approval is required for any amendment which: (a) changes the number of shares of Common Stock subject to the 1996 Stock Option Plan other than by adjustment provisions provided therein, (b) changes the designation of the class of employees eligible to receive Options, (c) decreases the price at which ISO's may be granted, (d) removes the administration of the 1996 Stock Option Plan from the Committee, or (e) without the consent of the affected holder, causes the ISO's granted under the 1996 Stock Option Plan and outstanding at such time that satisfied the requirements of Sec. 422 of the Code no longer to satisfy such requirements. 401(K) PLAN On August 1, 1996 the Company implemented a 401(k) salary deferral plan (the "Plan") which covers all non-union employees who have reached the age of 20- 1/2 years and have been employed by the Company for at least one year. Years of service with TGC Industries (the former parent) are recognized for the purpose of this plan. The covered employees may elect to have an amount deducted from their wages for investment in a retirement plan. The Company has the option, at its discretion, to make contributions to the Plan. Effective with implementation of the Plan, the Company makes a matching contribution to the Plan equal to the sum of seventy-five percent (75%) of each Participant's salary reduction contributions to the Plan for such Plan year which are not in excess of three percent (3%) of the Participant's compensation for such Plan year, and fifty percent (50%) of each Participant's salary reduction contributions to the Plan for such Plan year which are in excess of three percent (3%) of the Participant's compensation but not in excess of eight percent (8%) of the Participant's compensation for such Plan year. Prior to August 1, 1996 Chase Packaging, as a wholly-owned subsidiary of TGC Industries, Inc., was a participating employer in the TGC 401(k) Plan. The TGC Plan contained the same eligibility requirements and Company matching features as described above. The total amount of the Company's contribution during 1996 for the one executive officer participating in the 401(k) Plan was $2,672.75 to Doug Kirkpatrick. -7- ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth the names of those persons known to Management to be beneficial owners of more than five percent of the Company's $.10 par value Common Stock as of March 12, 1997. The table also sets forth information with respect to the Company's Common Stock which is beneficially owned by each director and executive officer of the Company, and by all directors and officers of the Company as a group, as of March 12, 1997 (including shares beneficially owned by such persons, pursuant to the rules of beneficial ownership, as a result of the ownership of certain warrants or options) according to data furnished by the persons named. Persons having direct beneficial ownership of the Company's Common Stock possess the sole voting and dispositive power in regard to such stock.
Amount and Nature of Approximate Percentage Name and address Title of Class Beneficial Owner of Class (1) Lewis W. Lovell Common 90,482 (2) 1.29% Doug Kirkpatrick Common 31,148 (2) * Allen T. McInnes Common 816,143 (2) 11.17% Herbert J. Gardner Common 400,645 (2) (3) 5.57% William J. Barrett Common 536,455 (2) (4) 7.42% Gerlach & Co. (5) 111 Wall Street, 8th Fl. New York, NY 10005 Common 466,666 6.66% Special Situations(6) Fund III L.P. 153 E. 53rd Street, 51st Fl. New York, NY 10022 Common 499,999 7.14% All directors & officers as a group (3 persons) Common 937,773 (2) 24.12% * Represents less than 1% of Class
(1) The percentage calculations have been made in accordance with Rule 13d- 3(d) (1) promulgated under the Securities Exchange Act of 1934. In making these calculations, shares beneficially owned by a person as a result of ownership of certain options and warrants of TGC, which upon exercise will entitle the holder to distribution of Chase Common Stock escrowed in the event of such exercise, were deemed to be currently outstanding with respect to the holders of such options and warrants at TGC. (2) Includes the number of shares of Common Stock set forth opposite the person's name in the following table, which shares are beneficially owned as a result of the ownership of options and warrants of TGC, which upon exercise will entitle the holder to distribution of Chase Common Stock escrowed in the event of such exercise. NAMES STOCK OPTIONS WARRANTS - ----- ------------- -------- Lewis W. Lovell 52,083 0 Doug Kirkpatrick 12,500 0 Allen T. McInnes 0 84,337 Herbert M. Gardner 0 55,925 William J. Barrett 0 55,925* All Directors and Officers as a group (3 persons) 64,583 84,337 * Excludes 3,750 shares of Common Stock distributable to Mr. Barrett's wife upon the exercise of 7,500 Warrants of TGC owned by Ms. Barrett. Mr. Barrett disclaims beneficial ownership of such Warrants. (3) Excludes 48,590 shares of Common Stock owned by Herbert M. Gardner's wife. Mr. Gardner has disclaimed beneficial ownership of these shares. (4) Excludes 62,970 shares of Common Stock owned by William J. Barrett's wife. Mr. Barrett has disclaimed beneficial ownership of these shares. (5) Gerlach & Co. is the record owner as nominee for the Redemptorist Fathers of N.Y. #100. -8- (6) MGP Advisors Limited Partnership ("MGP") is the general partner of Special Situations Fund III, L.P. ("Special Situations"). AWM Investment Company, Inc. ("AWM") is the sole general partner of MGP. Austin W. Marxe is the principal limited partner of MGP and is the President and Chief Executive Officer of AWM. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. To the best of the Company's knowledge there have been no transactions with management or other related parties to which the Company has been a party. PART IV ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS Consolidated Financial Statements of the Registrant (Included in Part II, Item 7) 2. EXHIBITS (b) REPORTS ON FORM 8-K None -9- SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHASE PACKAGING CORPORATION Date: May 6, 2002 By: __________________ Ann W. Green Assistant Secretary Principal Financial and Accounting Officer -10- -----END PRIVACY-ENHANCED MESSAGE-----