10QSB 1 v050013_10qsb.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2006 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-21609 CHASE PACKAGING CORPORATION (Exact name of registrant as specified in its charter) Texas 93-1216127 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 636 River Road, Fairhaven, New Jersey 07704 (Address of principal executive offices) (Zip Code) (732) 741-1500 (Issuer's telephone number, including area code) Check whether the Issuer (1) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 30, 2006 Common Stock, par value $.10 per share 8,627,275 shares - INDEX - Page(s) ------- PART I. Financial Information: ITEM 1. Financial Statements Condensed Balance Sheets - June 30, 2006 (Unaudited) and December 31, 2005 3 Condensed Statements of Operations (Unaudited) - Cumulative Period During the Development Stage (January 1, 1999 to June 30, 2006) and the Six and Three Months Ended June 30, 2006 and 2005 4 Condensed Statements of Cash Flows (Unaudited) - Cumulative Period During the Development Stage (January 1, 1999 to June 30, 2006) and the Six Months Ended June 30, 2006 and 2005 5 Notes to Interim Condensed Financial Statements (Unaudited) 6 ITEM 2. Management's Discussion and Analysis or Plan of Operation 8 ITEM 3. Controls and Procedures 8 PART II. Other Information 9 SIGNATURES 10 EXHIBITS 11 Page 2 PART I. FINANCIAL INFORMATION: ITEM I. FINANCIAL STATEMENTS: CHASE PACKAGING CORPORATION (A Development Stage Company) CONDENSED BALANCE SHEETS June 30, December 31, 2006 2006 ----------- ------------ (unaudited) - ASSETS - CURRENT ASSETS: Cash and cash equivalents $ 7,634 $ 1,186 ----------- ----------- TOTAL ASSETS $ 7,634 $ 1,186 =========== =========== - LIABILITIES AND SHAREHOLDERS' DEFICIT - CURRENT LIABILITIES: Accrued expenses $ 7,680 $ 9,484 ----------- ----------- TOTAL CURRENT LIABILITIES 7,680 9,484 ----------- ----------- CONVERTIBLE NOTES PAYABLE 47,000 32,000 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT: Preferred stock $1.00 par value; 4,000,000 shares authorized, none issued -- -- Common stock, $.10 par value 25,000,000 authorized 8,627,275 issued in 2006 and 2005 862,728 862,728 Additional paid-in capital 2,757,275 2,757,275 Common stock subscribed 8,000 8,000 Accumulated deficit (3,626,121) (3,626,121) Deficit accumulated during the development stage (48,928) (42,180) ----------- ----------- (47,046) (40,298) ----------- ----------- $ 7,634 $ 1,186 =========== =========== See notes to financial statements. Page 3 CHASE PACKAGING CORPORATION (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited)
Cumulative During the Development Six Months Ended Three Months Ended Stage ---------------------- ---------------------- (January 1, June 30, June 30, 1999 to ---------------------- ---------------------- June 30, 2006 2006 2005 2006 2005 ------------- ---------- ---------- ---------- ---------- NET SALES $ -- $ -- $ -- $ -- $ -- ---------- ---------- ---------- ---------- ---------- COSTS AND EXPENSES: General and administrative expenses 54,053 5,550 7,400 1,850 3,700 Reversal of overaccrued expenses (7,077) -- -- -- -- Interest expense 3,131 1,255 676 630 486 Interest income (1,179) (57) (16) (37) (12) ---------- ---------- ---------- ---------- ---------- TOTAL COSTS AND EXPENSES 48,928 6,748 8,060 2,443 4,174 ---------- ---------- ---------- ---------- ---------- (LOSS) BEFORE INCOME TAXES (48,928) (6,748) (8,060) (2,443) (4,174) Income tax expense -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- NET (LOSS) $ (48,928) $ (6,748) $ (8,060) $ (2,443) $ (4,174) ========== ========== ========== ========== ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,627,275 8,627,275 8,627,275 8,627,275 8,627,275 ========== ========== ========== ========== ========== (LOSS) PER COMMON SHARE - BASIC AND DILUTED $ -- $ -- $ -- $ -- ========== ========== ========== ==========
See notes to financial statements. Page 4 CHASE PACKAGING CORPORATION (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
Cumulative During the Six Months Ended Development Stage June 30, (January 1, 1999 to ---------------- June 30, 2006) 2006 2005 --------------------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $(48,928) $(6,748) $(8,060) Change in assets and liabilities: Accounts payable and accrued expenses (15,599) (1,804) (383) -------- ------- ------- Net cash (utilized) by operating activities (64,527) (8,552) (8,443) -------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES -- -- -- -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible debt 47,000 15,000 12,000 Proceeds from private placement/exercise of stock warrants 5,500 -- -- Proceeds from stock subscriptions 8,000 -- -- -------- ------- ------- Net cash provided by financing activities 60,500 15,000 12,000 -------- ------- ------- NET (DECREASE) INCREASE IN CASH (4,027) 6,448 3,557 CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 11,661 1,186 734 -------- ------- ------- CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 7,634 $ 7,634 $ 4,291 ======== ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for: Interest $ -- $ -- $ --
See notes to financial statements. Page 5 CHASE PACKAGING CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (Unaudited) NOTE 1 - BASIS OF PRESENTATION: 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. The Company had experienced losses for past 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. Liquidation of the Company's assets was completed as of December 31, 1997. The Board of Directors has been devoting its efforts to establishing a new business and, accordingly, the Company is being treated as a development stage company, in accordance with Statement of Financial Accounting Standards No. 7, effective January 1, 1999. In the opinion of management, the accompanying unaudited interim condensed financial statements of the Company, contain all adjustments necessary (consisting of normal recurring accruals or adjustments only) to present fairly the Company's financial position as of June 30, 2006 and the results of its operations and cash flows for the six and three month periods ended June 30, 2006 and 2005. The accounting policies followed by the Company are set forth in Note 2 to the Company's financial statements included in its Annual Report on Form 10-KSB for the year ended December 31, 2005 which is incorporated herein by reference. Specific reference is made to this report for a description of the Company's securities and the notes to consolidated financial statements. NOTE 2 - LOSS PER COMMON SHARE: Basic loss per common share was calculated by dividing net loss by the weighted average number of shares outstanding for each reporting period. Diluted loss per common share is the same as basic loss per common share for all periods presented NOTE 3 - SHAREHOLDERS' EQUITY: In July 2002, the Company received $8,000 as payment for 800,000 shares of common stock. Such shares have not been issued as of the filing date of this report. Page 6 CHASE PACKAGING CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (Unaudited) NOTE 4 - CONVERTIBLE DEBT: During the 2004 third quarter, the Company issued $12,500 of 5% Convertible Notes due 2006 and received proceeds of $12,500; during the first quarter of 2005, the Company issued $4,000 of 5% Convertible Notes and received proceeds of $4,000; during the second quarter of 2005, the Company issued $8,000 of 5% Convertible Notes and received proceeds of $8,000; during the third quarter of 2005, the Company issued $5,000 of 5% Convertible Notes and received proceeds of $5,000; during the fourth quarter of 2005, the Company issued $2,500 of 5% Convertible Notes and received proceeds of $2,500; during the first quarter of 2006, the Company issued $7,500 of 5% Convertible Notes and received proceeds of $7,500; and during the second quarter of 2006, the Company issued $7,500 of 5% Convertible Notes and received proceeds of $7,500. The investors were directors and an officer of the Company. The Notes are convertible into common stock at $0.01 or par value (currently $0.10 per share) whichever is greater. The Company and the Note Holder(s) have the option to mutually extend the term of the Note(s) if the par value has not been reduced to $0.01. If the Notes are converted at par greater than $0.01, then the Note Holder(s) will, upon conversion, receive a Unit consisting of one share of common stock and a 10-year warrant exercisable at the then par value of the common stock. Interest will accrue and be paid at maturity and, if unpaid, added to principal at the time of conversion. The notes, which were originally due in 2006, have been extended until 2007. Page 7 ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS: Chase Packaging Corporation (the Company) experienced cash losses for past years in spite of numerous infusions of working capital and an aggressive program of inventory and expense reductions. During 1997, the Board of Directors determined that an orderly liquidation 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, the Company sold most of its assets in Idaho Falls, Idaho (excluding real estate) to Lockwood Packaging Corporation 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, Oregon to other packaging companies. The Company also sold its band label extruder for $125,000 and its remaining inventory and machinery and equipment were sold at an August 14, 1997 auction, for gross proceeds of approximately $340,000. As of December 31, 1997, the Company had completed the liquidation of all of its assets. Effective January 1, 1999, the Board of Directors has been devoting its efforts to establishing a new business and accordingly, the Company is being treated as a development stage company, in accordance with Statement of Financial Accounting Standards No. 7, as of that date. The Company continues to pay for minor administrative expenses and has generated interest income on its remaining cash balance. As a result of the sale of common shares in a private placement, the exercise of common stock purchase warrants during the last quarter of 2001, additional capital contributions during 2002 through the first six months of 2006 and the proceeds realized from convertible debt, the Company's cash balance as of June 30, 2006 was $7,634. The Company may need to raise additional funds in order to satisfy its minimal expenses for the ensuing twelve months. ITEM 3. CONTROLS AND PROCEDURES: (a) Evaluation of Disclosure Controls and Procedures. As of June 30, 2006, we carried out an evaluation, under the supervision of Ann W. Green our sole Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange Act"), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified by the SEC's rules and forms. Based upon that evaluation, the Principal Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to the Company required to be included in the Company's period SEC filings. (b) Changes in Internal Control. Subsequent to the date of such evaluation as described in subparagraph (a) above, there were no significant changes in our internal controls or other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses. Page 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports None Exhibit 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Page 9 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHASE PACKAGING CORPORATION /s/ Ann W. Green --------------------------- Date: August 2, 2006 Ann W. Green (Assistant Secretary and Principal Financial and Accounting Officer) Page 10 CHASE PACKAGING CORPORATION QUARTERLY REPORT ON FORM 10-QSB QUARTER ENDED JUNE 30, 2006 EXHIBIT INDEX Exhibit Number Description ------- ----------- 31.1 Certification of the Chief 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 Chief 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 Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Page 11