U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDING JUNE 30, 1997.
[ ] 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 small business issuer as specified in its charter)
Texas 93-1216127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2550 NW Nicolai Street
Portland, Oregon 97210
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number, including area code: 503/228-4366
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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
---- ----
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at July 31, 1997
Common Stock ($.10 Par Value) 7,002,964
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Incorporated herein is the following unaudited financial
information:
Statement of Net Assets in Liquidation as of June 30,
1997.
Statement of Operations for the three and six month
periods ended June 30, 1997 and 1996.
Statements of Cash Flows for the six month periods ended
June 30, 1997 and 1996.
Statements of Changes in Net Assets in Liquidation for
June 30, 1997.
Notes to Consolidated Financial Statements.
CHASE PACKAGING CORPORATION
STATEMENT OF NET ASSETS IN LIQUIDATION
(Unaudited)
<TABLE>
<S> <C> <C>
June 30, 1997
ASSETS
Cash and cash equivalents $ 10,975
Accounts receivable, net of allowance
for doubtful accounts of $97,853 830,511
Inventories, net of write-down of $870,995 1,004,924
Prepaid expenses 25,679
ASSETS HELD FOR SALE 767,400
OTHER ASSETS 3,495
---------
$ 2,642,984
=========
See notes to financial statements.
</TABLE>
CHASE PACKAGING CORPORATION
STATEMENT OF NET ASSETS IN LIQUIDATION -- CONTINUED
(Unaudited)
<TABLE>
<S> <C>
June 30, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 1,042,148
Accrued liabilities 274,065
Advance billings 86,222
Line-of-credit 1,517,551
STOCKHOLDERS' EQUITY
Deficit of assets in liquidation (277,002)
----------
$ 2,642,984
=========
See notes to financial statements.
</TABLE>
CHASE PACKAGING CORPORATION
(a wholly-owned subsidiary of TGC Industries, Inc.
through July 31, 1996 - see Note A)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
SALES $1,638,161 $2,317,866 $3,805,516 $4,714,683
COSTS AND EXPENSES
Cost of sales 1,811,689 2,265,762 3,988,917 4,656,976
Selling, general and administrative 336,726 447,101 702,300 957,237
Interest expense 45,324 205,990 114,165 418,650
--------- -------- --------- ---------
2,193,739 2,918,853 4,805,382 6,032,863
LOSS BEFORE EXTRAORDINARY ITEM
AND INCOME TAXES ( 555,578) (600,987) ( 999,866) (1,318,180)
Income tax expense -- -- -- --
Loss before extraordinary item ( 555,578) (600,987) ( 999,866) (1,318,180)
Extraordinary item - gain from
extinguishment of debt -- -- 173,893 --
--------- -------- --------- ---------
NET LOSS $( 555,578) $(600,987) $( 825,973) $(1,318,180)
Weighted average shares 7,002,964 6,960,714 7,002,964 6,960,714
outstanding
LOSS PER COMMON SHARE
Loss per share before
extraordinary item $(.08) $(.09) $(.14) $(.19)
Extraordinary item -- -- .02 --
--------- -------- --------- ---------
LOSS PER SHARE $(.08) $(.09) $(.12) $(.19)
See notes to financial statements.
</TABLE>
CHASE PACKAGING CORPORATION
(a wholly-owned subsidiary of TGC Industries, Inc.
through July 31, 1996 - see Note A)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
Six-Months Ended
June 30,
1997 1996
Increase (decrease) in cash
Cash flows from operating activities
Net Loss $ (825,973) (1,318,180)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities
Non-Cash Compensation -- 3,600
Depreciation and amortization 180,481 320,696
and equipment ( 42,988) 8,629
Gain from extinguishment of debt (173,893) --
Non-Cash Expenses 62,428 --
Change in assets and liabilities
Accounts Receivable 499,413 24,380
Inventories 477,328 1,137,626
Prepaid Expenses 66,225 32,390
Accounts Payable (161,906) ( 206,430)
Accrued Liabilities (147,930) 105,533
Advance Billings ( 28,109) ( 74,277)
Net cash provided by (used in)
operating activities ( 94,924) 33,967
Cash flows from investing activities
Capital expenditures (113,360) ( 97,063)
Proceeds from sale of property
and equipment 886,250 9,000
Other assets 500
Net cash provided by (used in)
investing activities 773,390 ( 88,063)
Cash flows from financing activities
Principal payments of debt obligations (350,000) ( 185,001)
Net payments on line of credit (348,187) ( 720,160)
Receivable from/payable to parent -- 935,607
Capital contributed 9,318 --
Net cash provided by (used in)
financing activities (688,869) 30,446
NET DECREASE IN CASH ( 10,403) ( 23,650)
Cash at beginning of period 21,378 25,123
Cash at end of period $ 10,975 $ 1,473
Supplemental cash flow information
Cash paid during the year for
Interest $ 94,156 $ 252,640
</TABLE>
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.
TGC converted the rent receivable to equity in Chase.
On March 18, 1997 TGC sold the Portland, Oregon facility
occupied by Chase. Proceeds of $1,780,00 were applied against
Chase's outstanding mortgage indebtedness to Union Camp.
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.
CHASE PACKAGING CORPORATION
Statement of Changes in Net Assets in Liquidation
(Unaudited)
<TABLE>
June 30, 1997
<S> <C>
Sales --
Costs and Expenses
Cost of sales --
Selling, general and administrative --
Write-down of assets in liquidation 1,962,533
---------
Interest Expense 1,962,533
ACCUMULATED LOSS ON ASSETS
IN LIQUIDATION $(1,962,533)
Net assets before write-down in liquidation (1,685,531)
Deficit of assets in liquidation $( 277,002)
</TABLE>
CHASE PACKAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE A -- BASIS OF PRESENTATION
On June 25, 1997 Chase Packaging Corporation ("Chase" or "the
Company") announced to employees and creditors that Chase would
begin an orderly liquidation of all Chase's assets beginning at
the close of business on June 30, 1997. 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. The Company's
Board of Directors determined that it is in the best interest of
the Company and all of its creditors to liquidate in an orderly
fashion. As a result of the plan of liquidation, the accompanying
unaudited 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. The statement of net assets in liquidation, statements of
operations, statements of cash flows and the statement of changes
in net assets in liquidation have been prepared in accordance with
the instructions to Form 10-QSB and therefore do not include all
information and footnotes necessary for a fair presentation in
conformity with generally accepted accounting principles. The
statement of changes in net assets in liquidation contains only the
write-down of assets as of the close of business on June 30, 1997.
As previously disclosed, in May 1996 a formal plan was adopted to
reorganize TGC Industries, Inc. (TGC) and Chase. Pursuant to the
plan, the following actions were taken:
1. TGC liquidated Chase (Old Chase) with TGC receiving all of Old
Chase's assets and liabilities in cancellation of the Old Chase
stock held by TGC. TGC formed a new wholly-owned subsidiary,
New Chase, and transferred to it all of the assets and
liabilities received in the liquidation of Old Chase, except
TGC retained the manufacturing facility located in Portland,
Oregon and canceled Old Chase's net payable to TGC.
2. TGC contributed $2,716,403 as additional capital to New Chase.
3. 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 to Chase Packaging Corporation (Chase).
The financial statements are presented on the basis that the
principal operations of Old Chase continued with the formation of
New Chase, therefore the statements of operations and cash flows
for the three months and six months ended June 30, 1996 consist of
three and six months operations of Old Chase as a wholly-owned
subsidiary of TGC.
NOTE B -- MANAGEMENT PRESENTATION
In the opinion of management, all adjustments (consisting of write-
downs to realizable value) considered necessary for a fair
presentation of net assets in liquidation, statements of operations,
statements of cash flows, and the related statement of changes in net
assets in liquidation have been made. For further information,
refer to the financial statements and the footnotes thereto included
in the Company's Annual Report for the year ended December 31, 1996
filed on Form 10-KSB.
NOTE C -- LOSS PER COMMON SHARE
Loss per common share before and after extraordinary gain for the
quarter and six months ended June 30, 1997 were calculated by dividing net loss
for the period by the number of shares outstanding for the period.
Loss per common share for the quarter and six months ended June 30,
1996 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 D -- EXTRAORDINARY ITEM - GAIN FROM EXTINGUISHMENT OF DEBT
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. 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 in the 1997
first quarter 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.
NOTE E -- LOAN DEFAULTS
As a result of the March 18, 1997 sale of the Portland facility
by TGC and subsequent payment made to Union Camp, the Company
cured its default condition under terms of the Union Camp
Promissory Note as the Note was declared paid in full. The Company
also cured its cross-default condition with the bank as a result of
the payment to Union Camp. In addition, the Company resolved the
violation of the tangible net worth covenant in the Accounts
Financing Agreement with the bank due to the contribution made by
TGC to the paid-in capital of Chase during the first quarter of
1997.
NOTE F -- 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 $75,000.00.
In addition, the Company sold inventory from the Idaho Falls
operation to Lockwood for $255,000.00. The total proceeds of
$330,000.00 were deposited with the Company's bank to pay down the
Company's loan balance with the bank.
Lockwood has entered into a lease with the Company for the
Company's Idaho Falls facility. The Company intends to sell the
Idaho Falls facility in the near future, and, upon such sale, it is
intended that the new owner will lease the property to Lockwood and
that the Company's lease with Lockwood will be terminated.
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 has been 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 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:
<TABLE>
<S> <C> <C> <C>
Going concern basis
6/30/97 Balance Liquidation Write-down Net Realizable Value
------------------- ---------------------- --------------------
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
Buildings (net book value) 332,319 80,209 325,000
Land 72,890 -- (included in above)
Machinery & Equipment (n.b.v.) 1,181,654 739,254 442,400
Other Assets 9,181 5,686 3,495
TOTAL $4,605,517 $1,962,533 $2,642,984
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Revenues were $1,638,161 for the three months ended June 30, 1997,
compared to revenues of $2,317,866 for the same period of 1996.
Net loss for the three months ended June 30, 1997 was $555,578 as
compared to net loss of $600,987 for the three months ended June
30, 1996.
Revenue for the first six months of 1997 was $3,805,516 as compared
to revenue of $4,714,683 for the first six months of 1996. Net
loss for the first half of 1997 was $825,973 as compared to
net loss of $1,318,180 for the first half of 1996.
The 29% reduction in revenues in the 1997 second quarter when
compared to the second quarter of 1996 was the result of continued
sluggish demand for the Company's woven polypropylene onion bags
and consumer-size mesh potato bags, Competition from cheap import
onion bags and low market prices for potatoes were the primary
factors impacting the lower demand for Chase's products. Although
costs throughout the operation were lower in 1997 than in 1996, 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. Chase
has retained the firm of Edward Hostmann, Inc. to assist the
Company in such liquidation.
As part of the liquidation program, 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. As
discussed earlier, the Company intends to sell the Idaho Falls real
estate (land and building) in the near future. 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 the August 14 auction for gross proceeds of
approximately $340,000. Closure of the Idaho Falls real estate
sale and collection of outstanding auction proceeds and accounts
receivable are the remaining items to be completed in the Company's
liquidation program as of August 21.
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 to $131,259 as of August 21, 1997. 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.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
a. On June 23, 1997, Mr. William J. Barrett and Mr.
Herbert M. Gardner resigned as directors of Chase
Packaging Corporation. The resignations of Mr.
Barrett and Mr. Gardner were not due to any
disagreement with the Company on any matter relating
to the Company's operations, policies or practices.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits -- None.
b. Reports -- No reports on Form 8-K have been filed
during the quarter for which this report is filed.
However, the following report on Form 8-K has been
filed subsequent to June 30, 1997:
(1) A report under Item 2 and Item 5 was filed on July
31, 1997. Such reporting under Item 2 was to
disclose the sale of the Company's Idaho Falls
operation as a going concern to Lockwood Packaging
Corporation Idaho effective July 21, 1997. Such
reporting under Item 5 was to disclose that the
Company notified its creditors on July 25, 1997
that Chase was beginning an orderly liquidation of
all of its remaining assets outside of a formal
bankruptcy or receivership proceeding.
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
Date: August 28, 1997 /s/ Doug Kirkpatrick
______________________________
Doug Kirkpatrick,
President and Treasurer
(Principal Executive Officer
and Principal Financial and
Accounting Officer)
H:\DOCS3\C5541\001\69297.1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,975
<SECURITIES> 0
<RECEIVABLES> 928,364
<ALLOWANCES> 97,853
<INVENTORY> 1,004,924
<CURRENT-ASSETS> 1,872,089
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,642,984
<CURRENT-LIABILITIES> 2,919,986
<BONDS> 0
<COMMON> 700,296
0
0
<OTHER-SE> (977,298)
<TOTAL-LIABILITY-AND-EQUITY> 2,642,984
<SALES> 3,805,516
<TOTAL-REVENUES> 3,805,516
<CGS> 3,988,917
<TOTAL-COSTS> 3,988,917
<OTHER-EXPENSES> 2,652,833<F1>
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 114,165
<INCOME-PRETAX> (2,962,399)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,962,399)
<DISCONTINUED> 0
<EXTRAORDINARY> 173,893
<CHANGES> 0
<NET-INCOME> (2,788,506)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
<FN>
<F1>Includes write-down for assets to be liquidated.
</FN>
</TABLE>
