FORM 8-K/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
March 22, 1999 February 25, 1999
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CHANCELLOR CORPORATION
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(Exact name of Registrant as specified in its charter)
Massachusetts 0-11663 04-2626079
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
210 South Street, Boston, Massachusetts 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 368-2700
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N/A
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(Former name or former address, if changed since last report)
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Item 4. Change in Registrant's Certifying Accountants.
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On February 25, 1999, our Audit Committee and Board of Directors approved
the dismissal of our independent accountants, Reznick Fedder & Silverman, P.C.
("Reznick Fedder").We provided Reznick Fedder with the reasons for the dismissal
in a letter on March 4, 1999. The reasons include, but are not limited to: (i)
disagreements on fees billed by Reznick Fedder for services, including, but not
limited to, due diligence and business advisory services in connection with
merger and acquisition activity, in the prior year and estimated fees in
connection with the proposed 1998 audit engagement, (ii) a lack of commitment by
Reznick Fedder to ensure timely completion of the 1998 audit and timely filing
of the 1998 Annual Report on Form 10-KSB, (iii) dissatisfaction as to the
timeliness of Reznick Fedder's provision of business advisory reports and
recommendations in general and Management Reports pursuant to the requirements
of Statements on Auditing Standards No. 61 in particular, and (iv) personality
conflicts between Reznick Fedder's audit team and management, including
disagreements concerning the quality of staffing provided previously.
During the years ended December 31, 1997 and 1996: (i) there were no
disagreements with Reznick Fedder on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Reznick Fedder, would have
caused Reznick Fedder to make a reference to the subject matter of the
disagreements in connection with its reports in the financial statements for
such years and (ii) there were no "reportable events" as described in Items 304
of Regulation S-K. Reznick Fedder's report of independent accountants on the
Company's consolidated financial statements for the years ended December 31,
1997 and 1996 each contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the interim period from December 31, 1997 through February 25, 1999
(the date of Reznick Fedder's dismissal as the Company's independent
accountants), Reznick Fedder alleged, solely in their opinion, (i) one potential
disagreement as to a matter relating to accounting principles, and (ii) one
suggested "reportable event".
By letter dated March 15, 1999, Reznick Fedder has indicated that, based on
the limited information provided to them as of February 6, 1999, it did not
appear that the purchase of Atlanta based MRB, Inc. and affiliates d/b/a
Tomahawk Truck & Trailer Sales, Inc. ("MRB") should be reflected as of August 1,
1998, as stated in our Current Report on Form 8-K filed on February 12, 1999.
Reznick Fedder based its preliminary determination on the August 1, 1998
Management Agreement, the January 29, 1999 Stock Purchase Agreement, and the
January 29, 1999 Loan Agreement, each with MRB, as indicated in Reznick Fedder's
letter to us dated March 8, 1999, set forth in Exhibit 99 hereto.
Reznick Fedder also incorrectly stated in that letter that their
preliminary determination was based in part on the First Amendment to the
Management Agreement dated August 17, 1998, when in fact, Reznick Fedder did
not review that First Amendment until after we filed our Current Report on Form
8-K on February 12, 1999 reporting the completion of our acquisition of MRB.
Despite their dismissal as our independent accountants, Reznick Fedder also
requested in that letter that the Company provide any additional information
that they should consider in connection with their opinion regarding the
appropriateness of the accounting disclosures made in the Company's Form 8-K
filed on February 12, 1999. Reznick Fedder did not request further information
as to this issue prior to their dismissal.
<PAGE>
We engaged the Atlanta based firm of Metcalf Rice Fricke & Davis ("Metcalf
Rice") on January 25, 1999 to perform the 1998, 1997, and 1996 audits of MRB, a
significant subsidiary. We further engaged the firm of Metcalf Rice, based on
the merits of their performance of services in connection with the MRB audits,
to serve as our independent accountants in February, 1999. We then asked
Metcalf Rice to review this potential issue, alleged by Reznick Fedder as
referenced in their letter dated March 15, 1999, using all available
information, including materials not previously requested by Reznick Fedder, and
provide us with their determination as to the proper accounting treatment of our
acquisition of MRB under generally accepted accounting principles. Furthermore,
we have given permission to Metcalf Rice to discuss this matter with Reznick
Fedder, should they choose to do so. Accordingly, if necessary and if so
advised by Metcalf Rice, we will file an amendment to our Current Report on Form
8-K as filed on February 12, 1999, to reflect a different reporting period.
As to the second paragraph of Reznick Fedder's letter, they were only
provided with a preliminary unaudited, unconsolidated, and unadjusted trial
balance for fiscal 1998. In addition, Reznick Fedder was not engaged as our
independent accountants for the purpose of certifying the consolidated financial
statements of Chancellor Corporation as of December 31, 1998 and for the year
then ended, and were therefore not engaged to perform planning for this audit.
Reznick Fedder was not asked by us to determine whether adjustments were
required to recorded assets and liabilities which could materially impact the
fairness or reliability of financial statements for the year ended December 31,
1998. Adjustments, if necessary, will be made based on recommendations of
Metcalf Rice during the course of their audit fieldwork.
Item 7. Financial Statements and Exhibits.
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a.) Exhibits.
Exhibit 16 Letter of Reznick Fedder & Silverman, P.C.
regarding change in certifying accountants,
dated March 15, 1999.
Exhibit 99 Letter of Reznick Fedder & Silverman, P.C.
stating basis for preliminary determination of
the "designation date of the Tomahawk
transaction for accounting purposes as August
1, 1998" and request for additional
information to be considered in connection
with Reznick Fedder & Silverman, P. C.'s
opinion, dated as of March 8, 1999.
<PAGE>
SIGNATURE
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 the
undersigned hereunto duly authorized.
CHANCELLOR CORPORATION
By: /s/ Franklyn E. Churchill
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Franklyn E. Churchill
President
Date: March 22, 1999
<PAGE>
EXHIBIT 16
March 15, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
Re: Chancellor Corporation
We have read Item 4 of Chancellor Corporation (the "Registrant") Form 8-K dated
March 4, 1999 (the "Form 8-K").
With respect to the first sentence of the first paragraph of the Form 8-K, we
make no comment.
We disagree with the comments in sub-paragraph (i) of the second sentence of the
first paragraph of the Form 8-K, with respect to the absence of any
disagreement. We advised the Registrant that, based on the information provided
to us by the Registrant relating to its acquisition of M.R.B. Inc., Tomahawk
Truck & Trailer Sales, Inc., Tomahawk Truck & Trailer Sales of Virginia, Inc.,
and Tomahawk Truck & Trailer Sales of Missouri, Inc., the Registrant's decision
to reflect the purchase for accounting purposes as of August 1, 1998 did not
comply with generally accepted accounting principles which require the purchase
to be reflected as of January 29, 1999. Registrant's decision as to the
accounting treatment it was going to use was set forth in its Form 8-K filed
with the Commission on February 12, 1999.
We disagree with the comments in sub-paragraph (ii) of the second sentence of
the first paragraph of the Form 8-K, with respect to the absence of "reportable
events" as described in Item 304 of Regulation S-K. In connection with
preliminary planning discussions with the Registrant regarding audit services
for the year ended December 31, 1998, on February 17, 1999, we advised the
Registrant that further investigation was required to determine whether
adjustments were required for certain recorded assets and liabilities, which
adjustments could materially impact the fairness or reliability of the financial
statements for the year ended December 31, 1998.
We make no comment regarding the second paragraph of the Form 8-K.
Very truly yours,
/s/ Reznick Fedder & Silverman
Reznick Fedder & Silverman, P.C.
cc: Franklyn E. Churchill, President
<PAGE>
EXHIBIT 99
March 8, 1999
Mr. Franklyn E. Churchill, President
Chancellor Corporation
210 South, Street, Floor 10
Boston, MA 02111
Dear Mr. Churchill:
We received a copy of the Form 8-K filed by Chancellor Corporation
("Chancellor") with the Securities and Exchange Commission (the "Commission") on
March 4, 1999 (the "March 8-K") in which you publicly disclosed our termination
as your auditors, and are in the process of considering an appropriate response.
As we advised you, the Form 8-K filed by Chancellor with the Commission on
February 10, 1999 (the "February 8-K"), in which Chancellor reports its
acquisition of Tomahawk Truck & Trailer Sales ("Tomahawk"), did not, based on
information available to us at such time, comply with generally accepted
accounting principles and practices in that the February 8-K designated "the
date of the [Tomahawk] transaction for accounting purposes as August 1, 1998".
Our determination regarding the February 8-K was based on the following
information which was furnished to us by Chancellor:
1. August 1, 1998 Management Agreement
2. August 17, 1998 First Amendment and Management Agreement
3. January 29, 1999 Stock Purchase Agreement
4. January 29, 1999 Loan Agreement
Please advise us promptly (i) as to whether you are in possession of other
information which you believe we should consider in connection with our opinion
regarding the appropriateness of the accounting disclosures made in Chancellor's
February 8-K and (ii) as to whether the February 8-K has been amended to date.
The supplemental information, if any, furnished will be used by us in
determining the scope of our response to the March 8-K.
We need to provide our response to your March 8-K no later than March 12, 1999.
Please furnish any additional information by the close of business on Wednesday,
March 10, 1999.
Very truly yours,
REZNICK FEDDER & SILVERMAN
/s/ Philip A. Weitzel
Principal
