SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 2
TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: Date of Earliest Event Reported:
July 9, 1999 February 10, 1999
COMMISSION FILE NUMBER 0-11663
CHANCELLOR CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2626079
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 SOUTH STREET
BOSTON, MASSACHUSETTS 02111
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 368-2700
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The registrant filed on February 12, 1999 a current report on Form 8-K relating
to its acquisition of MRB, Inc., a Georgia corporation d/b/a Tomahawk Truck and
Trailer Sales; Tomahawk Truck & Trailer Sales, Inc., a Florida corporation;
Tomahawk Truck and Trailer Sales of Virginia, Inc., a Virginia corporation; and
Tomahawk Truck and Trailer Sales of Missouri, Inc., a Missouri corporation
(collectively "Tomahawk") and an amendment on Form 8-K/A dated April 13, 1999
for the purpose of providing the financial statement and information required by
Item 7 of the Form 8-K. The purpose of this Form 8-K/A Amendment No. 2 is to
provide revised pro forma financial statements and a description of the total
purchase price relating to the subject transaction pursuant to the requirements
of Item 301(d) of Regulation S-B.
Chancellor Asset Management Inc. ("CAM"), a wholly owned subsidiary of the
Company, entered into a Management Agreement, dated August 1, 1998, as amended
August 17, 1998, with Tomahawk. The Management Agreement provided CAM with
effective control of Tomahawk's operations as of August 1, 1998. Subsequently,
CAM acquired all of the outstanding capital stock of Tomahawk from the two (2)
sole shareholders (the "Selling Shareholders") pursuant to a Stock Purchase
Agreement (the "Agreement") dated January 29, 1999.
Tomahawk is engaged in a similar line of business as CAM. Tomahawk retails and
wholesales used transportation equipment, primarily tractors and trailers.
Tomahawk operates five (5) retail centers in Conley, Georgia; Richmond,
Virginia; Pompano Beach, Florida; Orlando, Florida; and Kansas City, Missouri.
Tomahawk also operates its wholesale division from the Conley, Georgia facility.
Tomahawk will operate as a wholly owned subsidiary of the Company, coordinating
many operations with the Company to achieve operating efficiencies and
synergies.
The purchase price paid by CAM consisted of 4,500,000 shares of Common Stock of
Chancellor (valued at $.96 per share) and future cash consideration pursuant to
an earn-out (the "Earn-Out") as provided for in the Agreement. The Earn-Out
provides that each of the Selling Shareholders will be paid an amount equal to
seven and one-half percent (7.5%) of the Adjusted Pre-Tax Earnings of Tomahawk.
The Earn-Out, which is paid on a quarterly basis, begins in the fiscal year
ended December 31, 1999 and ends in the fiscal year ended December 31, 2004. In
connection with this Agreement, CAM loaned the Selling Shareholders a total of
$500,000 pursuant to certain promissory notes payable that are payable in full
on January 29, 2004.
The Agreement also: i) nominates one of the Selling Shareholders as a director
of Chancellor's Board of Directors; ii) elects both of the Selling Shareholders
as directors of CAM's Board of Directors; iii) provides for Employment
Agreements for the Selling Shareholders over a period of five years with base
salaries of $200,000 per annum; iv) prohibits the Selling Shareholders from
competing against CAM or Tomahawk, or soliciting former employees and customers
of Tomahawk; v) provides for Tomahawk to lease from the Selling Shareholders the
Conley, Georgia facility at fair market value rents of approximately $8,500 per
month; and vi) provides CAM an option to purchase from the Selling Shareholders
the Conley, Georgia facility for an amount not to exceed $950,000.
This transaction has been recorded in accordance with the purchase method of
accounting. As a result of the effect on the transaction of the Management
Agreement, as amended, the designated date of this transaction for accounting
purposes is August 1, 1998. In connection with this transaction, CAM assumed
liabilities of approximately $6,414,000 and incurred acquisition costs of
approximately $3,405,000. The excess of the purchase price over net assets of
approximately $7,695,000 has been recorded in intangibles. Approximately
$154,000 of intangibles has been amortized as of December 31, 1998.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Financial Information (unaudited):
Exhibit 99.1 filed herewith contains the following pro forma condensed financial
statements as required by Article 11 of Regulation S-X and Item 301(d) of
Regulation S-B:
Pro Forma Balance Sheet as of December 31, 1998
Pro Forma Statements of Operations for the years ended December 31, 1998 and
1997
(b) Exhibits:
Exhibit 99.1 The unaudited pro forma condensed balance sheet as of December
31, 1998, and statements of operations for the years ended December 31, 1998 and
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHANCELLOR CORPORATION
By: /s/ Franklyn E. Churchill______
----------------------------------------
Franklyn E. Churchill, President
Date: July 9, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.1 The unaudited pro forma condensed balance sheet as of
December 31, 1998, and statements of operations for the
years ended December 31, 1998 and 1997.
EXHIBIT 99.1
<TABLE>
<CAPTION>
CHANCELLOR CORPORATION
PRO FORMA COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
PRO FORMA PRO FORMA
CHANCELLOR MRB ADJUSTMENTS COMBINED
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 612 $ 32 $ 644
Receivables, net 2,880 375 3,255
Inventory 37 10,721 10,758
Net investment in direct finance lease 359 359
Equipment on operating lease, net 702 702
Residual values, net 219 219
Furniture and equipment, net 808 191 999
Other investments 3,681 3,681
Intangibles, net 3,251 4,290 (1) 7,541
Other assets, net 1,262 149 1,411
13,811 11,468 4,290 29,569
------------ ---------- ------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & accrued expenses 5,062 1,303 6,365
Deferred reimbursable expenses 1,068 - 1,068
Indebtedness:
Revolving credit line - 9,063 9,063
Notes payable 115 828 943
Non recourse debt 889 - 889
Recourse debt 4,234 - 4,234
11,368 11,194 - 22,562
------------ ---------- ------------- ----------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, Series AA 50 50
APIC, Series AA 964 964
Common stock 385 80 (35) (2) 430
APIC 28,978 - 4,275 (3) 33,253
Retained earnings/accumulated deficit (27,934) 194 50 (4) (27,690)
2,443 274 4,290 7,007
------------ ---------- ------------- ----------
$ 13,811 $ 11,468 $ 4,290 $ 29,569
============ ========== ============= ==========
<FN>
SUMMARY NOTES TO PRO FORMA ADJUSTMENTS:
(1) Adjustment to reflect i) acquisition costs of $3,405,000, ii) issuance
of 4,500,000 shares of Chancellor's Common Stock valued at $0.96 per share or
$4,320,000, and iii) elimination of $80,000 of MRB common stock and $50,000 of
accumulated deficit. Intangibles include the allocated purchase price in the
amounts of $995,000, $750,000, and $5,950,000 for non-compete agreements,
customer lists, and goodwill, respectively, net of accumulated amortization of
$154,000. Intangibles have been amortized using the straight-line method over
their useful economic lives ranging from 5 to 40 years.
(2) Adjustment to reflect i) elimination of MRB common stock of $80,000 and
ii) record issuance of 4,500,000 shares of Chancellor Common Stock, $.01 par
value.
(3) Adjustment to reflect additional paid-in capital associated with the
issuance of 4,500,000 shares of Chancellor Common Stock, $.01 par value, valued
at $0.96 per share.
Adjustment to eliminate accumulated deficit of MRB as of July 31, 1998.
</TABLE>
<TABLE>
<CAPTION>
CHANCELLOR CORPORATION
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
CHANCELLOR MRB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues:
Transportation equipment sales $ 6,165 $ 39,074 $ 45,239
Rental income 942 942
Lease underwriting income 74 74
Direct finance lease income 110 110
Interest income 194 194
Gains from portfolio remarketing 1,374 1,374
Fees from remarketing income 1,407 1,407
Other 442 442
10,708 39,074 - 49,782
----------- ---------- ------------ ---------
Cost of Sales:
Cost of transportation equipment sales 5,646 32,753 38,399
Selling, general & administrative 3,613 5,491 9,104
Interest 201 445 646
Depreciation & amortization 642 40 682
10,102 38,729 - 48,831
----------- ---------- ------------ ---------
Net income $ 606 $ 345 $ - $ 951
=========== ========== ============ =========
Basic net income per share $ 0.03
===========
Diluted net income per share $ 0.02
===========
Shares used in computing basic net
Net income per share 36,695,162
===========
Shares used in computing diluted net
Income per share 52,941,579
===========
</TABLE>
<TABLE>
<CAPTION>
CHANCELLOR CORPORATION
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA PRO FORMA
CHANCELLOR MRB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues:
Transportation equipment sales $ - $ 27,332 $ 27,332
Rental income 870 870
Lease underwriting income 293 293
Direct finance lease income 272 272
Interest income 44 44
Gains from portfolio remarketing 801 801
Fees from remarketing income 1,488 1,488
Other 665 665
4,433 27,332 - 31,765
------------ ---------- ------------ ----------
Cost of Sales:
Cost of transportation equipment sales - 22,604 22,604
Selling, general & administrative 6,412 4,207 10,619
Interest 281 406 687
Depreciation & amortization 459 47 506
7,152 27,264 - 34,416
------------ ---------- ------------ ----------
Income (loss) before extraordinary item
and income tax provision (2,719) 68 - (2,651)
Income tax provision 13 - - 13
------------ ---------- ------------ ----------
Income (loss) before extraordinary item (2,732) 68 - (2,664)
Extraordinary item-gain on debt forgiveness 930 - - 930
------------ ---------- ------------ ----------
Net income (loss) $ (1,802) $ 68 $ - $ (1,734)
============ ========== ============ ==========
Basic net loss per share:
Loss before extraordinary item $ (0.17)
Extraordinary item 0
Net loss $ (0.11)
============
Shares used in computing basic net
loss per share 15,224,432
============
</TABLE>
