0001165527-14-000498.txt : 20140813 0001165527-14-000498.hdr.sgml : 20140813 20140813165348 ACCESSION NUMBER: 0001165527-14-000498 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20140630 FILED AS OF DATE: 20140813 DATE AS OF CHANGE: 20140813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR GROUP INC. CENTRAL INDEX KEY: 0000894544 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870438647 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30219 FILM NUMBER: 141038165 BUSINESS ADDRESS: STREET 1: 216 SOUTH PRICE ROAD, CITY: PAMPA, STATE: TX ZIP: 79065 BUSINESS PHONE: 7027927479 MAIL ADDRESS: STREET 1: 216 SOUTH PRICE ROAD, CITY: PAMPA, STATE: TX ZIP: 79065 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR GROUP INC/ DATE OF NAME CHANGE: 19960520 FORMER COMPANY: FORMER CONFORMED NAME: NIGHTHAWK CAPITAL INC DATE OF NAME CHANGE: 19940426 10-Q 1 g7543.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2014 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 No. 000-30219 CHANCELLOR GROUP, INC. (Exact name of Registrant as Specified in Its Charter) Nevada 87-0438647 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 500 Taylor Street, Plaza Two - Suite 200, Amarillo, TX 79101 (Address of principal executive offices, including zip code) Issuer's Telephone Number, Including Area Code: (806) 322-2731 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Number of shares of Common Stock outstanding as of August 13, 2014: 74,600,030 CHANCELLOR GROUP, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: 3 Condensed and Consolidated Balance Sheets, as of June 30, 2014 (unaudited) and as of December 31, 2013 4 Condensed and Consolidated Statements of Operations, for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited) 5 Condensed and Consolidated Statements of Cash Flows, for the Six Months Ended June 30, 2014 and 2013 (unaudited) 6 Notes to Unaudited Condensed and Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 Item 4. Controls and Procedures 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 6. Exhibits 25 SIGNATURES 26 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following condensed and consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months and six ended June 30, 2014 and 2013 are not necessarily indicative of the results for the entire fiscal year or for any other period. 3 CHANCELLOR GROUP, INC. Condensed and Consolidated Balance Sheets
June 30, 2014 December 31, 2013 ------------- ----------------- (Unaudited) ASSETS Current Assets: Cash $ 201,808 $ 589,901 Restricted Cash 25,000 25,000 Accounts Receivable 12,326 12,326 Income Tax Receivable 7,757 12,558 Prepaid Expenses 16,773 18,069 Assets Held for Sale 30,200 27,987 ------------ ------------ Total Current Assets 293,864 685,841 ------------ ------------ Property and Equipment: Furniture, Fixtures, & Office Equipment 5,655 4,454 Accumulated Depreciation (715) (159) ------------ ------------ Total Property and Equipment, net 4,940 4,295 ------------ ------------ Other Assets: Goodwill 427,200 427,200 Deposits 250 250 ------------ ------------ Total Other Assets 427,450 427,450 ------------ ------------ Total Assets $ 726,254 $ 1,117,586 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 129,280 $ 99,866 Contributions Payable -- 90,400 Accrued Expenses 3,268 2,473 Notes Payable Related Party, net of unamortized discount 15,009 -- ------------ ------------ Total Current Liabilities 147,557 192,739 ------------ ------------ Stockholders' Equity Series B Preferred Stock: $1,000 Par Value 250,000 shares authorized, none outstanding -- -- Common Stock; $.001 par value, 250,000,000 shares authorized, 74,600,030 and 73,760,030 shares issued and outstanding, respectively 74,600 73,760 Paid-in Capital 3,849,463 3,813,853 Retained Earnings (Deficit) (3,186,206) (2,773,659) ------------ ------------ Total Chancellor, Inc. Stockholders' Equity 737,857 1,113,954 Non-controlling Minority Interest in Pimovi, Inc. (301,860) (274,157) Non-controlling Minority Interest in The Fuelist, LLC 142,700 85,049 ------------ ------------ Total Stockholders' Equity 578,697 924,846 ------------ ------------ Total Liabilities and Stockholders' Equity $ 726,254 $ 1,117,586 ============ ============
See Notes to Unaudited Condensed and Consolidated Financial Statements 4 CHANCELLOR GROUP, INC. Condensed and Consolidated Statements of Operations Three and Six Months Ended June 30, 2014 and 2013 (Unaudited)
Three months ended Six months ended June 30, June 30, ------------------------------ ------------------------------ 2014 2013 2014 2013 ------------ ------------ ------------ ------------ Revenues: Oil, net of royalties paid $ -- $ -- $ -- $ -- Technology Segment Revenues -- -- -- -- Other Operating Income -- -- -- -- ------------ ------------ ------------ ------------ Gross Revenue -- -- -- -- ------------ ------------ ------------ ------------ Operating Expenses: Other Operating Expenses 10,362 -- 21,701 -- Technology Segment Professional and Consulting Expenses 92,785 183,054 245,325 334,241 Administrative Expenses 111,629 75,289 254,739 265,009 Depreciation and Amortization 278 -- 556 -- ------------ ------------ ------------ ------------ Total Operating Expenses 215,054 258,343 522,321 599,250 ------------ ------------ ------------ ------------ (Loss) From Operations (215,054) (258,343) (522,321) (599,250) ------------ ------------ ------------ ------------ Other Income (Expense): Interest Income 30 400 110 915 Other Income 2,700 -- 8,260 -- Foreign Transactions Gain (Loss) (914) -- (914) -- ------------ ------------ ------------ ------------ Total Other Income (Expense) 1,816 400 7,456 915 ------------ ------------ ------------ ------------ Financing Charges: Interest Expense 95 -- 95 -- Bank Fees 538 371 976 1,010 ------------ ------------ ------------ ------------ Total Financing Charges 633 371 1,071 1,010 ------------ ------------ ------------ ------------ (Loss) Before Provision for Income Taxes (213,871) (258,314) (515,936) (599,345) Provision for Income Taxes (Benefit) -- -- -- -- ------------ ------------ ------------ ------------ Net (Loss) of Chancellor, Inc. (213,871) (258,314) (515,936) (599,345) Net Loss attributable to non-controlling interest in Pimovi, Inc. 11,199 71,391 27,703 130,354 Net Loss attributable to non-controlling interest in The Fuelist, LLC 13,364 -- 70,666 -- ------------ ------------ ------------ ------------ Net (Loss) from continuing operations $ (189,307) $ (186,923) $ (417,566) $ (468,991) ------------ ------------ ------------ ------------ Net Income (Loss) from discontinued operations $ (6,591) $ (924) $ 5,018 $ 55,902 ------------ ------------ ------------ ------------ Net (Loss) attributable to Chancellor Group, Inc. Shareholders $ (195,898) $ (187,847) $ (412,548) $ (413,089) ============ ============ ============ ============ Net (Loss) per Share (Basic and Fully Diluted) $ (*) $ (*) $ (*) $ (*) ============ ============ ============ ============ Weighted Average Number of Common Shares Outstanding 74,394,396 71,560,030 74,194,197 70,902,571 ============ ============ ============ ============
---------- * Less than $0.01 per share See Notes to Unaudited Condensed and Consolidated Financial Statements 5 CHANCELLOR GROUP, INC. Condensed and Consolidated Statements of Cash Flows Six Months Ended June 30, 2014 and 2013 (Unaudited)
June 30, 2014 June 30, 2013 ------------- ------------- Cash Flows from Operating Activities: Net (Loss) From Continuing Operations $ (417,567) $ (468,991) Adjustments to Reconcile Net (Loss) to Net Cash (Used in) Operating Activities: (Loss) from Non-controlling Interest in Pimovi, Inc. (27,703) (130,354) (Loss) from Non-controlling Interest in The Fuelist, LLC (70,666) -- Income (Loss) from Discontinued Operations 5,018 55,902 Depreciation and Amortization 556 -- Stock Compensation Expense 36,450 100,000 Foreign Transactions (Gain) Loss 914 -- Amortization of Note Payable Discount 95 -- Decrease (Increase) in Operating Assets 6,097 (70,367) Increase in Operating Liabilities 30,210 14,301 ------------ ------------ Net Cash (Used in) Operating Activities - Continuing Ops (436,596) (499,509) Net Cash (Used in) Provided by Operating Activities - Discontinued Ops (2,213) 2,879 ------------ ------------ Net Cash (Used in) Operating Activities (438,809) (496,630) ------------ ------------ Cash Flows From Investing Activities: Proceeds from Sale of Securities 29,817 -- Purchase of Property and Equipment (1,201) -- ------------ ------------ Net Cash Provided by Investing Activities - Continuing Ops 28,616 -- Net Cash (Used in) Investing Activities - Discontinued Ops -- -- ------------ ------------ Net Cash Provided by Investing Activities 28,616 -- ------------ ------------ Cash Flows From Financing Activities: Note Payable Advances 14,000 -- Capital Contributions Received from Other Member 8,100 -- ------------ ------------ Net Cash Provided by Financing Activities - Continuing Ops 22,100 -- Net Cash Provided by Financing Activities - Discontinued Ops -- -- ------------ ------------ Net Cash Provided by Financing Activities 22,100 -- ------------ ------------ Net (Decrease) in Cash (388,093) (496,630) Cash and restricted cash at the Beginning of the Period 614,901 1,725,508 ------------ ------------ Cash and restricted cash at the End of the Period $ 226,808 $ 1,228,878 ============ ============ Supplemental Disclosures of Cash Flow Information: Interest Paid $ -- $ -- ============ ============ Income Taxes Paid $ -- $ -- ============ ============
See Notes to Unaudited Condensed and Consolidated Financial Statements 6 CHANCELLOR GROUP, INC. Notes to Unaudited Condensed and Consolidated Financial Statements June 30, 2014 NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION Chancellor Group, Inc. (the "Company", "our", "we", "Chancellor" or the "Company") was incorporated in the state of Utah on May 2, 1986, and then, on December 30, 1993, dissolved as a Utah corporation and reincorporated as a Nevada corporation. On March 26, 1996, the Company's corporate name was changed from Nighthawk Capital, Inc. to Chancellor Group, Inc. During early 2012, the Company's corporate office was moved from Pampa to Amarillo, Texas. Throughout most of the Company's history, our primary business purpose has been to explore for, develop and produce oil and gas. Effective as of July 1, 2014, we sold substantially all of our oil and gas assets. Although the Company expects to continue to explore strategic opportunities in the oil and gas business, our primary focus going forward will be to manage and develop the operations of our subsidiaries, Pimovi, Inc. ("Pimovi") and The Fuelist, LLC ("Fuelist"). Pimovi was incorporated in Delaware on November 16, 2012, and subsequently reincorporated in Nevada. Chancellor owns 61% of the equity in Pimovi in the form of Series A Preferred Stock, and therefore maintains significant financial control over Pimovi. As a result, Pimovi's financial statements have been consolidated with Chancellor's consolidated financial statements since the fourth quarter of 2012. On August 15, 2013, Chancellor Group, Inc. entered into a binding term sheet with Fuelist and its founders, Matthew Hamilton, Eric Maas and Thomas Rand-Nash (together, the "Founders"), pursuant to which Chancellor agreed to acquire a 51% ownership interest in Fuelist. As consideration for the ownership interest, Chancellor contributed to Fuelist a total of $271,200 in cash. As additional consideration for the ownership interest, Chancellor contributed a total of 2,000,000 shares of newly issued common stock to Fuelist on August 19, 2013, valued at $156,000, or $0.078 per share. As of June 30, 2014, Fuelist had not commenced principal operations and had no sales or operating revenues through June 30, 2014, therefore Fuelist is considered a "development-stage enterprise". The primary purpose of Fuelist is the development of a data-driven mobile and web technology platform that leverages extensive segment expertise and big data analysis tools to value classic vehicles. These tools are expected to enable users to quickly find values, track valuations over time, and to identify investment and arbitrage opportunities in this lucrative market. GOING CONCERN These condensed and consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had continued net operating losses with net losses attributable to Chancellor Group, Inc. shareholders of $412,548 and $413,089 for the six months ended June 30, 2014 and 2013, respectively, and retained earnings deficits of $3,186,206 and $2,773,659 as of June 30, 2014 and December 31, 2013, respectively. The Company's continued operations are dependent on the successful implementation of its business plan and its ability to obtain additional financing as needed. The accompanying condensed and consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. OPERATIONS During the three months ended June 30, 2014, the Company and its wholly-owned subsidiary, Gryphon Production Company, LLC , owned 5 wells in Gray County, Texas, of which 1 is a water disposal well and 4 are oil wells. As of June 30, 2014, 4 oil wells were actively producing. We produced a total of 0 and 248 barrels of oil in the three and six months ended June 30, 2014, respectively, and a total of 139 and 530 barrels of oil in the three and six months ended June 30, 2013, respectively. The oil is light sweet crude. Effective July 1, 2014, we sold all of our oil wells to S & W Oil & Gas, LLC. 7 Both Pimovi and Fuelist were development stage enterprises as of June 30, 2014, with no significant operations other than the ongoing development of their respective technologies as described above. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The condensed and consolidated financial statements of Chancellor Group, Inc. have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q and in accordance with US GAAP. Accordingly, these condensed and consolidated financial statements do not include all of the information and footnotes required by US GAAP for annual consolidated financial statements. These condensed and consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Chancellor Group, Inc. Annual Report on Form 10-K for the year ended December 31, 2013. These accompanying condensed and consolidated financial statements include the accounts of Chancellor and its wholly-owned subsidiaries: Gryphon Production Company, LLC, and Gryphon Field Services, LLC. These entities are collectively hereinafter referred to as "the Company". The accompanying condensed and consolidated financial statements include the accounts of Chancellor's majority-owned subsidiary, Pimovi, Inc., with which Chancellor owns 61% of the equity of Pimovi and maintains significant financial control. Beginning in the third quarter 2013, the accompanying consolidated financial statements also include The Fuelist, LLC, which Chancellor acquired 51% of the equity of Fuelist and maintains significant financial control. All material intercompany accounts and transactions have been eliminated in the condensed and consolidated financial statements. The consolidated financial statements are unaudited, but, in management's opinion, include all adjustments (which, unless otherwise noted, include only normal recurring adjustments) necessary for a fair presentation of such financial statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2014. ACCOUNTING YEAR The Company employs a calendar accounting year. The Company recognizes income and expenses based on the accrual method of accounting under generally accepted accounting principles. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRODUCTS AND SERVICES, GEOGRAPHIC AREAS AND MAJOR CUSTOMERS For our oil segment, the Company's major customers during the six months ended June 30, 2014, to which substantially all oil production was sold, were Plains Marketing and XTO Energy. Given the number of readily available purchasers for our products, it is unlikely that the loss of a single customer in the areas in which we sell our products would materially affect our sales. The Company sold substantially all of its oil and gas assets effective July 1, 2014. We expect to continue to explore strategic opportunities in the oil and gas business in the future. For our technology segment, the Company plans to continue developing its web-based and mobile technology platforms for its two majority-owned subsidiaries, Pimovi, Inc. and Fuelist, LLC. NET LOSS PER SHARE The net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if 8 any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. CONCENTRATION OF CREDIT RISK Some of the Company's operating cash balances are maintained in accounts that currently exceed federally insured limits. The Company believes that the financial strength of depositing institutions mitigates the underlying risk of loss. To date, these concentrations of credit risk have not had a significant impact on the Company's financial position or results of operations. RESTRICTED CASH Included in restricted cash at June 30, 2014 and December 31, 2013 are deposits totaling $25,000, in the form of a bond issued to the Railroad Commission of Texas as required for the Company's oil and gas activities which is renewed annually. ACCOUNTS RECEIVABLE The Company reviews accounts receivable periodically for collectability, establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Based on review of accounts receivable by management at period end, including credit quality and subsequent collections from customers, an allowance for doubtful accounts was not considered necessary or recorded at June 30, 2014 or December 31, 2013. PREPAID EXPENSES Certain expenses, primarily consulting fees and insurance, have been prepaid and will be used within one year. GOODWILL Goodwill represents the cost in excess of the fair value of net assets of the acquisition. Goodwill is not amortized but is subject to periodic testing for impairment. The Company tests goodwill for impairment using a two-step process. The first step tests for potential impairment, while the second step measures the amount of the impairment, if any. The Company performs the annual impairment test during the last quarter of each year. As of June 30, 2014, we determined there was no impairment of our goodwill. PROPERTY AND DEPRECIATION Property and equipment are recorded at cost and depreciated under the straight-line method over the estimated useful life of the assets. The estimated useful life of leasehold costs, equipment and tools ranges from five to seven years. Equipment is depreciated over the estimated useful lives of the assets, which ranged from 5 to 7 years, using the straight-line method. OIL AND GAS PROPERTIES The Company follows the successful efforts method of accounting for its oil and gas activities. Under this accounting method, costs associated with the acquisition, drilling and equipping of successful exploratory and development wells are capitalized. Geological and geophysical costs, delay rentals and drilling costs of unsuccessful exploratory wells are charged to expense as incurred. The carrying value of mineral leases is depleted over the minimum estimated productive life of the leases, or ten years. Undeveloped properties are periodically assessed for possible impairment due to un-recoverability of costs invested. Cash received for partial conveyances of property interests is treated as a recovery of cost and no gain or loss is recognized. 9 LONG-LIVED ASSETS The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as deferred charges, under the guidance Topic 360 "PROPERTY, PLANT AND EQUIPMENT" in the Accounting Standards Codification (the "ASC"). The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment. As of June 30, 2014 we do not believe any of our long-lived assets are impaired. ASSET RETIREMENT OBLIGATIONS The Company has not recorded an asset retirement obligation (ARO) in accordance with ASC 410. Under ASC 410, a liability should be recorded for the fair value of an asset retirement obligation when there is a legal obligation associated with the retirement of a tangible long-lived asset, and the liability can be reasonably estimated. The associated asset retirement costs should also be capitalized and recorded as part of the carrying amount of the related oil and gas properties. Management believes that not recording an ARO liability and asset under ASC 410 is immaterial to the consolidated financial statements. INCOME TAXES Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. We have recorded a valuation allowance as of June 30, 2014. REVENUE RECOGNITION For our oil segment, revenue is recognized for the oil production when a product is sold to a customer, either for cash or as evidenced by an obligation on the part of the customer to pay. For our technology segment, revenue will be recognized when earned, including both future subscriptions and other future revenue streams, as required under relevant revenue recognition policies under generally accepted accounting policies. FAIR VALUE MEASUREMENTS AND DISCLOSURES The Company estimates fair values of assets and liabilities which require either recognition or disclosure in the financial statements in accordance with FASB ASC Topic 820 "FAIR VALUE MEASUREMENTS". There is no material impact on the June 30, 2014 consolidated financial statements related to fair value measurements and disclosures. Fair value measurements include the following levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities. Level 3: Unobservable inputs that are not corroborated by market data. Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market 10 exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and long term debt, as reported in the accompanying consolidated balance sheet, approximates fair values. EMPLOYEE STOCK-BASED COMPENSATION Compensation expense is recognized for performance-based stock awards if management deems it probable that the performance conditions are or will be met. Determining the amount of stock-based compensation expense requires us to develop estimates that are used in calculating the fair value of stock-based compensation, and also requires us to make estimates of assumptions including expected stock price volatility which is derived based upon our historical stock prices. BUSINESS COMBINATIONS The Company accounts for business combinations in accordance with FASB ASC Topic 805 "Business Combinations". This standard modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets, the liabilities assumed and the goodwill acquired in a business combination. The Company entered into a business combination with The Fuelist, LLC on August 15, 2013 (See Note 7 for further disclosure). DISCONTINUED OPERATIONS The Company complies with guidance related to when the results of operations of a component of an entity that either has been disposed of or is classified as held for sale should be reported as a discontinued operations as provided by (ASC) Subtopic 205-20, Presentation of Financial Statements - Discontinued Operations. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. To qualify for presentation as a discontinued operation, both conditions must be met, including (1) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction, and (2) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. SUBSEQUENT EVENTS Events occurring after June 30, 2014 were evaluated through the date this quarterly report was issued, in compliance FASB ASC Topic 855 "SUBSEQUENT EVENTS", to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. RECENT ACCOUNTING PRONOUNCEMENTS In June 2014, FASB issued ASU No. 2014-10, DEVELOPMENT STAGE ENTITIES (TOPIC 915): ELIMINATION OF CERTAIN FINANCIAL REPORTING REQUIREMENTS, INCLUDING AN AMENDMENT TO VARIABLE INTEREST ENTITIES GUIDANCE IN TOPIC 810, CONSOLIDATION. The presentation and disclosure requirements in Topic 915 will no longer be required effective for annual periods beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. The new guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities, such as startup companies, without compromising the availability of relevant information. The new guidance removes the requirement to present the additional inception-to-date information. In July 2013, FASB issued ASU No. 2013-11, INCOME TAXES (TOPIC 740): PRESENTATION OF AN UNRECOGNIZED TAX BENEFIT WHEN A NET OPERATING LOSS CARRYFORWARD, A SIMILAR TAX LOSS, OR A TAX CREDIT CARRYFORWARD EXISTS. This ASU is effective for interim and annual periods beginning after December 15, 2013. This update standardizes the presentation of an unrecognized tax benefit when a 11 net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This accounting pronouncement did not have any material effect on our condensed and consolidated financial statements. There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries, and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. NOTE 2. INCOME TAXES Deferred income taxes are recorded for temporary differences between financial statement and income tax basis. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax basis. Deferred tax assets are recognized for temporary differences that will be deductible in future years' tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years' tax returns. At June 30, 2014, the Company had a federal net operating loss carry-forward of approximately $3,008,000 compared to $2,639,000 at December 31, 2013. A deferred tax asset of $601,627 at June 30, 2014 and $527,915 at December 31, 2013 has been partially offset by a valuation allowance of approximately $598,257 and $524,414 at June 30, 2014 and December 31, 2013, respectively, due to federal net operating loss carry-back and carry-forward limitations. The Company also had approximately $3,370 and $3,501 in deferred income tax liability at June 30, 2014 and December 31, 2013, respectively, attributable to timing differences between federal income tax depreciation, depletion and book depreciation, which has been offset against the deferred tax asset related to the net operating loss carry-forward. Management evaluated the Company's tax positions under FASB ASC No. 740 "UNCERTAIN TAX POSITIONS," and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2010. NOTE 3. STOCKHOLDERS' EQUITY PREFERRED STOCK The Company has authorized 250,000 shares, par value $1,000 per share, of convertible Preferred Series B stock ("Series B"). Each Series B share is convertible into 166.667 shares of the Company's common stock upon election by the stockholder, with dates and terms set by the Board. No shares of Series B preferred stock have been issued. COMMON STOCK The Company has 250,000,000 authorized shares of common stock, par value $.001, with 74,600,030 and 73,760,030 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively. STOCK BASED COMPENSATION For the three and six months ended June 30, 2014, the Company issued 350,000 and 840,000 shares of common stock, respectively and recognized $7,500 and $36,450 respectively in consulting fees expense, which is recorded in general and administrative expenses. 12 NON-EMPLOYEE STOCK OPTIONS AND WARRANTS The Company accounts for non-employee stock options under FASB ASC Topic 505 "EQUITY-BASED PAYMENTS TO NON-EMPLOYEES", whereby options costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. During the three and six months ended June 30, 2014, no options were issued, exercised or cancelled. The Company currently has outstanding warrants expiring December 31, 2014 to purchase an aggregate of 6,000,000 shares of common stock; these warrants consist of warrants to purchase 2,000,000 shares at an exercise price of $.025 per share, and warrants to purchase 4,000,000 shares at an exercise price of $0.02 per share. These warrants were extended in May 2014 to December 31, 2017 to purchase 5,000,000 shares at an exercise price of $.020 per share, and warrants to purchase 1,000,000 shares at an exercise price of $.025 per share. In July 2009, the Company issued additional warrants expiring June 30, 2014 to purchase an aggregate of 500,000 shares of common stock at an exercise price of $0.125 per share. From June 2010 thru April 2011, the Company issued additional warrants expiring June 30, 2015 to purchase an aggregate of 420,000 shares of common stock at an exercise price of $0.125 per share. On June 30, 2014, the Company had the following outstanding warrants: Exercise Weighted Remaining Price times Average Exercise Number of Contractual Life Number of Exercise Price Shares (in years) Shares Price ----- ------ ---------- ------ ----- $0.125 420,000 1.00 $ 52,500 $0.025 1,000,000 3.50 $ 25,000 $0.020 5,000,000 3.50 $100,000 --------- -------- 6,420,000 $177,500 $0.028 ========= ======== Weighted Average Remaining Number of Exercise Contractual Life Warrants Shares Price (in years) -------- ------ ----- ---------- Outstanding at December 31, 2013 6,920,000 $0.035 --------- ------ Issued -- -- Exercised -- -- Expired/Cancelled -- -- --------- ------ Outstanding at June 30, 2014 6,420,000 $0.028 2.67 --------- ------ ---- Exercisable at June 30, 2014 6,420,000 $0.028 2.67 ========= ====== ==== NOTE 4. PROPERTY AND EQUIPMENT A summary of fixed assets at: Balance Balance December 31, June 30 2013 Additions Deletions 2014 -------- --------- --------- -------- Equipment $ 4,454 $ 1,201 $ -- $ 5,655 ------- ------ ------- ------- Total Cost $ 4,454 $ 1,201 $ -- $ 5,655 ======= ====== ======= ======= Less: Accumulated Depreciation $ 159 $ 556 $ -- $ 715 ------- ------ ------- ------- Total Property and Equipment, net $ 4,295 $ 645 $ -- $ 4,940 ======= ====== ======= ======= 13 NOTE 5. CONTRACTUAL OBLIGATIONS On February 25, 2013, the Company entered into a twelve month agreement with a new investor relations consultant, which pays the consultant a fee of $9,000 monthly for the period from February 2013 through July 2013. The agreement was not renewed. In addition, the Company granted 1,000,000 shares of common stock to the consultant upon execution of the agreement. The Company recognized $0 and $9,500 in consulting fees for the three and six months ended June 30, 2014 related to this agreement, respectively compared to $19,000 and $28,500 in consulting fees for the three and six months for the same period during 2013, respectively. On May 1, 2013, Fuelist entered into a lease agreement with a related party limited liability company for its main office, located in Berkeley, California. The lease term was for one year beginning on May 1, 2013 and ending May 1, 2014. The agreement was subsequently renewed through October 31, 2015. The Company is obligated to pay a minimum amount of rent of $32,400 per year in equal monthly installments of $2,700 payable on the 1st of each month. The Company subsequently entered into a sub-lease agreement with another related party entity in which it was not legally relieved of its primary obligation for the lease agreement. The Company recognized $2,700 and $8,160 in sub-lease rent revenue in other income and $8,100 and $16,200 in rent expense in other operating expenses, related to these agreements during the three and six months ended June 30, 2014, respectively. NOTE 6. RELATED PARTY TRANSACTIONS The Company has used the services of a consulting company owned by the Chairman of the Board. The Company paid $27,000 and $54,000 for those services during the three and six months ended June 30, 2014, respectively. The Company paid $27,000 and $54,000 for those services during the three and six months ended June 30, 2013, respectively. The Company has paid directors fees to a company owned by the chairman of the board in the amount of $7,500 and $15,000 during the three and six months ended June 30, 2014, respectively, compared to $7,500 and $15,000 for the same period during 2013, respectively. The Company also paid one other director in the amount of $7,500 and $15,000 during the three and six months ended June 30, 2014, respectively and $7,500 and $15,000 during the three and six months ended June 30, 2013, respectively. On April 28, 2014, Chancellor received an interest-free loan of $5,000 from a related party company owned by the chairman of the board with no specific repayment terms. On May 23, 2014, Chancellor received a second interest-free loan of $9,000 from the same related party company owned by the chairman of the board. Interest on the loans is imputed at 5.25% for a one year term. NOTE 7. NON-CONTROLLING INTERESTS All non-controlling interest of Chancellor related to Fuelist is a result of Chancellor's initial investment, the investment of other members in Fuelist, and results of operations. Cumulative results of these activities result in: June 30, December 31, 2014 2013 ---------- ---------- Cash contributions paid by Chancellor to Fuelist $ 271,200 $ 180,800 Cash contributions paid by others to Fuelist 32,400 24,300 Net loss prior to acquisition by Chancellor attributable to non-controlling interest (29,006) (29,006) Net loss subsequent to acquisition by Chancellor attributable to non-controlling interest (161,711) (91,045) Proceeds from Fuelist sales of Chancellor stock 29,817 -- ---------- ---------- Total non-controlling interest in Fuelist $ 142,700 $ 85,049 ========== ========== 14 The following is a summary of changes in non-controlling interest in Fuelist during the six months ended June 30, 2014: Non-controlling interest in Fuelist at December 31, 2013 $ 85,049 Cash contributions paid by Chancellor to Fuelist 90,400 Cash contributions paid by others to Fuelist 8,100 Net losses attributable to non-controlling interest in Fuelist (70,666) Proceeds from Fuelist sales of Chancellor stock 29,817 ---------- Non-controlling interest in Fuelist at June 30, 2014 $ 142,700 ========== All non-controlling interest of Chancellor related to Pimovi is a result of results of operations. Cumulative results of these activities result in: June 30, December 31, 2014 2013 ---------- ---------- Cumulative net loss attributable to non-controlling interest in Pimovi $(301,860) $(274,157) ---------- ---------- Total non-controlling interest in Pimovi $(301,860) $(274,157) ========== ========== The following is a summary of changes in non-controlling interest in Pimovi during the six months ended June 30, 2014: Non-controlling interest in Pimovi at December 31, 2013 $(274,157) Net loss attributable to non-controlling interest in Pimovi (27,703) --------- Non-controlling interest in Pimovi at June 30, 2014 $(301,860) ========= NOTE 8. FOREIGN CURRENCY TRANSACTIONS On April 28, 2014, Chancellor received an interest-free loan of $5,000 from a related party company owned by the chairman of the board with no specific repayment terms. On May 23, 2014, Chancellor received a second interest-free loan of $9,000 from the same related party company owned by the chairman of the board with no specific repayment terms. These loans are fixed in terms of Australian dollars and therefore resulted in foreign transaction losses of $309 and $605, respectively, for the six months ended June 30, 2014, due to the change in exchange rates from the time of the loans and the balance sheet date of June 30, 2014. Such gains and losses are recorded in other income in the period incurred. NOTE 9. NOTES PAYABLE RELATED PARTY The Company issued an unsecured note payable with a face amount of $5,000 from a related party company owned by the chairman of the board as discussed in Note 6. The balance of the note payable is non-interest bearing with no specific repayment terms. As a result the note payable has been recorded net of unamortized discount of $267 imputed at the rate of 5.25% and assuming a term of one year. At June 30, 2014, the total unpaid balance of this note payable, net of the unamortized discount of $223, is $5,045. The Company issued an unsecured note payable with a face amount of $9,000 from a related party company owned by the chairman of the board as discussed in Note 6. The balance of the note payable is non-interest bearing with no specific repayment terms. As a result the note payable has been recorded net of unamortized discount of $482 imputed at the rate of 5.25% and assuming a term of one year. At June 30, 2014, the total unpaid balance of this note payable, net of the unamortized discount of $433, is $9,049. 15 NOTE 10. DISCONTINUED OPERATIONS On July 1, 2014, Chancellor sold its remaining oil and gas leases located in Gray County, Texas, owned by its subsidiary Gryphon Production Company, LLC. In accordance with (ASC) Subtopic 205-20, Presentation of Financial Statements - Discontinued Operations, at June 30, 2014 all of the related assets (primarily leasehold costs) and liabilities to Chancellor's oil and gas segment were classified as held for sale, and presented separately in current assets and liabilities in the condensed and consolidated balance sheets. Assets held for sale consisted of $62,940 in capitalized leasehold costs and $32,740 of related accumulated depreciation at June 30, 2014 and $57,580 in capitalized leasehold costs and $29,593 of related accumulated depreciation at December 31, 2013. In addition, the net income (losses) related to Chancellor's oil and gas segment were reported in discontinued operations in the condensed and consolidated statements of income. Total revenues for Chancellor's oil and gas segment were approximately $-0- and $18,000 for the three months ended June 30, 2014 and 2013, respectively, and were approximately $23,000 and $83,000 for the six months ended June 30, 2014 and 2013, respectively. Chancellor had no other operating income related to its oil and gas segment for the three and six months ended June 30, 2014 compared to $0 and $53,337 for the three and six months ended June 30, 2013, respectively. Expenses related to the Company's oil and gas segment were $6,591 and $17,666 for the three and six months ended June 30, 2014, respectively, compared to $19,219 and $27,256 for the same periods in 2013, respectively. Net cash used for operating activities related to discontinued operations was $2,213 for the six months ended June 30, 2014 compared to net cash provided by operating activities related to discontinued operations of $2,879 for the same period in 2013. NOTE 11. SUBSEQUENT EVENTS Events occurring after June 30, 2014 were evaluated through the date the Form 10Q was issued, in compliance FASB ASC Topic 855 "Subsequent Events", to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. Effective as of July 1, 2014, our wholly-owned subsidiary, Gryphon Production Company, LLC ("Gryphon"), entered into an Assignment and Bill of Sale (the "Assignment") with S & W Oil & Gas, LLC ("S&W"), pursuant to which Gryphon agreed to sell to S&W all of Gryphon's interest in certain oil and gas leases covering lands in Gray County, Texas, and all of Gryphon's property located on those lands, including four oil wells and one water disposal well (collectively, the "Assets"), for $95,000 in cash. After deducting agent's commissions, the net proceeds to Gryphon were $88,350. The sale of the Assets represents the sale of substantially all of the Company's oil and gas assets. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Throughout this report, we make statements that may be deemed "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities, events, outcomes and other matters that Chancellor plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and sale of oil and gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of goods and services, environmental risks, operating risks, regulatory changes, the uncertainty inherent in estimating proved oil and natural gas reserves and in projecting future rates of production and timing of development expenditures and other risks described herein, the effects of existing or continued deterioration in economic conditions in the United States or the markets in which we operate, and acts of war or terrorism inside the United States or abroad. BACKGROUND In April 2007 we commenced operations with what were 84 producing wells in Gray and Carson counties, Texas. On July 22, 2008, we had entered into an Agreement, effective as of June 1, 2008 with Legacy Reserves Operating LP ("Legacy") for the sale of our oil and gas wells in Carson County, Texas, representing for approximately 84% of our oil and gas production at that time. In 2010, the Company acquired three additional properties in Hutchinson County including approximately 16 wells. In 2011, the Company continued our operational and restoration programs and the production capacity from our 67 actively producing wells in Gray and Hutchinson counties. On October 18, 2011, pursuant to the terms of the Purchase and Sale Agreement, LCB Resources purchased all of Gryphon's rights, titles and interests in certain leases, wells, equipment, contracts, data and other designated property, which sale to LCB constituted approximately 82% of the Company's consolidated total assets as of September 30, 2011 and contributed approximately 95% and 77%, respectively, of the Company's consolidated gross revenues and total expenses for the nine months then ended. Under the terms of the Purchase and Sale Agreement, LCB paid Gryphon $2,050,000 in cash, subject to certain adjustments as set forth in the Agreement. The proceeds from the asset sale to LCB are being used to provide working capital to Chancellor and for future corporate purposes, including but not limited to possible acquisitions, including new business ventures outside of the oil and gas industry, such as with Pimovi, Inc. commencing during the fourth quarter of 2012 and The Fuelist, LLC commencing during the third quarter 2013. Since the sale of substantially all of the assets of Gryphon to LCB, the Company has continued to maintain a total of four (4) producing wells and one (1) water disposal well. Gryphon also retains an operator's license with the Texas Railroad Commission and continued to operate the Hood Leases itself until July 1, 2014. Effective as of July 1, 2014, Gryphon sold its interest in the Hood Lease and all of its remaining Wells to S&W for a purchase price of $95,000 in cash. After deducting agent's commissions, the net proceeds to Gryphon were $88,350. Following this sale of substantially all of the Company's remaining oil and gas assets, our primary focus will be on developing the operations of our subsidiaries, Pimovi and Fuelist, although we expect to continue to explore strategic opportunities in the oil and gas business. On November 16, 2012, a certificate of incorporation was filed with the state of Delaware for the formation of Pimovi, a new majority-owned subsidiary of Chancellor, the separate company financial statements of which are consolidated with Chancellor's consolidated financial statements beginning for the fourth quarter of 2012. Subsequently on January 11, 2013 the final binding term sheet was signed by Chancellor summarizing the principal terms, conditions and formal 17 establishment of Pimovi by its two "Co-Founders", Chancellor and Kasian Franks. Under the agreement, Chancellor agreed to provide the initial funding of $250,000 over a period of up to eight months, in consideration of the receipt of 61% of the equity of Pimovi in the form of Series A Preferred Stock. Kasian Franks, whom is also the Chief Scientific Officer of Pimovi, agreed to contribute certain intellectual property related to its business in consideration for receipt of the remaining equity in Pimovi in the form of common stock. The primary business purpose of Pimovi relates largely to technology and mobile application fields, including development of proprietary consumer algorithms, creating user photographic and other activity records, First Person Video Feeds and other such activities related to mobile and computer gaming. In March 2013, Pimovi was reincorporated in Nevada. On August 15, 2013, Chancellor entered into a binding term sheet with Fuelist and its founders, Matthew Hamilton, Eric Maas and Thomas Rand-Nash, pursuant to which Chancellor agreed to acquire a 51% ownership interest in Fuelist. As consideration for the ownership interest, Chancellor contributed to Fuelist a total of $271,200 in cash payable in 12 monthly installments of $22,600, beginning in August 2013. The contribution was paid in full as of June 30, 2014. As additional consideration for the ownership interest, Chancellor contributed a total of 2,000,000 shares of newly issued common stock to Fuelist on August 19, 2013, valued at $156,000, or $0.078 per share. The primary business purpose of Fuelist relates largely to developing a data-driven mobile and web technology platform that leverages extensive segment expertise and big data analysis tools to value classic vehicles. These tools enable users to quickly find values, track valuations over time and to identify investment and arbitrage opportunities in this lucrative market. Our common stock is quoted on the Over-The-Counter market and trades under the symbol CHAG.OB. As of August 13, 2014, there were 74,600,030 shares of our common stock issued and outstanding. RESULTS OF OPERATIONS Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013. OIL SEGMENT REVENUES AND PRODUCTION: During the three months ended June 30, 2014, we produced and sold no barrels of oil and produced and sold no gas due to the timing of oil deliveries, generating $0 in gross revenues net of royalties paid as compared with 208 barrels of oil, generating $18,295 in gross revenues for the same period in 2013. We had 4 wells actually producing oil and none producing gas at June 30, 2014 and had 4 wells actually producing oil and none producing at June 30, 2013. During the quarter ended June 30, 2014, the Company maintained a total of four (4) producing wells and one (1) water disposal well. Effective July 1, 2014, we sold all of our oil wells to S & W Oil & Gas, LLC. The proceeds from the asset sale will be used to provide working capital and for future corporate purposes including, but not limited to, exploring strategic opportunities in the oil and gas business and managing and developing the operations of our technology segment. The following table summarizes our production volumes and average sales prices for the periods ended June 30: 2014 2013 -------- -------- Oil Sales: Oil Sales (Bbl) 0 208 Average Sales Price: Oil, per Bbl $ 0 $88.05 The decrease in net sales of oil during the period ended June 30, 2014 (as compared to the period ended June 30, 2013) resulted primarily from the Company having no oil revenues in the second quarter of 2014 due to no deliveries being made as the Company was in the process of selling all of its oil properties at June 30, 2014. TECHNOLOGY SEGMENT REVENUES AND DEVELOPMENT: During the quarters ended June 30, 2014 and 2013, we did not generate any revenues as our operations focused solely on the development of our web-based and mobile application technologies. 18 DEPRECIATION AND AMORTIZATION: Expense recognized for depreciation and amortization of property and equipment increased $412, or approximately 29% in the three months ended June 30, 2014 compared to the same period in 2013. This increase was primarily attributable to an increase in capitalized well equipment for the oil production segment and capitalized computer equipment for the technology segment. OPERATING EXPENSES AND ADMINISTRATIVE EXPENSES: During the three months ended June 30, 2014, our general and administrative expenses increased $36,340, or approximately 48% compared to same period in 2013. Significant components of these expenses include professional and consulting fees, travel expenses, and insurance expense. Professional and consulting fees increased approximately $23,500, or approximately 51%, during the three months ending June 30, 2014 compared to the same period in 2013, primarily the result of large investor relations expenses and consultation costs with third parties in the second quarter of 2014 related to Fuelist. Travel expenses increased approximately $10,254 compared to same period in 2013, primarily the result of travel expenses during the second quarter of 2014 related to the Company's investment in Pimovi, Inc. During the three months ended June 30, 2014, approximately $28,715 of investment related professional and consulting expenses were incurred by Pimovi, Inc. compared to approximately $183,000 for the same period in 2013. The majority of this expense incurred was for the financing of Pimovi's general business purpose related to the initial development of technology and mobile applications fields. During the three months ended June 30, 2014, approximately $64,070 of investment related professional and consulting expenses were incurred by Fuelist compared to $0 in the for the same period in 2013, as Chancellor's interest in Fuelist was not acquired until the third quarter of 2013. The majority of this expense was incurred for the financing of Fuelist's general business purpose related to the initial development of technology and mobile applications fields. Our gross revenues from oil production for the three months ended June 30, 2014 were $0 compared to $18,295 during the same period in 2013. The management of the Company has expended a large amount of time and resources in exploring other acquisitions and business opportunities, primarily outside of the oil and gas industry. During the three months ended June 30, 2014, Pimovi incurred a loss of $28,715 compared to $183,059 for the same period in 2013 mostly related to consulting fees and general and administrative expenses, as it continues to develop its product line. Chancellor recorded a $17,517 loss from Pimovi during the three months ended June 30, 2014, representing its 61% share of Pimovi compared to $111,663 for the same period during 2013. During the third quarter of 2013, Chancellor acquired a 51% ownership interest in The Fuelist, LLC. For the three months ended June 30, 2014, Fuelist incurred a loss of $122,684, mostly related to consulting fees and general and administrative expenses, as it continues to develop its technologies. Chancellor recorded a $62,569 loss from Fuelist for the period ended June 30, 2014 representing its 51% share of Fuelist. Therefore, the Company reported a consolidated net loss of $195,898 during the three months ended June 30, 2014, compared to a net loss $187,847 reported for the same period in 2013. Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013. OIL SEGMENT REVENUES AND PRODUCTION: During the six months ended June 30, 2014, we produced and sold 248 barrels of oil, generating $22,684 in gross revenues net of royalties paid, with a one month lag in receipt of revenues for the prior months sales, as compared with 345 barrels of oil generating $29,821 in gross revenues net of royalties paid during the same period in 2013. During the six months ended June 30, 2014, the Company also recorded $0 of other income compared to $53,337 for the same period during 2013 related to the settlement of Cause 37053, related to production proceeds from 2009 through 2011 from properties previously owned and operated by the Company which had been previously paid to another party in error. We had 4 wells actually producing oil at June 30, 2014 and 2013. During the six months ended June 30, 2014, the Company maintained a total of four (4) producing wells and one (1) water disposal well. Effective July 1, 2014, we sold all of our oil wells to S & W Oil & Gas, LLC. The proceeds from the asset sale will be used to provide working capital and for future corporate purposes including, but not limited to, exploring strategic opportunities in the oil and gas business and managing and developing the operations of our technology segment. 19 The following table summarizes our production volumes and average sales prices for the six months ended June 30: 2014 2013 -------- -------- Oil Sales: Oil Sales (Bbl) 248 345 Average Sales Price: Oil, per Bbl $91.49 $86.55 The decrease in revenues of oil during the six months ended June 30, 2014 (as compared to the period ended June 30, 2013) resulted primarily from the Company having no oil revenues in the second quarter of 2014 due to no deliveries being made as the Company was in the process of selling all of its oil properties. TECHNOLOGY SEGMENT REVENUES AND DEVELOPMENT: During the quarters ended June 30, 2014 and 2013, we did not generate any revenues as our operations focused solely on the development of our web-based and mobile application technologies. DEPRECIATION AND AMORTIZATION: Expense recognized for depreciation and amortization of property and equipment increased $824, or approximately 29% in the six months ended June 30, 2014 compared to the same period in 2013. This increase was primarily attributable to an increase in capitalized well equipment for the oil production segment and capitalized computer equipment for the technology segment. OPERATING EXPENSES AND ADMINISTRATIVE EXPENSES: During the six months ended June 30, 2014, our general and administrative expenses decreased $10,270, or approximately 4% compared to same period in 2013. Significant components of these expenses include professional and consulting fees, travel expenses, and insurance expense. Professional and consulting fees decreased approximately $31,056, or approximately 15%, during the six months ending June 30, 2014 compared to the same period in 2013, primarily the result of large investor relations expenses and consultation costs with third parties in the first quarter of 2013 related to the formation of Pimovi. Travel expenses increased approximately $7,078 compared to same period in 2013, primarily the result of travel expenses related to the Company's investment in Pimovi, Inc. during the second quarter 2014. During the six months ended June 30, 2014, approximately $71,134 of investment related professional and consulting expenses were incurred by Pimovi, Inc. compared to approximately $334,241 for the same period in 2013. The majority of this expense incurred was for the financing of Pimovi's general business purpose related to the initial development of technology and mobile applications fields. During the six months ended June 30, 2014, approximately $174,191 of investment related professional and consulting expenses were incurred by Fuelist compared to $0 in the for the same period in 2013, as Chancellor's interest in Fuelist was not acquired until the third quarter of 2013. The majority of this expense was incurred for the financing of Fuelist's general business purpose related to the initial development of technology and mobile applications fields. During the six months ended June 30, 2014, we continued with the ongoing production and maintenance of our 4 producing wells in Gray County. As a result of these efforts, our gross revenues from oil production for the six months ended June 30, 2014 were $22,684. The management of the Company has expended a large amount of time and resources in exploring other acquisitions and business opportunities, primarily outside of the oil and gas industry. During the six months ended June 30, 2014, Pimovi incurred a loss of $71,034, compared to $334,241 for the same period in 2013 mostly related to consulting fees and general and administrative expenses, as it continues to develop its product line. Chancellor recorded a $43,331 loss from Pimovi during the six months ended June 30, 2014, representing its 61% share of Pimovi compared to $203,887 for the same period during 2013. During the third quarter of 2013, Chancellor acquired a 51% ownership interest in The Fuelist, LLC. During the six months ended June 30, 2014, Fuelist incurred a loss of $244,015, mostly related to consulting fees and general and administrative expenses, as it continues to develop its technologies. Chancellor recorded a $124,447 loss from Fuelist for the six months ended June 30, 2014 representing its 51% share of Fuelist. Therefore, the Company reported a consolidated net loss of $412,548 during the six months ended June 30, 2014, compared to a net loss $413,089 reported for the same period in 2013. 20 LIQUIDITY AND CAPITAL RESOURCES OVERVIEW: The following table highlights certain information relation to our liquidity and capital resources at: June 30, 2014 December 31, 2013 ------------- ----------------- Working Capital $ 116,107 $ 465,115 Current Assets 263,664 657,854 Current Liabilities 147,557 192,739 Stockholders' Equity 578,697 924,846 Our working capital at June 30, 2014, decreased by $349,008 or approximately 75% from December 31, 2013, primarily from the loss from operations during first quarter 2014 related to Pimovi and Fuelist which consists mostly of third party consulting expenses as our technology segment continues to develop its technologies. Current assets decreased by $394,190 or approximately 60%, while current liabilities decreased $45,182 or approximately 23%, primarily as a result of the timing of cash disbursements related to Pimovi and Fuelist operating expenses and Chancellor's fulfillment of its capital contributions to Fuelist during the quarter ended June 30, 2014. Our capital resources consist primarily of cash from operations and permanent financing, in the form of capital contributions from our stockholders. As of June 30, 2014, the Company had $201,808 of unrestricted cash on hand. Our capital expenditures related to our oil and gas operations for the six months ended June 30, 2014, were approximately $14,500, which consisted primarily of repair and maintenance of our four producing oil wells and one water disposal well. Following our sale of those assets effective July 1, 2014, we do not currently expect to make any significant capital expenditures on oil and gas assets for the remainder of fiscal year 2014. Chancellor has fulfilled its contractual obligations to provide funding for Fuelist but expects from time to time to provide additional support for Pimovi until such time as Pimovi receives sufficient operating revenue from its business. This additional support is not expected to exceed $15,000 a month. Based on current cash availability Chancellor should be able to provide this for the next 6 - 8 months. Thereafter it would need to obtain third party financing. There is no assurance that would be available on favourable terms or at all. It is anticipated that Fuelist will require significant additional capital to further develop its business. Fuelist plans to fund this development from subscriptions and royalties from its website which went live on March 22, 2014 and from other planned developments such as a related phone app. such revenue is not sufficient to fund business operations and development Fuelist would need third party financing and there is no assurance that would be available on favourable terms or at all. CASH FLOW: Net cash used during the six months ended June 30, 2014 was $388,093 compared to net cash used of $496,630 during same period in 2013. The most significant factor causing the decrease in net cash used during the six months ended June 30, 2014 relates to cash disbursements for the formation of Pimovi in the first six months 2013. Cash used for operations decreased by $63,181, or approximately 13% during the six months ended June 30, 2014, compared to the same period in 2013, primarily resulting from the loss from operations attributable to both Pimovi during the second quarter of 2013. This operating loss was mostly related to consulting fees and general and administrative expenses, as Pimovi continued to develop its technologies. Cash provided by investing activities is $23,256, or approximately 100% during the six months ended June 30, 2014 compared to cash provided by investment activities of $0 for the same period during 2013, mainly attributable to proceeds from the sale of securities by Fuelist. Cash provided by financing activities increased $22,100, or approximately 100% during the six months ended June 30, 2014 compared to the same period in 2013 related to the cash contributions received by Fuelist from its other equity members and loans from a related party company. EQUITY FINANCING: As of June 30, 2014, included in our stockholders equity was a total of $3,924,063 in equity financing from stockholders and stock compensation. We do not anticipate that significant equity financing will take place in the foreseeable future. 21 CONTRACTUAL OBLIGATIONS On February 25, 2013, the Company entered into a twelve month agreement with a new investor relations consultant, which pays the consultant a fee of $9,000 monthly for the period from February 2013 through July 2013. The agreement was not renewed. In addition, the Company granted 1,000,000 shares of common stock to the consultant upon execution of the agreement. The Company recognized $0 and $9,500 in consulting fees for the three and six months ended June 30, 2014 related to this agreement, respectively compared to $19,000 and $28,500 in consulting fees for the three and six months for the same period during 2013, respectively. On May 1, 2013, Fuelist entered into a lease agreement with a related party limited liability company for its main office, located in Berkeley, California. The lease term was for one year beginning on May 1, 2013 and ending May 1, 2014. The lease agreement was subsequently renewed through October 31, 2015. The Company is obligated to pay a minimum amount of rent of $32,400 per year in equal monthly installments of $2,700 payable on the 1st of each month. The Company subsequently entered into a sub-lease agreement with another related party entity in which it was not legally relieved of its primary obligation for the lease agreement. The Company recognized $2,700 and $8,160 in sub-lease rent revenue in other income and $8,100 and $16,200 in rent expense in other operating expenses, related to these agreements during the three and six months ended June 30, 2014, respectively. CRITICAL ACCOUNTING POLICIES The Securities and Exchange Commission (the "SEC") recently issued "FINANCIAL REPORTING RELEASE NO. 60 CAUTIONARY ADVICE REGARDING DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES" ("FRR 60"), suggesting companies provide additional disclosures, discussion and commentary on those accounting policies considered most critical to its business and financial reporting requirements. FRR 60 considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy. For a summary of the Company's significant accounting policies, including the critical accounting policies discussed below, please refer to the accompanying notes to the financial statements provided in this Quarterly Report on Form 10-Q. This discussion and analysis of financial condition and results of operations has been prepared by our management based on our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, our management evaluates our critical accounting policies and estimates, including those related to revenue recognition, valuation of accounts receivable, intangible assets and contingencies. Estimates are based on historical experience and on various assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting periods. We consider the following accounting policies important in understanding our operating results and financial condition: GOING CONCERN These consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had continued net operating losses with net losses attributable to Chancellor Group, Inc. shareholders of $412,548 and $413,089 for the six months ended June 30, 2014 and 2013, respectively, and retained earnings deficits of $3,186,206 and $2,773,659 as of June 30, 2014 and December 31, 2013, respectively. The Company's continued operations are dependent on the successful implementation of its business plan and its ability to obtain additional financing as needed. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 22 INTANGIBLE ASSET VALUATION Assessing the valuation of intangible assets is subjective in nature and involves significant estimates and assumptions as well as management's judgment. We periodically perform impairment tests on our long-lived assets, including our intangible assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived assets are testing for impairment by first comparing the estimated future undiscounted cash flows from a particular asset or asset group to the carrying value. If the expected undiscounted cash flows are greater than the carrying value, no impairment is recognized. If the expected undiscounted cash flows are less than the carrying value, then an impairment charge is recorded for the difference between the carrying value and the expected discounted cash flows. The assumptions used in developing expected cash flow estimates are similar to those used in developing other information used by us for budgeting and other forecasting purposes. In instances where a range of potential future cash flows is possible, we use a probability-weighted approach to weigh the likelihood of those possible outcomes. As of June 30, 2014 we do not believe any of our long-lived assets are impaired except for our goodwill related to the acquisition of Fuelist. GOODWILL Our goodwill represents the excess of the purchase price paid for The Fuelist, LLC over the fair value of the identifiable net assets and liabilities acquired. Goodwill is not amortized but is tested annually for impairment, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Goodwill is tested for impairment by comparing the carrying amount of the asset to its fair value, which is estimated through the use of a discounted cash flows model. If the carrying amount exceeds fair value, an impairment loss is recognized for the difference. As of June 30, 2014, we determined there was no impairment of our goodwill. REVENUE RECOGNITION For our oil segment, revenue is recognized for the oil production segment when a product is sold to a customer, either for cash or as evidenced by an obligation on the part of the customer to pay. For our technology segment, revenue will be recognized when earned, including both future subscriptions and other future revenue streams, as required under relevant revenue recognition policies under generally accepted accounting policies. NATURAL GAS AND OIL PROPERTIES The process of estimating quantities of oil and gas reserves is complex, requiring significant decisions in the evaluation of all available geological, geophysical, engineering and economic data. The data for a given field may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data make these estimates generally less precise than other estimates included in the financial statement disclosures. INCOME TAXES As part of the process of preparing the consolidated financial statements, we are required to estimate federal and state income taxes in each of the jurisdictions in which Chancellor operates. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as derivative instruments, depreciation, depletion and amortization, and certain accrued liabilities for tax and accounting purposes. These differences and our net operating loss carry-forwards result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess, using all available positive and negative evidence, the likelihood that the deferred tax assets will be recovered from future taxable income. If we believe that recovery is not likely, we must establish a valuation allowance. Generally, to the extent Chancellor establishes a valuation allowance or increases or decreases this allowance in a period, we must include an expense or reduction of expense within the tax provision in the consolidated statement of operations. 23 Under accounting guidance for income taxes, an enterprise must use judgment in considering the relative impact of negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists (i) the more positive evidence is necessary and (ii) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or all of the deferred tax asset. Among the more significant types of evidence that we consider are: * taxable income projections in future years; * whether the carry-forward period is so brief that it would limit realization of tax benefit; * future sales and operating cost projections that will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures; and * our earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than a continuing condition. If (i) oil and natural gas prices were to decrease significantly below present levels (and if such decreases were considered other than temporary), (ii) exploration, drilling and operating costs were to increase significantly beyond current levels, or (iii) we were confronted with any other significantly negative evidence pertaining to our ability to realize our NOL carry-forwards prior to their expiration, we may be required to provide a valuation allowance against our deferred tax assets. As of June 30, 2014, a deferred tax liability of $3,616 has been recognized but partially offset by a valuation allowance of approximately $438,000 due to federal NOL carry-back and carry-forward limitations. BUSINESS COMBINATIONS The Company accounts for business combinations in accordance with FASB ASC Topic 805 "Business Combinations". This standard modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets acquired, the liabilities assumed and the goodwill acquired in a business combination. Net assets acquired must be recorded upon acquisition at their estimated fair values. Fair values must be determined based on the requirements of FASB ASC Topic 820, Fair Value Measurements. In many cases the determination of fair values of net assets requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Also often times these fair value estimates are considered preliminary at acquisition date, and are subject to change for up to one year after the closing date of the acquisition if any additional information relative to closing dated fair values becomes available. On August 15, 2013, the Company entered into a business combination with The Fuelist, LLC.). ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable for Small Reporting Company. ITEM 4. CONTROLS AND PROCEDURES As required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of the design and operation of our Company's disclosure controls and procedures as of the end of the period covered by this quarterly report, being June 30, 2014. This evaluation was carried out under the supervision and with the participation of our Company's management, including our Company's chief executive officer and principal financial offer, Maxwell Grant. Our Company's disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no significant changes in our Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out our evaluation. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our Company's reports filed under the 24 Exchange Act is accumulated and communicated to management, including our Company's chief executive officer as appropriate, to allow timely decisions regarding required disclosure. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Chancellor is from time to time involved in legal proceedings incidental to its business and arising in the ordinary course. Chancellor's management does not believe that any such proceedings will result in liability material to its financial condition, results of operations or cash flow. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table sets forth the sales of unregistered securities since the Company's last report filed under this item.
Principal Total Offering Price/ Date Title and Amount(1) Purchaser Underwriter Underwriting Discounts ---- ------------------- --------- ----------- ---------------------- May 1, 2014 250,000 shares of common stock Advisor NA $0.030/NA July 11, 2014 100,000 shares of common stock Advisor NA $0.020/NA
---------- (1) The issuances to advisors are viewed by the Company as exempt from registration under the Securities Act of 1933, as amended ("Securities Act"), alternatively, as transactions either not involving any public offering, or as exempt under the provisions of Regulation D promulgated by the SEC under the Securities Act. The Company did not engage an underwriter with respect to any of the issuances of securities described in the foregoing table, and none of these issuances gave rise to any underwriting discount or commission. The shares were issued in private transactions, exempt from registration under the Securities Act of 1933, and are restricted securities within the meaning of Rule 144 thereunder. ITEM 6. EXHIBITS 10.1 Term Sheet for Investment in Pimovi, Inc. (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed by the Company on March 25, 2013 with the Securities and Exchange Commission). 10.2 Binding Term Sheet for Investment in The Fuelist, LLC, dated August 15, 2013 (incorporated by reference to Exhibit No. 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 20, 2013). 10.3 Assignment and Bill of Sale, dated July 21, 2014, by and between Gryphon Production Company, LLC and S & W Oil & Gas, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 25, 2014). 31 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.* 32 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** SEC Ref.No. Title of Document ------- ----------------- 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document ---------- * Filed herewith. ** Furnished herewith. 25 SIGNATURES Pursuant to the requirements of Section 12(g) 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, on August 13, 2014. CHANCELLOR GROUP, INC. By: /s/ Maxwell Grant ------------------------------------- Maxwell Grant Chief Executive Officer and Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated, on August 13, 2014. By: /s/ Maxwell Grant -------------------------------------- Maxwell Grant, Chief Executive Officer 26 EXHIBIT INDEX 10.1 Term Sheet for Investment in Pimovi, Inc. (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed by the Company on March 25, 2013 with the Securities and Exchange Commission). 10.2 Binding Term Sheet for Investment in The Fuelist, LLC, dated August 15, 2013 (incorporated by reference to Exhibit No. 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 20, 2013). 10.3 Assignment and Bill of Sale, dated July 21, 2014, by and between Gryphon Production Company, LLC and S & W Oil & Gas, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 25, 2014). 31 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.* 32 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** SEC Ref.No. Title of Document ------- ----------------- 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document ---------- * Filed herewith. ** Furnished herewith.
EX-31 2 ex31.txt EXHIBIT 31 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002 CERTIFICATION I, Maxwell Grant, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Chancellor Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the liability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant's Board of Directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; DATE: August 13, 2014 /s/ Maxwell Grant -------------------------------------- Maxwell Grant, Chief Executive Officer and Principal Financial Officer EX-32 3 ex32.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Chancellor Group, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Maxwell Grant, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Maxwell Grant ------------------------------------- Maxwell Grant Chief Executive Officer and Principal Financial Officer August 13, 2014 EX-101.INS 4 fil-20140630.xml 0000894544 2013-12-31 0000894544 2014-06-30 0000894544 2014-01-01 2014-06-30 0000894544 2013-01-01 2013-06-30 0000894544 2012-12-31 0000894544 2013-06-30 0000894544 fil:NumberOfSharesMember 2014-06-30 0000894544 fil:RemainingContractualLifeInYearsMember 2014-06-30 0000894544 fil:ExercisePriceTimesNumberOfSharesMember 2014-06-30 0000894544 fil:WeightedAverageExercisePriceMember 2014-06-30 0000894544 fil:NumberOfShares1Member 2013-12-31 0000894544 fil:WeightedAverageExercisePrice1Member 2013-12-31 0000894544 fil:NumberOfShares1Member 2014-01-01 2014-06-30 0000894544 fil:NumberOfShares1Member 2014-06-30 0000894544 fil:WeightedAverageExercisePrice1Member 2014-06-30 0000894544 fil:RemainingContractualLifeInYears1Member 2014-06-30 0000894544 2014-08-13 0000894544 2014-04-01 2014-06-30 0000894544 2013-04-01 2013-06-30 xbrli:shares iso4217:USD iso4217:USD xbrli:shares 25000 25000 2639000 3008000 527915 601627 524414 598257 3501 3436 3501 3370 250000 1000 166.67 250000000 0.001 74600030 36450 6000000 1000000 0.025 5000000 0.02 500000 420000 0.125 1000000 3.50 25000 5000000 3.50 100000 420000 1.00 52500 6420000 177500 .028 6920000 0.035 6420000 0.028 2.67 0 0 0 6420000 0.028 2.67 4454 5655 4454 5655 159 715 4295 4940 10-Q 2014-06-30 false CHANCELLOR GROUP INC. 0000894544 --12-31 74600030 Smaller Reporting Company Yes No No 2014 Q2 589901 201808 25000 25000 12326 12326 12558 7757 18069 16773 685841 293864 4454 5655 4295 4940 427200 427200 <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> ORGANIZATION Chancellor Group, Inc. (the "Company", "our", "we", "Chancellor" or the "Company") was incorporated in the state of Utah on May 2, 1986, and then, on December 30, 1993, dissolved as a Utah corporation and reincorporated as a Nevada corporation. On March 26, 1996, the Company's corporate name was changed from Nighthawk Capital, Inc. to Chancellor Group, Inc. During early 2012, the Company's corporate office was moved from Pampa to Amarillo, Texas. Throughout most of the Company's history, our primary business purpose has been to explore for, develop and produce oil and gas. Effective as of July 1, 2014, we sold substantially all of our oil and gas assets. Although the Company expects to continue to explore strategic opportunities in the oil and gas business, our primary focus going forward will be to manage and develop the operations of our subsidiaries, Pimovi, Inc. ("Pimovi") and The Fuelist, LLC ("Fuelist"). Pimovi was incorporated in Delaware on November 16, 2012, and subsequently reincorporated in Nevada. Chancellor owns 61% of the equity in Pimovi in the form of Series A Preferred Stock, and therefore maintains significant financial control over Pimovi. As a result, Pimovi's financial statements have been consolidated with Chancellor's consolidated financial statements since the fourth quarter of 2012. On August 15, 2013, Chancellor Group, Inc. entered into a binding term sheet with Fuelist and its founders, Matthew Hamilton, Eric Maas and Thomas Rand-Nash (together, the "Founders"), pursuant to which Chancellor agreed to acquire a 51% ownership interest in Fuelist. As consideration for the ownership interest, Chancellor contributed to Fuelist a total of $271,200 in cash. As additional consideration for the ownership interest, Chancellor contributed a total of 2,000,000 shares of newly issued common stock to Fuelist on August 19, 2013, valued at $156,000, or $0.078 per share. As of June 30, 2014, Fuelist had not commenced principal operations and had no sales or operating revenues through June 30, 2014, therefore Fuelist is considered a "development-stage enterprise". The primary purpose of Fuelist is the development of a data-driven mobile and web technology platform that leverages extensive segment expertise and big data analysis tools to value classic vehicles. These tools are expected to enable users to quickly find values, track valuations over time, and to identify investment and arbitrage opportunities in this lucrative market. GOING CONCERN These condensed and consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had continued net operating losses with net losses attributable to Chancellor Group, Inc. shareholders of $412,548 and $413,089 for the six months ended June 30, 2014 and 2013, respectively, and retained earnings deficits of $3,186,206 and $2,773,659 as of June 30, 2014 and December 31, 2013, respectively. The Company's continued operations are dependent on the successful implementation of its business plan and its ability to obtain additional financing as needed. The accompanying condensed and consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. OPERATIONS During the three months ended June 30, 2014, the Company and its wholly-owned subsidiary, Gryphon Production Company, LLC , owned 5 wells in Gray County, Texas, of which 1 is a water disposal well and 4 are oil wells. As of June 30, 2014, 4 oil wells were actively producing. We produced a total of 0 and 248 barrels of oil in the three and six months ended June 30, 2014, respectively, and a total of 139 and 530 barrels of oil in the three and six months ended June 30, 2013, respectively. The oil is light sweet crude. Effective July 1, 2014, we sold all of our oil wells to S &#38; W Oil &#38; Gas, LLC. Both Pimovi and Fuelist were development stage enterprises as of June 30, 2014, with no significant operations other than the ongoing development of their respective technologies as described above. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The condensed and consolidated financial statements of Chancellor Group, Inc. have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q and in accordance with US GAAP. Accordingly, these condensed and consolidated financial statements do not include all of the information and footnotes required by US GAAP for annual consolidated financial statements. These condensed and consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Chancellor Group, Inc. Annual Report on Form 10-K for the year ended December 31, 2013. These accompanying condensed and consolidated financial statements include the accounts of Chancellor and its wholly-owned subsidiaries: Gryphon Production Company, LLC, and Gryphon Field Services, LLC. These entities are collectively hereinafter referred to as "the Company". The accompanying condensed and consolidated financial statements include the accounts of Chancellor's majority-owned subsidiary, Pimovi, Inc., with which Chancellor owns 61% of the equity of Pimovi and maintains significant financial control. Beginning in the third quarter 2013, the accompanying consolidated financial statements also include The Fuelist, LLC, which Chancellor acquired 51% of the equity of Fuelist and maintains significant financial control. All material intercompany accounts and transactions have been eliminated in the condensed and consolidated financial statements. The consolidated financial statements are unaudited, but, in management's opinion, include all adjustments (which, unless otherwise noted, include only normal recurring adjustments) necessary for a fair presentation of such financial statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2014. ACCOUNTING YEAR The Company employs a calendar accounting year. The Company recognizes income and expenses based on the accrual method of accounting under generally accepted accounting principles. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRODUCTS AND SERVICES, GEOGRAPHIC AREAS AND MAJOR CUSTOMERS For our oil segment, the Company's major customers during the six months ended June 30, 2014, to which substantially all oil production was sold, were Plains Marketing and XTO Energy. Given the number of readily available purchasers for our products, it is unlikely that the loss of a single customer in the areas in which we sell our products would materially affect our sales. The Company sold substantially all of its oil and gas assets effective July 1, 2014. We expect to continue to explore strategic opportunities in the oil and gas business in the future. For our technology segment, the Company plans to continue developing its web-based and mobile technology platforms for its two majority-owned subsidiaries, Pimovi, Inc. and Fuelist, LLC. NET LOSS PER SHARE The net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. CONCENTRATION OF CREDIT RISK Some of the Company's operating cash balances are maintained in accounts that currently exceed federally insured limits. The Company believes that the financial strength of depositing institutions mitigates the underlying risk of loss. To date, these concentrations of credit risk have not had a significant impact on the Company's financial position or results of operations. RESTRICTED CASH Included in restricted cash at June 30, 2014 and December 31, 2013 are deposits totaling $25,000, in the form of a bond issued to the Railroad Commission of Texas as required for the Company's oil and gas activities which is renewed annually. ACCOUNTS RECEIVABLE The Company reviews accounts receivable periodically for collectability, establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Based on review of accounts receivable by management at period end, including credit quality and subsequent collections from customers, an allowance for doubtful accounts was not considered necessary or recorded at June 30, 2014 or December 31, 2013. PREPAID EXPENSES Certain expenses, primarily consulting fees and insurance, have been prepaid and will be used within one year. GOODWILL Goodwill represents the cost in excess of the fair value of net assets of the acquisition. Goodwill is not amortized but is subject to periodic testing for impairment. The Company tests goodwill for impairment using a two-step process. The first step tests for potential impairment, while the second step measures the amount of the impairment, if any. The Company performs the annual impairment test during the last quarter of each year. As of June 30, 2014, we determined there was no impairment of our goodwill. PROPERTY AND DEPRECIATION Property and equipment are recorded at cost and depreciated under the straight-line method over the estimated useful life of the assets. The estimated useful life of leasehold costs, equipment and tools ranges from five to seven years. Equipment is depreciated over the estimated useful lives of the assets, which ranged from 5 to 7 years, using the straight-line method. OIL AND GAS PROPERTIES The Company follows the successful efforts method of accounting for its oil and gas activities. Under this accounting method, costs associated with the acquisition, drilling and equipping of successful exploratory and development wells are capitalized. Geological and geophysical costs, delay rentals and drilling costs of unsuccessful exploratory wells are charged to expense as incurred. The carrying value of mineral leases is depleted over the minimum estimated productive life of the leases, or ten years. Undeveloped properties are periodically assessed for possible impairment due to un-recoverability of costs invested. Cash received for partial conveyances of property interests is treated as a recovery of cost and no gain or loss is recognized. LONG-LIVED ASSETS The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as deferred charges, under the guidance Topic 360 "PROPERTY, PLANT AND EQUIPMENT" in the Accounting Standards Codification (the "ASC"). The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment. As of June 30, 2014 we do not believe any of our long-lived assets are impaired. ASSET RETIREMENT OBLIGATIONS The Company has not recorded an asset retirement obligation (ARO) in accordance with ASC 410. Under ASC 410, a liability should be recorded for the fair value of an asset retirement obligation when there is a legal obligation associated with the retirement of a tangible long-lived asset, and the liability can be reasonably estimated. The associated asset retirement costs should also be capitalized and recorded as part of the carrying amount of the related oil and gas properties. Management believes that not recording an ARO liability and asset under ASC 410 is immaterial to the consolidated financial statements. INCOME TAXES Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. We have recorded a valuation allowance as of June 30, 2014. REVENUE RECOGNITION For our oil segment, revenue is recognized for the oil production when a product is sold to a customer, either for cash or as evidenced by an obligation on the part of the customer to pay. For our technology segment, revenue will be recognized when earned, including both future subscriptions and other future revenue streams, as required under relevant revenue recognition policies under generally accepted accounting policies. FAIR VALUE MEASUREMENTS AND DISCLOSURES The Company estimates fair values of assets and liabilities which require either recognition or disclosure in the financial statements in accordance with FASB ASC Topic 820 "FAIR VALUE MEASUREMENTS". There is no material impact on the June 30, 2014 consolidated financial statements related to fair value measurements and disclosures. Fair value measurements include the following levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities. Level 3: Unobservable inputs that are not corroborated by market data. Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and long term debt, as reported in the accompanying consolidated balance sheet, approximates fair values. EMPLOYEE STOCK-BASED COMPENSATION Compensation expense is recognized for performance-based stock awards if management deems it probable that the performance conditions are or will be met. Determining the amount of stock-based compensation expense requires us to develop estimates that are used in calculating the fair value of stock-based compensation, and also requires us to make estimates of assumptions including expected stock price volatility which is derived based upon our historical stock prices. BUSINESS COMBINATIONS The Company accounts for business combinations in accordance with FASB ASC Topic 805 "Business Combinations". This standard modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets, the liabilities assumed and the goodwill acquired in a business combination. The Company entered into a business combination with The Fuelist, LLC on August 15, 2013 (See Note 7 for further disclosure). DISCONTINUED OPERATIONS The Company complies with guidance related to when the results of operations of a component of an entity that either has been disposed of or is classified as held for sale should be reported as a discontinued operations as provided by (ASC) Subtopic 205-20, Presentation of Financial Statements - Discontinued Operations. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. To qualify for presentation as a discontinued operation, both conditions must be met, including (1) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction, and (2) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. SUBSEQUENT EVENTS Events occurring after June 30, 2014 were evaluated through the date this quarterly report was issued, in compliance FASB ASC Topic 855 "SUBSEQUENT EVENTS", to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. RECENT ACCOUNTING PRONOUNCEMENTS In June 2014, FASB issued ASU No. 2014-10, DEVELOPMENT STAGE ENTITIES (TOPIC 915): ELIMINATION OF CERTAIN FINANCIAL REPORTING REQUIREMENTS, INCLUDING AN AMENDMENT TO VARIABLE INTEREST ENTITIES GUIDANCE IN TOPIC 810, CONSOLIDATION. The presentation and disclosure requirements in Topic 915 will no longer be required effective for annual periods beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. The new guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities, such as startup companies, without compromising the availability of relevant information. The new guidance removes the requirement to present the additional inception-to-date information. In July 2013, FASB issued ASU No. 2013-11, INCOME TAXES (TOPIC 740): PRESENTATION OF AN UNRECOGNIZED TAX BENEFIT WHEN A NET OPERATING LOSS CARRYFORWARD, A SIMILAR TAX LOSS, OR A TAX CREDIT CARRYFORWARD EXISTS. This ASU is effective for interim and annual periods beginning after December 15, 2013. This update standardizes the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This accounting pronouncement did not have any material effect on our condensed and consolidated financial statements. There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries, and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. </pre> <p>~</p> 250 250 427450 427450 1117586 726254 99866 129280 90400 0 2473 3268 0 15009 192739 147557 0 0 73760 74600 3813853 3849463 -2773659 -3186206 1113954 737857 -274157 -301860 85049 142700 924846 578697 1117585 726254 159 715 1000 1000 250000 250000 .001 .001 250000000 250000000 73760030 74600030 73760030 74600030 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21701 0 10362 0 245325 334241 92785 183054 254739 265009 111629 75289 556 0 278 0 522321 599250 215054 258343 -522321 -599250 -215054 -258343 110 915 30 400 8260 0 2700 0 -914 0 -914 0 7456 915 1816 400 95 0 95 0 976 1010 538 371 -515936 -599345 -213871 -258314 0 0 0 0 -515936 -599345 -213871 -258314 27703 130354 11199 71391 70666 0 13364 0 1071 1010 633 371 -417566 -468991 -189307 -186923 5018 55902 -6591 -924 -412548 -413089 -195898 -187847 74194197 70902571 74394396 71560030 -417567 -468991 -27703 -130354 -70666 0 556 0 36450 100000 95 0 6097 -70367 30210 14301 -436596 -499509 -2213 2879 -438809 -496630 29817 0 -1201 0 28616 0 0 0 28616 0 14000 0 8100 0 22100 0 0 0 22100 0 -388093 -496630 614901 226808 1725508 1228878 0 0 0 0 <p style="margin: 0pt"></p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The condensed and consolidated financial statements of Chancellor Group, Inc. have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q and in accordance with US GAAP. Accordingly, these condensed and consolidated financial statements do not include all of the information and footnotes required by US GAAP for annual consolidated financial statements. These condensed and consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Chancellor Group, Inc. Annual Report on Form 10-K for the year ended December 31, 2013. These accompanying condensed and consolidated financial statements include the accounts of Chancellor and its wholly-owned subsidiaries: Gryphon Production Company, LLC, and Gryphon Field Services, LLC. These entities are collectively hereinafter referred to as "the Company". The accompanying condensed and consolidated financial statements include the accounts of Chancellor's majority-owned subsidiary, Pimovi, Inc., with which Chancellor owns 61% of the equity of Pimovi and maintains significant financial control. Beginning in the third quarter 2013, the accompanying consolidated financial statements also include The Fuelist, LLC, which Chancellor acquired 51% of the equity of Fuelist and maintains significant financial control. All material intercompany accounts and transactions have been eliminated in the condensed and consolidated financial statements. The consolidated financial statements are unaudited, but, in management's opinion, include all adjustments (which, unless otherwise noted, include only normal recurring adjustments) necessary for a fair presentation of such financial statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2014. </pre> <p>~</p> <p style="margin: 0pt"></p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company employs a calendar accounting year. The Company recognizes income and expenses based on the accrual method of accounting under generally accepted accounting principles.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. </pre> <p>~</p> <p style="margin: 0pt"></p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> For our oil segment, the Company's major customers during the six months ended June 30, 2014, to which substantially all oil production was sold, were Plains Marketing and XTO Energy. Given the number of readily available purchasers for our products, it is unlikely that the loss of a single customer in the areas in which we sell our products would materially affect our sales. The Company sold substantially all of its oil and gas assets effective July 1, 2014. We expect to continue to explore strategic opportunities in the oil and gas business in the future. For our technology segment, the Company plans to continue developing its web-based and mobile technology platforms for its two majority-owned subsidiaries, Pimovi, Inc. and Fuelist, LLC.</pre> <p>~</p> <p style="margin: 0pt"></p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Some of the Company's operating cash balances are maintained in accounts that currently exceed federally insured limits. The Company believes that the financial strength of depositing institutions mitigates the underlying risk of loss. To date, these concentrations of credit risk have not had a significant impact on the Company's financial position or results of operations. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Included in restricted cash at June 30, 2014 and December 31, 2013 are deposits totaling $25,000, in the form of a bond issued to the Railroad Commission of Texas as required for the Company's oil and gas activities which is renewed annually.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company reviews accounts receivable periodically for collectability, establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Based on review of accounts receivable by management at period end, including credit quality and subsequent collections from customers, an allowance for doubtful accounts was not considered necessary or recorded at June 30, 2014 or December 31, 2013.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Certain expenses, primarily consulting fees and insurance, have been prepaid and will be used within one year.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Goodwill represents the cost in excess of the fair value of net assets of the acquisition. Goodwill is not amortized but is subject to periodic testing for impairment. The Company tests goodwill for impairment using a two-step process. The first step tests for potential impairment, while the second step measures the amount of the impairment, if any. The Company performs the annual impairment test during the last quarter of each year. As of June 30, 2014, we determined there was no impairment of our goodwill.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Property and equipment are recorded at cost and depreciated under the straight-line method over the estimated useful life of the assets. The estimated useful life of leasehold costs, equipment and tools ranges from five to seven years. Equipment is depreciated over the estimated useful lives of the assets, which ranged from 5 to 7 years, using the straight-line method. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company follows the successful efforts method of accounting for its oil and gas activities. Under this accounting method, costs associated with the acquisition, drilling and equipping of successful exploratory and development wells are capitalized. Geological and geophysical costs, delay rentals and drilling costs of unsuccessful exploratory wells are charged to expense as incurred. The carrying value of mineral leases is depleted over the minimum estimated productive life of the leases, or ten years. Undeveloped properties are periodically assessed for possible impairment due to un-recoverability of costs invested. Cash received for partial conveyances of property interests is treated as a recovery of cost and no gain or loss is recognized.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as deferred charges, under the guidance Topic 360 "PROPERTY, PLANT AND EQUIPMENT" in the Accounting Standards Codification (the "ASC"). The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment. As of June 30, 2014 we do not believe any of our long-lived assets are impaired.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company has not recorded an asset retirement obligation (ARO) in accordance with ASC 410. Under ASC 410, a liability should be recorded for the fair value of an asset retirement obligation when there is a legal obligation associated with the retirement of a tangible long-lived asset, and the liability can be reasonably estimated. The associated asset retirement costs should also be capitalized and recorded as part of the carrying amount of the related oil and gas properties. Management believes that not recording an ARO liability and asset under ASC 410 is immaterial to the consolidated financial statements. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. We have recorded a valuation allowance as of June 30, 2014.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> For our oil segment, revenue is recognized for the oil production when a product is sold to a customer, either for cash or as evidenced by an obligation on the part of the customer to pay. For our technology segment, revenue will be recognized when earned, including both future subscriptions and other future revenue streams, as required under relevant revenue recognition policies under generally accepted accounting policies.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company estimates fair values of assets and liabilities which require either recognition or disclosure in the financial statements in accordance with FASB ASC Topic 820 "FAIR VALUE MEASUREMENTS". There is no material impact on the June 30, 2014 consolidated financial statements related to fair value measurements and disclosures. Fair value measurements include the following levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities. Level 3: Unobservable inputs that are not corroborated by market data. Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and long term debt, as reported in the accompanying consolidated balance sheet, approximates fair values.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Compensation expense is recognized for performance-based stock awards if management deems it probable that the performance conditions are or will be met. Determining the amount of stock-based compensation expense requires us to develop estimates that are used in calculating the fair value of stock-based compensation, and also requires us to make estimates of assumptions including expected stock price volatility which is derived based upon our historical stock prices.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company accounts for business combinations in accordance with FASB ASC Topic 805 "Business Combinations". This standard modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets, the liabilities assumed and the goodwill acquired in a business combination. The Company entered into a business combination with The Fuelist, LLC on August 15, 2013 (See Note 7 for further disclosure).</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company complies with guidance related to when the results of operations of a component of an entity that either has been disposed of or is classified as held for sale should be reported as a discontinued operations as provided by (ASC) Subtopic 205-20, Presentation of Financial Statements - Discontinued Operations. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. To qualify for presentation as a discontinued operation, both conditions must be met, including (1) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction, and (2) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Events occurring after June 30, 2014 were evaluated through the date this quarterly report was issued, in compliance FASB ASC Topic 855 "SUBSEQUENT EVENTS", to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> In June 2014, FASB issued ASU No. 2014-10, DEVELOPMENT STAGE ENTITIES (TOPIC 915): ELIMINATION OF CERTAIN FINANCIAL REPORTING REQUIREMENTS, INCLUDING AN AMENDMENT TO VARIABLE INTEREST ENTITIES GUIDANCE IN TOPIC 810, CONSOLIDATION. The presentation and disclosure requirements in Topic 915 will no longer be required effective for annual periods beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. The new guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities, such as startup companies, without compromising the availability of relevant information. The new guidance removes the requirement to present the additional inception-to-date information. In July 2013, FASB issued ASU No. 2013-11, INCOME TAXES (TOPIC 740): PRESENTATION OF AN UNRECOGNIZED TAX BENEFIT WHEN A NET OPERATING LOSS CARRYFORWARD, A SIMILAR TAX LOSS, OR A TAX CREDIT CARRYFORWARD EXISTS. This ASU is effective for interim and annual periods beginning after December 15, 2013. This update standardizes the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This accounting pronouncement did not have any material effect on our condensed and consolidated financial statements. There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries, and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Deferred income taxes are recorded for temporary differences between financial statement and income tax basis. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax basis. Deferred tax assets are recognized for temporary differences that will be deductible in future years' tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years' tax returns. At June 30, 2014, the Company had a federal net operating loss carry-forward of approximately $3,008,000 compared to $2,639,000 at December 31, 2013. A deferred tax asset of $601,627 at June 30, 2014 and $527,915 at December 31, 2013 has been partially offset by a valuation allowance of approximately $598,257 and $524,414 at June 30, 2014 and December 31, 2013, respectively, due to federal net operating loss carry-back and carry-forward limitations. The Company also had approximately $3,370 and $3,501 in deferred income tax liability at June 30, 2014 and December 31, 2013, respectively, attributable to timing differences between federal income tax depreciation, depletion and book depreciation, which has been offset against the deferred tax asset related to the net operating loss carry-forward. Management evaluated the Company's tax positions under FASB ASC No. 740 "UNCERTAIN TAX POSITIONS," and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2010. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> PREFERRED STOCK The Company has authorized 250,000 shares, par value $1,000 per share, of convertible Preferred Series B stock ("Series B"). Each Series B share is convertible into 166.667 shares of the Company's common stock upon election by the stockholder, with dates and terms set by the Board. No shares of Series B preferred stock have been issued. COMMON STOCK The Company has 250,000,000 authorized shares of common stock, par value $.001, with 74,600,030 and 73,760,030 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively. STOCK BASED COMPENSATION For the three and six months ended June 30, 2014, the Company issued 350,000 and 840,000 shares of common stock, respectively and recognized $7,500 and $36,450 respectively in consulting fees expense, which is recorded in general and administrative expenses. NON-EMPLOYEE STOCK OPTIONS AND WARRANTS The Company accounts for non-employee stock options under FASB ASC Topic 505 "EQUITY-BASED PAYMENTS TO NON-EMPLOYEES", whereby options costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. During the three and six months ended June 30, 2014, no options were issued, exercised or cancelled. The Company currently has outstanding warrants expiring December 31, 2014 to purchase an aggregate of 6,000,000 shares of common stock; these warrants consist of warrants to purchase 2,000,000 shares at an exercise price of $.025 per share, and warrants to purchase 4,000,000 shares at an exercise price of $0.02 per share. These warrants were extended in May 2014 to December 31, 2017 to purchase 5,000,000 shares at an exercise price of $.020 per share, and warrants to purchase 1,000,000 shares at an exercise price of $.025 per share. In July 2009, the Company issued additional warrants expiring June 30, 2014 to purchase an aggregate of 500,000 shares of common stock at an exercise price of $0.125 per share. From June 2010 thru April 2011, the Company issued additional warrants expiring June 30, 2015 to purchase an aggregate of 420,000 shares of common stock at an exercise price of $0.125 per share. On June 30, 2014, the Company had the following outstanding warrants: Exercise Weighted Remaining Price times Average Exercise Number of Contractual Life Number of Exercise Price Shares (in years) Shares Price ----- ------ ---------- ------ ----- $0.125 420,000 1.00 $ 52,500 $0.025 1,000,000 3.50 $ 25,000 $0.020 5,000,000 3.50 $100,000 --------- -------- 6,420,000 $177,500 $0.028 ========= ======== Weighted Average Remaining Number of Exercise Contractual Life Warrants Shares Price (in years) -------- ------ ----- ---------- Outstanding at December 31, 2013 6,920,000 $0.035 --------- ------ Issued -- -- Exercised -- -- Expired/Cancelled -- -- --------- ------ Outstanding at June 30, 2014 6,420,000 $0.028 2.67 --------- ------ ---- Exercisable at June 30, 2014 6,420,000 $0.028 2.67 ========= ====== ==== </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> A summary of fixed assets at: Balance Balance December 31, June 30 2013 Additions Deletions 2014 -------- --------- --------- -------- Equipment $ 4,454 $ 1,201 $ -- $ 5,655 ------- ------ ------- ------- Total Cost $ 4,454 $ 1,201 $ -- $ 5,655 ======= ====== ======= ======= Less: Accumulated Depreciation $ 159 $ 556 $ -- $ 715 ------- ------ ------- ------- Total Property and Equipment, net $ 4,295 $ 645 $ -- $ 4,940 ======= ====== ======= =======</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> On February 25, 2013, the Company entered into a twelve month agreement with a new investor relations consultant, which pays the consultant a fee of $9,000 monthly for the period from February 2013 through July 2013. The agreement was not renewed. In addition, the Company granted 1,000,000 shares of common stock to the consultant upon execution of the agreement. The Company recognized $0 and $9,500 in consulting fees for the three and six months ended June 30, 2014 related to this agreement, respectively compared to $19,000 and $28,500 in consulting fees for the three and six months for the same period during 2013, respectively. On May 1, 2013, Fuelist entered into a lease agreement with a related party limited liability company for its main office, located in Berkeley, California. The lease term was for one year beginning on May 1, 2013 and ending May 1, 2014. The agreement was subsequently renewed through October 31, 2015. The Company is obligated to pay a minimum amount of rent of $32,400 per year in equal monthly installments of $2,700 payable on the 1st of each month. The Company subsequently entered into a sub-lease agreement with another related party entity in which it was not legally relieved of its primary obligation for the lease agreement. The Company recognized $2,700 and $8,160 in sub-lease rent revenue in other income and $8,100 and $16,200 in rent expense in other operating expenses, related to these agreements during the three and six months ended June 30, 2014, respectively. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company has used the services of a consulting company owned by the Chairman of the Board. The Company paid $27,000 and $54,000 for those services during the three and six months ended June 30, 2014, respectively. The Company paid $27,000 and $54,000 for those services during the three and six months ended June 30, 2013, respectively. The Company has paid directors fees to a company owned by the chairman of the board in the amount of $7,500 and $15,000 during the three and six months ended June 30, 2014, respectively, compared to $7,500 and $15,000 for the same period during 2013, respectively. The Company also paid one other director in the amount of $7,500 and $15,000 during the three and six months ended June 30, 2014, respectively and $7,500 and $15,000 during the three and six months ended June 30, 2013, respectively. On April 28, 2014, Chancellor received an interest-free loan of $5,000 from a related party company owned by the chairman of the board with no specific repayment terms. On May 23, 2014, Chancellor received a second interest-free loan of $9,000 from the same related party company owned by the chairman of the board. Interest on the loans is imputed at 5.25% for a one year term. </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> All non-controlling interest of Chancellor related to Fuelist is a result of Chancellor's initial investment, the investment of other members in Fuelist, and results of operations. Cumulative results of these activities result in: June 30, December 31, 2014 2013 ---------- ---------- Cash contributions paid by Chancellor to Fuelist $ 271,200 $ 180,800 Cash contributions paid by others to Fuelist 32,400 24,300 Net loss prior to acquisition by Chancellor attributable to non-controlling interest (29,006) (29,006) Net loss subsequent to acquisition by Chancellor attributable to non-controlling interest (161,711) (91,045) Proceeds from Fuelist sales of Chancellor stock 29,817 -- ---------- ---------- Total non-controlling interest in Fuelist $ 142,700 $ 85,049 ========== ========== The following is a summary of changes in non-controlling interest in Fuelist during the six months ended June 30, 2014: Non-controlling interest in Fuelist at December 31, 2013 $ 85,049 Cash contributions paid by Chancellor to Fuelist 90,400 Cash contributions paid by others to Fuelist 8,100 Net losses attributable to non-controlling interest in Fuelist (70,666) Proceeds from Fuelist sales of Chancellor stock 29,817 ---------- Non-controlling interest in Fuelist at June 30, 2014 $ 142,700 ========== All non-controlling interest of Chancellor related to Pimovi is a result of results of operations. Cumulative results of these activities result in: June 30, December 31, 2014 2013 ---------- ---------- Cumulative net loss attributable to non-controlling interest in Pimovi $(301,860) $(274,157) ---------- ---------- Total non-controlling interest in Pimovi $(301,860) $(274,157) ========== ========== The following is a summary of changes in non-controlling interest in Pimovi during the six months ended June 30, 2014: Non-controlling interest in Pimovi at December 31, 2013 $(274,157) Net loss attributable to non-controlling interest in Pimovi (27,703) --------- Non-controlling interest in Pimovi at June 30, 2014 $(301,860) ========= </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> On April 28, 2014, Chancellor received an interest-free loan of $5,000 from a related party company owned by the chairman of the board with no specific repayment terms. On May 23, 2014, Chancellor received a second interest-free loan of $9,000 from the same related party company owned by the chairman of the board with no specific repayment terms. These loans are fixed in terms of Australian dollars and therefore resulted in foreign transaction losses of $309 and $605, respectively, for the six months ended June 30, 2014, due to the change in exchange rates from the time of the loans and the balance sheet date of June 30, 2014. Such gains and losses are recorded in other income in the period incurred.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The Company issued an unsecured note payable with a face amount of $5,000 from a related party company owned by the chairman of the board as discussed in Note 6. The balance of the note payable is non-interest bearing with no specific repayment terms. As a result the note payable has been recorded net of unamortized discount of $267 imputed at the rate of 5.25% and assuming a term of one year. At June 30, 2014, the total unpaid balance of this note payable, net of the unamortized discount of $223, is $5,045. The Company issued an unsecured note payable with a face amount of $9,000 from a related party company owned by the chairman of the board as discussed in Note 6. The balance of the note payable is non-interest bearing with no specific repayment terms. As a result the note payable has been recorded net of unamortized discount of $482 imputed at the rate of 5.25% and assuming a term of one year. At June 30, 2014, the total unpaid balance of this note payable, net of the unamortized discount of $433, is $9,049.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> On July 1, 2014, Chancellor sold its remaining oil and gas leases located in Gray County, Texas, owned by its subsidiary Gryphon Production Company, LLC. In accordance with (ASC) Subtopic 205-20, Presentation of Financial Statements - Discontinued Operations, at June 30, 2014 all of the related assets (primarily leasehold costs) and liabilities to Chancellor's oil and gas segment were classified as held for sale, and presented separately in current assets and liabilities in the condensed and consolidated balance sheets. Assets held for sale consisted of $62,940 in capitalized leasehold costs and $32,740 of related accumulated depreciation at June 30, 2014 and $57,580 in capitalized leasehold costs and $29,593 of related accumulated depreciation at December 31, 2013. In addition, the net income (losses) related to Chancellor's oil and gas segment were reported in discontinued operations in the condensed and consolidated statements of income. Total revenues for Chancellor's oil and gas segment were approximately $-0- and $18,000 for the three months ended June 30, 2014 and 2013, respectively, and were approximately $23,000 and $83,000 for the six months ended June 30, 2014 and 2013, respectively. Chancellor had no other operating income related to its oil and gas segment for the three and six months ended June 30, 2014 compared to $0 and $53,337 for the three and six months ended June 30, 2013, respectively. Expenses related to the Company's oil and gas segment were $6,591 and $17,666 for the three and six months ended June 30, 2014, respectively, compared to $19,219 and $27,256 for the same periods in 2013, respectively. Net cash used for operating activities related to discontinued operations was $2,213 for the six months ended June 30, 2014 compared to net cash provided by operating activities related to discontinued operations of $2,879 for the same period in 2013.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> Events occurring after June 30, 2014 were evaluated through the date the Form 10Q was issued, in compliance FASB ASC Topic 855 "Subsequent Events", to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. Effective as of July 1, 2014, our wholly-owned subsidiary, Gryphon Production Company, LLC ("Gryphon"), entered into an Assignment and Bill of Sale (the "Assignment") with S &#38; W Oil &#38; Gas, LLC ("S&#38;W"), pursuant to which Gryphon agreed to sell to S&#38;W all of Gryphon's interest in certain oil and gas leases covering lands in Gray County, Texas, and all of Gryphon's property located on those lands, including four oil wells and one water disposal well (collectively, the "Assets"), for $95,000 in cash. After deducting agent's commissions, the net proceeds to Gryphon were $88,350. The sale of the Assets represents the sale of substantially all of the Company's oil and gas assets.</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> On June 30, 2014, the Company had the following outstanding warrants: Exercise Weighted Remaining Price times Average Exercise Number of Contractual Life Number of Exercise Price Shares (in years) Shares Price ----- ------ ---------- ------ ----- $0.125 420,000 1.00 $ 52,500 $0.025 1,000,000 3.50 $ 25,000 $0.020 5,000,000 3.50 $100,000 --------- -------- 6,420,000 $177,500 $0.028 ========= ======== Weighted Average Remaining Number of Exercise Contractual Life Warrants Shares Price (in years) -------- ------ ----- ---------- Outstanding at December 31, 2013 6,920,000 $0.035 --------- ------ Issued -- -- Exercised -- -- Expired/Cancelled -- -- --------- ------ Outstanding at June 30, 2014 6,420,000 $0.028 2.67 --------- ------ ---- Exercisable at June 30, 2014 6,420,000 $0.028 2.67 ========= ====== ====</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> A summary of fixed assets at: Balance Balance December 31, June 30 2013 Additions Deletions 2014 -------- --------- --------- -------- Equipment $ 4,454 $ 1,201 $ -- $ 5,655 ------- ------ ------- ------- Total Cost $ 4,454 $ 1,201 $ -- $ 5,655 ======= ====== ======= ======= Less: Accumulated Depreciation $ 159 $ 556 $ -- $ 715 ------- ------ ------- ------- Total Property and Equipment, net $ 4,295 $ 645 $ -- $ 4,940 ======= ====== ======= ======= </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> June 30, December 31, 2014 2013 ---------- ---------- Cash contributions paid by Chancellor to Fuelist $ 271,200 $ 180,800 Cash contributions paid by others to Fuelist 32,400 24,300 Net loss prior to acquisition by Chancellor attributable to non-controlling interest (29,006) (29,006) Net loss subsequent to acquisition by Chancellor attributable to non-controlling interest (161,711) (91,045) Proceeds from Fuelist sales of Chancellor stock 29,817 -- ---------- ---------- Total non-controlling interest in Fuelist $ 142,700 $ 85,049 ========== ==========</pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The following is a summary of changes in non-controlling interest in Fuelist during the six months ended June 30, 2014: Non-controlling interest in Fuelist at December 31, 2013 $ 85,049 Cash contributions paid by Chancellor to Fuelist 90,400 Cash contributions paid by others to Fuelist 8,100 Net losses attributable to non-controlling interest in Fuelist (70,666) Proceeds from Fuelist sales of Chancellor stock 29,817 ---------- Non-controlling interest in Fuelist at June 30, 2014 $ 142,700 ========== </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> All non-controlling interest of Chancellor related to Pimovi is a result of results of operations. Cumulative results of these activities result in: June 30, December 31, 2014 2013 ---------- ---------- Cumulative net loss attributable to non-controlling interest in Pimovi $(301,860) $(274,157) ---------- ---------- Total non-controlling interest in Pimovi $(301,860) $(274,157) ========== ========== </pre> <p>~</p> <pre style="color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; word-spacing: 0px"> The following is a summary of changes in non-controlling interest in Pimovi during the six months ended June 30, 2014: Non-controlling interest in Pimovi at December 31, 2013 $(274,157) Net loss attributable to non-controlling interest in Pimovi (27,703) --------- Non-controlling interest in Pimovi at June 30, 2014 $(301,860) ========= </pre> <p>~</p> 27987 30200 Less than $0.01 per share EX-101.SCH 5 fil-20140630.xsd 00000001 - Document - Document and Entity Information link:presentationLink link:calculationLink link:definitionLink 00000002 - 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Weighted Average Exercise Price. Remaining Contractual Life (in years). Document and Entity Information Entity Registrant Name Document Type Document Period End Date Amendment Flag Entity Central Index Key Current Fiscal Year End Date Entity Common Stock, Shares Outstanding Entity Filer Category Entity Current Reporting Status Entity Voluntary Filers Entity Well-known Seasoned Issuer Document Fiscal Year Focus Document Fiscal Period Focus Entity Public Float Assets [Abstract] Current Assets: Cash Restricted Cash Accounts Receivable Income Tax Receivable Prepaid Expenses Assets Held For Sale Total Current Assets Property: Furniture, Fixtures, & Office Equipment Accumulated Depreciation Total Property and Equipment, net Other Assets: Goodwill Deposits Total Other Assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable Contributions Payable Accrued Expenses Notes Payable Related Party, net of unamortized discount Total Current Liabilities Stockholders' Equity Series B Preferred Stock: $1,000 Par Value 250,000 shares authorized, none outstanding Common Stock; $.001 par value, 250,000,000 shares authorized, 74,600,030 and 73,760,030 shares issued and outstanding, respectively Paid-in Capital Retained Earnings (Deficit) Total Chancellor, Inc. Stockholders' Equity Non-controlling Minority Interest in Pimovi, Inc. Non-controlling Minority Interest in The Fuelist, LLC Total Stockholders' Equity Total Liabilities and Stockholders' Equity Stock Transactions, Parenthetical Disclosures [Abstract] Series B Preferred Stock Par Value Series B Preferred stock shares authorized Common Stock par value Common Stock Shares authorized Common Stock shares issued Common Stock shares outstanding Revenues [Abstract] Oil, net of royalties paid Technology Segment Revenues Other Operating Income Gross Revenue Operating Expenses: Lease Operating Expenses Severance Taxes Other Operating Expenses Technology Segment Professional and Consulting Expenses Administrative Expenses Depreciation and Amortization Total Operating Expenses (Loss) From Operations Other Income (Expense): Interest Income Other Income Foreign Transactions Gain (Loss) Total Other Income (Expense) Financing Charges: Interest Expense Bank Fees Total Financing Charges (Loss) Before Provision for Income Taxes Provision for Income Taxes (Benefit) Net (Loss) of Chancellor, Inc. Net Loss attributable to non-controlling interest in Pimovi, Inc. Net Loss attributable to non-controlling interest in The Fuelist, LLC Net (Loss) from continuing operations Net Income (Loss) from discontinued operations Net (Loss) attributable to Chancellor Group, Inc. Shareholders Net (Loss) per Share (Basic and Fully Diluted) Weighted Average Number of Common Shares Outstanding Net Cash Provided by (Used in) Operating Activities [Abstract] Cash Flows from Operating Activities: Net Loss Adjustments to Reconcile Net (Loss) to Net Cash Provided by (Used in) Operating Activities: (Loss) from Non-controlling Interest in Pimovi, Inc. (Loss) from Non-controlling Interest in The Fuelist, LLC Income (Loss) from Discontinued Operations Depreciation and Amortization Stock Compensation Expense Foreign Transactions Gain (Loss) Amortization of Note Payable Discount Decrease (Increase) in Operating Assets Increase in Operating Liabilities Net Cash (Used in) Operating Activities - Continuing Ops Net Cash (Used in) Provided by Operating Activities - Discontinued Ops Net Cash (Used in) Operating Activities Cash Flows From Investing Activities: Proceeds from Sale of Securities Purchase of Property and Equipment Net Cash Provided by Investing Activities - Continuing Ops Net Cash (Used in) by Investing Activities - Discontinued Ops Net Cash Provided by Investing Activities Cash Flows From Financing Activities: Note Payable Advances Capital Contributions Received from Other Member Net Cash Provided by Financing Activities - Continuing Ops Net Cash Provided by Financing Activities - Discontinued Ops Net Cash Provided by Financing Activities Net (Decrease) in Cash Cash and restricted cash at the Beginning of the Period Cash and restricted cash at the End of the Period Supplemental Disclosures of Cash Flow Information: Interest Paid Income Taxes Paid Organization, Consolidation and Presentation of Financial Statements [Abstract] ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: INCOME TAXES INCOME TAXES STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT CONTRACTUAL OBLIGATIONS CONTRACTUAL OBLIGATIONS Related Party Transactions [Abstract] RELATED PARTY TRANSACTIONS Business Combinations: Business Combination NON-CONTROLLING INTERESTS NON-CONTROLLING INTERESTS Foreign Currency Transactions Foreign Currency Transactions Notes Payable Related Party Notes Payable Related Party Discontinued Operations Discontinued Operations Subsequent Events [Abstract] SUBSEQUENT EVENTS ACCOUNTING POLICIES (Policies) Basis of Presentation and Principles of Consolidation Accounting Year Use of Estimates Products and Services, Geographic Areas and Major Customers Net Loss per Share POLICY Cash and Cash Equivalents Policy Concentration of Credit Risk Restricted Cash Policy Accounts Receivable Policy Prepaid Expenses Policy Goodwill Policy Property Policy Oil and Gas Properties Policy Long-Lived Assets Asset Retirement Obligations Policy Income Tax Policy Revenue Recognition Fair Value Measurements and Disclosures Policy Fair Value of Financial Instruments Policy Employee Stock-Based Compensation Policy Business Combinations Policy Discontinued Operations SUBSEQUENT EVENTS Recent Accounting Pronouncements STOCKHOLDERS EQUITY OUTSTANDING WARRANTS Following outstanding warrants Summary of fixed assets Summary of fixed assets Non Controlling Interest In Fuelist Table Text Block: Non Controlling Interest In Fuelist The following is a summary of changes in non-controlling interest in Fuelist as follows The following is a summary of changes in non-controlling interest in Fuelist as follows Non Controlling Interest Of Chancellor Related To Pimovi Non Controlling Interest Of Chancellor Related To Pimovi Summary of changes in non-controlling interest in Pimovi Summary of changes in non-controlling interest in Pimovi Statement [Table] Statement [Line Items] Equity Components [Axis] Exercise Price $0.125 Exercise Price $0.025 Exercise Price $0.020 Total oustanding warrants number of shares Restricted Cash Consists Of: Restricted cash totaled Significant portions of deferred tax assets and liabilities are presented below Deferred tax assets: Net operating loss carry-forward Total deferred tax assets Valuation allowance against deferred tax assets Deferred tax assets net of valuation allowance Deferred tax liabilities: Total deferred tax liabilities EQUITY TRANSACTIONS: Preferred Stock: Authorized shares of preferred stock Authorized shares of preferred stock par value Series B convertible preferred shares into shares of common stock Common Stock: Authorized shares of common stock Authorized shares of common stock par value Common stock shares issued and outstanding STOCK BASED COMPENSATION: Consulting fees expense related to stock Non-employee Stock Options and Warrants: Outstanding warrants expiring December 31, 2017 to purchase an aggregate shares of common stock Warrants to purchase shares Warrants to purchase shares at an exercise price per share Warrants to purchase shares. Warrants to purchase shares at an exercise price per share. Issued additional warrants expiring June 30, 2014 Issued additional warrants expiring June 30, 2015 to purchase Shares of common stock at an exercise price Outstanding, beginning Outstanding, ending Issued Exercised Expired/Cancelled Exercisable PROPERTY AND EQUIPMENT AS FOLLOWS: Equipment Total Cost Less: Accumulated Depreciation Total Property and Equipment, net Face amount or stated value of common stock per share; generally not indicative of the fair market value per share. The amount of Bank Fees Amortization during the period. The entire diclosure on Cash and Cash Equivalents Policy Common stock shares issued and outstanding Consulting fees expense related to stock Other amounts due but not specifically defined in the taxonomy to other stockholders, broker-dealers or clearing organizations. Exercisable warrants Exercise Price The number of shares reserved for issuance pertaining to the outstanding exercisable stock options as of the balance sheet date in the customized range of exercise prices for which the market and performance vesting condition has been satisfied. The number of shares reserved for issuance pertaining to the outstanding exercisable stock options as of the balance sheet date in the customized range of exercise prices for which the market and performance vesting condition has been satisfied. Expired/Cancelled warrants during the period. Disclosure of Fair Value Measurements and Disclosures Policy of the entity during the period. Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased, and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt. Face amount or stated value per share of nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer); generally not indicative of the fair market value per share. Issued additional warrants Issued additional warrants The cumulative amount of depreciation, depletion and amortization (related to property, plant and equipment, but not including land) that has been recognized in the income statement. Disclosure of Long Lived Assets Policy of the entity during the period. This element represents the income or loss from continuing operations attributable to the economic entity which may also be defined as revenue less expenses and taxes from ongoing operations before extraordinary items, and noncontrolling interest. This element represents the income or loss from continuing operations attributable to the economic entity which may also be defined as revenue less expenses and taxes from ongoing operations before extraordinary items, and noncontrolling interest. Amount of Income (Loss) attributable to the noncontrolling interest. Non-controlling interest of Chancellor related to Fuelist Tabular disclosure for all non-controlling interest of Chancellor related to Pimovi is a result of results of operations The equity interest of noncontrolling shareholders, partners or other equity holders in consolidated entity. Number of shares issued and outstanding as of the balance sheet date. Outstanding warrants expiring December 31, 2014 to purchase an aggregate shares of common stock Entire policy disclosure for prepaid expenses The entire disclosure on Cash cash equivalents and restricted cash policy The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. This element is for unclassified presentations; for classified presentations there is a separate and distinct element. Series B convertible preferred shares into shares of common stock Shares of common stock at an exercise price Tabular disclosure for summary of changes in non-controlling interest in Pimovi during the year ended . Tabular disclosure for summary of changes in non-controlling interest in Fuelist. Total oustanding warrants number of shares Amount, net of accumulated depreciation, depletion and amortization, of long-lived physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment. Warrants to purchase shares Warrants to purchase shares. Warrants to purchase shares at an exercise price per share Warrants to purchase shares at an exercise price per share. Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Depreciation, Depletion and Amortization, Nonproduction Cash and Cash Equivalents, at Carrying Value Income Tax Disclosure [Text Block] Stockholders' Equity Note Disclosure [Text Block] Property, Plant and Equipment Disclosure [Text Block] Long-Duration Contracts, Assumptions Underlying Guarantee Obligations [Text Block] Noncontrolling Interest Disclosure [Text Block] Foreign Currency Disclosure [Text Block] Accounts Payable and Accrued Liabilities Disclosure [Text Block] DiscontinuedOperationsDisclosureTextBlock Discontinued Operations, Policy [Policy Text Block] Subsequent Events, Policy [Policy Text Block] Property, Plant and Equipment [Table Text Block] TheFollowingIsASummaryOfChangesInNonControllingInterestInFuelistAsFollowsTableTextBlock NonControllingInterestOfChancellorRelatedToPimoviTableTextBlock SummaryOfChangesInNonControllingInterestInPimoviAsFollowsTableTextBlock ExercisePrice0125 ExercisePrice0025 ExercisePrice0020 TotalOustandingWarrantsNumberOfShares Outstanding Exercisable TotalPropertyAndEquipmentNet EX-101.PRE 9 fil-20140630_pre.xml EXCEL 10 Financial_Report.xlsx IDEA: XBRL DOCUMENT begin 644 Financial_Report.xlsx M4$L#!!0`!@`(````(0!F'MSGR0$``(03```3``@"6T-O;G1E;G1?5'EP97-= M+GAM;""B!`(HH``"```````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M``````````````````````````````````````#,F%U/PC`4AN]-_`]+;\W6 MM2JB87#AQZ62B#^@K@>VL+5-6Q#^O=WXB"$((9)X;EA@[7D?>O%D>WN#15U% M<["NU"HC+$E)!"K7LE23C'R,7N(NB9P72HI**\C($AP9]"\O>J.E`1>%W/%#J\@)JX1)M0(4[8VUKX<-7.Z%&Y%,Q`.*TKBK@$'H MWH3FSN\!ZWUOX6AL*2$:"NM?11TPZ**B7]I./[6>)H>'[*'4XW&9@]3YK`XG MD#AC04A7`/BZ2MIK4HM2;;@/Y+>+'6TO[,P@S?]K!Y_(P9%P7"/AN$'"<8N$ MHX.$XPX)1Q<)QST2#I9B`<%B5(9%J0R+4QD6J3(L5F58M,JP>)5A$2O#8E:. 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