UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 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 Identification No.)
incorporation or organization)
216 South Price Road, Pampa, TX 79065 79065
(Address of Principal Executive Offices) (Zip Code)
(806-688-9697)
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. [X] Yes [ ] 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 [X] No
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding the issuer's common stock, $.001 par value, was
67,560,030 as of November 2, 2011.
Chancellor Group, Inc.
Table of Contents
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 15
Item 4. Controls and Procedures........................................ 15
PART II OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..... 16
Item 6. Exhibits........................................................ 16
ii
ITEM 1. FINANCIAL STATEMENTS
Chancellor Group, Inc.
I N D E X
Page No.
--------
Consolidated Balance Sheets as of September 30, 2011 (Unaudited)
and December 31, 2010.................................................. 2
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2011
and 2010 (Unaudited).................................................. 3
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2011
and 2010 (Unaudited).................................................. 4
Notes to Unaudited Consolidated Financial Statements .................. 5
1
Chancellor Group, Inc.
CONSOLIDATED BALANCE SHEETS
September 30, 2011 December 31, 2010
------------------ -----------------
(Unaudited)
ASSETS
Current Assets:
Cash in Bank $ 224,810 $ 560,098
Restricted Cash 250,000 250,000
Revenue Receivable 58,007 91,053
Prepaid Insurance 13,530 21,479
------------ ------------
Total Current Assets 546,347 922,630
------------ ------------
Property and Equipment:
Leasehold Costs - Developed 1,784,247 1,773,749
Office Building & Equipment 134,630 134,630
Fleet - Road 155,346 178,929
Heavy Field Equipment & Tools 473,471 455,128
Accumulated Depreciation and Amortization (963,575) (773,487)
------------ ------------
Total Property and Equipment, Net 1,584,119 1,768,949
------------ ------------
Other Assets:
Investment in Unconsolidated Subsidiary -- 50,000
Unamortized Letter of Credit 3,389 2,095
Deposits 250 250
------------ ------------
Total Other Assets 3,639 52,345
------------ ------------
Total Assets $ 2,134,105 $ 2,743,924
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 69,282 $ 88,415
Accrued Expenses 32,278 59,806
------------ ------------
Total Current Liabilities 101,560 148,221
------------ ------------
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, 67,060,630 and
66,640,030 shares issued and outstanding, respectively 67,060 66,640
Paid in Capital 3,480,953 3,458,273
Retained Earnings (Deficit) (1,515,468) (929,210)
------------ ------------
Total Stockholders' Equity 2,032,545 2,595,703
------------ ------------
Total Liabilities and Stockholders' Equity $ 2,134,105 $ 2,743,924
============ ============
See Notes to Unaudited Consolidated Financial Statements
2
Chancellor Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 30, 2010
(Unaudited)
For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
2011 2010 2011 2010
------------ ------------ ------------ ------------
Sales - Net of Royalties Paid:
Oil $ 187,431 $ 178,514 $ 561,030 $ 526,031
Natural Gas 12,363 25,008 28,759 65,495
------------ ------------ ------------ ------------
Gross Revenues 199,794 203,522 589,789 591,526
------------ ------------ ------------ ------------
Operating Expenses:
Lease Operating Expenses 53,677 43,472 149,491 145,327
Production Taxes 9,609 10,114 28,183 29,105
Other Operating Expenses 127,169 168,219 376,318 501,347
General & Administrative Expenses 97,245 162,912 394,464 454,532
Depreciation, Depletion & Amortization 66,834 66,566 201,448 200,429
------------ ------------ ------------ ------------
Total Operating Expenses 354,534 451,283 1,149,904 1,330,740
------------ ------------ ------------ ------------
Loss From Operations (154,740) (247,761) (560,115) (739,214)
------------ ------------ ------------ ------------
Other Income (Expenses):
Interest Income 422 2,574 1,560 9,383
Loss from Unconsolidated Subsidiary -- -- (20,119) --
Gain (Loss) on Sale of Assets -- (2,394) -- (2,394)
------------ ------------ ------------ ------------
Total Other Income (Expense) 422 180 (18,559) 6,989
------------ ------------ ------------ ------------
Financing Charges:
Interest Expense 156 -- 1,250 --
Bank Fees Amortization 1,629 2,585 6,335 5,809
------------ ------------ ------------ ------------
Total Financing Charges 1,785 2,585 7,585 5,809
------------ ------------ ------------ ------------
Loss before provision for Income Taxes (156,103) (250,166) (586,259) (738,034)
Provision for Income Taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (156,103) $ (250,166) $ (586,259) $ (738,034)
------------ ------------ ------------ ------------
Net Loss per Share
(Basic and Fully Diluted) $ (*) $ (*) $ (.01) $ (.01)
Weighted Average Number of Common Shares
Outstanding 67,060,030 65,247,589 66,874,910 65,104,813
============ ============ ============ ============
----------
* Less than $.01 per Share
See Notes to Unaudited Consolidated Financial Statements
3
Chancellor Group, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 30, 2010
(Unaudited)
September 30, 2011 September 30, 2010
------------------ ------------------
Cash Flows From Operating Activities:
Net Loss $ (586,259) $ (738,034)
Adjustments to Reconcile Net Loss to Net Cash
Used for Operating Activities:
Depreciation & Amortization 201,448 200,429
Non-Cash Stock Compensation 23,100 85,526
Decrease in Operating Assets 89,701 81,455
Increase in Operating Liabilities (46,661) 92,649
----------- -----------
Net Cash (Used for) Operating Activities (318,671) (277,975)
----------- -----------
Cash Flows From Investing Activities:
Sale of Assets Proceeds 12,224 1,000
Capital Expenditures (28,841) (176,413)
----------- -----------
Net Cash (Used for) Investing Activities (16,617) (175,413)
----------- -----------
Cash Flows From Financing Activities:
-- --
----------- -----------
Net Cash Provided by (Used for) Financing Activities -- --
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (335,288) (453,388)
Cash and Cash Equivalents at the Beginning of the Period 810,098 1,154,695
----------- -----------
Cash and Cash Equivalents at the End of the Period $ 474,810 $ 701,307
=========== ===========
Supplemental Disclosures of Cash Flows Information
Interest Paid $ 1,250 $ --
Income Taxes Paid $ -- $ --
See Notes to Unaudited Consolidated Financial Statements
4
CHANCELLOR GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
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. The Company's primary business purpose is to engage in the
exploration and production of oil and gas. On March 26, 1996, the Company's
corporate name was changed from Nighthawk Capital, Inc. to Chancellor Group,
Inc. The Company's headquarters is in Pampa, Texas.
OPERATIONS
The Company and its wholly-owned subsidiaries, Gryphon Production Company, LLC
and Gryphon Field Services, LLC, own 134 wells, of which 19 are water disposal
wells and 2 are gas wells, although "associated" gas is also produced from some
oil wells. As of September 30, 2011, approximately 67 oil wells and 2 gas wells
located in Gray and Hutchinson counties in the Texas panhandle are actively
producing. We also own and operate our 15.9 acre property, with its shop, yard
and office complex. Company equipment includes two work-over rigs as well as
other oil field related equipment.
In addition, we own approximately 4,830 gross and net acres of production rights
on nine leases, which includes 4,300 acres of developed acreage and 500 acres of
undeveloped acreage, approximately 300 acres of which was previously owned by
Mobil and approximately 200 acres of which are on the Worley Combs lease. The
nine leases have the production rights for oil, casing-head gas and natural gas.
We produced a total of 6,272 barrels of oil and 4,654 mcf of gas in the nine
months ended September 30, 2011. The oil is light sweet crude and the natural
gas has very high heat content, 1600 to 2600 btu/scf.
BASIS OF PRESENTATION
The 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 GAAP. Accordingly, these consolidated
financial statements do not include all of the information and footnotes
required by GAAP for annual financial statements. These 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, 2010.
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 this year ending December 31, 2011.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Chancellor Group, Inc.; and its wholly owned subsidiaries: Gryphon Production
Company, LLC, and Gryphon Field Services, LLC. These entities are collectively
hereinafter referred to as "the Company". Any inter-company accounts and
transactions have been eliminated.
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 in the United States of America.
5
USE OF ESTIMATES
The preparation of 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 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
The Company plans to develop its domestic oil and gas properties, located in
Gray and Hutchinson counties in the Texas panhandle, and possibly to acquire
additional producing oil and gas properties. The Company's major customers, to
which the majority of its oil and gas production is sold, are Plains Marketing
and DCP Midstream.
NET INCOME (LOSS) PER SHARE
The net income (loss) per share is computed by dividing the net income (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
six 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 cash in bank at September 30, 2011 are deposits totaling $250,000
which are assigned and held as collateral for a letter of credit issued to the
Railroad Commission of Texas as required for its oil and gas activities.
ACCOUNTS RECEIVABLE
The Company reviews accounts receivable periodically for collectibles and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. An allowance for doubtful accounts was not considered
necessary or recorded at September 30, 2011.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated under the straight
line method over the estimated useful life of the equipment. The estimated
useful life of leasehold costs, equipment and tools ranges from five to seven
years. The useful life of the office building and warehouse is estimated to be
twenty years.
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.
DEPLETION
The carrying value of the mineral leases is depleted over the minimum estimated
productive life of the leases, or ten years.
6
INCOME TAX
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.
REVENUE RECOGNITION
The Company recognizes revenue 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.
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
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, 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 did not enter into any business combinations during the quarter ending
September 30, 2011.
The Company complies with the accounting guidance related to consolidation of
variable interest entities ("VIEs") that requires a reporting entity to
determine if a primary beneficiary that would consolidate the VIE from a
quantitative risk and rewards approach, to a qualitative approach based on which
variable interest holder has the power to direct the economic performance
related activities of the VIE as well as the obligation to absorb losses or
right to receive benefits that could potentially be significant to the VIE. This
guidance requires the primary beneficiary assessment to be performed on an
ongoing basis and also requires enhanced disclosures that will provide more
transparency about a company's involvement in a VIE. The Company did not have
any VIEs that required consolidation in these financial statements during the
quarter ending September 30, 2011.
7
SUBSEQUENT EVENTS
Events occurring after September 30, 2011, 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 January 2010, the FASB issued Accounting Standards Update ("ASU") 2010-03 to
align the oil and gas reserve estimation and disclosure requirements of
Extractive Industries -- Oil and Gas Topic of the Accounting Standards
Codification with the requirements in the SEC's final rule, "MODERNIZATION OF
THE OIL AND GAS REPORTING REQUIREMENTs." We implemented ASU 2010-03 as of
December 31, 2009. Key items in the new rules include changes to the pricing
used to estimate reserves and calculate the full cost ceiling limitation,
whereby a 12-month average price is used rather than a single day spot price,
the use of new technology for determining reserves, the ability to include
nontraditional resources in reserves and the ability to disclose probable and
possible reserves. Management has elected not to include probable and possible
reserves in its reserve studies and related disclosures.
In January 2010, the FASB issued ASU 2010-6, "IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS." This update requires additional disclosure within the roll
forward of activity for assets and liabilities measured at fair value on a
recurring basis, including transfers of assets and liabilities between Level 1
and Level 2 of the fair value hierarchy and the separate presentation of
purchases, sales, issuances and settlements of assets and liabilities within
Level 3 of the fair value hierarchy. In addition, the update requires enhanced
disclosures of the valuation techniques and inputs used in the fair value
measurements within Levels 2 and 3. The new disclosure requirements are
effective for interim and annual periods beginning after December 15, 2009,
except for the disclosure of purchases, sales, issuances and settlements of
Level 3 measurements. Those disclosures are effective for fiscal years beginning
after December 15, 2010. As ASU 2010-6 only requires enhanced disclosures, the
adoption of this update did not have a material effect on its financial
position, cash flows and results of operations.
In May 2011, ASU 2011-04 was issued which amends U.S. GAAP to confirm with
measurement and disclosure requirements in International Financial Reporting
Standards. The amendments in this Update change the wording used to describe the
requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. The amendments include the following:
1. Those that clarify the Board's intent about the application of
existing fair value measurement and disclosure requirements.
2. Those that change a particular principle or requirement for measuring
fair value or for disclosing information about fair value
measurements.
In addition, to improve consistency in application across jurisdictions some
changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value
measurement and disclosure requirements are described in the same way (for
example, using the word shall rather than should to describe the requirements in
U.S. GAAP). The amendments in this Update are to be applied prospectively and
are effective during interim and annual period beginning after December 15,
2011.
In June 2011, ASU 2011-05, "COMPREHENSIVE INCOME" was issued to provide guidance
on the presentation of total comprehensive income, the components of net income,
and the components of other comprehensive income. The amendments in this update
are to be applied retrospectively and are effective for financial statements
issued for fiscal years, and interim periods within those years, beginning after
December 15, 2011. The provisions of ASU 2011-05 are not expected to have a
material impact on our 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 arise from temporary differences in recognition of certain
revenues and expenses between financial statement and income tax basis of
accounting, and also net operating loss carry-forwards and other tax credit
carry-forwards
At September 30, 2011, the Company had a federal net operating loss
carry-forward of approximately $2,707,000. A deferred tax asset of approximately
$541,000 has been partially offset by a valuation allowance of approximately
$364,000 due to federal net operating loss carry-back and carry-forward
limitations.
At September 30, 2011, the Company also had approximately $177,000 in deferred
income tax liability 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.
8
Management evaluated the Company's tax positions under FASB ASC Topic 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 2008.
NOTE 3. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has provided for the issuance of 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 shareholder of the Series B Share, with dates and terms set by
the Board. No shares of Series B preferred stock are outstanding.
COMMON STOCK
The Company has 250,000,000 authorized shares of common stock, par value $.001,
with 67,060,030 shares issued and outstanding as of September 30, 2011.
STOCK BASED COMPENSATION
For the nine months ending September 30, 2011, the Company recognized $23,100 in
professional and consulting fees expense related to stock issued, which is
recorded in general and administrative expenses.
STOCK OPTIONS AND WARRANTS
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. For the
quarter ending September 30, 2011, 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. 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. In 2010, the Company issued additional
warrants expiring in 2015 to purchase an aggregate of 336,000 shares of common
stock at an exercise price of $0.125 per share. During 2011, the Company issued
additional warrants expiring in 2016 to purchase an aggregate of 168,000 shares
of common stock at an exercise price of $0.125 per share.
On September 30, 2011, the Company had the following outstanding warrants:
Remaining Exercise Price Weighted
Exercise Number of Contractual Life Times Number Average
Price Shares (in years) of Shares Exercise Price
----- ------ ---------- --------- --------------
$0.025 2,000,000 4 $ 50,000
$0.020 4,000,000 4 $ 80,000
$0.125 500,000 3.5 $ 62,500
$0.125 504,000 4.5 $ 63,000
---------- --------- -------
7,004,000 $ 255,500 $ 0.036
========== ========= =======
9
Weighted
Average Remaining
Number of Exercise Contractual Life
Warrants Shares Price (in years)
-------- ------ ----- ----------
Outstanding at January 1, 2011 6,836,000 $0.044
------
Issued 168,000 0.125
Exercised -- --
Expired/Cancelled -- --
--------- ------
Outstanding at September 30, 2011 7,004,000 $0.036 4.0
--------- ------ ---
Exercisable at September 30, 2011 7,004,000 $0.036 4.0
--------- ------ ---
EMPLOYEE STOCK OPTIONS
The Company accounts for employee stock options under FASB ASC Topic 718
"COMPENSATION-STOCK COMPENSATION". The Company issued no employee stock options
and had none outstanding as of September 30, 2011.
NOTE 4. PROPERTY AND EQUIPMENT
A summary of fixed assets at:
Balance Balance
December 31, September 30,
2010 Additions Deletions 2011
---------- --------- --------- ----------
Auto/Transportation Equipment $ 178,929 $ -- $ 23,583 $ 155,346
Buildings & Improvements 125,280 -- -- 125,280
Leasehold Costs - Developed 1,773,749 10,498 -- 1,784,247
Furniture, Fixtures & Office Equipment 9,350 -- -- 9,350
Machinery & Equipment 455,128 18,343 -- 473,471
---------- ---------- ---------- ----------
$2,542,436 $ 28,841 $ 23,583 $2,547,694
========== ========== ========== ==========
Less: Accumulated Depreciation 773,487 134,614 11,360 963,575
---------- ---------- ---------- ----------
$1,768,949 $ 134,614 $ 11,360 $1,584,119
========== ========== ========== ==========
NOTE 5. CONTINGENT LIABILITY
Chancellor is from time to time involved in legal proceedings arising in the
normal course of business. Other than proceedings incidental to Chancellor's
business, and a current proceeding against Gryphon (Cause no. 36433 in the 223rd
District Court in Gray County, Texas) in which Gryphon has made a counterclaim
for declaratory judgment, Chancellor is not a party to, nor is any of their
property the subject of, any material legal proceedings. Although the amount of
any ultimate liability with respect to such matters cannot be determined, in the
opinion of Chancellor's management, any such liability will not have a material
adverse effect upon Chancellor's financial condition, results of operations or
cash flows.
NOTE 6. LONG-TERM DEBT
The Company had no long-term debt at September 30, 2011.
At September 30, 2011, the Company had an irrevocable blanket letter of credit
totaling $250,000 issued to the Railroad Commission of Texas as required for its
oil and gas activities, which is secured by certain bank deposits totaling
$250,000. The Company has recognized approximately $4,019 in amortization
expense related to bank fees associated with this letter of credit in the nine
months ending September 30, 2011, and currently has approximately $3,389 in
unamortized bank fees as of September 30, 2011.
10
NOTE 7. ACCUMULATED COMPENSATED ABSENCES
It is the Company's policy to permit employees to accumulate a limited amount of
earned but unused vacation, which will be paid to employees upon separation from
the Company's service. The cost of vacation and sick leave is recognized when
payments are made to employees. These amounts are immaterial and not accrued.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company has used the services of a consulting company owned by the Chairman
of the Board. The Company has paid $72,000 for those services during the nine
months ending September 30, 2011.
NOTE 9. SUBSEQUENT EVENTS
Events occurring after September 30, 2011 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.
On October 18, 2011, Gryphon Production Company, LLC, a wholly owned subsidiary
of Chancellor Group, Inc., and LCB Resources, LLC, located in Kingfisher,
Oklahoma, entered into a Purchase and Sale Agreement "Agreement" pursuant to
which Gryphon will sell and LCB Resources, LLC will purchase substantially all
of the assets of Gryphon. Assets to be sold include all of Gryphon's facilities
and equipment located in Pampa, Texas and most all of Gryphon's oil and gas
properties (both producing and non-producing wells), leases and drilling rights
located in Gray and Hutchinson counties in the Texas Panhandle, excluding only
four producing wells and one water disposal well. Gryphon will also retain its
operator's license with the Texas Railroad Commission and continue to operate
the Hood Leases.
Under the terms of the Agreement, LCB Resources, LLC will pay Gryphon $2,050,000
in cash for the assets, subject to certain conditions and adjustments as set
forth in the Agreement. Approval of the Agreement must be obtained by at least a
majority of the outstanding stockholders of Chancellor common stock. Management
anticipates to complete the asset sale sometime during the fourth quarter of
2011 although delays could occur. The Agreement provides for a December 15, 2011
termination date, although an extension may be possible if both parties agree.
Further information, including the Purchase and Sale Agreement, is provided in
our Form 8-K filing on October 20, 2011.
On October 13, 2011, the Company entered into a consulting agreement for 500,000
shares of stock and $3,000. The agreement is for six months with an additional
200,000 shares and $3,000 payable monthly.
11
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
The Company is an independent oil and gas exploration and development company
focused on building and revitalizing our oil and gas properties located in the
State of Texas. The Company is organized as a producing oil and gas company and
licensed as an operator by the Texas Railroad Commission. We are in the business
of acquisition, exploration, and development of oil and natural gas properties.
Our common stock is quoted on the Over-The-Counter market and trades under the
symbol CHAG.OB. As of November 2, 2011, there are 67,560,030 shares of our
common stock issued and outstanding.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2011 Compared to Three Months Ended September
30, 2010:
PRODUCTION: During the three months ended September 30, 2011, we produced and
sold 2,251 barrels of oil and produced and sold 2,165 mcf of gas, generating
$199,794 in gross revenues net of royalties paid, with a one month lag in
receipt of revenues for the prior months sales, as compared with 2,489 barrels
of oil and 2,976 mcf of gas, generating $203,522 in gross revenues net of
royalties paid during the three months ended September 30, 2010. We had 67 wells
actually producing oil and 2 producing gas at September 30, 2011, and had 72
wells actually producing oil and 2 producing gas at September 30, 2010.
The following table summarizes our production volumes and average sales prices
for the three months ended September 30:
2011 2010
-------- --------
Oil and Gas Sales:
Oil Sales (Bbl) 2,251 2,489
Natural Gas Sales (Mcf) 2,165 2,976
Average Sales Price:
Oil, per Bbl $83.27 $71.72
Gas, per McF $ 5.54 $ 8.40
A small decline in oil production was more than offset by an increase in oil
prices resulting in a slight increase in oil revenues during the third quarter
compared to the same quarter in 2010. Decreases in production combined with
price declines resulted in a decrease in natural gas revenues during the third
quarter compared to the same quarter in 2010.
DEPRECIATION AND AMORTIZATION: Expense recognized for depreciation and
amortization of property and equipment increased only $300, or approximately 1%
in the three months ended September 30, 2011 from the three months ended
September 30, 2010. This increase was primarily attributable to the additional
depreciation related to the oil and gas properties and equipment acquired during
May 2010.
12
GENERAL AND ADMINISTRATIVE EXPENSES: During the three months ended September 30,
our general and administrative expenses decreased $65,667, or approximately 40%
in 2011 from 2010, due primarily to a reduction in consultant fees, travel
expenses and insurance costs.
Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30,
2010:
PRODUCTION: During the nine months ended September 30, 2011, we produced and
sold 6,272 barrels of oil and produced and sold 4,654 mcf of gas, generating
$589,789 in gross revenues net of royalties paid, with a one month lag in
receipt of revenues for the prior months sales, as compared with 7,156 barrels
of oil and 7,909 mcf of gas, generating $591,526 in gross revenues net of
royalties paid during the nine months ended September 30, 2010. We had 67 wells
actually producing oil and 2 producing gas at September 30, 2011, and had 72
wells actually producing oil and 2 producing gas at September 30, 2010.
The Company and its wholly-owned subsidiaries, Gryphon Production Company, LLC
and Gryphon Field Services, LLC, own 134 wells, of which 19 are water disposal
wells and 2 are gas wells, although "associated" gas is also produced from some
oil wells. As of September 30, 2011, approximately 69 wells were actively
producing. We also own and operate our 15.9 acre property, with its shop, yard
and office complex. Company equipment includes two work-over rigs as well as
other oil field related equipment. In addition, we own approximately 4,830 gross
and net acres of production rights on six leases, which includes 500 gross and
net acres of undeveloped acreage, approximately 300 acres of which was
previously owned by Mobil, and the balance of approximately 200 acres on the
Worley Combs lease. The six leases have production rights for oil, casing-head
gas and natural gas.
The following table summarizes our production volumes and average sales prices
for the nine months ended September 30:
2011 2010
-------- --------
Oil and Gas Sales:
Oil Sales (Bbl) 6,272 7,156
Natural Gas Sales (Mcf) 4,654 7,909
Average Sales Price:
Oil, per Bbl $89.45 $73.51
Gas, per McF $ 6.14 $ 8.78
At various times during the first nine months of 2011 our main gas purchaser
closed lines for maintenance of their plant. Two new gas meters were required to
be installed to comply with Texas Railroad Commission regulations, as well as a
delay in locating a new gas compressor motor which needed replaced, which caused
a noticeable loss of natural gas production during the nine months ending
September 30, 2011 compared to the same period in 2010. Bad weather in early
2011 in our area of the Panhandle coupled with the need for major parts
replacement on rigs resulted in slightly lower oil production during the first
nine months of 2011 compared to the same period in 2010. The reduction in our
production was offset in part by increased oil prices and the increased
production resulting from our acquisition of 15 oil wells in Hutchinson County
in May of 2010, which management believes that the wells acquired in this
transaction will continue to increase our production and reserves in our 2011
fiscal year.
DEPRECIATION AND AMORTIZATION: Expense recognized for depreciation and
amortization of property and equipment increased $1,000, or approximately 1% in
the nine months ended September 30, 2011 from the nine months ended September
30, 2010. This increase was primarily attributable to the additional
depreciation related to the oil and gas properties and equipment acquired during
May 2010.
GENERAL AND ADMINISTRATIVE EXPENSES: During the nine months ended September 30,
our general and administrative expenses decreased $60,068, or approximately 13%
in 2011 from 2010. Significant components of these expenses include salaries,
professional fees, and insurance costs. Professional fees increased $28,349, or
approximately 29%, during 2011, primarily the result of a change in auditors, as
previously disclosed in our Form 8-K filing dated January 25, 2011. Consulting
fees decreased by $59,675, or approximately 40%, during 2011. Insurance
decreased $9,446, or approximately 15%, during 2011. Travel expenses decreased
by $17,955, or approximately 32%, during 2011.
OVERALL: The majority of the past two years we have continued with the ongoing
production, maintenance and enhancements of our producing wells in Gray county,
as well as bringing into production 2 of our new wells in Hutchinson county
during the third quarter of 2010. As a result of these efforts, along with
continued increases in oil prices during most of 2010 and 2011, our gross oil
revenues increased by approximately $35,000, or 7% during the nine months ended
September 30, 2011 compared to the nine months ended September 30, 2010. During
the nine months ended September 30, 2011 our gross natural gas revenues
decreased approximately $36,000, or 56% due to line closures for repairs and
periodic shutdowns or slowdowns in pressure due to compressor or plant problems.
At the same time we were also able to reduce our direct lease and operating
costs by $120,000, or 18%, compared to the same period last year.
The Company also recognized a loss of approximately $20,000 related to its
investment in an unconsolidated subsidiary (Munda We) in the nine months ended
September 30, 2011. The Company expects this to be a discrete event, as the
Company has terminated this agreement, effective March 22, 2011. However, with
13
our continued efforts to reduce administrative expenses and other operating
expenses, we reported a smaller net loss of $586,259 during the nine months
ended September 30, 2011, compared to a net loss of $738,034 reported for the
same period last year. Management anticipates that both oil and gas production
volumes and prices will continue to increase during 2011, as well as continuing
to look for opportunities to reduce general and administrative expenses, in an
effort to continue to improve profitability of the Company.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW: The following table highlights certain information relation to our
liquidity and capital resources at:
September 30, 2011 December 31, 2010
------------------ -----------------
Working Capital $ 444,787 $ 774,409
Current Assets $ 546,347 $ 922,630
Current Liabilities $ 101,560 $ 148,221
Stockholders' Equity $2,032,545 $2,595,703
Our working capital at September 30, 2011, decreased by $329,622 or
approximately 43%, from December 31, 2010. Current assets decreased by $376,283
or approximately 41%, while current liabilities decreased $46,661, or
approximately 31%. Decrease in current assets was attributable to several
factors, including a decrease in cash in bank, revenue receivables and prepaid
insurance.
Our capital resources consist primarily of cash from operations and permanent
financing, in the form of capital contributions from our stockholders. As of
September 30, 2011 the Company had $474,810 of cash on hand, which includes
restricted cash of $250,000 held as collateral for a letter of credit issued to
the Railroad Commission of Texas as required for its oil and gas activities.
Other than financing continuing operations, additional capital would be
necessary should we decide to further expand our operations or pursue
acquisitions of additional property or significant production equipment.
CASH FLOW: Net cash used during the nine months ended September 30, 2011 was
$335,288, compared to net cash used of $453,388 during same period in 2010. The
most significant factors causing the decrease in net cash flow during the nine
months ending September 30, 2011 were professional fees of $126,000 and our net
loss of $586,259.
EQUITY FINANCING: As of September 30, 2011, our stockholders have contributed
$3,548,013 in equity financing. We do not anticipate that significant equity
financing will take place in the foreseeable future.
CRITICAL ACCOUNTING POLICIES
The Securities and Exchange Commission (the "SEC") 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.
NATURAL GAS AND OIL PROPERTIES
In January 2010, the Financial Accounting Standards Board issued ASU 2010-03 to
align the oil and gas reserve estimation and disclosure requirements of
Extractive Industries -- Oil and Gas Topic of the Accounting Standards
Codification with the requirements in the SEC's final rule, "MODERNIZATION OF
THE OIL AND GAS REPORTING REQUIREMENTS". We implemented ASU 2010-03 as of
December 31, 2009. Key items in the new rules include changes to the pricing
used to estimate reserves and calculate the full cost ceiling limitation,
whereby a 12-month average price is used rather than a single day spot price,
the use of new technology for determining reserves, the ability to include
nontraditional resources in reserves and the ability to disclose probable and
possible reserves. Management has elected not to include probable and possible
reserves in its reserve studies and related disclosures.
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 for various fields make
these estimates generally less precise than other estimates included in the
financial statement disclosures.
14
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.
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 September 30, 2011, a deferred tax asset
of $510,000 has been recognized but partially offset by a valuation allowance of
approximately $333,000 due to federal NOL carry-back and carry-forward
limitations
OFF-BALANCE SHEET ARRANGEMENTS:
There are no off-balance sheet transactions, arrangements, obligations
(including contingent obligations), or other relationships of the Company with
unconsolidated entities or other persons that have, or may have, a material
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk - Interest rate risk refers to fluctuations in the value of a
security resulting from changes in the general level of interest rates.
Investments that are classified as cash and cash equivalents have original
maturities of six months or less. Our interest income is sensitive to changes in
the general level of U.S. interest rates.
Credit Risk - Our accounts receivables are subject, in the normal course of
business, to collection risks. We regularly assess these risks and have
established policies and business practices to protect against the adverse
effects of collection risks. As a result, we do not anticipate any material
losses in this area.
Commodity Price Risk - We are exposed to market risks related to price
volatility of crude oil and natural gas. The prices of crude oil and natural gas
affect our revenues, since sales of crude oil and natural gas comprise all of
the components of our revenues. A decline in crude oil and natural gas prices
will likely reduce our revenues, unless we implement offsetting production
increases. We do not use derivative commodity instruments for trading purposes.
ITEM 4. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Principal Financial Officer is
primarily responsible for the accuracy of the financial information that is
presented in this quarterly Report. This officer has, as of the close of the
period covered by this Quarterly Report on Form 10-Q, evaluated the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon that evaluation, this officer concluded that our disclosure
controls and procedures were effective as of that date to ensure that
information required to be disclosed by us in our reports filed or submitted
under the Exchange Act is (a) accumulated and communicated to our management,
including our principal executive and financial officer, as appropriate to allow
timely discussions regarding required disclosure and (b) recorded, processed,
15
summarized and reported within the time periods specified in the SEC's rules and
forms. There were no changes to the Company's internal controls in this period
identified in connection with this evaluation that have materially affected, or
are reasonably likely materially to affect, the Company's internal control over
financial reporting.
PART II--OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no shares issued during the quarter ending September 30, 2011.
ITEM 6. EXHIBITS
3.1 Certificate of Incorporation of Nighthawk Capital, Inc. (Utah)
(incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form 10-SB12G, filed with the Securities and Exchange
Commission on April 5, 2000).
3.2 Articles on Incorporation on Nighthawk Capital, Inc. (Nevada)
(incorporated by reference to Exhibit 2.2 to the Company's Registration
Statement on Form 10-SB12G, filed with the Securities and Exchange
Commission on April 5, 2000).
3.3 Articles of Merger of Nighthawk Capital, Inc. (Utah) into Nighthawk
Capital, Inc. (Nevada) (incorporated by reference to Exhibit 2.3 to the
Company's Registration Statement on Form 10-SB12G, filed with the
Securities and Exchange Commission on April 5, 2000).
3.4 By-Laws (incorporated by reference to Exhibit 2.4 to the Company's
Registration Statement on Form 10-SB12G, filed with the Securities and
Exchange Commission on April 5, 2000.)
3.5 Amendments to the Articles of Incorporation of Nighthawk Capital, Inc.,
dated as of March 26, 1996. (incorporated by reference to Exhibit 3.5
to the Company's Annual Report on Form 10-K, filed with the Securities
and Exchange Commission on March 25, 2011.
3.6 Certificate of Amendment of Articles of Incorporation of Chancellor
Group, Inc., dated as of February 25, 2000. (incorporated by reference
to Exhibit 3.6 to the Company's Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on March 25, 2011.
4.1 Form of Warrant issuable to PK and ESP. (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on November 15, 2010).
10.1 Agreement and Plan of Reorganization, dated October 19, 2000, between
Chancellor Group, Inc. and Southwin financial, Ltd. (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 November 21,
2000).
10.2 Purchase and Sale Agreement by and between Gryphon Production Co., LLC,
and LCB Resources dated as of October 18, 2011 (incorporated by
reference to Exhibit No. 2.1 to the Company's Current Report on Form
8-K, filed with the Securities and Exchange Commission on October 20,
2011.)
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.
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Chancellor Group, Inc.
(Registrant)
By: /s/ Maxwell Grant
------------------------------------
Chief Executive Officer and
Principal Financial Officer
Dated: November 2, 2011
17
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of Nighthawk Capital, Inc. (Utah)
(incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form 10-SB12G, filed with the Securities and Exchange
Commission on April 5, 2000).
3.2 Articles on Incorporation on Nighthawk Capital, Inc. (Nevada)
(incorporated by reference to Exhibit 2.2 to the Company's Registration
Statement on Form 10-SB12G, filed with the Securities and Exchange
Commission on April 5, 2000).
3.3 Articles of Merger of Nighthawk Capital, Inc. (Utah) into Nighthawk
Capital, Inc. (Nevada) (incorporated by reference to Exhibit 2.3 to the
Company's Registration Statement on Form 10-SB12G, filed with the
Securities and Exchange Commission on April 5, 2000).
3.4 By-Laws (incorporated by reference to Exhibit 2.4 to the Company's
Registration Statement on Form 10-SB12G, filed with the Securities and
Exchange Commission on April 5, 2000.)
3.5 Amendments to the Articles of Incorporation of Nighthawk Capital, Inc.,
dated as of March 26, 1996. (incorporated by reference to Exhibit 3.5
to the Company's Annual Report on Form 10-K, filed with the Securities
and Exchange Commission on March 25, 2011.
3.6 Certificate of Amendment of Articles of Incorporation of Chancellor
Group, Inc., dated as of February 25, 2000. (incorporated by reference
to Exhibit 3.6 to the Company's Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on March 25, 2011.
4.1 Form of Warrant issuable to PK and ESP. (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on November 15, 2010).
10.1 Agreement and Plan of Reorganization, dated October 19, 2000, between
Chancellor Group, Inc. and Southwin financial, Ltd. (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 November 21,
2000).
10.2 Purchase and Sale Agreement by and between Gryphon Production Co., LLC,
and LCB Resources dated as of October 18, 2011 (incorporated by
reference to Exhibit No. 2.1 to the Company's Current Report on Form
8-K, filed with the Securities and Exchange Commission on October 20,
2011.)
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.
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.