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
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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.