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<B><FONT SIZE=3><P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549</B><BR>
<B>FORM 10-KSB<BR>
</P></B></FONT>
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<FONT SIZE=3><P ALIGN="JUSTIFY">(Mark One)<BR>
</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">[X]</FONT></TD>
<TD WIDTH="79%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE</FONT></TD>
</TR>
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<FONT SIZE=3><P>SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">For the fiscal year ended <U>December 31, 1999</U></FONT></TD>
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<TD WIDTH="6%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">OR</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">[_]</FONT></TD>
<TD WIDTH="79%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
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<TD WIDTH="79%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">For the transition period from_________________ to _________________</FONT></TD>
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<TD WIDTH="79%" VALIGN="TOP"> </TD>
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</TABLE>

<FONT SIZE=3><P ALIGN="CENTER">Commission File Number  <U>0-11663</P>
</U><P ALIGN="JUSTIFY"></P>
<U><P ALIGN="CENTER">Chancellor Corporation<BR>
</U>(Name of Small Business Issuer in its Charter)</P>
<P ALIGN="CENTER"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=558>
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<U><FONT SIZE=3><P ALIGN="CENTER">Massachusetts</U></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">04-2626079</U></FONT></TD>
</TR>
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<FONT SIZE=3><P ALIGN="CENTER">(State or Other Jurisdiction of</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">(I.R.S. Employer Identification No.)</FONT></TD>
</TR>
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<FONT SIZE=3><P ALIGN="CENTER">Incorporation or Organization)</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP"> </TD>
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<U><FONT SIZE=3><P ALIGN="CENTER">210 South Street, Boston, Massachusetts</U></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">02111</U></FONT></TD>
</TR>
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<FONT SIZE=3><P ALIGN="CENTER">(Address of Principal Executive Offices)</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Zip Code</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">Issuer's Telephone Number, Including Area Code <U>(617) 368-2700</P>
</U><P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 BORDERCOLOR="#ffffff" CELLPADDING=7 WIDTH=375>
<TR><TD WIDTH="37%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Securities registered under Section 12(b) of the Exchange Act:</P>
<P ALIGN="JUSTIFY">Title of Each Class</FONT></TD>
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<TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Name of Each Exchange on Which Registered</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=3><P ALIGN="CENTER">None</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="45%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=3><P ALIGN="CENTER">None</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="CENTER">Securities registered under Section 12(g) of the Exchange Act:</P>
<U><P ALIGN="CENTER">Common Stock, par value $.01</P>
</U><P ALIGN="CENTER">(Title of Class)</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Check whether the issuer: (1) 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.    Yes   [X]        No   [ ]<U> </P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Check if there is no disclosure of delinquent filers pursuant in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [ ]</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Issuer's revenues for the year ended December 31, 1999 were approximately $62,272,000.<BR>
</P>
<P ALIGN="JUSTIFY">Aggregate market value of the registrant (inclusive of Series B shares) was approximately $51,082,000 as of March 30, 2000.</P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="CENTER">APPLICABLE ONLY TO CORPORATE REGISTRANTS<BR>
</P>
</B><P ALIGN="JUSTIFY">As of March 30, 2000<B>, </B>58,795,000 shares of Common Stock, $.01 par value per share and 350,000 shares of Series B Convertible Preferred Stock ("Series B"), $.01 par value per share were outstanding.  The Series B shares
convert into common on a 1 for 10 basis (3,500,000 in total) and have a liquidation preference of $20.00 per preferred share or $7,000,000 in the aggregate.  Market value of the voting stock held by non-affiliates of the registrant as of March 30, 2000
was approximately $10,183,000.  </P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="CENTER">DOCUMENTS INCORPORATED BY REFERENCE<BR>
</P>
</B><P>Proxy Statement for the Annual Meeting of Stockholders to be held at 2<B>:</B>00 p.m. on June 30, 2000 at the offices of Bingham Dana, LLP, 150 Federal Street, Boston, MA 02109 - Part III</P>
<P ALIGN="JUSTIFY">This Annual Report on Form 10-KSB contains certain "Forward-Looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the Company and its subsidiaries that are based
on the beliefs of the Company's management as well as assumptions used in this report, the words "anticipate", "believe", "estimate", "expect", and "intend" and words or phrases of similar import, as they relate to the Company or its subsidiaries or the
Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions,
customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introduction and acceptance, technology changes and changes in industry conditions.  Should
any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does
not intend to update these forward-looking statements.</P>
<B><P ALIGN="JUSTIFY"></P>
<P ALIGN="CENTER">PART I</P>
</B><U><P ALIGN="JUSTIFY">ITEM 1.</U>        <B>Description of Business.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Chancellor Corporation ("Chancellor" or the "Company") was incorporated in Massachusetts in January 1977.  It is principally engaged in (1) wholesale and retail used transportation equipment sales through its wholly owned subsidiary,
Chancellor Asset Management. (CAM), which was incorporated in Massachusetts in 1998, (2) buying, selling, leasing and remarketing new and used transportation equipment, (3) managing equipment on and off-lease, and (4) arranging equipment-related financing
through its principal subsidiary, Chancellor Fleet Corporation ("Fleet") which was incorporated in Massachusetts in January 1980.</P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">HISTORICAL BUSINESS AND FISCAL YEAR 1999 SIGNIFICANT DEVELOPMENTS</P>
<P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">The Company originates lease transactions directly with equipment users and in most cases sells those leases to investors and/or may hold for its own account.  The Company also manages most of the leases it sells to investors and,
when the original leases expire or terminate, remarket the equipment for the benefit of the investors and the Company.  The Company originates leases involving primarily transportation equipment, but also leases other equipment including material handling
equipment and construction equipment. Investors who purchase equipment subject to a lease may receive the tax and most of the economic benefits associated with the lease transaction.  In certain cases, the Company has retained leases for its own account.
The Company also arranges non-recourse financing for some of the leases which it sells and for most leases which it has retained for its own account.  Typically, when the Company originates leases, the investors or buyers of those leases are not known.
Therefore, the Company at the time of entering into the lease transaction is "underwriting" the lease.  At the expiration or early termination of the original lease, the Company typically sells or releases the equipment on behalf of the investor.  To
date, the Company has leased, re-marketed, or re-sold equipment with an original cost of over $1,500,000,000 ($1.5 Billion U.S.).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During the period 1989 through 1997, the Company incurred cumulative losses in excess of $56 million.  The Company recorded a loss of $1,802,000 during fiscal 1997.  This continued decline from 1989 through 1996 (inclusive of such
losses) led the Company to the development and implementation of a restructuring and transition plan.  This plan was developed and implemented under the direction of Vestex Capital Corporation, the Company's majority shareholder.  The continued, but
decreasing loss in 1997 was due primarily to the lack of sufficient cash flow to add new leases to the Company's own lease portfolio and continued costs that occurred in the first half of 1997 in connection with the Company's restructuring efforts.  The
Company virtually broke-even for Q3, 1997 with a loss of approximately $9,000, and the Company posted a profit for Q4, 1997.  For the year ended December 31, 1998, the Company recorded a profit of $524,000, the first full year of profitability since 1988.
 The Company's return to profitability in 1998 reflects the culmination of new management's efforts and strategies to maximize remarketing of off lease transportation equipment and continued implementation of its strategy to expand its operations to
retail used transportation equipment.  The Company continues to develop and attempts to implement innovative financing and fleet management programs in the transportation equipment finance industry to further the Company's continued growth<B>.</P>
<P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">Chancellor Asset Management Inc. ("CAM"), a wholly owned subsidiary of the Company, entered into a Management Agreement, dated August 1, 1998, as amended August 17, 1998, with M.R.B. Inc., a Georgia corporation d/b/a Tomahawk Truck
Sales; Tomahawk Truck & Trailer Sales, Inc., a Florida corporation; and Tomahawk Truck & Trailer Sales of Virginia, Inc., a Virginia corporation; and Tomahawk Truck & Trailer Sales of Missouri, a Missouri Company, and the management agreement
provided CAM with effective control of Tomahawk's operations as of August 1, 1998.  Subsequently, CAM acquired all of the outstanding capital stock of Tomahawk from the two (2) sole shareholders (the "Selling Shareholders") pursuant to a Stock Purchase
Agreement (the "Agreement") dated January 29, 1999.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Tomahawk is engaged in a similar line of business as CAM.  Tomahawk retails and wholesales used transportation equipment consisting primarily of tractors and trailers.  Tomahawk operates seven (7) retail centers in Conley, Georgia;
Richmond, Virginia; Pompano Beach, Florida; Orlando, Florida; Elizabeth, New Jersey; Dallas, Texas; and Kansas City, Missouri.  Tomahawk also operates its wholesale division from the Conley, Georgia facility.  Tomahawk operates as a wholly owned
subsidiary of CAM, coordinating many operations with the Company to achieve operating efficiencies and synergies. </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The purchase price paid by CAM consisted of 4,500,000 shares of Common Stock of Chancellor (valued at $.65 per share) and future cash consideration pursuant to an earn-out (the "Earn-Out") as provided for in the Agreement.  The Earn-Out
provides that each of the Selling Shareholders will be paid an amount equal to seven and one-half percent (7.5%) of the Adjusted Pre-Tax Earnings of Tomahawk.  The Earn-Out, which is paid on a quarterly basis, begins in the fiscal year ended December 31,
1999 and ends in the fiscal year ended December 31, 2004.  In connection with this Agreement, CAM loaned the Selling Shareholders a total of $300,000 pursuant to certain promissory notes payable that are payable in full on January 29, 2004.  Additionally,
Vestex Capital Corporation, the largest shareholder of the Company, is to receive up to $3,250,000 plus expenses, not to exceed $50,000, payable over the next six years for services rendered in finding, negotiating and arranging financing on the
transaction as well as ongoing management and development of long-term growth strategies including initiation of possible acquisition and/or merger candidates.  The final fee is based principally upon the financial impact and profitability that Tomahawk
adds to the Company's operating results.  Through 1999, Vestex received approximately $1,109,000 in fees, plus repayment of debt advanced to the Company, as well as fees for granting a line of credit advanced for the CAM subsidiary of up to $1,000,000 at
prime plus 2%.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Agreement also: i) nominates one of the Selling Shareholders as a director of Chancellor's Board of Directors; ii) elects both of the Selling Shareholders as directors of CAM's Board of Directors; iii) provides for Employment
Agreements for the Selling Shareholders over a period of five years with base salaries of $200,000 per annum; iv) prohibits the Selling Shareholders from competing against CAM or Tomahawk, or soliciting former employees and customers of Tomahawk; v)
provides for Tomahawk to lease from the Selling Shareholders the Conley, Georgia facility at fair market value rents of approximately $8,500 per month; and vi) provides CAM an option to purchase from the Selling Shareholders the Conley, Georgia facility
for an amount not to exceed $950,000.  Subsequent to year- end, the Company and the shareholders have entered into a definitive agreement.  Final details are being confirmed and/or reviewed by legal counsel, however the purchase price is believed to be
less than the $950,000 as discussed above.  The Company plans to own the real estate, when closed, through a new subsidiary incorporated in 2000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">This Tomahawk acquisition was recorded in accordance with the purchase method of accounting as of January 29, 1999.  In connection with this transaction, CAM assumed liabilities of approximately $11,200,000 and incurred acquisition
costs of approximately $155,000.  The excess of the purchase price over net assets of approximately $3,142,000 at December 31, 1999, including additional consideration since closing, has been recorded in intangibles and allocated between a covenant not to
compete, customer database files and goodwill in 1999 and will be amortized over periods of five (5) to fifteen (15) years beginning February, 1999. </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In August 1997, the Company committed to make a $1,000,000 ($1 million) equity investment in the New Africa Opportunity Fund, LP ("NAOF").  NAOF is a $120 million investment fund composed of $40 million from equity participants
including the Company, and $80 million in debt financing provided by the Overseas Private Investment Corporation ("OPIC"), an independent U.S. government agency.  In addition to Chancellor, some of the limited partners within the fund include, but are not
limited to, Sun America, Northwestern, Citicorp, and others.  The purpose of the fund is to make direct investments in emerging companies throughout Africa.  As of December 31, 1999, the Company had funded approximately $469,000 and is obligated to
provide additional funding in the approximate amount of $531,000.  As further described in footnote 13, the company has additionally invested up to 15.1% into one of NAOF's investee companies.  The Company continues to negotiate further strategic
opportunities with this investee company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During a prior year, the Company undertook a review of its trust portfolio, including consultation with legal counsel, an International "Big Five (5)" Independent public accounting firm, and industry consultants and determined that it
had not been recovering costs associated with administering the trusts.  Management's initial review determined that approximately $22,000,000 of costs for periods prior to 1997 had not been recovered from the trusts.  The Company has recorded
approximately $972,000 and $1,498,000 of cost recoveries in the years ended December 31, 1999 and 1998, respectively.  For periods prior to 1998, $2,862,000 was recovered.  Thus, to date, the Company has recovered in excess of $5,300,000.  Management
makes no representations concerning the Company's ability to recover any further costs for periods prior to 1997.  Further recoveries for periods prior to 1997 and thereafter are contingent upon the current status of the specific trusts and the Company's
level of recovery efforts.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The ability of the Company to profitably operate its lease origination business unit in the future will depend largely on the amount of new capital available to the Company and the cost of that capital.  In addition, the success of the
Company's remarketing and retailing of used transportation equipment will result, in part, from its ability to locate sources of quality used transportation equipment and expansion of its distribution channel through siting of potential new retail
facilities.  The Company continues to explore possible sources of new capital including, for example, obtaining new or additional recourse debt, obtaining new equity capital, securitizing lease transactions, obtaining equity capital from private
investors, purchases of equipment leases originated by the Company and/or entering into strategic alliances/joint ventures with other leasing or financial services companies and the sale of ancillary business units and/or assets as considered appropriate.
 The Company also utilizes an expansive database of over 75,000 sources and customers of used transportation equipment. This effort is on going and includes a fully staffed telemarketing group to continually upgrade and add new sources and users of
transportation equipment.  Additionally, the Company's management has established a retail facility expansion program which investigates potential new sites that can be developed internally as well as acquisition candidates.  The Company intends on
investing any new capital that it obtains in leases for its own portfolios (if practical), expansion of its remarketing and retail/wholesale operations, general working capital purposes, and other activities or operations as determined by management
and/or the board of Directors.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<U><P ALIGN="JUSTIFY">Description of Business</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">The majority of the Company's leases are noncancelable "net" leases which contain provisions under which the customer must make all lease payments regardless of any defects in the equipment and which require the customer to insure
the equipment against casualty loss, and pay all related property, sales and other taxes.  Some of the leases written by the Company provide for early termination options.  Generally, these options may be exercised at specified times upon receipt by the
Company of an amount at least equal to the discounted present value of remaining rent payments.  The Company intends to collect all termination payments.  Other leases allow the lessee at certain times to require the Company to attempt to sell or sublease
the equipment for the lessee, with the Company sharing in any losses or gains should a decrease or increase in revenue streams occur as a result.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Leases are generally originated for private third party purchasers of equipment. The Company's lease origination marketing strategy is transaction driven.  With each lease origination opportunity, the Company evaluates both the
prospective lessee and the equipment to be leased.  With respect to each potential lessee, the Company evaluates the lessee's credit worthiness.  With respect to the equipment, the Company evaluates the remarketing potential.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company currently concentrates on leasing transportation equipment, such as tractors, trailers and trucks.  The Company also leases construction equipment, aircraft, material handling equipment and other equipment.  The Company's
long term business plan will also consider diversification of the equipment available to be financed.  This potential diversification will provide for the financing of low-obsolescence, hard-asset equipment with predictable and dependable residual values,
including but not limited to, plastics, printing, construction and general manufacturing equipment.  Further, the Company will seek to syndicate transactions not meeting these criteria or the Company's credit risk profile.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company leases equipment to lessees in diverse industries throughout the United States.  Although the Company's direct solicitation efforts involving leases of new equipment have shifted from Fortune 100 companies to include smaller
business entities, most of the Company's lessees of new equipment are still of substantial creditworthiness, with minimum net worth in excess of $25 million.  Some of the Industries the Company participates in include; aircraft/aerospace, agricultural,
automotive, beverage/bottling, chemical/pharmaceutical, consumer goods, electronics, food distribution, hotels & entertainment, industrial, paper & textiles, petroleum, retail/apparel, and transportation.  Customers within these industries include;
 Purdue, Tyson Farms, Ford Motor, Daimlerbenz, Coors, Coca-Cola, Dow, Walmart, Whirlpool, Texaco, Alliant Food Service, and others.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During 1999, the Company continued its lease originating activities, including brokering of new lease transactions.  The Company also transacted several significant buyouts of portfolios held by certain trust investors. During 1999, 67%
(based on original equipment cost) of the new lease transactions originated by the Company were with one large lessee.  During 1998, 31% (based on original equipment cost) of the new lease transactions originated by the Company were with the one largest
lessee (Wal-Mart). In addition, approximately 40% and 31% (based on original equipment cost) of equipment sold to investors in 1998 were purchased by the two largest investors<B>.</P>
</B><P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Equipment Acquisition</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company acquired $4.2 million of equipment under 40 leases during 1999.  The Company acquired $5.5 million of equipment under 40 leases during 1998.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<U><P ALIGN="JUSTIFY">Equipment Disposition</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In 1999, the Company disposed of $1.1 million of portfolio equipment (measured by its original cost) on operating leases and disposed of $310,000 on direct finance leases. The total equipment (net of depreciation, pay-down and
write-downs) on operating leases and direct finance leases increased in 1999 to $4.2 million and $376,000, respectively.  In 1998, the Company disposed of $6.8 million of the Company's portfolio equipment (measured by its original cost) on operating
leases and disposed of $139,000 on direct finance leases, reducing the total equipment (net of depreciation, pay-down and write-downs) on operating leases and direct finance leases to $702,000 and $359,000, respectively. </P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Remarketing Activities</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The remarketing of equipment plays a vital role in the operations of the Company.  The Company's remarketing efforts are directed through Chancellor Asset Management, Inc. ("CAM"), the Company's wholly owned subsidiary.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In connection with the sale of lease transactions to investors, the Company typically is entitled to share in a portion of the residual value realized upon remarketing.  Successful remarketing of the equipment is essential not only to
the realization of the Company's interest in the residual value but also for the Company to recover its original investment in the equipment in its portfolios and to recognize a return on that investment.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company continues to dedicate substantial resources towards the development and improvement of its remarketing capabilities, which is a significant profit center for the Company.  The Company's strategy is to exploit its remarketing
expertise by providing fee-based remarketing services to fleet equipment owners and lessees and also to create a dealer capability under which the Company would buy and re-sell fleet equipment. The Company continually explores the potential for financing
relationships enabling the remarketing group to enter into transactions to purchase used transportation equipment which can be quickly and profitably remarketed.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has found that its ability to remarket equipment is affected by a number of factors. The original equipment specifications, current market conditions, technological changes, and condition of the equipment upon its return all
influence the price for which the equipment can be sold or re-leased.  Delays in remarketing caused by various market conditions reduce the profitability of remarketing.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Remarketing efforts are pursued on a direct retail sale, wholesale or lease basis. The Company's fleet equipment remarketing experience has shown that generally the greatest residual value is realized by initially re-leasing equipment,
rather than immediately selling it.  Therefore, the Company has concentrated its remarketing efforts on re-leasing, although re-leasing involves more risks than selling because lessees of used equipment are generally smaller, less creditworthy enterprises
than the Company's initial lessees.  The Company sells fleet equipment through its retail sales center located in Elizabeth, New Jersey.  Additionally, the Company uses indirect retail sales centers in California, Georgia, Illinois, Florida, Missouri, and
Texas.</P>
<U><P ALIGN="JUSTIFY"></P>
<P>Retail and Wholesale Activities</P>
</U>
<P ALIGN="JUSTIFY">As previously mentioned, CAM acquired Tomahawk for purposes of enhancing its remarketing of used transportation equipment.  The acquisition of Tomahawk provides the Company with six (6) additional retail centers in Conley, Georgia;
Pompano Beach and Orlando, Florida; Richmond, Virginia; Dallas, Texas; and Kansas City, Missouri, in addition to its previously existing location in Elizabeth, New Jersey.  The Dallas, Texas location was opened in Q3, 1999 and the Kansas City location was
opened in Q4, 1998.  Tomahawk also provides additional wholesale opportunities from its Conley, Georgia headquarters.  The Company will derive significant revenues from the retail and wholesale of used transportation equipment through CAM's Tomahawk
business unit.  In addition, the Company's ability to utilize retail pricing to establish residual values on lease transactions will provide the Company with a competitive advantage in its retail centers throughout the domestic marketplace.  CAM maintains
an extensive database of used equipment sources and customers and continually updates this information through a fully staffed telemarketing group.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Competition</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The principal methods by which the Company competes are its ability to underwrite the lease transactions which it originates; its knowledge of the equipment used by its lessees; the training and experience of its personnel; the
relationships and reputation it has established with lessees, equipment suppliers and financial institutions; its ability to adapt to changing regulations and tax laws; and its experience in successfully remarketing the equipment at lease termination.
Additionally, the Company's ability to provide in-house retail distribution channels provides advantages in establishing pricing for lease origination transactions and improving overall fleet management and total holding costs for the customer.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The equipment leasing business, on a global basis, is a highly competitive, fragmented marketplace with thousands of competitors.  The Company has identified emerging markets such as Russia, the Commonwealth of Independent States, the
Republic of South Africa, the Kingdom of Swaziland, and other sub-Saharan countries.  These emerging markets hold significant opportunity to provide financial services, such as leasing, that the Company will continue to explore as resources and
opportunities permit, however, the primary focus remains within the United States.  The Company is aggressively pursuing the transacting of lease deals and negotiation of strategic alliances in these markets.  Chancellor's competitors include (1) large
diversified financial services companies, (2) other leasing companies and (3) vendor financing programs.  Many of these organizations have greater financial resources than the Company and, therefore, may be able to obtain funds or equipment on more
favorable terms than those available to the Company.  Additionally, the Company competes against other financing alternatives available to lessees for the purchase of equipment.</P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">BUSINESS PLAN</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's strategy is to continue in a profitable manner, increase market share, and create growth opportunities by expanding its core business through servicing of investment grade and middle market clients, joint ventures with
financial institutions, expanding its used transportation equipment retail and wholesale distribution channel, expanding into new transportation and equipment markets and seeking strategic financial partnerships and joint ventures domestically and
internationally.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Historically, the Company focused its efforts on Fortune 100 companies. The Company implemented a plan to broaden the focus of its transportation equipment and remarketing expertise by expanding the number of customers within its target
market.  The Company will broaden its scope of lease origination activities to include middle market clients with a variety of transportation equipment requirements.  The strategic decision to target middle market origination activities is expected to
result in higher gross margins while utilizing the Company's twenty years of historical equipment residual performance.  The Company will leverage off of its expertise allowing entry into emerging international markets seeking these basic financial
services in their economic development.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company enjoys a reputation as one of the premier transportation equipment remarketers in the industry.  The Company believes there is a significant opportunity to offer lease and rental companies, finance companies, utilities,
financial institutions, municipalities, and transportation companies an outlet for their used equipment other than the traditional low-end auction channels.  The Company further believes the acquisition of Tomahawk will enhance the distribution of this
equipment at lease expiration.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company also perceives significant opportunities for its services in international markets.  Additionally, the Company can benefit from higher margins in less competitive international markets.  The Company has completed certain
lease transactions in the Russian Federation and the Commonwealth of Independent States ("Russia and the CIS").  In addition, the Company has made investments with certain parties that both invest in and operate companies in the Republic of South Africa
("RSA"), the Kingdom of Swaziland and other sub-Saharan countries.  The Company continues to evaluate the potential for providing additional financial services in the RSA as a result of the strategic alliances established.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Business Expansion</P>
</U><B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">Since the change in management and Board control on December 3, 1996 the Company closely scrutinizes transactions to maximize profitability. As a result of the restructuring, which was completed in 1997, and a move towards
concentrating on profit centers, the Company has established a foundation upon which future profitable business expansion can be achieved.  As an outgrowth of the Company's core transportation leasing business, several acquisitions are being evaluated
that provide for vertical and horizontal integration into businesses that utilize similar back office operations.</P>
<B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">The expansion of the Company's core business through the acquisition of and merger with complementary businesses within the financial services and transportation industries will be an ongoing strategic focus. The implementation of
this strategy involves members of senior management and outside professionals reporting to a Mergers and Acquisitions subcommittee of the Board of Directors. This group is constantly evaluating a variety of domestic and international leasing companies and
related opportunities, for potential alliances and/or business combinations.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company, through an affiliate acquired from Afinita Motor Corporation (Pty) Ltd., ("AMC) the exclusive worldwide distribution rights for products manufactured/assembled by AMC, excluding Africa, England, Scotland and Wales.  AMC is
one of South Africa's largest manufacturer/assembler of trucks, tractor-trailers, buses, automobiles, sport utility vehicles ("SUV), motorcycles, and other products supplied by AMC.  The Company is currently evaluating various methods to utilize these
rights, along with direct and indirect commissions the Company may receive with these products.  A long-term plan is to directly re-sell/market these rights and/or products within this exclusive territory.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Communications and Information</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">The Company has completed efforts to assess and, where required, remediate issues associated with Year 2000 ("Y2K") issues.  Generally defined, Y2K issues arise from computer programs which use only two digits to refer to the year
and which may experience problems when the two digits become "00" in the year 2000.  In addition, imbedded hardware microprocessors may contain time and two-digit year fields in executing their functions.  Much literature has been devoted to the possible
effects such programs may experience in the Year 2000, although significant uncertainty exists as to the scope and effect the Y2K issues will have on industry and the Company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In 1998, the Company developed a strategic plan to identify the IT systems needed to accomplish the Company's overall growth plans.  As part of this process, Y2K issues were considered and addressed by the Company's senior management
and MIS personnel.  Although this plan was intended to modernize the IT systems, compliance with Y2K requirements were incorporated.  The cost of bringing the Company in full compliance should not result in a material increase in the recent levels of
capital spending or any material one-time expenses.  To date, the Company has spent approximately $400,000 in modernizing its IT system, including compliance with Y2K requirements.  The Company anticipates spending approximately $300,000 during fiscal
2000 to complete the modernization of its IT system.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The failure of either the Company, its vendors or clients to correct the systems affected by Y2K issues could result in a disruption or interruption of business operations.  The Company uses computer programs and systems in a vast array
of its operations to collect, assimilate and analyze data.  Failure of such programs and systems could affect the Company's ability to track assets under lease and properly bill.  Although the Company does not believe that any of the foregoing worst-case
scenarios will occur, there can be no assurance that unexpected Y2K problems of the Company's and its vendors' and customer's operations will not have a material adverse effect on the Company.  No significant operational deficiencies have arisen from the
Y2K issue.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In 1998 the Company made several improvements to its Internet presence </FONT><FONT FACE="Courier New" SIZE=3>(http://www.chancellorcorp.com)</FONT><FONT SIZE=3> as part of the Company's strategy to further incorporate technology into
its marketing and customer service initiatives.  The Company's goal<B> </B>is to create a simple, well-designed and useful Internet destination by redesigning the site and expanding content to improve its usefulness as a business resource for customers and an informational tool for investors when fully developed.  The
Chancellor site will showcase the Company's truck and trailer inventory available through its seven (7) retail locations, provides online and downloadable lease applications for fleet managers, and improve the quality and quantity of corporate and
financial information tailored for the investment community.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Market Opportunities</P>
</U><B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">Through implementation of a strategy allowing for penetration of investment grade and middle market, as well as Fortune 100 customers, the Company will broaden its target market to a less competitive and price sensitive arena. The
Company will focus its energies domestically and internationally on the multi-billion dollar leasing marketplace.  The ability of the Company to originate and remarket equipment in underdeveloped and inefficient markets translates into higher potential
rates of return.  Additionally, the willingness of the Company's strategic financial partners to augment the Company's deal underwriting capabilities provides financial strength to execute transactions.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The used transportation equipment market also presents one of the most fragmented markets available.  Dominated by local dealers and manufacturer remarketers, the used transportation equipment market presents Chancellor an opportunity
for consolidation in this industry.  The Company's management believes that a significant opportunity exists to offer lease and rental companies, finance companies, utilities, municipalities, and transportation companies a retail outlet for their used
equipment as opposed to the current wholesale and auction outlets currently used.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company also views its efforts to be a global originator/remarketer of transportation and non-transportation equipment as an element to its corporate growth strategy over the next 5 to 7 years.  The additional international revenue
streams, where margins are significantly higher than the domestic market, will help facilitate the Company's goal of increasing profitability. Exposure on these transactions will be mitigated through the use of credit enhancement, letters of credit and
other similar instruments.  The Company's management is committed to a strategy providing for international diversification within emerging global markets.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Additionally, the Company has made significant progress in establishing a presence in the Republic of South Africa ("RSA") as a premier financial services company in this region.  The Company's efforts as a key contributor in the
economic development of the RSA are demonstrated indirectly through an investment in the New Africa Opportunity Fund, LP ("NAOF.)  Additionally, during 1999, the Company invested in and acquired up to 15.1% of one of NAOF's investee companies as well as
obtained worldwide distribution rights excepting certain countries for its products..</P>
<U><P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">As a result of its strength in the management of assets, the Company has a unique opportunity to originate and/or remarket long-lived assets in the international marketplace. As continued emphasis is placed on projects to rebuild
and improve infrastructure, the need for capital equipment in these international markets is expected to grow.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Operating Facility</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's fully integrated sales and marketing departments are headquartered in Boston, Massachusetts, with a satellite office located in New York City, New York.  The Company maintains retail used transportation equipment centers
in Conley, Georgia; Pompano Beach, Florida; Orlando, Florida; Richmond, Virginia; Dallas, Texas; Kansas City, Missouri; and Elizabeth, New Jersey.  A direct sales staff and telemarketing program supports a national network of sales representatives.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Seasonality</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">Because of tax and investment considerations, investors frequently defer their decisions to purchase lease transactions until after the first half of the calendar year.</P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Employees</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">In April 1999, the Company employed approximately 90 persons on a full time basis.  As of March 30, 2000, the Company employed approximately 107 persons on a full time basis.  Pending adequate financial resources, the Company
expects to hire a number of sales and marketing people to support its plan to re-establish its origination business and service planned development or acquisition of additional dealerships.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">ITEM 2</U>.        <B>Description of Property.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company leases an office facility in Boston, Massachusetts.  This facility houses the Company's administrative, financing and marketing operations.  The Boston, Massachusetts lease is for a non-cancelable period of five years, with
a five-year renewable period at fair market value.  The lease has two and a half years remaining in the original term as of December 31, 1999, with a base rent of approximately $11,000 per month.  The Boston, Massachusetts facility adequately provides for
present and future needs, as currently planned.  The Company also leases offices in New York and Nevada on a month to month basis.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company also leases seven (7) other retail locations in the following states; Florida, Georgia, New Jersey, Texas, Missouri, and Virginia.  Total lease commitments at December 31, 1999 wre aproximately $33,000 per month.  Subsequent
to year- end, the Company and the former Tomahawk shareholders have entered into a definitive agreement to purchase the Conley, Georgia location.  Final details are being confirmed and/or reviewed by legal counsel, however the purchase price is believed
to be less than $950,000.  The Company plans to own the real estate, when closed, through a new subsidiary incorporated in 2000.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">ITEM 3</U>.        <B>Legal Proceedings.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">As of 12/31/99, all material litigation involving the Company has been settled and grievances have been resolved.  The Company is involved in routine legal proceedings incidental to the conduct of its business.  Management believes that
none of these legal proceedings will have a material adverse effect on the financial condition or operations of the Company.</P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">ITEM 4</U>.        <B>Submission of Matters to a Vote of Security Holders</P>
</B><P ALIGN="JUSTIFY">None.</P>
<B><P ALIGN="CENTER">PART II</P>
</B><U><P ALIGN="JUSTIFY">ITEM 5</U>.        <B>Market for Common Equity and Related Stockholder Matters.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's Common Stock has traded on the NASDAQ OTC Electronic Bulletin Board under the symbol "CHLR" since August 21, 1996 and under the symbol "CHCR" between January 28, 1994 and August 21, 1996 on the basis of actual trading
prices. The Company's Common Stock had traded from June 30, 1992 to January 28, 1994 on the Small Cap Market of the Automated Quotation System of NASDAQ on the basis of actual trading prices.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The following table sets forth the high and low sales prices of the Company's Common Stock for the periods indicated, according to published sources.</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">High</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Low</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>2000</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>First quarter through March 30</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$        .82</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$        .28</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>1999</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Fourth Quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.67</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.22</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Third Quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.88</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.44</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Second Quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.75</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.44</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>First quarter </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.93</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.43</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>1998</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Fourth quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.88</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.50</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Third quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1.34</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.24</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Second quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.37</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.16</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>First quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.44</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.27</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>1997</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Fourth quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.44</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.15</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Third quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.18</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.10</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Second quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.15</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.09</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>First quarter</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.10</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.04</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">On March 30, 2000, there were approximately 700 beneficial owners of the Company's common stock.  The Company has not paid or declared cash dividends on its common stock during the periods indicated and does not currently intend to pay
cash dividends on its common stock for the foreseeable future.</P>
<U><P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">ITEM 6</U>.        <B>Management's Discussion and Analysis or Plan of Operations.</P>
</B><U><P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>

<P ALIGN="JUSTIFY">Results of Operations</P>
</U><I><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Year Ended December 31, 1999 vs. December 31, 1998</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Revenues.</I>  Total revenues for the year ended December 31, 1999 was $62,272,000 as compared to $10,708,000 for the prior year, an increase of $51,564,000 or 482.0%.  For the year ended December 31, 1999, transportation equipment
sales were $54,528,000 as compared to $6,165,000 sales for the corresponding prior year.  The increase in revenue is attributable in part to the acquisition of Tomahawk, as well as the ongoing efforts of purchasing and selling of transportation
portfolios.  The Company will also utilize the competitive advantage provided by its access to retail pricing for residual values to aid in the ability to improve competitiveness within the Company's lease origination business unit.  For the year ended
December 31, 1999, rental income increased by $813,000 or 86.3%<B> </B>as compared to the prior year.  The increase in rental income is attributable primarily to the addition of certain equipment acquired in connection with the purchase of several portfolios.  For the year ended December 31, 1999, lease-underwriting
income decreased by $47,000 or 63.5% as compared to the prior year.  Lease underwriting income decreased due to a higher concentration of broker related activity that results in a lower overall revenue stream.  The Company<U>,</U> however, continues to rebuild its lease origination process and plans the addition of key senior management and sales personnel, and development of strategic alliances to provide future growth in this area.  For the year ended December 31, 1999,
direct finance lease income decreased by $1,000 or 0.9%, as compared to the prior year.  The decrease in direct finance lease income is attributable primarily to the lack of additions to its portfolio of direct finance leases in 1999.  For the year ended
December 31, 1999, gains from portfolio remarketing decreased by $501,000 or 36.5% as compared to the prior year.  The decrease in gains from portfolio remarketing is attributable to the shift in revenue to sales of transportation equipment.  For the year
ended December 31, 1999, fees from remarketing activities increased by $2,848,000 or 164.8% as compared to the prior year.  This significant increase is attributable, in part, to management's efforts to increase the level of activity in the sales of used
transportation equipment.  For the year ended December 31, 1999, other income increased by $67,000.  Other comprehensive income was $49,000 for 1999 and $0 for 1998.</P>
<P ALIGN="JUSTIFY"></P>
<I><P ALIGN="JUSTIFY">	Costs and Expenses</I>.  Total costs and expenses for the year ended December 31, 1999 was $61,442,000 as compared to $10,184,000 for the prior year, an increase of $51,258,000 or 503.3%.  The increase is primarily a result of
the costs associated with sales of transportation equipment.  The cost of transportation equipment sales was $43,802,000 for the year ended December 31, 1999 and resulted in an overall gross margin of 19.7%.  Selling, general and administrative expenses
for the year ended December 31, 1999 was $15<B>,</B>217,000 as compared to $3,949,000 for the corresponding prior year, an increase of $11,268,000 or 285.3%.  For the year ended December 31, 1999, selling, general and administrative expenses included reimbursable administration costs of $972,000 as
compared to $1,498,000 for the corresponding prior year.  Before netting out the reimbursable administration costs, selling, general and administrative costs increased to $16,189,000 for the year ended December 31, 1999 as compared to $5,447,000 for the
corresponding prior year, an increase of $10,742,000.  The increase in selling, general and administrative expenses is due, in part, to the operating expenses of Tomahawk, as well as increases in technology spending and expenses incurred in start up
operations in Missouri and Texas as well as costs incurred in acquiring investments in Tomahawk and South Africa in accordance with S.O.P 98.5.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	Interest expense for the year ended December 31, 1999 was $802,000 as compared to $111,000 for the prior year, an increase of $691,000 or 622.5%.<B>  </B>This increase is due primarily to the continued expansion of the Company's
retail platform, and the floor planning lines of credit required to finance its equipment inventory as well as the cost to finance the operating lease portfolios purchased from the trusts and other financial institutions during 1999.</P>
<B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">	Depreciation and amortization expense for the year ended December 31, 1999 was $1,621<B>,</B>000 as compared to $477,000 for the prior year, an increase of $1,144,000 or 239.8%.<B>  </B>This increase is primarily due to the
amortization of excess purchase price of the Tomahawk acquisition, amortization of distribution rights acquired from AMC, depreciation on assets from operating leases, and the amortization of prepaid fees on the trust recovery and buyout projects. These
costs are being amortized over periods from three (3) to fifteen (15) years.</P>
<B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">	<I>Net Income</I>.  Net income after taxes for the year ended December 31, 1999 was $1,074<B>,</B>000 as compared to of $524,000 for the prior year, an increase of $550,000 or 105%. The increase in net income is attributable to
the significant increase in revenues, primarily from the retail and wholesale of used transportation equipment, the buy-out of leases from trust portfolios, the utilization of tax benefits generated from prior years net operating losses, and continued
improvements in the containment of corporate overhead costs.  Basic net income per share for the year ended December 31, 1999 remained at $0.02 per share.  The earnings per share remains fairly constant due to the issuance of additional equity interests
and/or an increase in the number of shares outstanding. </P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Liquidity and Capital Resources</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">	The Company recognized a net increase in cash and cash equivalents for the year ended December 31, 1999 of $492,000.  Operating activities provided cash of $2,785,000 during the year ended December 31, 1999.  Investing
activities used cash of $9,441,000 during the year ended December 31, 1999.  Financing activities provided cash of $7,148,000 during the year ended December 31, 1999 and is primarily a result of conversion of stock options and warrants<B> </B>and increases in debt required to finance its used equipment inventory as well as debt incurred to finance the buyout of certain lease portfolios<B>.</B>  Cash and cash equivalents amounted to $1,104,000 at December 31, 1999 as compared to
$612,000 at December 31, 1998, an increase of $492,000 or 80.4%.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company is provided management and consulting services by VMI, Corporation ("VMI") an affiliate of the Company's majority stockholder, pursuant to a consulting agreement approved by the shareholders at the 1995 Annual Meeting of the
Stockholders, as amended in July 1998.  VMI provides specified services including, but not limited to, general business consulting, the development and implementation of the Company's 1997 transition and turnaround strategies, development of domestic and
international business opportunities and growth strategies, identification and development of strategic alliances, and support of merger and acquisition activity.  VMI was paid approximately $1.1 million for consulting fees including reimbursement for
expenses paid on behalf of the Company in the approximate amount of $170,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Vestex Capital Corporation ("VCC"), the major shareholder of the Company, provided specified services including debt and equity raising efforts, due diligence related to major acquisitions, and other services related to financing and
investing activities.  VCC is paid fees related to debt and equity transactions up to 3.0% and 7.5%, respectively, of the amount of financing raised in addition to related expenses.  VCC provides additional services to the Company on operational and other
matters for which it is compensated at levels negotiated with the Company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During 1999, VCC investigated numerous strategic alliances and merger and acquisition opportunities on behalf of the Company.  VCC was instrumental in the negotiation and management of the Company's financing, acquisition and investment
efforts in the Republic of South Africa and other international opportunities.  VCC was also instrumental in the development and implementation of the strategy to buy-out  and acquire investment grade transportation equipment portfolios.  As a result of
this strategy, the Company acquired portfolios valued at an original equipment cost of approximately $35,000,000.  The acquisition of these portfolios was further facilitated by VCC assisting in arranging approximately $8,000,000 of financing to effect
the portfolio buy-out.  VCC was also instrumental in recruiting and attracting key employees to the Company.  Additionally, VCC provided these key employees warrants to purchase Chancellor common stock, beneficially owned by VCC and valued at
approximately $1,752,300.  VCC's activities provided sources of funding to the Company of approximately $6,500,000, and $300,000 for fees for services and reimbursable expenses, respectively, and converted into debt and equity instruments of the Company.
In 1998, this included the purchase of 1,946,146 shares of the Company's common stock at a price of $.69 per share.  During 1999 VCC infused directly over $3,250,000 into the Company in the form of cash and of stock purchases, and paid over $450,000 of
expenses on behalf of the Company.  VCC also exercised stock options valued at $2,000,000 during 1999.  Vestex also guaranteed the debt of up to $1,000,000 for a line of credit with a financial institution for one of the Company's subsidiaries.  VCC
infused approximately $2,385,000 of cash and paid expenses of approximately $670,000 on behalf of the Company during 1998.  As a result, in part, of VMI and VCC's activities and services provided, the Company's net worth increased to approximately
$9,500,000 at December 31, 1999, to $2,362,000 at December 31, 1998, from $227,000 as of December 31, 1997 and from a negative net worth of approximately $9,446,000 as of December 31, 1996, as adjusted for stock issuance, direct equity infusions,
contributions of related parties, and the results of discussion regarding the initial Vestex recapitalization of the Company during 1995.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company's ability to underwrite equipment lease transactions is largely dependent upon the availability of short-term warehouse lines of credit.  Management is engaged in continuing dialogue with several inventory lenders which
appear to be interested in providing the Company with warehouse financing.  If the Company experiences delays in putting warehouse facilities in place, the Company transacts deals by coterminous negotiation of lease transactions with customers and
financing with institutions upon which it obtains a fee as the intermediary of up to 3% of the amount of financing.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The remarketing, retailing and wholesaling of equipment has played and will continue to play a vital role in the Company's operating activities.  In connection with the sale of lease transactions to investors, the Company typically
is entitled to share in a portion of the residual value realized upon remarketing.  Successful remarketing of the equipment is essential to the realization of the Company's interest in the residual value of its managed portfolio.  It is also essential to
the Company's ability to recover its original investment in the equipment in its own portfolios and to recognize a return on that investment.  The Company has found that its ability to remarket equipment is affected by a number of factors. The original
equipment specifications, current market conditions, technological changes, and condition of the equipment upon its return all influence the price for which the equipment can be sold or re-leased.  Delays in remarketing caused by various market conditions
reduce the profitability of the remarketing.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company anticipates it will continue to dedicate substantial resources toward the further development and improvement of its remarketing and retailing capabilities and believes that this business unit will continue to be a
profit center for the Company.  The Company's strategy is to further exploit its remarketing expertise by continuing to develop its ability to sell remarketing services to other lessors, fleet owners, and lessees and also to create a dealer capability
under which the Company would buy and resell fleet equipment.  The Company will also expand its used transportation equipment retail and wholesale capabilities through addition of retail centers through internal growth and acquisitions. This improved
capability will be used as a competitive advantage that will enable the Company to provide a "total holding cost" concept when competing for new lease origination deals.  The Company's retail and wholesale business unit will provide both an improved
outlet for other lessors, financial institutions, and fleet owners to dispose of used transportation equipment and a source of quality used transportation equipment for fleet owners and owner-operators.  The Company will also aggressively promote its
Internet capabilities to further promote its business activities and as an e-commerce tool.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In August 1997, the Company committed to make a $1 million equity investment in the New Africa Opportunity Fund, LP ("NAOF").  NAOF is a $120 million investment fund composed of $40 million from equity participants including the
Company, and $80 million in debt financing provided by the Overseas Private Investment Corporation ("OPIC"), an independent U.S. government agency.  The purpose of the fund is to make direct investments in emerging companies throughout Africa.  As of
December 31, 1999, the Company had funded approximately $469,000 and is obligated to provide additional funding in the approximate amount of $531,000.  As further described in footnote 13, the Company has additionally invested in and acquired up to 15.1%
of one of NAOF's investee companies, plus acquired the worldwide distribution rights, excluding certain countries, to distribute the products manufactured by the investee company.  The Company continues to negotiate further strategic opportunities with
this investee company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company's renewal or replacement of recently expired lines, its expected access to the public and private securities markets, both debt and equity, anticipated new lines of credit (both short-term and long-term and recourse and
non-recourse), anticipated long-term financing of individual significant lease transactions, and its estimated cash flows from operations are anticipated to provide adequate capital to fund the Company's operations for the next twelve months.  Although no
assurances can be given, the Company expects to be able to renew or timely replace expired lines of credit, to continue to have access to the public and private securities markets, both debt and equity, and to be able to enter into new lines of credit and
individual financing transactions.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Potential Fluctuations in Quarterly Operating Results</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">	The Company's future quarterly operating results and the market price of its stock may fluctuate.  In the event the Company's revenues or earnings for any quarter are less than the level expected by securities analysts or the
market in general, such shortfall could have an immediate and significant adverse impact on the market price of the Company's stock.  Any such adverse impact could be greater if any such shortfall occurs near the same time of any material decrease in any
widely followed stock index or in the market price of the stock of one or more public equipment leasing companies or major customers or vendors of the Company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company's quarterly results of operations are susceptible to fluctuations for a number of reasons, including, without limitation, as a result of sales by the Company of equipment it leases to its customers.  Such sales of
equipment, which are an ordinary but not predictable part of the Company's business, will have the effect of increasing revenues, and, to the extent sales proceeds exceeds net book value, net income, during the quarter in which the sale occurs.
Furthermore, any such sale may result in the reduction of revenue, and net income, otherwise expected in subsequent quarters, as the Company will not receive lease revenue from the sold equipment in those quarters.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	Given the possibility of such fluctuations, the Company believes that comparisons of the results of its operations to immediately succeeding quarters are not necessarily meaningful and that such results for one quarter should not be
relied upon as an indication of future performance.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Recent Accounting Pronouncements</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".  SFAS No. 130 prescribes standards for reporting comprehensive income and its components.  The implementation of
this SFAS has no material effect on the Company's consolidated financial statements.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">SFAS No. 131, "Disclosures About Segments of An Enterprise and Related Information", requires disclosures of certain information about the Company's operating segments on a basis consistent with the way in which the Company is managed
and operated.  SFAS No. 131 also requires disclosures about products and services, geographic areas and major customers.  The adoption of SFAS No. 131 did not affect results of operations or the financial position of the Company but did affect the
disclosure of segment information.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Start-up Costs.  In April, 1998, AcSEC issued Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" (SOP 98-5).  SOP 98-5 requires costs of start up activities and organization costs to be expensed as incurred and
is effective for fiscal years beginning after December 15, 1998.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Revenue Recognition  In December, 1999, the Securities and Exchange Commission issued staff accounting bulletin No. 101("SAB101"), "Revenue Recognition in Financial Statements."  SAB101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.  The Company will adopt SAB101 as required during the year 2000, and is evaluating the effect such adoption may have on its consolidated results of operations and financial
position.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">ITEM 7</U>.	<B>Financial Statements.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The following documents are filed as a part of this report on Form 10-KSB:</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=1 BORDERCOLOR="#ffffff" CELLPADDING=7 WIDTH=486>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Page No.</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Independent Auditors' Report</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-1</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Consolidated Balance Sheet as of</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">December 31, 1999</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-2</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Consolidated Statements of Operations for the </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">years ended December 31, 1999 and 1998</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-3</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Consolidated Statements of Stockholders</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Equity for the years ended December 31, 1999 and 1998</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-4</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Consolidated Statements of Cash Flows for the </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Years ended December 31, 1999 and 1998</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-5</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">F-6</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">All schedules have been omitted because they are inapplicable or the required information is included in the notes to the consolidated financial statements.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<B><P ALIGN="CENTER">PART III</P>
</B><P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>

<U><P ALIGN="JUSTIFY">ITEM 8</U>.	<B>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.</P></DIR>
</DIR>
</DIR>

</B><P ALIGN="JUSTIFY">None.</P>
<U><P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">ITEM 9</U>.	<B>Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act.</P>
<U><P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>

</B></U><P ALIGN="JUSTIFY">The information required by Item 401 and 405 of Regulation S-B with respect to directors and executive officers of the registrant will be set forth in the Proxy Statement for the Annual Meeting of Stockholders to be held on June
30, 2000 and to be filed with the Securities and Exchange Commission by April 30, 2000, and is incorporated herein by this reference.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY"> </P>
<U><P ALIGN="JUSTIFY">ITEM 10</U>.	<B>Executive Compensation</B><U>.</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The information required by Item 402 of Regulation S-B with respect to executive compensation will be set forth in the Proxy Statement for the Annual Meeting of Stockholders to be held on June 30, 2000 and to be filed with the
Securities and Exchange Commission by April 30, 2000, and is incorporated herein by this reference.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">ITEM 11</U>.	<B>Security Ownership of Certain Beneficial Owners and Management.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The information required by Item 403 of Regulation S-B with respect to security ownership of certain beneficial owners and management will be set forth in the Proxy Statement for the Annual Meeting of Stockholders to be held on June 30,
2000 and to be filed with the Securities and Exchange Commission by April 30, 2000, and is incorporated herein by this reference.</P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">ITEM 12</U>.	<B>Certain Relationships and Related Transactions.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The information required by Item 404 of Regulation S-B with respect to certain relationships and related transactions will be set forth in the Proxy Statement for the Annual Meeting of Stockholders to be held on June 30, 2000 and to be
filed with the Securities and Exchange Commission by April 30, 2000, and is incorporated herein by this reference.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">ITEM 13</U>.	<B>Exhibits List and Reports on Form 8-K.</P>
</B><P ALIGN="JUSTIFY"></P>
<OL TYPE="a">

<P ALIGN="JUSTIFY"><LI>Exhibits:</LI></P></OL>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">	2		Stock Purchase Agreement, dated January 29, 1999, by and among Chancellor Asset Management, Inc., M. Rea Brookings and David F. Herring (incorporated by reference from Exhibit 2 to the Company's current report on Form 8-K
filed with the Securities and Exchange Commission on February 12, 1999).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">3.1	Restated Articles of Organization of the Company (Incorporated by reference from Exhibit 3A to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on July 22, 1983 (Registration
Statement)), as amended by Articles of Amendment filed with the Massachusetts Secretary of the Commonwealth on May 18, 1990 (incorporated by references from Exhibit 3(a) to the Company's Annual Report, Form 10-K, for the year ended December 31, 1991), as
amended by Articles of Amendment filed with the Massachusetts Secretary of the Commonwealth on January 26, 1995 (incorporated by reference from Exhibit 3(a) to the Company's Annual Report, Form 10-K, for the year ended December 31, 1994) and as amended by
Articles of Amendment files with the Massachusetts Secretary of the Commonwealth on October 27, 1997 (incorporated by reference from Exhibit 3(a) to the Company's annual report, Form 10-KSB-A, for the year ended December 31, 1997).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">3.2	By-laws of the Company, as amended to date (incorporated by reference from Exhibit 3(b) to the Company's Annual Report, Form 10-K, for the year ended December 31, 1994)</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.1	Recapitalization and Stock Purchase Agreement dated as of September 20, 1994 among the Company, Bruncor Inc. and Vestex Corporation (incorporated by reference from Exhibit 3 to the Company's Form 8-K filed with the Securities
and Exchange Commission on September 27, 1994 and dated August 26, 1994), as amended by Amendment No. 1 (incorporated by reference from Appendix I to the Company's Proxy Statement dated 	December 9, 1994), by a letter agreement dated as of February 28,
1995 	among the Company, Bruncor Inc. and Vestex Corporation (incorporated by 	reference from Exhibit 10(t) to the Company's Annual Report, Form 10-K, 	for the year ended December 31, 1994), by Amendment No. 3 to 	Recapitalization and Stock
Purchase Agreement dated as of July 14, 1995 by and among the Company, Bruncor Inc., and Vestex Corporation (incorporated by reference from Exhibit 1 to the Company's Form 8-K filed with the Securities and Exchange Commission on August 4, 1995 and dated
July 25, 1995), and by Amendment No. 4 to Recapitalization and Stock Purchase Agreement dated as of July 14, 1995 by and among the Company, Bruncor Inc., and Vestex Corporation (incorporated by reference from Exhibit 1 to the Company's Form 8-K filed with
the Securities and Exchange Commission on April 22, 1996 and dated April 12, 1996).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.2	Loan Reduction and Purchase and Assignment Agreement dated as of April 4, 1997 among the Company, Chancellor Fleet Corporation, Chancellor Financial Sales Service, Inc., Chancellor Fleet Remarketing, Inc., Chancellor Asset
Corporation, Chancellor Financialease, Inc., Valmont Financial Corporation, Chancellor DataComm, Inc., Alco 474N Trust, Cains 931D Trust, Cains 931E Trust, Chrysler Bo4E Trust, Conagra 25405 Trust, Conagra 25409 Trust, Dallas 38329 Trust, H.E. Butt 796C
Trust, Kraft 79328 Trust, Savron B063 Trust, Saturn B067 Trust, Shamrock 25748 Trust, Tyler 3Mo Trust, Whirlpool 49434 Trust, Fleet National Bank and VESTEX Capital Corporation.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.3	*1994 Stock Option Plan, adopted by the Board of Directors of the Company on August 12, 1994 and approved by the Stockholders of the Company on January 20, 1995 (incorporated by reference from Appendix III to the Company's Proxy
Statement dated December 9, 1994).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.4	*1994 Directors' Stock Option Plan, adopted by the Board of Directors of the Company on August 12, 1994 and approved by the Stockholders of the Company on January 20, 1995 (incorporated by reference from Appendix III to the
Company's Proxy Statement dated December 9, 1994) and as amended by the Board of Directors of the Company on December 30, 1996 and approved by the Stockholders of the Company on August 29, 1997 (incorporated by reference from Appendix III to the Company's
Proxy Statement dated July 30, 1997.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.5	*1994 Employee Stock Purchase Plan, adopted by the Board of Directors of the Company on August 12, 1994 and approved by the Stockholders of the Company on January 20, 1995 (incorporated by reference from Appendix IV to the
Company's Proxy Statement dated December 9, 1994).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.6	*1997 Stock Option Plan, adopted by the Board of Directors of the Company on March 20, 1997 and approved by the stockholders of the Company on August 29, 1997 (incorporated by reference from Appendix III to the Company's proxy
statement dated July 30, 1997), and as amended by the Board of Directors of the Company on April 1, 1998 and approved by the stockholders of the Company on May 15, 1998 (incorporated by reference from Appendix III to the Company's proxy statement dated
April 9, 1998).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.7	$200,000 Subordinated Promissory Note dated as of July 25, 1995 by the Company in favor of Bruncor, Inc. (incorporated by reference from Exhibit 3 to the Company's Form 8-K filed with the Securities and Exchange Commission on
August 4, 1995 and dated July 25, 1995).</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<OL START=8>
<OL START=8>

<P ALIGN="JUSTIFY"><LI>Specimen of Final Form of Warrant to Purchase Common Stock of Chancellor Corporation issued by the Company on April 1, 1998 to VESTEX Capital Corporation.</LI></P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"><LI>Consulting Agreement, dated July 1, 1998, by and among the Company and VMI Corporation.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY"></P>
<OL START=11>
<OL START=11>

<P ALIGN="JUSTIFY"><LI>Stock Redemption Agreement, dated August 7, 1998, by and among the Company and VESTEX Capital Corporation.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">10.22	Security Agreement, dated as of December 22, 1998, by and among Chancellor Corporation and Vestex Capital Corporation.</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<OL START=23>
<OL START=23>

<P ALIGN="JUSTIFY"><LI>Employment Agreement, dated October 1, 1998, by and among Chancellor Corporation and Franklyn E. Churchill.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY">	</P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">10.24	Promissory Note, dated September 30, 1999, in the original principal amount of $546,274 from Chancellor Corporation to Vestex Capital Corporation.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">10.25	Promissory Note, dated December 22, 1999, in the original principal amount of $39,500 from Chancellor Corporation to Vestex Capital Corporation.</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<P ALIGN="JUSTIFY">	11	Computation of Earnings per Share</P>
<P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">16(a) 	Letter dated January 9, 1997, from Deloitte & Touche LLP (incorporated by reference from Exhibit to the Company's Amendment No. 1 to Form 8-K filed with the Securities and Exchange Commission on January 13, 1997 and dated
December 6, 1996). </P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<OL START=21>

<OL>

<P ALIGN="JUSTIFY"><LI>Subsidiaries of the Company (incorporated by reference from Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY"></P>
<OL>
<OL>

<P ALIGN="JUSTIFY"><LI>Independent Auditor's Consent - Metcalf, Rice, Fricke and Davis</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P ALIGN="JUSTIFY">27.1	Financial Data Schedule for year ended December 31, 1999.</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<P ALIGN="JUSTIFY">*	Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	Copies of these exhibits are available to stockholders of record at a charge of $.09 per page, plus postage upon written request.  Direct requests to: Jon Ezrin, Treasurer, Chancellor Corporation, 210 South Street, Boston, MA 02111.
</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	(b)	Reports on Form 8-K:</P>
<P ALIGN="JUSTIFY"></P><DIR>
<DIR>

<P ALIGN="JUSTIFY">	Current Report on Form 8-K, dated February 10, 1999</P>
<P ALIGN="JUSTIFY">	Current Report on Form 8-K, dated March 4, 1999</P>
<P ALIGN="JUSTIFY">	Current Report on Form 8-K/A, dated March 22, 1999</P>
<P ALIGN="JUSTIFY">	Current Report on Form 8-K/A, dated April 13, 1999</P></DIR>
</DIR>

</FONT><B><U><P ALIGN="CENTER">EXHIBIT 11</P>
</U><FONT SIZE=2><P ALIGN="CENTER">Chancellor Corporation and Subsidiaries</P>
<P ALIGN="CENTER">Computation of Earnings Per Share</P>
</B>
<P> </P>
<P>The following table reflects the calculation of the earnings per share:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=590>
<TR><TD WIDTH="44%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P>Weighted Average</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P>                          Income</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P>Common Shares Outstanding</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P>(numerator)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P>(denominator)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
</TR>
</TABLE>

<FONT SIZE=1><P>                                        
                            In thousands, except share and per share data</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=609>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Year ended December 31, 1999</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Earnings from Operations</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P>$        1,074</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>   50,804,176</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=25>
<FONT SIZE=2><P>Basic earnings per common share</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2 HEIGHT=25><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=25><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=25><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=25>
<FONT SIZE=2><P>$  0.02</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Effective of dilutive securities</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Convertible preferred shares</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>    3,083,333</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Warrant-VCC</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>    1,622,807</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P><HR WIDTH="9%" SIZE=1>      Stock option plans</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P>    1,680,144</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<U><FONT SIZE=2><P>$        1,074</U></FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P>   57,190,460</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Diluted earnings per common share</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>$  0.02</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Year ended December 31, 1998</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Earnings from operations</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<U><FONT SIZE=2><P>$          524</U></FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P>   32,195,162</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Basic earnings per common share</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>$  0.02</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Effect of dilutive securities</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Convertible preferred shares</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>    5,000,000</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Warrant-VCC</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>    2,959,184</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>      Stock option plans</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P>    1,246,417</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<U><FONT SIZE=2><P>$         524</U></FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P>   41,400,763</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P>Diluted earnings per common share</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P>$  0.01</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P>      </P>
</FONT><FONT SIZE=3><P ALIGN="CENTER">INDEPENDENT AUDITORS' REPORT<BR>
</P>

<P> </P>
<P>To the Stockholders and Board of Directors<BR>
of Chancellor Corporation</P>

<P> </P>
<P ALIGN="JUSTIFY">We have audited the accompanying consolidated balance sheet of Chancellor Corporation and subsidiaries as of December 31, 1999 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each
of the years in the two year period ended December 31, 1999.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">We conducted our audit in accordance with generally accepted auditing standards.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chancellor Corporation and its subsidiaries as of December 31, 1999 and the results of their
operations and their cash flows for each of the years in the two year period ended December 31, 1999 in conformity with generally accepted accounting principles.</P>

<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P ALIGN="RIGHT">/s/<B> </B>Metcalf Rice Fricke & Davis</P>

<P>Atlanta, Georgia</P>
<P>March 24, 2000</P>

</FONT><B><U><P ALIGN="CENTER"> Chancellor Corporation and Subsidiaries</P>
</U><FONT SIZE=2><P ALIGN="CENTER">Consolidated Balance Sheet</P>
</B><P ALIGN="CENTER">(<I>In Thousands</I>)</P>
<P ALIGN="CENTER"></P>
<P> </P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=528>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">December 31,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=526>
<TR><TD WIDTH="82%" VALIGN="TOP">
<B><FONT SIZE=2><P>Assets</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,104</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Receivables, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,154</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Deferred taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">336</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Net investment in direct finance leases </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">376</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Equipment on operating lease, net of accumulated depreciation of $1,887</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,152</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Inventory</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">10,359</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Residual values, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">143</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Furniture and equipment, net of accumulated depreciation of $1,539</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,072</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Investments</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,758</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Intangibles, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,010</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Other assets, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,084</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,548</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<B><FONT SIZE=2><P>Liabilities and Stockholders' Equity</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY">Liabilities</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,444</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Deferred revenue</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,812</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Indebtedness:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>     Revolving credit line</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,543</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>     Notes payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">699</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>     Nonrecourse</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">192</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>     Recourse</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,320</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>          Total liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,010</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY">Stockholders' equity</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Preferred Stock, $.01 par value, 20,000,000 shares authorized:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>        Convertible Series B, 2,000,000 shares authorized, 350,000 shares </P>
<P>            issued and outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"> $</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Common stock, $.01 par value; 75,000,000 shares authorized,</P>
<P>     58,795,065 shares issued and outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">                590                                                         </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Additional paid-in capital</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">35,837</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>   Accumulated deficit</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(     26,893</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>              Total Stockholders' Equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,538</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>              </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=2><P>Total Liabilities and Stockholders' Equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,548</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2>
<P> </P>
</FONT><B><FONT SIZE=4><P ALIGN="CENTER">Chancellor Corporation and Subsidiaries</P>
</FONT><P ALIGN="CENTER">Consolidated Statements of Operations</P>
</B><FONT SIZE=2><P ALIGN="CENTER">(<I>In Thousands, Except Per Share Data</I>)</P>
</FONT>
<TABLE BODER=0 CELLSPACING=1 CELLPADDING=2 WIDTH=540>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=4 HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">1998</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" COLSPAN=2 HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY">Revenues</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2>
<P>  Transportation equipment sales</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$            54,528</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$                  6,165 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Rental income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,755</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 942</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Lease underwriting income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">27</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">74</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Direct finance lease income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">109</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">110</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Interest income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">267</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">195</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Gains from portfolio remarketing</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">873</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,374</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Fees from remarketing activities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">4,575</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,728</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Other income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">138</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">120</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total Revenue</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$            62,272</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>$                10,708                 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY">Costs and expenses</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Cost of transportation equipment sales</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$            43,802</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                  5,647</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Selling, general and administrative</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">15,217</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">3,949</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Interest expense</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">802</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">111</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>  Depreciation and amortization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,621</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">477</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT SIZE=2><P ALIGN="RIGHT">$            61,442</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=15>
<FONT SIZE=2><P>$                10,184                 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Earnings before taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                 830</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                     524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Provision for income taxes   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$(               244)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                          -  </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18>
<B><FONT SIZE=2><P>Net Income</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$              1,074</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$                     524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>Basic net income per share</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$                0.02</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$                    0.02</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Diluted net income per share</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                0.02</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$                    0.01</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>Shares used in computing basic net income per share</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">50,804,176</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">32,195,162</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Shares used in computing diluted net income per share</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">57,190,460</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">41,400,763</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" ROWSPAN=2 HEIGHT=18>
<FONT SIZE=2><P>Net Income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" ROWSPAN=2 HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" ROWSPAN=2 HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$              1,074</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" ROWSPAN=2 HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$                     524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>Other Comprehensive Income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">49</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>Net Income and Comprehensive Income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$              1,123</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT">$                     524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
</TR>
</TABLE>

<FONT SIZE=2>
</FONT><B><FONT SIZE=1><P ALIGN="CENTER">Chancellor Corporation and Subsidiaries</B><BR>
<B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)<BR>
YEARS ENDED DECEMBER 31, 1999 AND 1998</B><BR>
(In Thousands)<BR>
</P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=565>
<TR><TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<U><FONT FACE="Courier New" SIZE=1><P><BR>
<BR>
Preferred Stock </U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<U><FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
Common Stock</U></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P><BR>
Add'l     Paid In</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY"><BR>
<BR>
Accum</B></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Accum.<BR>
Other Comp. </U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER"><BR>
Stockholders<BR>
Equity</U></FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Shares</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Amt</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Shares</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">Am</U>t</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Capital</U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT FACE="Courier New" SIZE=2><P ALIGN="JUSTIFY">Deficit</B></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=1><P>Income</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">(Deficit</U>)</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Balance 12/31/97<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">8,711</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$87</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">25,401</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$254</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> $28,426</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$(28,540)</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">    $227</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Preferred Stock Series A converted to common  stock<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
(711)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
(7)</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
7,105</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
71</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
    (64)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Preferred stock, Series AA converted to common stock<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
(3000)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
(30)</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
3,000</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
30</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Common Stock Issued<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2,146</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">21</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">   1,296</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">   1,317</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Exercise of Stock Options<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 892</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 9</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">     284</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">    293</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Additional Paid in Capital<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">       1</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">      1</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Net Income</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">_____</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">____</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P>______</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">____</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">______</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">        524</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P>______</P>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">   524</U></FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Balance 12/31/98</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">5,000</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$ 50</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">38,544</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$385</U></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER"> $29,943</U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">  $(28,016)</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">_</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$2,362</U></FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Exercise of stock warrants<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">10,000</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$100</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">   $1,900</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">$2,000</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Preferred stock, Series AA converted to common stock<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
(5,000)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
(50)</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
5,000</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
50</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Preferred stock, Series B issued<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">4</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">4</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">    1,815</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">1,819</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Common stock issued<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">4,700</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">48</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">    2,153</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2,201</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Exercise of stock options<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 718</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 8</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">       81</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">  89</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Common Shares Returned<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">  (167)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">  (1)</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">      (97)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">  (98)</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Additional paid in capital<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">      42</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 42</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Unrealized gain on available-for-sale securities<BR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">49</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER"> 49</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Net Income</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">____</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">____</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">_____</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">____<BR>
</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">_____</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">      1,074</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">_____</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">1,074</U></FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Balance 12/31/99</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">   4</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">   $4</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER"> 58,795</U></FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$ 590</U></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$  35,837</U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$   (26,942)</U></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">49</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=1><P ALIGN="CENTER">$9,538</U></FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">The accompanying notes are an integral part<BR>
of these consolidated financial statements.<BR>
<BR>
</FONT><FONT SIZE=3>F-4</P>
</FONT><B><U><P ALIGN="CENTER">Chancellor Corporation and Subsidiaries<BR>
</B>Consolidated Statements of Cash Flows<BR>
<B><FONT SIZE=2>(<I>In Thousands</I>)</P>
</B></U><P ALIGN="CENTER"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=560>
<TR><TD WIDTH="69%" VALIGN="TOP" HEIGHT=21><P></P></TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=3 HEIGHT=21>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998</FONT></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="7%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=595>
<TR><TD WIDTH="65%" VALIGN="TOP">
<B><FONT SIZE=2><P>Cash flows from operating activities:</B></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Net income</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,074</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">524</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Adjustments to reconcile net income to</P>
<P>      net cash provided by operating activities:</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>      Depreciation and amortization</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,621</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">477</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>      Residual value estimate realizations and</P>
<P>         Reductions, net of additions</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">              76</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">246</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>      Changes in assets and liabilities:</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>            (Increase) in receivables</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT"> </B></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          702</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       2,213</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>            (Increase) in deferred taxes</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          336</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">---</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>            (Increase) in inventory</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          440</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(            36</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">) </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>            Increase in deferred revenue </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">744</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,053</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>            Increase (decrease) in accounts payable and accrued  expenses</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">748</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       2,334</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">) </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,711</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       2,807</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>                Net cash provided by (used in ) operating activities</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,785</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       2,283 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=595>
<TR><TD WIDTH="65%" VALIGN="TOP">
<B><FONT SIZE=2><P>Cash flows from investing activities:</B></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>    Leased equipment held for underwriting</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">502</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Net investments in direct finance leases</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(            17</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">162</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Equipment on operating lease</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       3,800</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          588</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Net change in cash restricted</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,419</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Additions to furniture and equipment, net</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          496</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P>(          172           </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   (Increase) in intangibles, net</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       1,866</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Net change in other assets</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       3,262</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       1,377</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>                Net cash (used for) provided by investing activities</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       9,441</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">946</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=595>
<TR><TD WIDTH="65%" VALIGN="TOP">
<B><FONT SIZE=2><P>Cash flows from financing activities:</B></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Net borrowings under revolving line of credit</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">         9</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Borrowings-nonrecourse debt</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"> -</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">688</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Borrowings-recourse debt</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,542</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">755</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Repayments of indebtedness-non recourse</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          697</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">(          327   </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Repayments of indebtedness-recourse</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(       4,517</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(          875              </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Repayment of notes payable - net</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(            14</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>   Issuance of stock, net</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,825</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,611</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>                Net cash provided by financing activities</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,148</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$  </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,852</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=595>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>Net increase in cash and cash equivalents</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">492</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">515</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER"> </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>Cash and cash equivalents at beginning of year</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">612</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">97</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>Cash and cash equivalents at end of year</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,104</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">612</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>Cash paid for interest</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">728</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">265</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=2><P>Cash paid for income taxes</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">57</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="1%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">13</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<U><FONT FACE="Courier New" SIZE=1>
</U></FONT><FONT SIZE=3><P ALIGN="JUSTIFY">CHANCELLOR CORPORATION AND SUBSIDIARIES</P>
<P ALIGN="JUSTIFY">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</P>
<P ALIGN="JUSTIFY">DECEMBER 31, 1999</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">1.	<U>Business Organization and Significant Accounting Policies</P>
</U><P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Business</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	Chancellor Corporation and Subsidiaries (the "Company") are engaged in (1) buying, selling, leasing and remarketing new and used equipment, primarily transportation, material handling and construction equipment, (2) managing
equipment on and off-lease, and (3) arranging equipment-related financing.  The Company's primary market has historically been the United States.  During 1999 and 1998, the Company expanded its market presence to include activities in international
markets such as the Republic of South Africa and Russia.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Principles of Consolidation</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant intercompany accounts, transactions and profits and losses have been eliminated in consolidation.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Accounting for Estimates</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.  These assumptions could change based on future experience and, accordingly, actual results may differ
from these estimates.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	<U>Revenue Recognition</P>
<P ALIGN="JUSTIFY"></P>
</U><I><P ALIGN="JUSTIFY">Transportation equipment sales</I> - Revenues on transportation equipment sales is recognized in the period in which the sale is completed and title is transferred.  Deposits on transportation equipment, that may be required
under certain financing contracts, are shown as deposits on sales and included in accrued expenses.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Although transportation equipment is primarily sold with recourse, the Company may undertake certain limited obligations with respect to specific customers in case of default, referred to as limited recourse.  Upon transfer of the asset
sold with limited or full recourse, the Company accounts for the transaction as a sale, in accordance with the provisions of FASB Statement No. 125, "Accounting for transfers and Servicing of Financial Assets and Extinguishments of Liabilities".  The
Company's management has considered its history of repossession losses and has determined that no liability for recourse obligations is currently necessary.</P>
<P ALIGN="JUSTIFY"></P>
<I><P ALIGN="JUSTIFY">Lease underwriting income</I> - Lease underwriting fees arise from the sale of equipment leasing transactions and include cash underwriting margins and residual value fees. The excess of the sales price of equipment to an investor
(including the assumption of any nonrecourse indebtedness) over its cost to the Company represents lease-underwriting fees. The Company typically arranges for the lease of equipment to a lessee and, in some cases for borrowings to finance the purchase of
the equipment, assigning lease rentals to secure such borrowings on a nonrecourse basis.  If the Company elects to sell the transaction (as opposed to retaining the transaction for its own portfolio), the equipment, subject to the lease and the borrowing
(if any), is then sold to investors.  Consideration for the sale of the leased equipment to investors is normally in the form of a cash investment.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Residual value fees arise from the sale of lease transactions to investors.  These fees represent the Company's present value share of the future residual value of the leased equipment that the Company expects to realize upon successful
remarketing of the equipment.  The Company accounts for these transactions by booking the income during the period in which it is recognized.</P>
<I><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Direct finance lease income</I> - Lease contracts which qualify as direct finance leases are accounted for by recording on the balance sheet minimum lease payments receivable and estimated residual values on leased equipment less
unearned lease income and credit allowances. Revenues from direct finance leases are recognized as income over the term of the lease, on the basis that produces a constant rate of return.</P>
<P ALIGN="JUSTIFY"></P>
<I><P ALIGN="JUSTIFY">Operating leases (Rental Income)</I> - Lease contracts, which qualify as operating leases, are accounted for by recording the leased equipment as an asset, at cost. The equipment is then depreciated on a straight-line basis over two
to fifteen years to its estimated residual value. Equipment is further depreciated below its initial residual value upon release to its estimated revised residual value at lease expiration. Any changes in depreciable lives affect the associated expense on
a prospective basis. Rental income from operating leases is recognized using a straight-line method over the initial term of the lease.</P>
<I><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Reimbursable Expenses</P>
</I><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company is entitled to reimbursement of expenses incurred in the remarketing of certain equipment as outlined in various remarketing agreements. Pursuant to the terms of the trust agreements, the Company is permitted to charge the
trusts for costs associated with administrating the trust and to recover expenses incurred in administering the trust.  The reimbursement of these costs is recorded as a reduction of general and administrative expenses. </P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Residual Values</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company reviews recorded residual values on an annual basis.  Write downs in estimated residual values, due to declines in equipment value or the financial creditworthiness of individual customers and major industries into which the
Company leases equipment, are recorded when considered other than temporary.  The residual valuation is based on independent valuation of the equipment held under trust lease and its internal valuation assessments.  The Company also reviews current market
analyses and trends of the industry for comparative valuations.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Cash and Cash Equivalents</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Concentration of Credit Risk</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	A primary credit risk includes financing for high-credit-risk customers.  The Company, as is common in this industry, obtains financing for the customers from outside financial institutions that specialize in this type of
high-credit risk customers primarily with no recourse.  The Company may undertake certain limited obligations with respect to specific customers with these financial institutions in case of customer default, referred to as limited recourse.  However,
should a sale without recourse be obtained by a credit application which contains misrepresentation to the financing company, via the Company or customer, then that sale can be reclassified as a sale with recourse and become an obligation of the Company.
As discussed in the summary of accounting policies of this report, the Company records limited and full recourse sales in accordance with the provisions of FASB Statement No. 125.  As of December 31, 1999, the Company's has sold approximately $1,849,000
with limited or full recourse.  The Company's management has considered its history of repossession losses and has determined that no liability for recourse obligations is currently necessary.  Concentrations with respect to trade receivables are limited
because the Company's client base is made up of a large number of geographically diverse clients.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company maintains its cash balances in several banks.  The Federal Deposit Insurance Corporation insures up to $100,000 of the balances held by each bank.  The Company also has arrangements whereby the funds in excess of specified
cash balances are invested in overnight repurchase agreements and such overnight investments are collateralized by high-grade corporate debt securities.  As of December 31, 1999, the uninsured portion of the cash balances held at banks was approximately
$825,000, of which $520,000 was invested in overnight repurchase agreements.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Inventory</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">All inventories are valued at the lower of cost or market.  The cost of transportation equipment, including reconditioning parts and other direct costs, is determined using the specific identification method.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Furniture, Equipment and Leaseholds</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Furniture and equipment are recorded at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, typically 3 to 7 years.  Leasehold improvements are amortized over the lease
term.</P>
<P ALIGN="JUSTIFY"></P><DIR>
<DIR>

<U><P ALIGN="JUSTIFY">Intangibles</P>
</U><P ALIGN="JUSTIFY"></P></DIR>
</DIR>

<P ALIGN="JUSTIFY">Intangibles primarily consist of goodwill and distribution rights, which are being amortized over an estimated life of three (3) to fifteen (15) years using the straight-line method.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Tomahawk excess purchase price</U> - The acquisition of MRB, Inc. was accounted for under the purchase method of accounting.  As previously reported in the April 1999 10-KSB, the purchase price paid by CAM consisted of 4,500,000
shares of Common Stock of Chancellor valued at $.96 cents per share.  The excess purchase price of $3,142,000 as of December, 1999 consisted of said shares valued at $.65 cents per share, less net worth plus earn-out payments accrued during 1999, which
has been allocated between a covenant not to compete, customer database files and goodwill in 1999 and will be amortized in the beginning of February, 1999 over a period of five to fifteen years.</P>
<P ALIGN="JUSTIFY"></P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>

</FONT><FONT FACE="Courier" SIZE=2><P ALIGN="JUSTIFY">Income Taxes</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY"></P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<P ALIGN="JUSTIFY">Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," requires an asset and liability approach for financial accounting and reporting for income taxes. In addition, future tax benefits, such as net
operating loss tax carry forwards, are recognized to the extent realization of such benefits is more likely than not.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Stock-based Compensation</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which allows the Company to account for stock-based awards (including stock options) to employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion No, 25, "Accounting for Stock Issued to Employees".</P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Net Income (Loss) per Share</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.  Diluted net income per share reflects the potential dilution
that could occur from potential common stock such as stock issuable pursuant to the exercise of stock options outstanding and conversion of debt.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Basic net loss per share amounts are computed based on the weighted average number of common shares and diluted net loss per share amounts are based on common and common equivalent shares, when dilutive. </P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Supplemental Cash Flow Information</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During 1999, the Company exchanged stock with a value of approximately $2,925,000 in exchange for the assets and liabilities of Tomahawk consisting of inventory, property, equipment, intangibles, trade accounts payable and certain notes
payable.</P>
<U><P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">During 1999, the Company exchanged preferred stock for an investment in equity securities and distribution rights totaling $1,819,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During 1999, the Company exchanged a note receivable including accrued interest for equity securities in the amount of $1,261,000 and recognized a loss of $529,000 on the transaction.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Other Investments</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">The Company accounts for its equity investments of less than twenty-percent ownership as an investee in a South African Company as available-for-sale securities, which are adjusted to their fair market value with unrealized gains
and losses recorded as a component of accumulated other comprehensive income.</P>
<U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Comprehensive Income</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".  SFAS No. 130 prescribes standards for reporting comprehensive income and its components.  Other comprehensive
income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from income as these amounts are recorded as an adjustment to stockholders equity, net of tax.
The Company's other comprehensive income is composed of unrealized gains on available/for sale securities.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Recent Accounting Pronouncements</P>
</U><P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Segment Reporting</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">SFAS No. 131, "Disclosures About Segments of An Enterprise and Related Information", requires disclosures of certain information about the Company's operating segments on a basis consistent with the way in which the Company is managed
and operated.  SFAS No. 131 also requires disclosures about products and services, geographic areas and major customers.  The adoption of SFAS No. 131 did not affect results of operations or the financial position of the Company but did affect the
disclosure of segment information.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	<U>Start-up Costs.</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">	In April 1998, AcSEC issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5).  SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred and is
effective for fiscal years beginning after December 15, 1998.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	Revenue Recognition</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In December, 1999, the Securities and Exchange Commission issued staff accounting bulletin No. 101("SAB101"), "Revenue Recognition in Financial Statements."  SAB101 provides guidance on applying generally accepted accounting principles
to revenue recognition issues in financial statements.  The Company will adopt SAB101 as required during the year 2000, and is evaluating the effect such adoption may have on its consolidated results of operations and financial position.</P>
<P ALIGN="JUSTIFY"> </P><DIR>
<DIR>

<U><P ALIGN="JUSTIFY">Impact of the Year 2000 Issue</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>

</U><P ALIGN="JUSTIFY">The Company has completed efforts to assess and, where required, remediate issues associated with Year 2000 ("Y2K") issues.  Generally defined, Y2K issues arise from computer programs which use only two digits to refer to the year
and which may experience problems when the two digits become "00" in the year 2000.  In addition, imbedded hardware microprocessors may contain time and two-digit year fields in executing their functions.  Much literature has been devoted to the possible
effects such programs may experience in the Year 2000, although significant uncertainty exists as to the scope and effect the Y2K issues will have on industry and the Company.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has recognized the need to address the Y2K issue in a comprehensive and systematic manner and has taken steps to assess the possible Y2K impact on the Company.  The Company has completed its assessment of all
mission-critical systems and the major applications and hardware have been assessed to determine the Y2K impact and a plan has been in place for timely resolution of potential issues.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In 1998, the Company developed a strategic plan to identify the IT systems needed to accomplish the Company's overall growth plans.  As part of this process, Y2K issues were considered and addressed by the Company's senior management
and MIS personnel.  Although this plan was intended to modernize the IT systems, compliance with Y2K requirements were incorporated.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The cost of bringing the Company in full compliance should not result in a material increase in the recent levels of capital spending or any material one-time expenses.  Prior to 1999, the Company has spent approximately $400,000 in
modernizing its IT system, including compliance with Y2K requirements.  The Company anticipates spending approximately $350,000 during fiscal 2000 to complete the modernization of its IT system.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The failure of either the Company, its vendors or clients to correct the systems affected by Y2K issues could result in a disruption or interruption of business operations.  The Company uses computer programs and systems in a vast array
of its operations to collect, assimilate and analyze data.  Failure of such programs and systems could affect the Company's ability to track assets under lease and properly bill.  Although the Company does not believe that any of the foregoing worst-case
scenarios will occur, there can be no assurance that unexpected Y2K problems of the Company's and its vendors' and customer's operations will not have a material adverse effect on the Company.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Fair Value of Financial Instruments</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The fair value of the Company's assets and liabilities that constitute financial instruments as defined in SFAS No. 107, "Disclosure about Fair Value of Financial Instruments", approximate their recorded amounts.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Risk Management</P>
</U><P ALIGN="JUSTIFY"></P>
</FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company is exposed to risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; material disasters; and product liability.  The Company carries
commercial insurance for risks of loss.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Foreign Currency Translation</P>
</U></FONT><FONT SIZE=3><P ALIGN="JUSTIFY"></P>
</FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company uses the US dollar as its functional currency.  Foreign currency assets are recoverable in US dollars, including equipment lease payments.  However, the Company has recorded an allowance equal to the net
book value for lease receivables from a party in Russia.  The effect of any foreign currency fluctuations is not considered material in these financial statements.</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Reclassification to 1998 Financial Statements</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">Certain reclassifications have been made to the 1998 financial statements to conform to the 1999 presentation.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY"> </P>
<B><P>2.	Receivables</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Receivables consists of the following as of December 31, 1999 (in thousands):</P>
<U><P ALIGN="JUSTIFY"></P></U></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=1 WIDTH=428>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Notes receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       202</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Receivables from trust, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,036</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Loans receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">84</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Trade receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,683</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued rents receivable, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">47</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Interest receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP">
<FONT SIZE=3><P>Contracts receivable </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="RIGHT">1,098</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       4,154</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Receivables from trusts include amounts due the Company for cash outlays associated with the remarketing of equipment of $103,000.  These amounts will be collected upon successful remarketing of such equipment.  Additionally,
receivables from trusts include amounts due for costs incurred by the Company for administration of the trusts in accordance with the trust agreements of $1,729,000.  Collection of costs of administration is not certain due to numerous factors and is,
therefore, included net of the estimated reserve.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Accrued rents represent amounts due from portfolio leases, net of an allowance of $18,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">3.	<U>Residual Values, Net</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's lease underwriting income includes consideration in the residual value sharing arrangements received from originating and selling lease transactions to investors.  The Company, upon remarketing of the equipment at
termination or expiration of the related leases, will realize this type of consideration (residual values).  The Company's share of expected future residual values is recorded as income at their discounted present value at the time the underlying leases
are sold to investors.  Any increases in the Company's expected residual sharing are recorded as gains upon realization. Write-down in estimated residual value due to declines in equipment value or the financial creditworthiness of individual customers
and major industries into which the Company leases equipment, are recorded when considered other than temporary.  The Company evaluates residual values based upon independent assessments by industry professionals, in addition to already established
internal criteria.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The activity in the residual value accounts for the years ended December 31, 1999 and 1998 is as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=513>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=3><P>Residual values, beginning of year, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       219</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       465</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=3><P>Residual realization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">76</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">204</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=3><P>Residual value estimate reduction</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">42</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<FONT SIZE=3><P>Residual values, end of year, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       143</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       219</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Residual value estimate reductions represent reductions in expected future residual values on certain equipment, the residuals that were substantially all recorded prior to 1997.  Such reductions resulted from an extensive review and
valuation of all assets owned, leased and managed by the Company.  For the years ended December 31, 1999 and 1998, the Company realized income of approximately $1,192,000 and $1,407,000, respectively, relating to the remarketing of equipment for which no
residuals were recorded or realized amounts exceeded the booked residual.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Aggregate residual value fees expected to be realized as of December 31, 1999 are as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE CELLSPACING=0 BODER=0=0 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Years ending December 31:</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=279>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$      116</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">5</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">---</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2003</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">---</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2004</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">22</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$      143</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">4.	<U>Net Investment in Direct Finance Leases and Equipment on Operating Lease</U>:</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Net investment in direct finance leases consisted of the following as of December 31, 1999 (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Minimum lease payments receivable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$          458</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Estimated unguaranteed residual values of</P>
<P>      leased equipment, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">               39</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Less:  Unearned income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(121</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$          376</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY">The cost of equipment on operating lease by category of equipment consists of the following as of December 31, 1999 (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Transportation equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       5,404</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Other equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">635</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">6,039</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Less - accumulated depreciation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,887</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       4,152</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The aggregate amounts of minimum lease payments to be received from noncancelable direct finance and operating leases are as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=3><P ALIGN="CENTER">Direct</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Year ending December 31:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Finance</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Operating</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="RIGHT"><TABLE BODER=0 CELLSPACING=2 WIDTH=346>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       166</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$    1,059</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">161</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">633</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">97</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">202</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=3><P>2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">34</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">111</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=3><P>Thereafter</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">---</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">175</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       458</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="6%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$    2,180</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<B><U><FONT SIZE=3><P ALIGN="JUSTIFY"></P>
</B></U><P ALIGN="JUSTIFY">5.	<U>Accounts Payable and Accrued Expenses</U>:</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Accounts payable and accrued expenses consists of the following as of December 31, 1999 (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Trade accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       2,227</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Payables to investors</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">883</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Contribution payable to New Africa Opportunity Fund</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">531</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued commissions payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">725</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued legal and accounting fees</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">189</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued interest payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">123</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Commitment Fees</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">183</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued Income Taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued Other Taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">40</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued Earn out Fees</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">217</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P>Accrued Other Expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       5,444</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY">6.	<U>Non-Recourse and Recourse Debt</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Non-recourse indebtedness consists of notes payable to banks and financial institutions arising from assignments of the Company's rights, (most notably the right to receive rental payments) as lessor, at interest rates ranging from
8.25% to 11.58%.  Amounts due under nonrecourse notes are obligations of the Company, which are secured only by the leased equipment, and assignments of lease receivables, with no recourse to any other assets of the Company.  The Company is at risk,
however, for the amount of residual value booked on equipment for its own portfolio in the event of a lessee default.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Aggregate future maturities of non-recourse debt as of December 31, 1999 are as follows (in thousands):</P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=1 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP" COLSPAN=4>
<FONT SIZE=3><P ALIGN="CENTER">Years ending December 31:</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$        88</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">91</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">13</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$      192</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Recourse debt consists of the following as of December 31, 1999 (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=470>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=470>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Promissory note payable to the Company's majority</P>
<P>  stockholder, bearing interest at the prime rate (8.50% at</P>
<P>  December 31, 1999) plus 2%, principal and accrued interest</P>
<P>  payable December 31, 2002<B>,</B> secured by substantially</P>
<P>  all of the assets of the Company.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">  $          586</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=12><P></P></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Subordinated promissory note payable to a former</P>
<P>   stockholder of the Company, bearing interest at the prime</P>
<P>   rate (8.5% at December 31, 1999) plus 1%<B>,</B> principal and</P>
<P>   accrued interest payable on demand.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P>              200</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Promissory note payable to a financial institution, bearing interest at 10%, monthly payments of $64,400 January 2000 through April 2000, $55,500 May 2000 through July 2000, and a balloon payment of $1,842,000 due August 2000, secured by
the equipment and lease contracts associated with the note payable.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                                                                          2,123</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Promissory note payable to a financial institution, bearing interest at the average of the one (1) and two (2) month London Interbank Offered Rates (5.99% at December 31,1999) plus interest through July 2000, secured by the equipment and
lease contracts with the note payable.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                                                                        1,206</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Promissory note payable to an insurance institution, bearing interest at 8%, principal and accrued interest payable if the note amount exceeds the cash value of the associated life insurance policy, secured by an adjustable whole life
policy insuring <U>certain officers of the Company.</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                                                                           291</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Promissory note payable to a financial institution , bearing interest at the prime rate (8.50 % at December 31, 1999) plus 2%, principal and accrued interest payable January 31, 2000, secured by guarantee of Vestex Capital Corporation and
Brian M. Adley.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                                                          900</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Equipment line of credit with one leasing company, monthly    payments of $502 expiring November 2002</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                 14</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">5,320</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Less - current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4,725</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$            595</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Aggregate future maturities of recourse debt as of December 31, 1999 are as follows (in thousands):</P></FONT>
<P ALIGN="LEFT"><TABLE CELLSPACING=0 BORDER=0 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Years ending December 31:</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=273>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$    4,725</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">6</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">589</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$    5,320</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY">7.	<U>Other Debt</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Revolving Lines of Credit.</U>  During 1994, and prior to its acquisition by the Company, Tomahawk entered into a revolving line of credit agreement with a financial institution whereby Tomahawk can borrow up to $7,500,000 to floor plan
used transportation equipment inventory.  The maximum amount outstanding during 1999 was $7,500,000.  In addition, during 1998, Tomahawk entered into a financing agreement with the same institution to floor plan additional used transportation equipment
inventory in the approximate amount of $4,500,000.  Interest is accrued monthly at the financial institution's prime plus 1.75 percent, depending on the floor planned inventory amounts.  The effective rate of interest at December 31, 1999 was 10.25
percent.  The aggregate principal balance outstanding on the revolving line of credit and the financing agreement as of December 31, 1999 was approximately $8,543,000.  The Company, in connection with the Tomahawk acquisition, assumed the obligation
pursuant to this revolving line of credit and financing agreement.  The revolving line of credit and financing agreement are both personally guaranteed by the selling stockholders of Tomahawk.</P>
</FONT><P ALIGN="JUSTIFY"></P>
<FONT SIZE=3><P ALIGN="JUSTIFY">	<U>Notes Payable</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Notes payable consists of the following as of December 31, 1999 (in thousands):</P>
<U><P ALIGN="JUSTIFY"></P></U></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=470>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="LEFT"><TABLE BODER=0 CELLSPACING=2 WIDTH=470>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Revolving Bridge loan payable to a financial institution providing    For maximum borrowings up to $400,000 for working capital</P>
<P>   Purposes, interest payable monthly at the rate of 10.5%</P>
<P>   per annum, principal balance due on March 27, 2000.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">380</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Various notes payable to a financial institution, payable in</P>
<P>   Monthly installments of $2,753 including interest at rates</P>
<P>   of 9 and 10 percent per annum, due from September 2001</P>
<P>   to May 2003, secured by automobiles and equipment.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">                                                   69</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">449</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP">
<FONT SIZE=3><P>Less - current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">407</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$            42</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<U><FONT SIZE=3>
</U><P ALIGN="JUSTIFY">Aggregate annual maturities of notes payable as of December 31, 1999 are as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE CELLSPACING=0 BORDER=0 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Years ending December 31:</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=279>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$      400</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">27</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">16</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2003</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">6</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$      449</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">8.	<U>Income Taxes</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The provision (benefit) for income taxes consists of the following (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=1 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Current:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Federal</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       355</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       493</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        State</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">73</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">31</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">428</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Deferred:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Federal</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(      566)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">493</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        State</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(      106)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(        31)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(      672)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">524</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$(    244) </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$        ----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY">A reconciliation of the rate used for the provision (benefit) for income taxes is as follows:</P>
</FONT><FONT SIZE=1><P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=511>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Tax benefit at statutory rate</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=3><P ALIGN="RIGHT">34.0%</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">34.0%</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Net operating loss carry forward benefit for which</P>
<P>      utilization is reasonably assured</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">(62.0)%</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">(34.0)%</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=3> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(28.0)%</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=3> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">0.0%</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company files consolidated federal income tax returns with all of its subsidiaries.  As of December 31, 1999, the Company has net operating loss carry forwards of approximately $21,000,000 of which only $6,741,000 is available for
federal tax purposes, which expire in the years 2001 through 2012. In addition, at December 31, 1999, the Company has investment tax credit carry forwards for federal income tax purposes available to offset future taxes of approximately $1,725,000
expiring in the years 2000 through 2002.  For federal tax purposes, utilization of net operating losses and tax credit carry forwards will be limited in future years as a result of a greater than 50% change in ownership which occurred in July 1995.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carry forwards.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The tax effects of significant items comprising the Company's net deferred tax assets and liability as of December 31, 1999 and 1998 are as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="RIGHT"><TABLE BODER=0 CELLSPACING=2 WIDTH=672>
<TR><TD WIDTH="51%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">December 31</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=532>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Deferred tax liabilities:</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Differences between book and tax basis of property</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$          165</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P>$         189</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Deferred tax assets:</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Reserves not currently deductible</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">438</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">552</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Net operating loss carry forwards</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">3,109</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">8,708</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Tax credit carry forwards</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,860</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,990</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>        Other</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">280</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,000</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>                Total deferred tax assets</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">5,687</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">11,248</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">5,552</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">11,059</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Valuation allowance</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(5,186</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=3><P>(     11,059)</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Net deferred tax asset</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$          336</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=3><P>$           ---</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">All deferred tax liabilities and deferred tax assets (except tax credit carry forwards) are tax effected at the enacted rates for state and federal taxes. The valuation allowance relates primarily to net operating loss carry forwards
and tax credit carry forwards that may not be realized.  The valuation allowance decreased by $5,873,000 in 1999.  For the year ended December 31, 1998 the valuation allowance decreased by $940,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The deferred tax asset is available to offset taxable income in excess of book income generated from the lease portfolio and residual values, which are the principal components of the total deferred tax liabilities of $165,000 as of
December 31, 1999.  The deferred tax asset, net of the deferred tax liability, has been fully reserved as of December 31, 1998.</P>
<P ALIGN="JUSTIFY">9.	<U>Stockholders Equity</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Preferred Stock issued by the Company carries certain preferences and rights as discussed below.  Each share of Preferred Stock is entitled to the number of votes equal to the number of whole shares of Common Stock into which the
share of the Preferred Stock held are then convertible. The holders of the Preferred Stock shall be entitled to receive cash dividends only to the extent and in the same amounts as dividends are declared and paid with respect to Common Stock as if the
Preferred Stock has been converted to Common Stock in accordance with the provisions related to conversion.  Preferences specific to each series are as follows:</P><DIR>
<DIR>

<P ALIGN="JUSTIFY">Series AA - convertible into one share of Common Stock for each share of Preferred Stock and has a liquidation preference of $.50 per share.  The Series AA preferred shares were converted into the Common Stock Equivalent during 1999.</P>

<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Series B - convertible into ten shares of Common Stock for each share of Preferred Stock and has a liquidation preference of $2.00 per converted preferred share or $20.00 per non-converted share.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In exchange for cash, amounts due VCC from the Company, reimbursement of certain expenses, and<U> </U>forgiveness of debt, VCC exercised $2,000,000 for warrants to purchase common stock.</P>
<P ALIGN="JUSTIFY"></P></DIR>
</DIR>

<P ALIGN="JUSTIFY">10.	<U>Stock Option Plans and Stock Purchase Plan</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has three stock option plans: a 1994 Stock Option Plan, a 1994 Directors' Stock Option Plan and a 1997 Stock Option Plan.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's stock option plans provide for incentive and nonqualified stock options to purchase up to an aggregate of 7,207,000 shares of the Company's Common Stock which may be granted to key contributors of the Company, including
officers, directors, employees and consultants.  The options are generally granted at the fair market value of the Company's Common Stock at the date of the grant, vest over a five-year period, are exercisable upon vesting and expire five years from the
date vested.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Information with respect to the stock option plans is as follows:</P>
<P ALIGN="JUSTIFY"></P></FONT>
<TABLE BODER=0 CELLSPACING=2 BORDERCOLOR="#ffffff" WIDTH=617>
<TR><TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">1994</P>
<P ALIGN="CENTER">Stock</P>
<P ALIGN="CENTER">Option Plan</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">1994</P>
<P ALIGN="CENTER">Directors</P>
<P ALIGN="CENTER">Option Plan</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">1997</P>
<P ALIGN="CENTER">Stock</P>
<P ALIGN="CENTER">Option Plan</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">1983</P>
<P ALIGN="CENTER">Stock</P>
<P ALIGN="CENTER">Option Plan</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Weighted</P>
<P ALIGN="CENTER">Average</P>
<P ALIGN="CENTER">Exercise</P>
<P ALIGN="CENTER">Price</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3></FONT>
<TABLE BODER=0 CELLSPACING=2 WIDTH=617>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Outstanding, December 31, 1997</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">870,994</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">717,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,245,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.49</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options granted</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">355,991</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">3,465,176</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.52</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options exercised</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(384,583</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">)</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(40,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">)</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(467,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">)</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.33</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options canceled and expired</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(139,770</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">)</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(952,500</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">)</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.52</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Outstanding, December 31, 1998</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">702,632</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">677,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4,290,676</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$         .54</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options granted</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">983,500</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.91</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options exercised</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(54,985)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(494,676)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.16</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Options canceled and expired</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(240,000)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(940,000)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.54</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Outstanding, December 31, 1999</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">407,647</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">677,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">3,839,500</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">.64</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY">Additional information regarding options outstanding as of December 31, 1999 is as follows:</P>
<U><P ALIGN="CENTER">Options Outstanding</P></U></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=547>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">Exercise</P>
<P ALIGN="CENTER">Price</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">Number</P>
<P ALIGN="CENTER">of Shares</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Weighted Average Contractual Life</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">Exercisable Options</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">Date of Expiration</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=547>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.01</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">147</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">3.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">147</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2002</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.05</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">137,500</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2.08</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">137,500</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2002</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.06</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">137,500</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.92</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">137,500</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2001</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.10</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">206,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">4.45</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">206,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2003--2005</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.13</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">16,345</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">16,345</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2001</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.19</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">16,155</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">16,155</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2002</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.20</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">625,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">4.28</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">625,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2002--2005</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">452,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2.96</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">452,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2000--2006</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">5.83</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2005</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.40</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">110,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">5.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">110,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2005--2006</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">783,333</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">5.42</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">783,333</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2004--2007</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.55</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">5.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2005</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.75</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">790,333</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">6.35</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2005--2008</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.80</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">6.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2006</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.82</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">5.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2005</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$0.92</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">6.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2006</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">740,334</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.40</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2006--2009</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.02</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2007</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.05</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2007</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.12</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">8.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2008</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.22</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2009</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.25</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">117,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">8.38</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2007--2008</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.30</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">8.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2008</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">197,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.83</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2007--2009</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.55</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">70,700</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2009</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$1.75</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">22,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2009</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">$2.00</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">150,000</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">8.50</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">----</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2008</FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4,924,147</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">2,614,680</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"> </TD>
<TD WIDTH="16%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY">	</P>
<U><P ALIGN="JUSTIFY">Pro forma information.</U>  The Company has elected to follow APB Opinion No. 25; "Accounting for Stock Issued to Employees," in accounting for its employee stock options because, as discussed below, the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee stock options.  Under APB No. 25, because the exercise price of the
Company's employee stock options equal or exceeds the market price of the underlying stock on the date of the grant, no compensation expense is recognized in the Company's financial statements.  SFAS No. 123 requires the disclosure of pro forma net income
(loss) and earnings per share as if the Company had adopted the fair value method as of the beginning of fiscal 1995.  Under SFAS 123, the fair value of stock options to employees is calculated through the use of option pricing models, even though such
models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards.  These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly differs from the calculated values.  </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, 48-60 months following vesting; stock volatility 200% in 1999 and 1998; risk free interest
rates, ranging from 4.45% to 8% and no dividends during the expected term.  The forfeitures of the options are recognized as they occur.  If the computed fair values of the 1997 and 1998 awards had been expensed over the vesting period of the awards, the
pro forma net income in 1999 would have been $1,023,000 or $.02 per share and the pro forma net income in 1998 would have been $414,000 or $0.01 per share.  </P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="JUSTIFY">Employee Stock Purchase Plan</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company's 1994 Employee Stock Purchase Plan authorizes the offering to employees of up to 250,000 shares of Common Stock in six semiannual offerings at a price of 85% of the Common Stock's bid price and in an amount determined by a
formula based on each employee's estimated annual compensation. The Company's stockholders authorized this plan in January 1995. No shares of Common Stock have been offered pursuant to the plan to date.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has reserved 250,000 shares of Common Stock for all amounts that may be offered to employees under this plan.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	<U>Stock Warrants</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	During 1998, the Company's majority shareholder (Vestex Capital Corporation) allocated 3,300,000 shares of the Company's common stock that VCC owns to employees of the Company under various stock purchase warrant agreements.  The
majority shareholder allocated these warrants as an incentive to hire and to retain management.  No warrants were exercised during 1999.</P>
<U><P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">	Additional information regarding options outstanding as of December 31, 1999 is as follows:</P>
<P ALIGN="JUSTIFY"></P>
<U><P ALIGN="CENTER">Warrants Outstanding</P>
<P ALIGN="CENTER"></P></U></FONT>
<TABLE BODER=0 CELLSPACING=1 BORDERCOLOR="#000000" CELLPADDING=7 WIDTH=633>
<TR><TD WIDTH="18%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="18%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="3%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2 BGCOLOR="#ffffff">
<B><U><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER">Warrants Exercisable</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">Range of </P>
<P ALIGN="CENTER">Exercise Prices</B></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER">Number </P>
<P ALIGN="CENTER">Outstanding</P>
<P ALIGN="CENTER">At 12/31/99</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER">Weight-Avg</P>
<P ALIGN="CENTER">Remaining </P>
<P ALIGN="CENTER">Life</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><U><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER"></P>
</U><P ALIGN="CENTER">Weight-Avg</P>
<P ALIGN="CENTER">Exerc-Price</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" BGCOLOR="#ffffff"> </TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER">Number</P>
<P ALIGN="CENTER">Exercisable</P>
<U><P ALIGN="CENTER">At 12/31/99</B></U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=3 COLOR="#ffffff"><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">Weight-Avg</P>
<U><P ALIGN="CENTER">Exerc Price</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.10</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">550,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">6.36</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.10</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">550,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.10</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.25</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">650,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.46</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.25</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">650,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.25</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.50</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">800,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">8.50</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.50</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">800,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.50</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.75</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">200,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.00</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.75</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.00</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">180,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">6.00</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.00</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.10</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">180,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.00</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.10</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.25</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">380,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.05</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.25</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.50</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">180,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">9.00</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1.50</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">- - -</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2.00</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">180,000</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">10.00</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">2.00</U></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">- - -</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="CENTER">- - -</U></FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">3,300,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">7.92</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.682</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">2,000,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">0.31</FONT></TD>
</TR>
</TABLE>

<B><U><FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P>
</B></U><P ALIGN="JUSTIFY">	<U>Pro forma information</U> As noted above The Company has elected to follow APB Opinion No. 25, Accounting Interpretation 1,  "Stock Plans Established by a Principal Stock Holder", in accounting for the Warrants because,
as discussed below, the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation", requires the use of option valuation models that were not developed for use in valuing these warrants.  These warrants
have been properly recorded within APB 25 and have resulted in approximately $42,000 and $939 compensation expense to the Company during 1999 and 1998, respectively.  SFAS No. 123 requires the disclosure of pro forma net income (loss) and earnings per
share as if the Company had adopted the fair value method as of the beginning of fiscal 1995.  Under SFAS 123, the fair value of stock options to employees is calculated through the use of option pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the stock warrants.  These models also require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly differs from the calculated values. </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">	The Company's calculations were made using the Black-Scholes option pricing model using the same assumptions utilized for the stock option plans discussed above.  The forfeitures of the warrants are recognized as they occur.  If the
computed fair values of the warrants had been expensed over the vesting period of the awards, the pro forma net income in 1999 would have been $757,000 or .01 per share and and the pro forema net loss in 1998 would have been $128,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">11.	<U>Major Customers</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company leases equipment to lessees in diverse industries throughout the United States.  Although the Company's direct solicitation efforts involving leases of new equipment have shifted from Fortune 100 companies to include smaller
business entities, most of the Company's lessees of new equipment are still of substantial creditworthiness, with minimum net worth in excess of $25 million.  Some of the Company's customers include, but are not limited to, Raytheon, Pepsico, Dow
Chemical, Whirlpool, Alliant Food Service, Walmart, Texaco, Coca-Cola, Johnson & Johnson, and others.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During 1999, the Company continued its lease originating activities, including brokering of new lease transactions.  The Company also transacted several significant buyouts of portfolios held by certain trust investors. During 1999, 67%
(based on original equipment cost) of the new lease transactions originated by the Company were with one large lessee.  During 1998, 31% (based on original equipment cost) of the new lease transactions originated by the Company were with the one largest
lessee (Wal-Mart). In addition, approximately 40% and 31% (based on original equipment cost) of equipment sold to investors in 1998 were purchased by the two largest investors<B>.</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">12.	<U>Employee Benefit Plan</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company sponsors a 401(k) retirement plan (the "Plan") for the benefit of its employees. The Plan enables employees to contribute up to 15% of their annual compensation. The Company's contributions to the Plan, up to a maximum of
$500 per participating employee, amounted to $0 and $11,000 in 1999 and 1998, respectively.  The decrease in contributions is due to forfeitures earned by the Company from non-vested employees.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">13.	<U>Other Investments</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Other investment includes a $1 million equity investment in the New Africa Opportunity Fund, LP ("NAOF").  NAOF is a $120 million investment fund with the backing of the Overseas Private Investment Corporation ("OPIC") created to make
direct investments in emerging companies throughout sub-Saharan Africa.  Capital contributions are payable within 10 business days of a capital call pursuant to the terms of the partnership agreement.  As of December 31, 1999, the Company funded $469,000
of a $1 million commitment for its 2.5% interest in NAOF and the remaining obligation of $531,000 is included in accounts payable and accrued expenses<B>.</P>
<P ALIGN="JUSTIFY"></P>
</B><U><P ALIGN="JUSTIFY">Investment in Afinita Motor Corporation and Distribution Rights</P>
<P ALIGN="JUSTIFY"></P>
</U></FONT><P ALIGN="JUSTIFY">In October 1999, the Company, through an affiliate, closed on the acquisition of a 15.1% equity interest in Afinita Motor Corporation (Pty) Ltd. ("AMC").  AMC is a South African manufacturer/assembler of trucks, buses,
automobiles, sport utility vehicles, and other products.  This transaction and the related transaction surrounding certain distribution rights were acquired via a combination of the conversion of a note receivable including accrued interest from cash
previously advanced, and the issuance of 250,000 shares of a newly created class of Series B Convertible Preferred Stock (the "Series B Preferred Stock").  </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In October 1999, the Company, through an affiliate, finalized several agreements that were made effective retroactive to June 30, 1999, with Afinta Motor Corporation (Pty) Ltd. ("AMC").  One such affiliate acquired the exclusive
worldwide distribution rights for products manufactured/assembled by AMC, excluding Africa, England, Scotland and Wales.  AMC is a manufacturer/assembler of trucks, buses, and other products.  These distribution rights to the AMC product range include,
but are not limited to trucks, tractor-trailers, buses, automobiles, sport utility vehicles, motorcycles, and other products supplied by AMC.  The Company issued 100,000 shares of Series B Preferred Stock in the transaction.</P>
<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company has these distribution rights for the next 99 years, whereby they expire during 2098.  The Company will amortize these rights over a 15-year period beginning October 1999.  It is the Company's desire to utilize these rights
to earn additional revenue via commissions and the potential sale and/or lease of AMC products within the defined territory.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><P ALIGN="JUSTIFY">The Series B Preferred Stock has a $20.00 per share liquidation preference and converts into common stock at a 1 for 10 basis, which will increase the shares used in computing diluted net income per share in future periods.
Also, in conjunction with these investments, NAOF, a $120 million OPIC backed investment fund of which the Company has a 2.5% investment in, also extended its investment/commitment in AMC to $10,000,000.  In addition to the Company, several of the other
investors are Sun America, Inc., Citicorp, Northwestern Mutual Life and others..</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">A summary of other investments at December 31, 1999 consists of the following:</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=565>
<TR><TD WIDTH="31%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Aggregate</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Gross Unrealized Holding</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Amortized</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Fair Value</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Gains/(Losses)</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Cost</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Securities available for sale</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$     3,734</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$      49</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$ 3,685</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">New Africa Opportunity</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY"> Fund</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">       1,000</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">-</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">  1,000</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Trading Securities</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">            24</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">       24</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$      4758</FONT></TD>
<TD WIDTH="33%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$      49</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">$ 4,709</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
<TD WIDTH="33%" VALIGN="TOP"> </TD>
<TD WIDTH="18%" VALIGN="TOP"> </TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">14.	<U>Major Acquisition</P>
<P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">Chancellor Asset Management Inc. ("CAM"), a wholly owned subsidiary of the Company, entered into a Management Agreement dated August 1, 1998, as amended August 17, 1998, with M.R.B. Inc., a Georgia corporation d/b/a Tomahawk Truck
Sales; Tomahawk Truck & Trailer Sales, Inc., a Florida corporation; Tomahawk Truck & Trailer Sales of Virginia, Inc., a Virginia corporation; and Tomahawk Truck & Trailer Sales of Missouri, Inc., a Missouri corporation (collectively
"Tomahawk").  The Management Agreement provided CAM with effective control of Tomahawk's operations as of August 1, 1998.  Subsequently, CAM acquired all of the outstanding capital stock of Tomahawk from the two (2) sole shareholders (the "Selling
Shareholders") pursuant to a Stock Purchase Agreement (the "Agreement") dated January 29, 1999.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The acquisition of MRB, Inc. was accounted for under the purchase method of accounting.  The purchase price paid by CAM consisted of 4,500,000 shares of Common Stock.  The excess purchase price of  $3,142,000 as of December 31, 1999
consisted of said shares valued at $.65 cents per share, less net worth, plus earn out payments paid or accrued during 1999 which has been allocated between a covenant not to compete, customer database files, and goodwill which will be amortized in the
beginning of February, 1999 over a period of five to fifteen years.  Results of operations of Tomahawk after the acquisition date are included in the consolidated statement of operations for 1999.</P>
</FONT><FONT SIZE=2>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Additionally, Vestex Capital Corporation, the largest shareholder of the Company, is to receive up to $3,250,000 plus expenses, not to exceed $50,000, payable over the next six years for services rendered in finding,
negotiating and arranging financing on the transaction as well as ongoing management and development of long-term growth strategies including initiation of possible acquisition and/or merger candidates.  The final fee is based principally upon the
financial impact and profitability that Tomahawk adds to the Company's operating results.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">15.	<U>Related Party Activities</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company is provided management and consulting services by VMI, Corporation ("VMI") an affiliate of the Company's majority stockholder, pursuant to a consulting agreement approved by the shareholders at the 1995 Annual Meeting of the
Stockholders, as amended in July 1998.  VMI provides specified services including, but not limited to, general business consulting, the development and implementation of the Company's 1997 transition and turnaround strategies, development of domestic and
international business opportunities and growth strategies, identification and development of strategic alliances, and support of merger and acquisition activity.  VMI was paid approximately $1.1 million for consulting fees including reimbursement for
expenses paid on behalf of the Company in the approximate amount of $170,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Vestex Capital Corporation ("VCC"), the major shareholder of the Company, provided specified services including debt and equity raising efforts, due diligence related to major acquisitions, and other services related to financing and
investing activities.  VCC is paid fees related to debt and equity transactions up to 3.0% and 7.5%, respectively, of the amount of financing raised in addition to related expenses.  VCC provides additional services to the Company on operational and other
matters for which it is compensated at levels negotiated with the Company.</P>
<B><P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">VCC provided key employees warrants to purchase Chancellor common stock, beneficially owned by VCC and valued at approximately $1,752,300 as of December 31, 1999.  During 1998, VCC's activities provided sources of funding to the
Company of approximately $6,500,000, and $300,000 for fees for services and reimbursable expenses, respectively, and converted into debt and equity instruments of the Company.  This included the purchase of 1,946,146 shares of the Company's common stock
at a price of $.69 per share.  Additionally, VCC infused directly over $2,385,000 into the Company, and paid over $670,000 of expenses on behalf of the Company during 1998.  During 1999, VCC also guaranteed debt on behalf of the Company, in which the
Company was able to utilize for the benefit of over $3,000,000 during the year.  As of December 31, 1999 and December 31, 1998, VCC guaranteed this debt line of up to $1,000,000 and $500,0000 respectively.  In addition to the above, VCC placed $1,000,000
in cash and/or marketable securities to another financial institution, whereby that financial institution loaned the Company $1,500,000 secured against the cash and/or cash equivalents and the guarantee by VCC.  In addition to the above, VCC infused
approximately $3,250,000 directly into the Company, consisting of cash and conversion of debt into equity during 1999.  Also, subsequent to year end, VCC loaned the Company an additional $350,000 in cash.  As a result, in part, of VMI and VCC's activities
and services provided, the Company's net worth increased to approximately $9,500,000 at December 31, 1999, from $2,362,000 at December 31, 1998 from $227,000 as of December 31, 1997 and from a negative net worth of approximately $9,446,000 as of December
31, 1996, as adjusted for stock issuance, direct equity infusions, contributions of related parties, and the results of discussion regarding the initial Vestex recapitalization of the Company during 1995.  During 1999, VCC received from the Company in the
form of fees, repayment of loans, and for expenses paid on behalf of the Company approximately $2,200,000. </P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In prior years, the Company had entered into two lease transactions with Kent International ("Kent"); a company owned 50 percent by a director of the Company.  Total original equipment cost for these transactions amount to approximately
$144,000.  During 1997, the Company loaned Kent $128,500.  The loan, bearing interest at 15 percent per annum, was to be repaid in equal monthly installments of $5,296 and matured December 1999.  As of December 31, 1998, Kent was in default of the loan.
The aforementioned leases and loan were re-written in May 1999.  The terms of the new lease provide for monthly lease payments of $7,442.90 through May, 2003.  As of December 31, 1999, the outstanding payments due on the lease is approximately $20,000.</P>
<U><P ALIGN="JUSTIFY"></P>
</U><P ALIGN="JUSTIFY">During 1999, a former director of the Company, and officer of the Company's subsidiary Long River Capital purchased back from the Company 100% of the stock of Long River Capital.  The repurchase included a note payable to the
Company of $40,000 and other consideration valued at less than $100,000.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">16.	<U>Commitments and Contingencies</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company rents its corporate offices under a five-year non-cancelable lease.  The Company leases an additional regional marketing office on the East Coast. The future minimum rental commitments are as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P></FONT>
<P ALIGN="LEFT"><TABLE CELLSPACING=0 BORDER=0 WIDTH=422>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">Years ending December 31:</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</P>

<B><FONT SIZE=1></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=279>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2000</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">240</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2001</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">240</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2002</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">171</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2003</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">102</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT SIZE=3><P>2004 and thereafter</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">600</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP"> </TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP"> </TD>
<TD WIDTH="17%" VALIGN="TOP"> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$   1,353</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=3><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Rental expense, net of abatements, for the years ended December 31, 1999 and 1998 amounted to approximately $614,000, and $222,000 respectively.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">During a prior year, the Company undertook a review of its trust portfolio, including consultation with legal counsel, an International "Big 5" Independent public accounting firm, and industry consultants and determined that it had not
been recovering costs associated with administering the trusts.  Management's initial review determined that approximately $22,000,000 of costs for periods prior to 1997 had not been recovered from the trusts.  The Company has recorded approximately
$972,000 and $1,498,000 of cost recoveries in the years ended December 31, 1999 and 1998, respectively.  For periods prior to 1998, $2,862,000 was recovered.  Thus, to date, the Company has recovered in excess of $5,300,000.  Management makes no
representations concerning the Company's ability to recover any further costs for periods prior to 1997.  Further recoveries for periods prior to 1997 and thereafter are contingent upon the current status of the specific trusts and the Company's level of
recovery efforts.  Consequently, the Company will record any further recoveries as income in the period in which collection is assured.</P>
<P ALIGN="JUSTIFY"></P>
<P>17.	<U>Legal Proceedings</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">In the normal course of its business, the Company is from time to time subject to litigation.  Management does not expect that the outcome of any of these actions, or the actions as noted above, will have a material adverse impact on
the Company, its business or its consolidated financial position or results of operations.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">18.	<U>Operating Segments</P>
</U><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">The Company operates in two primary business segments: 1) sales of transportation equipment and 2) leasing activity, as follows (in thousands):</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"> </P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=3><P ALIGN="CENTER">Years Ended December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>Sales of Transportation Equipment</U>:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Revenues</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $ 51,791</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $   6,165</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Cost and expenses:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Cost of transportation equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">43,802</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">5,647</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>             Selling, general and administrative           </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P>      6,543 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P>         278 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Depreciation and Amortization          </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"> 396 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">--- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Interest Expense          </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">512</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">---</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $ 51,253</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $   5,925</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Income from sales of transportation equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $      538 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P> $      240</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3>
<P>Identifiable Assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$  14,563 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$        36 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=3><P ALIGN="CENTER">Years Ended December 31,</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="CENTER">1998</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BODER=0 CELLSPACING=2 WIDTH=508>
<TR><TD WIDTH="66%" VALIGN="TOP">
<U><FONT SIZE=3><P>Leasing Activity</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Revenues:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Leasing activity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$  10,076</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$    4,228</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Interest income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">267</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">195</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Other income</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">138</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">120</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">10,530</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4,543</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Costs and expenses:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Selling, general and administrative</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">8,674</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">3,671</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Interest expense</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">290</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">111</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>            Depreciation and amortization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">1,225</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">477</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$  11,111</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">4,259</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Income (loss) from leasing activity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$(    567)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">(</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$       284</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>Identifiable assets </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$  13,612</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT">$  3,648</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP"> </TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=3><P>      Income (loss) before extraordinary item and</P>
<P>            Provision (benefit) for income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$       879</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"> </TD>
<TD WIDTH="4%" VALIGN="TOP"> </TD>
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<P ALIGN="RIGHT">524</FONT></TD>
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<P> </FONT></TD>
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<FONT SIZE=2><P> </P>
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<P ALIGN="CENTER">Signatures</P>
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<P ALIGN="JUSTIFY">In accordance with Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
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<FONT SIZE=3><P ALIGN="JUSTIFY">CHANCELLOR CORPORATION</FONT></TD>
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<B><U><FONT FACE="Courier New" SIZE=1><P>Dated: March 30, 2000</B></U></FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">By:<U> /s/ Brian M. Adley            </U></FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP"> </TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Brian M. Adley</FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP"> </TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Chairman of the Board and Director</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.</P>
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<P ALIGN="JUSTIFY"> </P>
<P ALIGN="JUSTIFY"> </P></FONT>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Dated: March 30, 2000</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">By:<U> /s/ Brian M. Adley            </U></FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP"> </TD>
<TD WIDTH="43%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Brian M. Adley</FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP"> </TD>
<TD WIDTH="43%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Chairman of the Board and Director</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">(Principle Executive Officer)</FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=12><P></P></TD>
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<B><U><FONT FACE="Courier New" SIZE=1><P>Dated: March 30, 2000</B></U></FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">By:<U> /s/ Franklyn E. Churchill   </U></FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=2> </TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Franklyn E. Churchill</FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=2> </TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">President</FONT></TD>
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<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=2> </TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Dated: March 30, 2000</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">By:<U> /s/ Jonathan C. Ezrin        </U> </FONT></TD>
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<TD WIDTH="43%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=3><P ALIGN="JUSTIFY">Jonathan C. Ezrin</FONT></TD>
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<FONT SIZE=3><P ALIGN="JUSTIFY">Corporate Treasurer</FONT></TD>
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<FONT SIZE=3><P>(Principal Accounting Officer)</FONT></TD>
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