UNITED  STATES  SECURITIES  AND  EXCHANGE  COMMISSION

                               WASHINGTON,  D.C.  20549

                                  FORM 10-KSB-A
                                  -------------

(Mark  One)
-----------

  [X]   ANNUAL  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
         SECURITIES  EXCHANGE  ACT  OF  1934

        For  the  fiscal  year  ended  December  31,  1998
                                       -------------------

                                       OR


  [_]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
         SECURITIES  EXCHANGE  ACT  OF  1934

        For  the  transition  period from _________________ to _________________


                         Commission File Number  0-11663
                         -------------------------------


                             Chancellor Corporation
                             ----------------------
              (Exact name of Small Business Issuer in its Charter)
              ----------------------------------------------------


                Massachusetts                               04-2626079
               -------------                                ----------
       (State or other jurisdiction of             (I.R.S. Employer I.D. No.)
      incorporation  or  organization)
--------------------------------------


             210 South Street, Boston, Massachusetts          02111
             ---------------------------------------          -----
           (Address of principal executive offices)          Zip Code


          Issuer's telephone number, including area code (617) 368-2700
          -------------------------------------------------------------


           Securities registered pursuant to Section 12(b) of the Act:
           -----------------------------------------------------------


     Title of each class          Name of each exchange on which registered
     -------------------          -----------------------------------------
            None                                    None


           Securities registered pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------

                          Common Stock, par value $.01
                          ----------------------------
                                (Title of Class)
                                ----------------

Check mark whether the issuer: (1) has filed all reports required to be filed by
Section  13  or  15(d) of the Securities Exchange Act of 1934 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   [  ]

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.  [  ]

Issuer's  revenues  for  the  year  ended  December  31, 1998 were approximately
$10,708,000.

As  of  April  13,  1999,  43,226,395 shares of Common Stock, $.01 par value per
share  and  5,000,000  shares of Series AA Convertible Preferred Stock, $.01 par
value  per share (with a liquidation preference of $.50 per share or $2,500,000)
were  outstanding.  Aggregate  market  value  of  the  voting  stock  held  by
non-affiliates  of  the  registrant  as  of  April  13,  1999  was approximately
$9,332,000.  Aggregate  market value of the total voting stock of the registrant
as  of  April  13,  1999  was  approximately  $28,367,000.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

Proxy  Statement  for the Annual Meeting of Stockholders to be held at 2:00 p.m.
on  June  25,  1999  at  the  offices  of Bingham Dana, LLP, 150 Federal Street,
Boston,  MA  02109  -  Part  III


<PAGE>
This  Annual  Report  on  Form  10-KSB-A  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.


                                     PART I
                                     ------

ITEM  1.     DESCRIPTION  OF  BUSINESS
-------      -------------------------

     Chancellor  Corporation ("Chancellor" or the "Company") was incorporated in
Massachusetts  in  January  1977.  It  is  principally  engaged  in  (1) buying,
selling,  leasing  and  remarketing  new  and used transportation equipment, (2)
managing  equipment  on  and  off-lease,  and  (3)  arranging  equipment-related
financing  through  its  principal  subsidiary,  Chancellor  Fleet  Corporation
("Fleet"),  which  was  incorporated  in  Massachusetts  in  January  1980.


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 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.

In  addition  to  having  effective  control  of Tomahawk as of August 1998, the
Company had also contractually committed to significant liabilities in excess of
$11,194,000.  The  Company  completed  additional  due  diligence  through  the
remainder  of  the  year  and  effected  a  formal closing in January 1999.  The
Company  had  initially  filed  its 1998 10-KSB on April 14, 1999,  whereby  the
Company  included  Tomahawk  in  its  consolidated  financial  statements.  Upon
additional  review  and discussions with the Securities and Exchange Commission,
the  Company has filed this amended 10-KSB-A to reflect the financial statements
without  Tomahawk as of August 1998, and recorded the transaction as of January,
1999.  In an effort to reflect the transaction on a pro forma basis as initially
recorded,  please  see  footnote  18  to  the  financial  statements.



HISTORICAL  BUSINESS  AND  FISCAL  YEAR  1998  SIGNIFICANT  DEVELOPMENTS
------------------------------------------------------------------------

The  Company  originates lease transactions directly with equipment users and in
most  cases  sells  those leases to investors.  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  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


<PAGE>
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.

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.  The  continued decline  from 1989  through  1996 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.
For the year ended December 31, 1998, the Company recorded a profit of $524,000,
the  first  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 equipment and fully implement
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.

     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 The
Management  Agreement  provided  CAM  with  effective  control  of  Tomahawk's
operations  as  of  August  1,  1998.  Subsequently,  CAM  acquired  all  of the
outstanding  capital  stock  of Tomahawk from the two (2) sole shareholders (the
"Selling Shareholders") pursuant to a Stock Purchase Agreement (the "Agreement")
dated  January  29,  1999.

Tomahawk  is engaged in a similar line of business as CAM.  Tomahawk retails and
wholesales  used  transportation  equipment,  primarily  tractors  and trailers.
Tomahawk  operates  five  (5)  retail  centers  in  Conley,  Georgia;  Richmond,
Virginia;  Pompano  Beach, Florida; Orlando, Florida; and Kansas City, Missouri.
Tomahawk also operates its wholesale division from the Conley, Georgia facility.
Tomahawk  will operate as a wholly owned subsidiary of the Company, coordinating
many  operations  with  the  Company  to  achieve  operating  efficiencies  and
synergies.

The  purchase price paid by CAM consisted of 4,500,000 shares of Common Stock of
Chancellor  (valued at $.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.
Investment  funding  the Earn-Out, which is paid on a quarterly basis, begins in
the  fiscal  year  ended  December  31,  1999  and ends in the fiscal year ended
December  31,  2004.  In  connection with this Agreement, CAM loaned the Selling
Shareholders  a  total  of $500,000 pursuant to certain promissory notes payable
that  are  payable  in  full  on January 29, 2004.  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.  The  final  fee is based principally upon the financial impact and
profitability  that  Tomahawk  adds  to  the  Company's  operating  results.

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


<PAGE>
salaries  of  $200,000  per  annum;  iv) prohibits the Selling Shareholders from
competing  against CAM or Tomahawk, or soliciting former employees and customers
of Tomahawk; v) provides for Tomahawk to lease from the Selling Shareholders the
Conley,  Georgia facility at fair market value rents of approximately $8,500 per
month;  and vi) provides CAM an option to purchase from the Selling Shareholders
the  Conley,  Georgia  facility  for  an  amount  not  to  exceed  $950,000.

This  transaction  was  recorded  in  accordance  with  the  purchase  method of
accounting  as of January ,  1999.  As a result of the effect on the transaction
of  the  Management  Agreement,  the  designated  date  of  this transaction for
accounting  purposes was initially August 1, 1998 but has been revised effective
January  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
$2,600,000 has been recorded in intangibles and 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  periods  of five to twenty years.

     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, 1998, the Company had funded
approximately  $350,000  and  is  obligated to provide additional funding in the
approximate  amount  of  $650,000.  The  Company  has  additionally  invested
approximately  $1,340,000  into  one  of NAOF's investee companies.  The Company
continues  to  negotiate  further  strategic  opportunities  with  this investee
company.

The  Company  undertook  a review of its trust portfolio, including consultation
with legal counsel 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  $1,498,000  and  $994,000  of  cost recoveries in the years ended
December 31, 1998 and 1997, respectively.  For periods prior to 1997, $1,868,000
was  recovered.  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.

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 potentialR  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 through the investigation of
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,  and  other  business  operations.



<PAGE>
Description  of  Business
-------------------------

     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.

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.

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
business  plan  calls  for  diversification  of  the  equipment  available to be
financed.  This  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.

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.

During  1998,  the Company continued its lease originating activities, including
brokering  of  several  new  lease  transactions.  The  Company  also transacted
several  significant  buyouts  of  portfolios  held  by certain trust investors.
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 equipm
ent cost) of equipment sold to investors in 1998 were purchased by the two large
st investors.  During  1997,  92%  (based  on  original  equipment  cost)  of
the  new  lease transactions  originated  by  the  Company  were with the one
largest lessee. In addition,  approximately  55%  and  37%  (based  on  original
equipment cost) of equipment sold to investors in 1997 were purchased by the two
largest investors.

Equipment  Acquisition
---------------------

     The Company acquired $5.5 million of equipment under 40 leases during 1998.
The  Company  acquired  $214,000  of  equipment  under  4  leases  during  1997.
Additionally,  the  Company  acquired  10 existing leases in connection with the
prepayment  of  the  intercreditor  loan  in  1997.

Equipment  Disposition
----------------------

In  1998,  the Company disposed of $6.8 million of portfolio equipment (measured


<PAGE>
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.  In  1997,  the Company disposed of $4.0 million of the
Company's  portfolio  equipment  (measured  by  its  original cost) on operating
leases  and  disposed  of  $590,000 on direct finance leases, reducing the total
equipment  (net  of  depreciation, pay-down and write-downs) on operating leases
and  direct  finance leases to $232,000 and $521,000, respectively. In 1997, the
Company,  as  a  result  of a commitment from the previous management and board,
sold  $1,300,000  (based on original cost) of equipment under one lease from the
portfolio  prior  to  lease  expiration.

Remarketing  Activities
-----------------------

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.

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.

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.

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.

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  and  Texas.

Retail  and  Wholesale  Activities
----------------------------------

     As  previously  mentioned,  CAM acquired Tomahawk for purposes of enhancing
its  remarketing  of used transportation equipment.  The acquisition of Tomahawk
provides  the  Company  with  five additional retail centers in Conley, Georgia;
Pompano  Beach  and  Orlando,  Florida;  Richmond,  Virginia;  and  Kansas City,
Missouri,  in  addition  to  its  previously existing location in Elizabeth, New
Jersey.  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.


<PAGE>
Equity  Syndications
--------------------

The  Company  sold  certain  lease transactions to private investors through the
sale  of  interests  in  grantor  trusts.  In  the  grantor trust structure, the
equipment is acquired directly by the trust and the related lease is transferred
to  the  trust.  The  Company or one of its subsidiaries usually acts as trustee
and  in  that  capacity  holds  title  to  the  equipment and performs specified
administrative  functions  for which it is entitled to receive reimbursement for
costs  incurred.  The Company typically sells equipment directly to an investor.
The  Company  receives  fees  upon  these sales.  In addition, the Company often
shares  with  the investor in the residual value derived from the remarketing of
equipment  at  lease  expiration  or  early  termination.  The  Company  sold
approximately  $3  million of equipment to private investors during 1997.  There
were  no  sales of equipment using grantor trusts in 1998.  Although the Company
will  continue its efforts to syndicate lease transactions, it does not envision
the  use  of  grantor  trusts  in  future  transactions.

Competition
-----------

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.

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.  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.

BUSINESS  PLAN
--------------

The  Company's strategy is to increase profitability, increase market share, and
create  growth  opportunities  by  expanding its core business through servicing
middle  market  clients,  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.

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.


<PAGE>
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,
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.

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.  In  1997,  the  Company
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.


Business  Expansion
-------------------

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 strong 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.

In  1997, the Company instituted an aggressive mergers and acquisition strategy,
seeking  candidates  providing  vertical and horizontal opportunities within the
areas  of  commercial,  consumer  and real estate finance.  The expansion of the
Company's core business through the acquisition of and merger with complementary
businesses  within  financial  services  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.


Year  2000  Disclosure
----------------------

The  Company  has  commenced  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.

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.  Although  the  Company has not completed a 100% assessment of all
its information technology ("IT") and non-IT systems for Y2K issues, the Company
has  completed  its  assessment  of  all  mission-critical  systems.  All
mission-critical  systems  and  most of the major applications and hardware have
been  assessed  to  determine  the  Y2K impact and a plan is in place for timely
resolution  of  potential  issues.

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

<PAGE>
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.  The Company has spent approximately $152,000 in modernizing
its  IT  system,  including  compliance  with  Y2K  requirements.  The  Company
anticipates  spending  of  approximately $300,000 during fiscal 1999 to complete
the  modernization  of  its  IT  system.

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.

While  it  is  difficult to classify our state of readiness, we believe that our
internal  plans  should  have  the  Company ready for the year 2000 to avoid any
material  Y2K  issues.  We have  completed  the assessment, testing systems and
developing  contingency plans.  Management is in constant communication with its
IT  personnel  and  has  made and will continue to make reports to the Company's
Board  of  Directors.


<PAGE>
In  1998  the  Company  made  several  improvements  to  its  Internet  presence
(http://www.chancellorcorp.com)  as  part  of  the Company's strategy to further
         ---------------------
incorporate technology into its marketing and customer service initiatives.  The
Company's goal for 1999 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.

     During  second quarter of 1999, the Company plans to launch a comprehensive
upgrade  to  its  Internet  site  designed  to  be  more user friendly.  The new
Chancellor  site  will  showcase  the  Company's  truck  and  trailer  inventory
available  through  its  New  Jersey  retail  location,  provide  online  and
downloadable  lease applications for fleet managers, and improve the quality and
quantity  of  corporate  and  financial  information tailored for the investment
community.


Market  Opportunities
---------------------

Through  implementation of a strategy allowing for penetration of 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.

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.


<PAGE>
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.

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.)

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.

Operating  Facility
-------------------

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;
Kansas City, Missouri; and Elizabeth, New Jersey.  A  direct  sales  staff  and
Telemarketing program supports a  national  network  of  sales  representatives.

Seasonality
-----------

     Because  of  tax  and investment considerations, investors frequently defer
their decisions to purchase lease transactions until after the first half of the
calendar  year.

Employees
---------

     As  of  April  13, 1999, the Company employed approximately 90 persons on a
full  time  basis.


ITEM  2.     DESCRIPTION  OF  PROPERTY
-------      -------------------------

     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 three and a half years remaining in the term, and with a base
rent,  as of December 31, 1998, of approximately $11,000 per month.  The Boston,
Massachusetts  facility  adequately  provides  for  present and future needs, as
currently  planned.

The Company also leases a retail center in Elizabeth, New Jersey.  This location
is  utilized  for  the  storage,  display,  and  selling  of used transportation
equipment.  This  facility is leased under a non-cancelable arrangement with the
remaining  term  of  one year.  The monthly rent of this facility as of December
31,  1998  is  approximately  $4,500.


<PAGE>
ITEM  3.     LEGAL  PROCEEDINGS
-------      ------------------

As  of  12/1/99,  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.


ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
-------      -----------------------------------------------------------

     None.
     -----

                                     PART II
                                     -------



ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS
-------      ------------------------------------------------------  -------

     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.

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.


<TABLE>
<CAPTION>

1999                                           High    Low
<S>                                             <C>    <C>

      First quarter (through March 30, 1999)  $ .93  $.43

1998
----

      Fourth quarter                            .88   .50
      Third quarter                            1.34   .24
      Second quarter                            .37   .16
      First quarter                             .44   .27

1997
----
      Fourth quarter                            .44   .15
      Third quarter                             .18   .10
      Second quarter                            .15   .09
      First quarter                             .10   .04
</TABLE>

     On  April  13,  1999, there were approximately 510 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.


<PAGE>
ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
-------      -------------------------------------------------------------------
RESULTS  OF  OPERATIONS
-----------------------

     The  analysis  below is reflected of the Company, and does not give rise to
further  analysis  of  the  Management  Agreement  with  Tomahawk.


Results  of  Operations
-----------------------

     Year  Ended  December  31,  1998  vs.  December  31,  1997
     ----------------------------------------------------------

     Revenues.  Total  revenues  for  the  year  ended  December  31,  1998  was
$10,708,000  as  compared  to  $4,433,000  for  the  prior  year, an increase of
$6,275,000  or  141.6%.  For  the  year  ended December 31, 1998, transportation
equipment  sales  were  $6,165,000 as compared to no sales for the corresponding
prior  year.  This significant revenue stream is attributable in part to a major
purchase  and  sale  of  equipment  from the buy-out of a portfolio resulting in
approximately  $5,647,000  of  revenues recorded.  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, 1998, rental
income increased by $72,000 or 8.3% 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,  1998,  lease  underwriting income decreased by $219,000 or
74.7% 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  does,  however,  continue  its  lease
origination rebuilding process through 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, 1998, direct finance lease income
decreased  by $162,000 or 59.6%, 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 1998 as compared to the addition of
10  leases  in 1997.  For the year ended December 31, 1998, gains from portfolio
remarketing  increased  by $573,000 or 71.5% as compared to the prior year.  The
increase  in gains from portfolio remarketing is attributable to the increase in
sales of portfolio assets during the year ended December 31, 1998 as compared to
the  prior  year.  For  the  year ended December 31, 1998, fees from remarketing
activities  decreased slightly by $81,000 or 5.4% as compared to the prior year.
This  decrease 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, 1998, other income decreased by $224,000 or 33.7% as compared
to the corresponding prior year period.  The decrease is attributable in part to
the  inclusion of certain consulting fees earned in 1997 that were not recurring
in  1998.

     Costs  and  Expenses.  Total costs and expenses for the year ended December
31,  1998  was  $10,184,000  as  compared  to  $7,152,000 for the prior year, an
increase  of  3,032,000  or  42.4%.  The  increase is primarily a  result of the
costs  associated  with  sales  of  transportation  equipment.  The  cost  of
transportation  equipment  sales  was $5,647,000 for the year ended December 31,
1998  and  resulted  in  an  overall gross margin of 8.4%.  Selling, general and
administrative  expenses  for the year ended December 31, 1998 was $3,949,000 as
compared  to  $6,412,000  for  the  corresponding  prior  year,  a  decrease  of
$2,463,000 or 38.4%.  For the year ended December 31, 1998, selling, general and
administrative  expenses included recovered reimbursable administration costs of
$1,498,000 as compared to $405,000 for the corresponding prior year.  Net of the
reimbursable  administration  costs  selling,  general  and administrative costs
decreased  to  $5,447,000  for  the  year ended December 31, 1998 as compared to
$6,817,000  for the corresponding prior year, a decrease of $1,370,000 or 20.1%.
The  decrease  in  selling,  general  and  administrative  expenses reflects the
success  of  management's  cost  containment and stabilization efforts that were
finalized in 1997.  Management believes it has successfully implemented its cost
containment  and  stabilization strategy.  These cost improvements have resulted


<PAGE>
in a stabilization of the corporate infrastructure and provide a firm foundation
for  the new management team to implement the growth phase of its business plan.

     Interest  expense  for  the  year  ended  December 31, 1998 was $111,000 as
compared  to  $281,000  for  the  prior  year,  a decrease of $170,000 or 60.5%.

     Depreciation  and amortization expense for the year ended December 31, 1998
was  $477,000 as compared to $459,000 for the prior year, an increase of $18,000
or  3.9%.

          Extraordinary Item - Gain on Debt Forgiveness.  The Company recorded a
gain  on  debt forgiveness for the year ended December 31, 1997 of $930,000.  In
April  1997,  the  Company  repaid  in  advance  of  their  respective  terms an
inter-creditor  loan  and  secured inventory loan.  The aggregate amount of this
debt  on  the repayment date was $1,906,000, of which approximately $976,000 was
paid in cash and the balance of $930,000 was forgiven.  In addition, the Company
paid  approximately $22,000 in legal and bank fees to complete this transaction.

     Net  Income.  Net  income for the year ended December 31, 1998 was $524,000
as  compared  to  a  net  loss  of $1,802,000 for the prior year, an increase of
$2,326,000  or  129.1%.  The increase in net income is primarily attributable to
the significant increase in revenues, primarily from the retail and wholesale of
used  transportation  equipment,  the  buy-out  of  leases  from portfolios, and
continued  improvements in the containment of costs.  Basic net income per share
for  the  year  ended  December  31,  1998  was $0.02 per share as compared to a
($0.12)  net  loss per share for the prior year, an increase of $0.14 per share.
The  increase  is  due  primarily  to  the marked increase in overall net income
resulting  from  significant  revenue  growth  .


Liquidity  and  Capital  Resources
----------------------------------

     The  Company recognized a net increase in cash and cash equivalents for the
year  ended  December  31,  1998 of $515,000.  Operating activities used cash of
$2,283,000  during  the  year  ended  December  31, 1998.  Investing  activities
provided cash  of  $946,000  during  the  year ended  December 31, 1998  and  is
primarily  a  result  of  investments  in  South  Africa.  Financing  activities
provided  cash  of $1,852,000  during the  year  ended December  31, 1998 and is
primarily a result of increases  in stock issuance.  Cash and  cash  equivalents
amounted to $612,000 at December  31,  1998  as compared to $97,000 at  December
31, 1997,  an  increase of  $515,000  or  530.9%.

     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.  Vestex Capital
Corporation  ("VCC"), an additional affiliate of the Company, provided specified
services  including  debt  and  equity  raising  efforts,  and  other  financing
activity.  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.  VMI provides services to the Company on operational and other matters
for  which  it  is  compensated  at  levels  negotiated  with  the  Company.

During  1998,  VCC  investigated  numerous  strategic  alliances  and merger and
acquisition  opportunities  on  behalf  of the Company.  In connection with this


<PAGE>
activity,  VCC was instrumental in the negotiation and consummation of the Lease
Servicing  Agreement  entered  into on November 1, 1998 among Chancellor Leasing
Services,  Riviera  Finance - East Bay and United Capital and Finance LLC.   VCC
continues  to  negotiate  and  manage  the  Company's financing, acquisition and
investment  efforts  in  the  Republic  of  South Africa and other international
opportunities.  VCC  was  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  $22,000,000.  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,  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 approximately
$755,000  of  cash  and paid expenses of approximately $670,000 on behalf of the
Company  during  1998.  As  a  result, in part, of VCC's activities and services
provided,  the  Company's net worth increased to $2,362,000 at December 31, 1998
from  $227,000  as  of  December  31,  1997  and  from an approximate $2,550,000
negative  net  worth  as  of  December  31,  1996.

     The  Company  undertook  a  review  of  its  trust  portfolio,  including
consultation with legal counsel and industry consultants, and determined that it
had  not  been  recovering  costs  associated  with  administering  the  trusts.
Management's  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  $1,498,000 and $994,000 of cost recoveries in the years
ended  December  31,  1998  and  1997, respectively.  For periods prior to 1997,
$1,868,000  was  recovered.  Management makes no representations  concerning the
Company's  ability  to  recover  any  further costs for periods prior to 1997 or
thereafter.  Further  recoveries  for  periods prior to 1997 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.

          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.

     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.

     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

<PAGE>
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 both provide 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-operator.  The  Company  will  also aggressively promote its Internet
capabilities  to  further  promote  its business activities and as an e-commerce
tool.

     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, 1998, the Company had funded
approximately  $350,000  and  is  obligated to provide additional funding in the
approximate  amount  of  $650,000.  The  Company  has  additionally  invested
approximately  $1,340,000  into  one  of NAOF's investee companies.  The Company
continues  to  negotiate  further  strategic  opportunities  with  this investee
company.

          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.


Contractual  -  Tomahawk  Liability
-----------------------------------

     As previously discussed, although the Company did not have a formal closing
with  Tomahawk  until  January  1999,  the  Company  was contractually liable at
December  31,  1998  for approximately $11,200,000 of liabilities.  The purchase
was  effected  January,  1999  (see  footnote  18  for  details).


Potential  Fluctuations  In  Quarterly  Operating  Results
----------------------------------------------------------

     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.

     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


<PAGE>
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.

     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.


Recent  Accounting  Pronouncements
----------------------------------

     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.

     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.


<PAGE>
ITEM  7.     FINANCIAL  STATEMENTS
-------      ---------------------

     The  following  documents  are  filed  as  a  part  of  this report on Form
     ---------------------------------------------------------------------------
10-KSB-A:
--------
                                                                        Page No.

     Independent  Auditors'  Report                                         F-1

     Independendent  Auditors'  Report                                      F-2

     Consolidated  Balance  Sheet  as  of
       December  31,  1998                                                  F-3

     Consolidated  Statements  of  Operations  for  the
       years  ended  December  31,  1998  and  1997                         F-4

     Consolidated  Statements  of  Stockholders
       Equity  for  the  years  ended  December  31,  1998  and  1997       F-5

     Consolidated  Statements  of  Cash  Flows  for  the
       years  ended  December  31,  1998  and  1997                         F-6

     Notes  to  Consolidated  Financial  Statements                         F-7


     All  schedules  have  been  omitted  because  they  are inapplicable or the
required  information  is  included  in  the notes to the consolidated financial
statements.


ITEM  8.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
-------      -------------------------------------------------------------------
FINANCIAL  DISCLOSURES
----------------------

          On  February  25,  1999,  our  Audit  Committee and Board of Directors
approved  the  dismissal  of  our  independent  accountants,  Reznick  Fedder  &
Silverman, P.C. ("Reznick Fedder").  We provided Reznick Fedder with the reasons
for  the  dismissal  in a letter on March 4, 1999.  The reasons include, but are
not  limited  to:  (i)  disagreements  on  fees  billed  by  Reznick  Fedder for
services,  including,  but  not  limited to, due diligence and business advisory
services  in  connection with merger and acquisition activity, in the prior year
and estimated fees in connection with the proposed 1998 audit engagement, (ii) a
lack  of  commitment  by  Reznick Fedder to ensure timely completion of the 1998
audit  and  timely  filing  of  the  1998  Annual Report on Form 10-KSB-A, (iii)
dissatisfaction  as  to the timeliness of Reznick Fedder's provision of business
advisory  reports and recommendations in general and Management Reports pursuant
to  the  requirements  of Statements on Auditing Standards No. 61 in particular,
and  (iv)  personality  conflicts  between  Reznick  Fedder's  audit  team  and
management,  including disagreements concerning the quality of staffing provided
previously.

          During  the years ended December 31, 1997 and 1996:  (i) there were no
disagreements  with  Reznick  Fedder  on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Reznick Fedder, would have
caused  Reznick  Fedder  to  make  a  reference  to  the  subject  matter of the
disagreements  in  connection  with  its reports in the financial statements for
such  years and (ii) there were no "reportable events" as described in Items 304
of  Regulation  S-K.  Reznick  Fedder's report of independent accountants on the
Company's  consolidated  financial  statements  for the years ended December 31,
1997  and  1996  each  contained no adverse opinion or disclaimer of opinion and
were  not  qualified  or  modified  as to uncertainty, audit scope or accounting
principles.


<PAGE>
     During  the interim period from December 31, 1997 through February 25, 1999
(the  date  of  Reznick  Fedder's  dismissal  as  the  Company's  independent
accountants), Reznick Fedder alleged, solely in their opinion, (i) one potential
disagreement  as  to  a  matter  relating to accounting principles, and (ii) one
suggested  "reportable  event".

          By  letter  dated  March  15, 1999, Reznick Fedder has indicated that,
based on the limited information provided to them as of February 6, 1999, it did
not  appear  that  the  purchase of Atlanta based MRB, Inc. and affiliates d/b/a
Tomahawk Truck & Trailer Sales, Inc. ("MRB") should be reflected as of August 1,
1998,  as  stated  in our Current Report on Form 8-K filed on February 12, 1999.
Reznick  Fedder  based  its  preliminary  determination  on  the  August 1, 1998
Management  Agreement,  the  January  29, 1999 Stock Purchase Agreement, and the
January 29, 1999 Loan Agreement, each with MRB, as indicated in Reznick Fedder's
letter  to  us  dated  March 8 (incorporated by reference from Exhibit 99 to the
Company's  Form 8-K/A filed with the Securities and Exchange Commission on March
22,  1999).

          Reznick  Fedder  also  incorrectly  stated  in  that letter that their
preliminary  determination  was  based  in  part  on  the First Amendment to the
Management  Agreement  dated  August 17, 1998, when in fact,  Reznick Fedder did
not  review that First Amendment until after we filed our Current Report on Form
8-K  on  February  12,  1999 reporting the completion of our acquisition of MRB.
Despite  their  dismissal  as  our  independent accountants, Reznick Fedder also
requested  in  that  letter  that the Company provide any additional information
that  they  should  consider  in  connection  with  their  opinion regarding the
appropriateness  of  the  accounting  disclosures made in the Company's Form 8-K
filed  on February 12, 1999.  Reznick Fedder did not request further information
as  to  this  issue  prior  to  their  dismissal.

          We  engaged  the  Atlanta  based  firm  of Metcalf Rice Fricke & Davis
("Metcalf  Rice") on January 25, 1999 to perform the 1998, 1997, and 1996 audits
of  MRB, a significant subsidiary.  We further engaged the firm of Metcalf Rice,
based  on the merits of their performance of services in connection with the MRB
audits,  to  serve  as  our  independent accountants in February, 1999.  We then
asked  Metcalf Rice to review this potential issue, alleged by Reznick Fedder as
referenced  in  their  letter  dated  March  15,  1999,  using  all  available
information, including materials not previously requested by Reznick Fedder, and
provide us with their determination as to the proper accounting treatment of our
acquisition of MRB under generally accepted accounting principles.  On March 29,
1999,  Metcalf Rice issued a letter pursuant to Statements of Auditing Standards
No.  50  "Independent Accountants Report on Appropriate Application of Generally
Accepted  Accounting  Principles,"  which  addressed  the reporting period under
generally  accepted  accounting  principles  that  the  Company complied with in
preparing  its  December  31,  1998  financial  statements.

          As  to the second paragraph of Reznick Fedder's letter, they were only
provided  with  a  preliminary  unaudited,  unconsolidated, and unadjusted trial
balance  for  fiscal  1998.  In  addition, Reznick Fedder was not engaged as our
independent accountants for the purpose of certifying the consolidated financial
statements  of  Chancellor  Corporation as of December 31, 1998 and for the year
then  ended,  and were therefore not engaged to perform planning for this audit.

          Reznick  Fedder  was  not asked by us to determine whether adjustments
were  required  to recorded assets and liabilities which could materially impact
the  fairness or reliability of financial statements for the year ended December
31,  1998.  Adjustments,  as  necessary,  were  made based on recommendations of
Metcalf  Rice  during  the  course  of  their  audit  fieldwork.

     The  Company had initially filed its 1998 10-KSB on April 14, 1999, whereby
the  Company  included  Tomahawk in its consolidated financial statements.  Upon
additional  review  and discussions with the Securities and Exchange Commission,
the  Company has filed this amended 10-KSB-A to reflect the financial statements
without  Tomahawk as of August 1998, and recorded the transaction as of January,
1999.


<PAGE>
                                    PART III
                                    --------

ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
-------      -------------------------------------------------------------------
COMPLIANCE  WITH  SECTION  16(a)  OF  THE  EXCHANGE  ACT
--------------------------------------------------------

     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 25,
1999  and to be filed with the Securities and Exchange Commission in April 1999,
and  is  incorporated  herein  by  this  reference.

ITEM  10.     EXECUTIVE  COMPENSATION
--------      -----------------------

     The  information  required  by  Item  402 of Regulation S-B with respect to
executive  compensation  will  be set forth in he Proxy Statement for the Annual
Meeting  of  Stockholders  to  be held on June 25, 1999 and to be filed with the
Securities  and Exchange Commission in April 1999, and is incorporated herein by
this  reference.

ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT
--------      ------------------------------------------------------------------

     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
25,  1999  and  to be filed with the Securities and Exchange Commission in April
1999,  and  is  incorporated  herein  by  this  reference.

ITEM  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
--------      --------------------------------------------------

     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 25, 1999 and
to  be  filed  with the Securities and Exchange Commission in April 1999, and is
incorporated  herein  by  this  reference.

ITEM  14.     EXHIBITS  AND  REPORTS  ON  FORM  8-K
--------      -------------------------------------

Exhibits:
---------
(a)          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).

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).


<PAGE>
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)

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).

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, Savrn B063 Trust, Saturn B067
Trust,  Shamrock  25748  Trust,  Tyler  3Mo  Trust, Whirlpool 49434 Trust, Fleet
National  Bank  and  VESTEX  Capital  Corporation.

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).

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.

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).


<PAGE>
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).

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).

10.8     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.


10.9     Consulting  Agreement, dated July 1, 1998, by and among the Company and
VMI  Corporation.


10.11     Stock  Redemption  Agreement,  dated  August 7, 1998, by and among the
Company  and  VESTEX  Capital  Corporation.

10.21     Promissory  Note,  dated  December 22, 1998, in the original principal
amount  of $3,475,000 from Chancellor Corporation to Vestex Capital Corporation.

10.22     Security  Agreement,  dated  as  of  December  22,  1998, by and among
Chancellor  Corporation  and  Vestex  Capital  Corporation.

10.23     Employment  Agreement,  dated October 1, 1998, by and among Chancellor
Corporation  and  Franklyn  E.  Churchill.

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).

21     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).

23.1     Independent  Auditor's  Consent  -  Metcalf,  Rice,  Fricke  and  Davis

23.2     Independent  Auditors'  Consent  -  Reznick  Fedder  &  Silverman

27.1     Financial  Data  Schedule  for  year  ended  December  31,  1998.

*     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.


<PAGE>
     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.

     (b)     Reports  on  Form  8-K:

     Current  Report  on  Form  8-K,  dated  February  10,  1999
     Current  Report  on  Form  8-K,  dated  March  4,  1999
     Current  Report  on  Form  8-K/A,  dated  March  22,  1999
     Current  Report  on  Form  8-K/A,  dated  April  13,  1999


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To  the  Stockholders  and  Board  of  Directors
of  Chancellor  Corporation


We  have  audited  the  accompanying  consolidated  balance  sheet of Chancellor
Corporation  and  subsidiaries  as  of  December  31,  1998  and  the  related
consolidated  statements  of operations, stockholders' equity (deficit) and cash
flows  for  the  year  then  ended.  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.  The financial
statements  of  Chancellor  Corporation  and  subsidiaries  for  the  year ended
December  31,  1997  were audited by other auditors whose report dated March 27,
1998  expressed  an  unqualified  opinion  on  those  statements.

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.

In  our  opinion,  the  1998 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, 1998, and the results of
their  operations  and  their  cash flows for the year then ended, in conformity
with  generally  accepted  accounting  principles.



                                                 /s/ METCALF RICE FRICKE & DAVIS

Atlanta,  Georgia
April  13,  1999,  except  for  Notes  7,  10,
14  and  18  which  are  as  of  December  30,  1999.

                                       F-1


<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To  the  Stockholders  and  Board  of  Directors
of  Chancellor  Corporation


We  have  audited  the  accompanying  consolidated  statements  of  operations,
stockholders'  equity  (deficit)  and cash flows for the year ended December 31,
1997.  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.

We  conducted  our  audits  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  audits  provide  a  reasonable  basis  for  our opinion.

In  our  opinion,  the  1997 consolidated financial statements referred to above
present fairly, in all material respects, and the results of operations and cash
flows of Chancellor Corporation and its subsidiaries for the year ended December
31,  1997,  in  conformity  with  generally  accepted  accounting  principles.





                                                  /s/ REZNICK FEDDER & SILVERMAN

Boston,  Massachusetts
March  18,  1998,  except  for  Note  V
which  is  as  of  March  27,  1998

 .                                       F2
<PAGE>
<TABLE>
<CAPTION>
                      CHANCELLOR CORPORATION AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Thousands)


                                                                    December 31,
                                                                        1998
                                                                   --------------
<S>                                                                <C>
 ASSETS

 Cash and cash equivalents                                         $         612
 Receivable, net                                                           2,880
 Inventory                                                                    36
 Net investment in direct finance leases                                     359
 Equipment on operating lease, net of accumulated depreciation
       of $2,351                                                             702
 Residual values, net                                                        219
 Furniture and equipment, net of accumulated depreciation
       of $1,221                                                             807
 Other investments                                                         1,000
 Intangibles, net                                                            111
 Other assets, net                                                         1,460
                                                                   --------------

        Total Assets                                               $       8,186
                                                                   ==============

 Liabilities and Stockholder's Equity

 Accounts payable and accrued expenses                             $       3,572
 Deferred revenue                                                          1,068
 Indebtedness:
   Nonrecourse                                                               889
   Recourse                                                                  295
                                                                   --------------
          Total Liabilities                                                5,824
                                                                   --------------

 Stockholders' Equity:
   Preferred Stock, $.01 par value; 20,000,000 shares authorized:
      Convertible Series AA, 5,000,000 shares issued
         and outstanding                                                      50
      Convertible Series B, 2,000,000 shares authorized,
        none issued and outstanding                                            -
   Common stock, $.01 par value; 75,000,000 shares authorized,
         38,541,895 shares issued and outstanding                            385
   Additional paid-in capital                                             29,943
   Accumulated deficit                                                   (28,016)
                                                                   --------------
         Total Stockholder's Equity                                         2,362
                                                                   --------------

   Total Liabilities and Stockholder's Equity                      $       8,186
                                                                   ==============
</TABLE>

                The accompanying notes are and integral part
             of these condensed consolidated financial statements


                                     F-3
<PAGE>
<TABLE>
<CAPTION>
                        CHANCELLOR CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                         (In Thousands, Except Per Share Data)


                                                                   December 31,
                                                                1998          1997
                                                             -----------  ------------
<S>                                                          <C>                   <C>
REVENUES:

   Transportation equipment sales                            $     6,165  $         -
   Rental income                                                     942          870
   Lease underwriting income                                          74          293
   Direct finance lease income                                       110          272
   Interest income                                                   195           44
   Gains from portfolio remarketing                                1,374          801
   Fees from remarketing activities                                1,407        1,488
   Other income                                                      441          665
                                                             -----------  ------------
                                                             $    10,708  $     4,433
                                                             -----------  ------------

COSTS AND EXPENSES:

   Cost of transportation equipment sales                          5,647            -
   Selling, general and administrative                             3,949        6,412
   Interest expense                                                  111          281
   Depreciation and amortization                                     477          459
                                                             -----------  ------------
                                                                  10,184        7,152
                                                             -----------  ------------

Earnings before taxes                                                524       (2,719)
                                                             -----------  ------------

Provision for income taxes                                             -           13
Income (loss) before extraordinary item                              524       (2,732)
                                                             -----------  ------------

Extraordinary item - gain on debt forgiveness                          -          930

Net income                                                   $       524  $    (1,802)
                                                             -----------  ------------
Basic net income per share:
  Income (loss) before extraordinary item                    $      0.02  $     (0.18)
  Extraordinary item                                                   -         0.06
                                                             -----------  ------------
  Net income (loss)                                          $      0.02  $     (0.12)
                                                             ===========  ============

Shares used in computing basic net income (loss) per share    32,195,162   15,224,432
</TABLE>

                The accompanying notes are and integral part
             of these condensed consolidated financial statements


                                     F-4
<PAGE>
<TABLE>
<CAPTION>
                                        CHANCELLOR CORPORATION AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                        YEARS ENDED DECEMBER 31, 1998 AND 1997
                                                    (In Thousands)



                         Preferred Stock       Common Stock     Additional              Treasury Stock     Stockholders
                        -----------------  -------------------  Paid - In Accumulated --------------------    Equity
                        Shares    Amount    Shares    Amount     Capital    Deficit    Shares     Amount    (Deficit)
                        -------  --------  --------  ---------  ---------  ---------  ---------  ---------  ----------
<S>                     <C>      <C>       <C>       <C>        <C>        <C>        <C>        <C>        <C>
BALANCE, 1/1/97          5,000   $    50     6,567   $     65   $ 24,609   $(26,738)     1,431   $   (536)  $  (2,550)

Preferred stock
   Series A issued         711         7                           1,343                                        1,350

Preferred stock
   Series AA issued      3,000        30    20,250                   870                                          900

Common stock issued                                       203      2,123                                        2,326

Exercise of stock
 options                                        15                     3                                            3

Retirement of treasury
  stock                                     (1,431)       (14)      (522)               (1,431)       536        ----

Net loss                                                                     (1,802)                           (1,802)
                        -------  --------  --------  ---------  ---------  ---------  ---------  ---------  ----------

BALANCE, 12/31/97        8,711        87    25,401        254     28,426    (28,540)     -----       ----         227

Preferred stock,
  Series A converted
  to common stock         (711)       (7)    7,105         71        (64)                                        ----

Preferred stock,
  Series AA converted
  to common stock       (3,000)      (30)    3,000         30       ----                                         ----

 Common stock issued                         2,146         21      1,296                                        1,317

 Exercise of stock
  options                                      892          9        284                                          293

Additional paid in
 capital                                                               1                                            1

 Net income                                                                     524                               524
                        -------  --------  --------  ---------  ---------  ---------  ---------  ---------  ----------

 BALANCE, 12/31/98       5,000   $    50    38,544   $    385   $ 29,943   $(28,016)  $   ----   $   ----   $   2,362
                        =======  ========  ========  =========  =========  =========  =========  =========  ==========
</TABLE>

                The accompanying notes are and integral part
             of these condensed consolidated financial statements


                                     F-5
<PAGE>
<TABLE>
<CAPTION>
                         CHANCELLOR CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (In Thousands)

                                                                  Years Ended December 31,
                                                                       1998      1997
                                                                     --------  --------
<S>                                                                  <C>       <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income (loss)                                                 $   524   $(1,802)
                                                                     --------  --------
   Adjustments to reconcile net income (loss)
     to net cash (used in) provided by operating activities:
     Depreciation and amortization                                       477       459
     Residual value estimate realizations and
       reductions, net of additions                                      246       283
     Gain on debt forgiveness                                              -      (930)
     Changes in assets & liabilities:
      Receivables                                                     (2,213)    1,896
       Inventory                                                         (36)        -
        Accounts payable & accrued expenses                           (2,334)    1,813
       Increase in deferred revenue                                    1,053        15
                                                                     --------  --------
                                                                      (2,807)    3,536
                                                                     --------  --------
               Net cash (used in) provided by operating activities    (2,283)    1,734
                                                                     --------  --------

 CASH FLOWS FROM INVESTING ACTIVITIES:
   Leased equipment held for underwriting                                502       729
   Net investments in direct finance leases                              162       227
   Equipment on operating lease                                         (588)       59
   Other investments                                                       -      (185)
   Net change in cash restricted and escrowed                          2,419     1,134
   Additions to furniture and equipment, net                            (172)   (1,018)
   Net change in other assets                                         (1,377)      141
                                                                     --------  --------
          Net cash provided by investing activities                      946     1,087
                                                                     --------  --------

 CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in indebtedness - nonrecourse                                688        40
   Increase in indebtedness - recourse                                   755     1,879
   Repayments of indebtedness - nonrecourse                             (327)     (701)
   Repayments of indebtedness - recourse                                (875)   (3,966)
   Issuance of common stock, net                                       1,611         3
                                                                     --------  --------
           Net cash provided by financing activities                   1,852    (2,745)
                                                                     --------  --------

-------------------------------------------------------------------
 Net increase in cash and cash equivalents                               515        76
 Cash and cash equivalents at beginning of period                         97        21
                                                                     --------  --------
 Cash and cash equivalents at end of period                          $   612   $    97
                                                                     ========  ========
</TABLE>

                The accompanying notes are and integral part
             of these condensed consolidated financial statements


                                     F-6
<PAGE>


                     CHANCELLOR CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

1.   Business  Organization  and  Significant  Accounting  Policies
     --------------------------------------------------------------

     Business
     --------

          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 1998,
the  Company  expanded  its  market  presence  to  include  minor  activities in
international  markets  such  as  Russia  and  the  Republic  of  South  Africa.

     Principles  of  Consolidation
     -----------------------------

     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.

Accounting  for  Estimates
--------------------------

     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.

     Revenue  Recognition
     --------------------

     Transportation equipment sales - 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.

     Lease  underwriting income - 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.


<PAGE>
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.

     Direct  finance  lease  income  -  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.

     Operating  leases  (Rental  Income)  -  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.

     Reimbursable  Expenses
     ----------------------

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.  The reimbursement of these
costs  is  recorded  as  a  reduction  of  general  and administrative expenses.

     Residual  Values
     ----------------

     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.

     Cash  and  Cash  Equivalents
     ----------------------------

     The  Company  considers  all  highly  liquid  investments  purchased with a
remaining  maturity  of  three  months  or  less  to  be  cash  equivalents.

     Concentration  of  Credit  Risk
     -------------------------------

     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, 1998, the uninsured portion of the cash balances
held  at  one bank was approximately $573,000, of which $532,000 was invested in
overnight  repurchase  agreements.


<PAGE>
Inventory
---------

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.

Furniture,  Equipment  and  Leaseholds
--------------------------------------

     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.

Intangibles
-----------

     Intangibles  primarily  consist  of  goodwill,  which  is amortized over an
estimated  life  of  ten  years  using  the  straight-line  method.

     Income  Taxes
     -------------

     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.

     Stock-based  Compensation
     -------------------------

     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".

     Net  Income  (Loss)  per  Share
     -------------------------------

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.

     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.  Diluted net loss per share
is  not  presented  for  1998 and 1997 since common stock equivalent shares from
convertible  preferred  stock  and  from  stock  options  and  warrants  are
antidilutive.

Supplemental  Cash  Flow  Information
-------------------------------------

     Cash  paid  for  income taxes during 1998 and 1997 was $13,000 and $13,000,
respectively.  Interest  paid  during  1998  and  1997 was $63,000 and $340,000,
respectively.



<PAGE>
Other  Investments
------------------

The  Company accounts for its equity investment of less than 20% ownership in an
investee  on  a  cost  basis.

     Recent  Accounting  Pronouncements
     ----------------------------------

          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.

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.

Impact  of  the  Year  2000  Issue
----------------------------------

     The  Company has commenced 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.

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.  Although  the  Company has not completed a 100% assessment of all
its information technology ("IT") and non-IT systems for Y2K issues, the Company
has  completed  its  assessment  of  all  mission-critical  systems.  All
mission-critical  systems  and  most of the major applications and hardware have
been  assessed  to  determine  the  Y2K impact and a plan is in place for timely
resolution  of  potential  issues.

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.  The Company has spent approximately $152,000 in modernizing
its  IT  system,  including  compliance  with  Y2K  requirements.  The  Company
anticipates  spending  of  approximately $300,000 during fiscal 1999 to complete
the  modernization  of  its  IT  system.


<PAGE>
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  and  its  vendors'  and  customer's
operations  will  not  have  a  material  adverse  effect  on  the  Company.

     Fair  Value  of  Financial  Instruments
     ---------------------------------------

     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.

     Risk  Management
     ----------------

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.

     Foreign  Currency  Translation
     ------------------------------

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.

2.     Receivables

     Receivables  consists  of  the  following  as  of  December  31,  1998  (in
thousands):

<TABLE>
<CAPTION>
                               December 31,
                                   1998
<S>                            <C>
Note receivable                $       1,242
Receivables from trust, net              855
Loans receivable                         373
Other notes receivable                   137
Accrued rents receivable, net             40
Interest receivable                      104
Other receivables                        129
                               -------------

                               $       2,880
</TABLE>


<PAGE>
Receivables  from  trusts  include  amounts  due  the  Company  for cash outlays
associated  with the remarketing of equipment of $72,000.  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
$1,764,000.  Collection  of  costs  of  administration  is  not  certain  due to
numerous  factors  and  is,  therefore,  included  net of the estimated reserve.

Accrued  rents  represent amounts due from portfolio leases, net of an allowance
of  $88,000.

3.     Residual  Values,  Net
       ----------------------

     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.

     The  activity  in  the residual value accounts for the years ended December
31,  1998  and  1997  is  as  follows  (in  thousands):


<TABLE>
<CAPTION>
                                          December 31,
                                         --------------
                                              1998        1997
                                         --------------  ------
<S>                                      <C>             <C>
Residual values, beginning of year, net  $         465   $ 748
Residual realization                              (204)   (283)
Residual value estimate reduction                  (42)   ----

Residual values, end of year, net        $         219   $ 465
</TABLE>


<TABLE>
<CAPTION>
                                          December 31,
                                         --------------
                                              1998        1997
                                         --------------  ------
<S>                                      <C>             <C>
Residual values, beginning of year, net  $         465   $ 748
Residual realization                              (204)   (283)
Residual value estimate reduction                  (42)   ----

Residual values, end of year, net        $         219   $ 465
</TABLE>


     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, 1998 and 1997, the Company realized income of approximately
$1,407,000  and  $1,488,000,  respectively,  relating  to  the  remarketing  of
equipment  for which no residuals were recorded or realized amounts exceeded the
booked  residual.


<PAGE>
Aggregate residual  value  fees  expected to be realized as of December 31, 1998
are  as  follows  (in  thousands):


<TABLE>
<CAPTION>

Years ending December 31:
<S>                         <C>
1999                        $ 102
2000                           74
2001                            8
2002                            2
2003                         ----
Thereafter                     33
                           ------
                            $ 219
</TABLE>


4.   Net Investment in Direct Finance Leases and Equipment on Operating Lease:
     ------------------------------------------------------------------------

     Net  investment  in  direct finance leases consisted of the following as of
December  31,  1998  (in  thousands):

<TABLE>
<CAPTION>

                                            December 31,
                                                1998
<S>                                        <C>
Minimum lease payments receivable          $         389
Estimated unguaranteed residual values of
      leased equipment, net                           53
Less:  Unearned income                               (83)

                                           $         359
</TABLE>

     The cost of equipment on operating lease by category of equipment consists
of  the  following  as  of  December  31,  1998  (in  thousands):

<TABLE>
<CAPTION>
                                 December 31,
                                     1998
<S>                              <C>
Transportation equipment         $         819
Other equipment                          2,234
                                         3,053
                                 -------------

Less - accumulated depreciation          2,351

                                 $         702
</TABLE>


<PAGE>
The  aggregate  amounts  of  minimum  lease  payments  to  be  received  from
noncancelable direct finance and operating leases are as follows (in thousands):

<TABLE>
<CAPTION>

                            Direct
Year ending December 31:   Finance   Operating
                                     ----------
<S>                        <C>      <C>
1999                       $    195  $      219
2000                            110          34
2001                             72          31
2002                              8          30
2003                              4          30

                           $    389    $    344
</TABLE>


5.     Accounts  Payable  and  Accrued  Expenses:
       -----------------------------------------

     Accounts  payable  and  accrued  expenses  consists  of the following as of
December  31,  1998  (in  thousands):

<TABLE>
<CAPTION>

                                                     December 31,
                                                         1998
<S>                                                  <C>
Trade accounts payable                               $         358
Payables to investors                                        1,361
Contribution payable to New Africa Opportunity Fund            650
Accrued commissions payable                                     53
Accrued legal and accounting fees                              272
Accrued interest payable                                        95
Other accrued expenses                                         783

                                                     $       3,572
</TABLE>


6.     Early  Extinguishment  of  Intercreditor  Loan
       ----------------------------------------------

     In  April  1997,  the Company executed and delivered (1) the Loan Reduction
and  Purchase  and  Assignment Agreement dated April 1997 among the Company, its
corporate affiliates, a bank, as agent (the "Agent") for the Company's principal
recourse  lenders,  and  VCC, the Company's majority shareholder; (2) release in
favor  of  the principal recourse lenders to be given by VCC and Brian M. Adley,
Chairman  of  the  Board  of  Directors  of  the  Company  and President of VCC,
individually; (3) release in favor of the principal recourse lenders to be given
by  the  Company, its corporate affiliates and/or subsidiaries, in favor of VCC.
Coterminous  with  this  transaction,  both  the  intercreditor loan and secured
inventory  loan were repaid in advance of their respective terms.  The aggregate
amount of this debt on the repayment date was approximately $1,906,000, of which
approximately  $976,000  was  paid  in  cash  and  the  balance  of $930,000 was
forgiven.  In addition, the Company paid approximately $22,000 in legal and bank
fees  to  complete  this  transaction.
<PAGE>

7.     Non-Recourse  and  Recourse  Debt
       ---------------------------------

     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 7.8%
to  13.6%.  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.

     Aggregate  future  maturities  of non-recourse debt as of December 31, 1998
are  as  follows  (in  thousands):


<TABLE>
<CAPTION>

Years ending December 31:
<S>                         <C>
1999                        $698
2000                          87
2001                          91
2002                          13
                             ---
                            $889
                            ====
</TABLE>


     Recourse  debt  consists  of  the  following  as  of  December 31, 1998 (in
thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                                    1998
<S>                                                             <C>
Promissory note payable to the Company's majority
  stockholder, bearing interest at the prime rate (7.75% at
  December 31, 1998) plus 2%, principal and accrued interest
  payable December 31, 2001, secured by substantially
  all of the assets of the Company.                             $          39


Subordinated promissory note payable to a former
   stockholder of the Company, bearing interest at the prime
   rate (7.75% at December 31, 1998) plus 1%, principal and
   accrued interest payable on demand.                                    200

Equipment line of credit with two leasing companies, aggregate
   monthly payments of $2,183 and leases expiring from
   November 2000 to January 2001                                           56
                                                                          295
Less - current portion                                                    220
                                                                     --------
                                                                $          75
                                                                 ============
</TABLE>

<PAGE>
     Aggregate  future  maturities of recourse debt as of  December 31, 1998 are
as  follows  (in  thousands):

<TABLE>
<CAPTION>

Years ending December 31:
<S>                         <C>
1999                        $220
2000                          23
2001                          46
2002                           6
                             ---
                            $295
                            ====
</TABLE>


8.   Income  Taxes
     -------------

     The  provision  (benefit)  for  income  taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>

                1998      1997
           -----------  ------
<S>              <C>    <C>
Current:
        Federal  $----  $----
        State     ----     13

Deferred:
        Federal   ----   ----
        State     ----   ----

                 $----  $  13
</TABLE>

 A reconciliation  of the rate used for the provision (benefit) for income taxes
is  as  follows:

<TABLE>
<CAPTION>
                                                     1998    1997
                                                    ------  ------
<S>                                                 <C>     <C>
Tax benefit at statutory rate                        34.0%   34.0%
Net operating loss carry forward benefit for which
      utilization is not assured and other items    (34.0)  (34.0)

                                                      0.0%    0.0%
</TABLE>


     The  Company  files consolidated federal income tax returns with all of its
subsidiaries.  As of December 31, 1998, the Company has net operating loss carry
forwards  of approximately $21,771,000 available for federal tax purposes, which
expire  in  the  years 2001 through 2012. In addition, at December 31, 1998, the
Company has investment tax credit carry forwards for federal income tax purposes
available  to  offset  future  taxes of approximately $1,855,000 expiring in the
years 1999 through 2002 and minimum tax credit carry forwards for federal income
tax purposes available to offset future taxes of approximately $135,000 which do
not  expire.  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.

     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.


<PAGE>
The  tax  effects of significant items comprising the Company's net deferred tax
liability  as  of  December  31,  1998  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>
                                                             December 31,
                                                                 1998
<S>                                                         <C>
Deferred tax liabilities:
        Differences between book and tax basis of property  $         189

Deferred tax assets:
        Reserves not currently deductible                             552
        Net operating loss carry forwards                           8,708
        Tax credit carry forwards                                   1,990
        Other                                                       1,000
                Total deferred tax assets                          11,248
                                                            --------------
                                                                   11,059
                                                            --------------
Valuation allowance                                               (11,059)

Net deferred tax liability                                  $        ----
                                                             =============
</TABLE>

     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 $940,000 in 1998.  For the year ended December 31, 1997
the  valuation  allowance  decreased  by  $1,050,000.

     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 $189,000 as of
December  31,  1998.  The deferred tax asset, net of the deferred tax liability,
has  been  fully  reserved  as  of  December  31,  1998.

9.     Stockholders  Equity
       --------------------

     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:

Series  AA  -  convertible  into  one  share  of  Common Stock for each share of
Preferred  Stock  and  has  a  liquidation  preference  of  $.50  per  share.

Series  B  -  convertible  into  ten  shares  of  Common Stock for each share of
Preferred  Stock  and  has  a  liquidation  preference  of  $2.00  per  share.


<PAGE>
10.     Stock  Option  Plans  and  Stock  Purchase  Plan
        ------------------------------------------------

     The  Company has three stock option plans: a 1994 Stock Option Plan, a 1994
Directors'  Stock  Option  Plan  and  a  1997  Stock  Option  Plan.

     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  of  grant.

Information  with  respect  to  the  stock  option  plans  is  as  follows:

<TABLE>
<CAPTION>
                                                                        Weighted
                            1994        1994        1997         1983    Average
                          Stock     Directors     Stock        Stock    Exercise
                      Option Plan  Option Plan  Option Plan   Option Plan  Price
     -------   --------  ------------  ------------  ------------  ---------
<S>                              <C>        <C>         <C>      <C>     <C>
Outstanding, December 31, 1996    1,081,466  329,500    ---     3,244    $.   18
                   ------------  ------------  ------------  ---------  ----
Options granted                    775,000   337,500   2,245,000             .51
Options exercised                  (15,000)      ----     ----       ----    .15
Options canceled and expired       (973,716) ---          ----       ----    .18
Options canceled and reissued         3,244 ----       ----     (3,244)      .01

Outstanding, December 31, 1997      870,994  667,000   2,245,000     ----    .49

Options granted            355,991          ----     1,911,500       ----    .52
Options exercised         (384,583)      (40,000)     (467,000)      ----    .33
Options canceled and expired  (59,985)      ----      (952,500)      ----    .52

Outstanding, December 31, 1998  782,417    627,000     2,737,000     ----   $.54
</TABLE>
<PAGE>

     Additional  information  regarding  options  outstanding as of December 31,
1998  is  as  follows:

<TABLE>
<CAPTION>
                                        Options Outstanding
                                        -------------------


            Weighted Average Contractual Life

Exercise                 Number                Exercisable Options              Date of Expiration
Price                   of Shares
----------  ---------------------------------
<S>                                     <C>                 <C>                  <C>           <C>
0.01                                   1,917                 5.00               1,917         2002
----------  ---------------------------------  -------------------  ------------------  -----------
0.05                                 112,500                 8.00             112,500         2006
0.06                                 112,500                 8.00             112,500         2006
0.10                                 364,000                 4.75             267,000  2003 - 2004
0.13                                  27,911                 2.59              27,911         2001
0.16                                   5,000                 2.59               5,000         2001
0.19                                  27,589                 2.59              27,589         2001
0.20                                 675,000                 6.15             475,000  2004 - 2007
0.25                                 602,000                 6.13             177,000  2004 - 2005
0.30                                  40,000                 4.75              40,000         2003
0.50                                 591,333                 6.64                ----  2005 - 2006
0.60                                  40,000                 5.75                ----         2004
0.70                                 120,000                 7.34                ----  2004 - 2008
0.71                                  10,000                 5.75                ----         2004
0.75                                 588,333                 7.64                ----  2006 - 2007
0.80                                  30,000                 7.75                ----  2004 - 2008
0.81                                  10,000                 6.75                ----         2005
0.91                                  10,000                 7.75                ----         2006
1.00                                 678,334                 9.09                ----  2007 - 2008
1.01                                  10,000                 8.75                ----         2007
1.11                                  10,000                 9.75                ----         2008
1.50                                  40,000                 8.75                ----  2007 - 2008
2.00                                  40,000                 8.75                ----  2007 - 2008

4,146,417                           1,246,417
</TABLE>


     Pro  forma  information.  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.



<PAGE>
The  Company's  calculations  were  made  using the Black-Scholes option pricing
model  with the weighted average assumptions: expected life, 48 months following
vesting; stock volatility 200% in 1998 and 1997; risk free interest rate, 8%, in
1998  and in 1997 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 1998 would have been $547,000 or $0.01 per share and
the  pro  forma  net loss in 1997 would have been $1,850,000 or $0.12 per share.

Employee  Stock  Purchase  Plan
-------------------------------

     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.

     The  Company  has  reserved  250,000 shares of Common Stock for all amounts
that  may  be  offered  to  employees  under  this  plan.

     Stock  Warrants
     ---------------

     During  1998,  the  Company's  majority shareholder has allocated 3,300,000
shares  to  employees  of  the  Company  under  various  stock  purchase warrant
agreements.

     Information  with  respect  to  these  stock  warrants  is  as  follows:


<TABLE>
<CAPTION>
                                Weighted Average
                                     Shares       Exercise Price
                                ----------------  ---------------
<S>                             <C>               <C>
Outstanding, December 31, 1997             -----  $          ----

Warrants granted                       3,300,000             .682
Warrants exercised                         -----            -----
Warrants forfeited                         -----            -----

Outstanding, December 31, 1998         3,300,000  $          .682
                                ----------------  ---------------
</TABLE>


<PAGE>
Additional  information regarding options outstanding as of December 31, 1998 is
as  follows:

<TABLE>
<CAPTION>
                                  Warrants Outstanding
                                  --------------------


                 OPTIONS EXERCISABLE
                 -------------------
                       NUMBER         WEIGHT-AVG    NUMBER
RANGE OF             OUTSTANDING      REMAINING   WEIGHT-AVG   EXERCISABLE  WEIGHT-AVG
EXERCISE PRICES      AT 12/31/98         LIFE     EXERC-PRICE  AT 12/31/98  EXERC PRICE
                                                               -----------  -----------
<S>              <C>                  <C>         <C>          <C>          <C>
0.10                         550,000        6.36         0.10      550,000         0.10
0.25                         650,000        7.46         0.25      650,000         0.25
0.50                         800,000        8.50         0.50      800,000         0.50
0.75                         200,000        9.00         0.75      200,000         0.75
1.00                         180,000        6.00         1.00      180,000         1.00
1.10                         180,000        7.00         1.10      180,000         1.10
1.25                         380,000        9.05         1.25      380,000         1.25
1.50                         180,000        9.00         1.50      180,000         1.50
2.00                         180,000       10.00         2.00      180,000         2.00
                 -------------------  ----------  -----------  -----------  -----------
3,300,000                       7.92       0.682    3,300,000         0.68
</TABLE>


     Pro  forma information As noted above The Company has elected to follow APB
     ----------------------
Opinion  No. 25,  "Accounting for Stock Issued to Employees",  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 a $939.00 compensation expense to the Company during
1998.  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.

     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  loss  in  1998  would have been $128,000

11.     Major  Customers
        ----------------

     The  Company  is  engaged  principally in originating and selling equipment
leasing  transactions.  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.  During  1997, 92% (based on original equipment cost) of the
new  lease  transactions  originated  by  the  Company were with the one largest
lessee.  In  addition,  approximately  55%  and 37% (based on original equipment
cost)  of  equipment sold to investors in 1997 were purchased by the two largest
investors.

<PAGE>

12.     Employee  Benefit  Plan
        -----------------------

     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 approximately $11,000 and $18,000
in  1998  and  1997,  respectively.

13.     Other  Investment
        -----------------

     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, 1998, the Company
funded $350,000 of a $1 million commitment for its 2.5% interest in NAOF and the
remaining  obligation  of  $650,000  is included in accounts payable and accrued
expenses.

14.     Related  Party  Activities
        --------------------------

During  1998,  VCC  investigated  numerous  strategic  alliances  and merger and
acquisition  opportunities  on  behalf  of the Company.  In connection with this
activity,  VCC was instrumental in the negotiation and consummation of the Lease
Servicing  Agreement  entered  into on November 1, 1998 among Chancellor Leasing
Services,  Riviera  Finance  -  East Bay and United Capital and Finance LLC. VCC
continues  to  negotiate  and  manage  the  Company's financing, acquisition and
investment  efforts  in  the  Republic  of  South Africa and other international
opportunities.  VCC  was  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  $22,000,000.  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.
In  connection  with  the  lease  recovery project the Company capitalized costs
charged  by  VCC of approximately $1,000,000, which currently represents approx-
imately 10% of  the  expected  recovery  costs.  These  costs  are  being
amortized over the expected  recovery  period  of the leases, which averages
approximately 24 to 36 months  and  amounted  to  approximately  $48,000  for
1998.


<PAGE>
 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  as  of  December  31,  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, 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  approximately  $755,000  cash  into  and $670,000 paid on behalf of the
Company  during  1998.  As  a  result, in part, of VCC's activities and services
provided,  the  Company's net worth increased to $2,362,000 at December 31, 1998
from  $227,000  as  of  December  31,  1997  and from an approximate $12,000,000
negative  net  worth  as  of December 31, 1996.  During 1998, in connection with
VMI's  consulting  agreement for the various activities as previously discussed,
VMI  received  cash  payments  of  approximately $470,000.  The Company recorded
consulting  expenses  of  approximately  $461,000.

Chancellor  has  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 is repaid in equal
monthly  installments  of  $5,296  and  matures  December  1999.  The loan bears
interest  at 15 percent per annum.  As of December 31, 1998, Kent was in default
of  the  loan.  As  of December 31, 1998, the outstanding balance on the loan is
approximately  $62,000.

15.     Commitments  and  Contingencies
        -------------------------------

     The  Company  rents  its corporate offices under a five-year non-cancelable
lease.  In  addition,  the  Company  leases  regional marketing offices at three
locations  along  the  east  coast. The future minimum rental commitments are as
follows  (in  thousands):

<TABLE>
<CAPTION>

Years ending December 31:
<S>                         <C>
1999                        $359
2000                         300
2001                         233
2002                         201
2003                         102

                           1,195
</TABLE>

     Rental  expense,  net  of abatements, for the years ended December 31, 1998
and  1997  amounted  to  approximately  $421,000,  and  $194,000,  respectively.

     The  Company  undertook  a  review  of  its  trust  portfolio,  including
consultation with legal counsel and industry consultants, and determined that it
had  not  been  recovering  costs  associated  with  administering  the  trusts.
Management's  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  $1,498,000 and $994,000 of cost recoveries in the years
ended  December  31,  1998  and  1997, respectively.  For periods prior to 1997,
$1,868,000  was  recovered.  Management  makes no representations concerning the
Company's  ability  to  recover  any  further costs for periods prior to 1997 or
thereafter.  Further  recoveries  for  periods prior to 1997 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.


<PAGE>
16.     Legal  Proceedings
        ------------------

    As of 12/1/99, 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.

17.     Operating  Segments
        -------------------

     The  Company  operates  in  two  primary  business  segments:  1)  sales of
transportation  equipment  and  2)  leasing activity, as follows (in thousands):

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                     -------------------------
1998                                                           1997
---------------------------------------------------  -------------------------
<S>                                                  <C>                        <C>
Sales of Transportation Equipment:
---------------------------------

      Revenues                                       $                   6,165  $----
      Cost and expenses:
            Cost of transportation equipment                             5,647   ----
            Selling, general and administrative      $                     278   ----
                                                     $                   -----   ----
                                                     $                   5,925
                                                                         =====   ====


      Income from sales of transportation equipment  $                     240  $----
                                                                         =====   ====


Total transportation equipment assets
   As of December 31, 1998                           $                      36
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                   Years Ended December 31,
                                                   -------------------------
                                                             1998              1997
                                                   -------------------------  ------
<S>                                                <C>                        <C>
Leasing Activity
----------------

      Revenues:
            Leasing activity                       $                   3,907  $3,724
            Interest income                                              195      44
            Other income                                                 441     665
                                                                       4,543   4,433

      Costs and expenses:
            Selling, general and administrative                        3,671   6,412
            Interest expense                                             111     281
            Depreciation and amortization                                477     459
                                                                       4,259   7,152

      Income (loss) from leasing activity          $                     284   ($2,719)
                                                                       =====   =======

Total leasing assets as of December 31, 1998       $                   3,648

      Income (loss) before extraordinary item and
            provision (benefit) for income taxes   $                     524   ($2,719)
</TABLE>


Domestic  and  Foreign  Operations

The  Company  has foreign operating segments in Russia and the Republic of South
Africa.  Operating  income from these operations for the year ended December 31,
1998  was  approximately  $13,000 in Russia and $96,000 in the Republic of South
Africa.  Foreign  assets  and  U.S. assets collateralized by equipment in Russia
and the Republic of South Africa are approximately $3,902,000 as of December 31,
1998.  The  assets,  which  include  intangibles  and  a  note  receivable,  are
recoverable  or  collectable  in  U.S.  dollars.

18.     Subsequent  Event
        -----------------

     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.


                                      F-26
<PAGE>
     Principles  of  proforma  information  The  proforma  consolidating balance
     -------------------------------------
sheet and statement of operations include the accounts of Chancellor Corporation
and  its  wholly  owned subsidiaries and MRB, Inc.  All significant intercompany
accounts,  transactions,  and  profits  and  losses  have been eliminated in the
proforma  financial  statements.

       Said  transaction has been accounted for at its formal closing in January
1999,  the  evaluation  being based on $.65 per share as opposed to the previous
$.96  per  share.  As previously noted the Company had been contractually liable
for  liabilities  of approximately $11,194,000.  The Company had initially filed
its 10K in April 1999.  Said 10K included Tomahawk consolidated with the Company
(as  of  August 1998), however, this 10K has been revised to reflect Tomahawk as
of January 1999.  The following financial statements are Pro-Forma only, and the
consolidated  statement of operations reflect Tomahawk for five months beginning
August  1998,  and  12  months  for  Chancellor  Corporation.

     Revenue  RecognitionTransportation  Equipment  Sales- Revenues on MRB, Inc.
     --------------------
transportation  equipment sales is recognized in the period in which the sale is
complete  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.

     Inventory  MRB,  Inc.  inventory  is 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.

     Tomahawk  excess purchase price  The acquisition of MRB, Inc. was accounted
     -------------------------------
for  under  the  purchase  method  of accounting.  As previously reported in the
April,  1999  10-K, 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 $2,600,000 as of January, 1999 consisted of said shares valued
at  $.65  cents  per  share,  less change in net worth, 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  twenty  years.

     Net  Income  per  share  Basic net income per share is computed by dividing
     -----------------------
net  income  available  to common stockholders by the weighted average number of
common shares outstanding for the period, including the MRB, Inc. shares issued.
Diluted  net  income  per share is not presented for the 1998 proforma financial
statements since common stock equivalent shares from convertible preferred stock
and  from  stock  options  and  warrants  are  antidilutive.

     Revolving Lines of Credit  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
1998  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 .75 to 1.5
percent,  depending  on the floor planned inventory amounts.  The effective rate
of  interest  at  December  31,  1998  was 9.7 percent.  The aggregate principal
balance  outstanding on the revolving line of credit and the financing agreement
as  of  December  31,  1998  was  approximately  $9,063,000.  The  Company,  in
connection  with  the  Tomahawk  acquisition, assumed the obligation pursuant to
this  revolving  line  of  credit and financing agreement.  The evolving line of
credit  and  financing  agreement  are both personally guaranteed by the selling
stockholders  of  Tomahawk.


     Notes  Payable
     --------------

     Notes  payable  consists  of  the  following  as  of  December 31, 1998 (in
thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                                    1998
                                                                -------------
<S>                                                             <C>
Unsecured notes payable to individuals due on demand
   including interest at 10 percent per annum. . . . . . . . .  $         256

Unsecured notes payable to selling stockholders of Tomahawk,
   including interest payable at 10 percent. . . . . . . . . .            200

Notes payable to a bank, payable in various monthly
   installments including interest at the prime rate (7.75% at
   December 31, 1998) plus 2%, secured by automobiles
   financed by the Company.. . . . . . . . . . . . . . . . . .            113

Note payable to a financial institution, payable in monthly
   installments of $4,135 including interest at a rate of 10
   percent per annum, due February 15, 1999, secured by
   automobiles and equipment.. . . . . . . . . . . . . . . . .              4

Bridge loan payable to a financial institution providing for
   maximum borrowings up to $400,000 for working capital
   purposes, interest payable monthly at the rate of 10.5
   percent per annum, principal balance due on March 27, 1999.            157

Various notes payable to a financial institution, payable in
   monthly installments of $2,753 including interest at rates
   of 9 and 10 percent per annum, due from September 2001
   to May 2003, secured by automobiles and equipment.. . . . .             97
                                                                -------------
                                                                          827
Less - current portion . . . . . . . . . . . . . . . . . . . .            706
                                                                -------------
                                                                          827

                                                                $         121
                                                                =============
</TABLE>

     Aggregate annual maturities of notes payable as of December 31, 1998 are as
follows  (in  thousands):

<TABLE>
<CAPTION>
Years ending December 31:
<S>                         <C>
       1999. . . . . . . .  $706
       2000. . . . . . . .    64
       2001. . . . . . . .    34
       2002. . . . . . . .    17
       2003. . . . . . . .     6
                            ----
                             827
                            ====
</TABLE>

                                     F-27
<PAGE>
<TABLE>
<CAPTION>
                                            CHANCELLOR CORPORATION
                                     PROFORMA CONSOLIDATING BALANCE SHEET
                                           AS OF DECEMBER 31, 1998
                                               (In Thousands)

                                                                            MRB       MRB
                                                                          CONSOL     CONSOL    CHANCELLOR
                                         CHANCELLOR    MRB    COMBINED   ENTRY #1   ENTRY #2  CONSOLIDATED
ASSETS
<S>                                      <C>          <C>     <C>        <C>        <C>       <C>
 Cash and cash equivalents                      612       32       644                                 644
 Accounts receivable                          2,880      375     3,255                               3,255
 Inventory                                       36   10,721    10,757                              10,757
 Net investment in direct finance lease         359                359                                 359
 Equipment on operating lease, net              702                702                                 702
 Residual values, net                           219                219                                 219
 Property, plant & equipment, net               807      191       998                                 998
 Intangibles                                    111                111                                 111
 Other investments                            1,000              1,000                               1,000
 Other assets                                 1,460      149     1,609                               1,609
 Tomahawk excess purchase price                                      -       (274)     2,925         2,651
                                                                     -
                                         -----------  ------  ---------  ---------  --------  -------------
                                              8,186   11,468    19,654       (274)     2,925        22,305
                                         ===========  ======  =========  =========  ========  =============

 LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES
   Accounts payable & accrued expenses        3,572    1,304     4,876                               4,876
   Deferred revenue                           1,068              1,068                               1,068
   Revolving credit line                               9,063     9,063                               9,063
   Notes payable                                         827       827                                 827
   Non recourse debt                            889                889                                 889
   Recourse debt                                295                295                                 295
                                                                     -                                   -
                                         -----------  ------  ---------  ---------  --------  -------------
                                              5,824   11,194    17,018          -          -        17,018
                                         -----------  ------  ---------  ---------  --------  -------------

 STOCKHOLDERS' EQUITY

   Preferred stock, Series AA                    50                 50                                  50
   Common Stock                                 385       80       465        (80)        45           430
   APIC                                      29,943             29,943                 2,880        32,823
                                            (28,016)     194   (27,822)      (194)                 (28,016)
                                         -----------  ------  ---------  ---------            -------------
                                              2,362      274     2,636       (274)     2,925         5,287
                                         -----------  ------  ---------  ---------  --------  -------------

                                         -----------  ------  ---------  ---------  --------  -------------
                                              8,186   11,468    19,654       (274)     2,925        22,305
                                         ===========  ======  =========  =========  ========  =============
</TABLE>


                                     F-28
<PAGE>
<TABLE>
<CAPTION>
                               CHANCELLOR CORPORATION
                 PROFORMA CONSOLIDATING STATEMENT OF OPERATIONS
                   FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
                                 (In Thousands)


                                                                        CHANCELLOR
                                         CHANCELLOR   MRB              CONSOLIDATED
                                                                           REVENUE
<S>                                      <C>         <C>               <C>
 Transportation equipment sales               6,165  18,930                  25,095
 Rental income                                  942                             942
 Lease underwriting income                       74                              74
 Direct finance lease income                    110                             110
 Interest income                                195                             195
 Gains from portfolio remarketing             1,374                           1,374
 Fees from remarketing income                 1,407                           1,407
 Other                                          441                             441

                                         ----------  ------            ------------
                                             10,708  18,930                  29,638
                                         ==========  ======            ============


 COST OF SALES:
 Cost of transportation equipment sales       5,647  16,084                  21,731
 Selling, general & administrative            3,949   2,441                   6,390
 Interest                                       111     142                     253
 Depreciation & amortization                    477      19                     496

                                         ----------  ------            ------------
                                             10,184  18,686                  28,870
                                         ----------  ------            ------------

INCOME BEFORE TAXES                             524     244                     768
                                         ==========  ======            ============

Basic Net Income Per Share                                                     0.02
                                                                       ============
</TABLE>


                                     F-29
<PAGE>
                                   Signatures

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized.



                                   CHANCELLOR  CORPORATION

Dated:  January 4,  2000

                                    By:  /s/  Brian  M.  Adley
                                           ------------------------------
                                              Brian  M.  Adley
                                              Chairman of the Board and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed below by the following persons on behalf of the registrant and
in  the  capacities  and  on  the  dates  indicated.



Dated:  January 4,  2000            By:  /s/  Brian  M.  Adley
                                           ------------------------------
                                              Brian  M.  Adley
                                              Chairman of the Board and Director
                                             (Principle  Executive  Officer)


Dated  January 4,  2000
                                    By:  /s/  Franklyn  E.  Churchill
                                           ------------------------------
                                              Franklyn  E.  Churchill
                                              President


Dated:  January 4,  2000            By:  /s/  Rudolph  Peselman
                                           ------------------------------
                                              Rudolph  Peselman
                                              Director


Dated:  January 4,  2000            By:  /s/  Jonathan  C.  Ezrin
                                           ------------------------------
                                              Jonathan  C.  Ezrin
                                              Corporate  Treasurer
                                             (Principal Accounting Officer)

<PAGE>