-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DSrlFmRz0YGKeIpDAtJbjIeMlQV9dOwRaXJ0AydNeWcnthzpEYbuIenS1kcGNnaN YBMoGKATztZXn45MlHbLNw== 0001012709-01-500952.txt : 20020410 0001012709-01-500952.hdr.sgml : 20020410 ACCESSION NUMBER: 0001012709-01-500952 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JORDAN AMERICAN HOLDINGS INC CENTRAL INDEX KEY: 0000855663 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 650142815 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18974 FILM NUMBER: 1790412 BUSINESS ADDRESS: STREET 1: 1875 SKI TIME SQUARE DRIVE STREET 2: SUITE ONE CITY: STEAMBOAT SPRINGS STATE: CO ZIP: 80487-9015 BUSINESS PHONE: 9708791189 MAIL ADDRESS: STREET 1: 1875 SKI TIME SQUARE STREET 2: SUITE ONE CITY: STEAMBOAT SPRINGS STATE: CO ZIP: 80487-9015 FORMER COMPANY: FORMER CONFORMED NAME: CHRISTIAN PURCHASING NETWORK INC DATE OF NAME CHANGE: 19920703 10QSB 1 x10qsb-1101.txt JORDAN AMERICAN HOLDINGS - QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM l0-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2001 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From_____________ to_____________ Commission File Number 0- 18974 Jordan American Holdings, Inc. ------------------------------ (Exact name of registrant as specified in its charter) Florida 65-0142815 ------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 333 West Vine Street, Suite 206, Lexington, Kentucky 40507 ---------------------------------------------------------- (Address of principal executive offices) (859) 254-2240 -------------- (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No --- --- As of the close of business on November 1, 2001, 14,217,266 shares of the registrant's common stock were issued and outstanding. 1 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES TABLE OF CONTENTS PART I ITEM 1 FINANCIAL INFORMATION PAGE Consolidated Balance Sheets ............................... 3 Consolidated Statements of Operations ..................... 4 Consolidated Statements of Cash Flows ..................... 5 Notes to Consolidated Financial Statements ................ 6 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations ..................................... 10 Liquidity and Capital Resources ........................... 12 Risk Factors, Trends & Uncertainties ...................... 13 PART 2 ITEM 1 Legal Proceedings .............................................. 14 2 PART I ITEM 1 FINANCIAL INFORMATION JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, ASSETS 2001 2000 ------------ ------------ CURRENT ASSETS (Unaudited) (Audited) Cash & cash equivalents $ 109,886 $ 1,029,173 Marketable Securities at market value 221,291 328,609 Investment advisory fee receivable - net 87,116 195,253 Deposit with clearing broker 25,000 25,000 Receivable from shareholders 23,337 61,697 Prepaid expenses 81,612 62,025 Other receivable 75,194 57,574 ------------ ------------ Total current assets 623,436 1,759,331 ------------ ------------ FIXED ASSETS Property & equipment - net of accumulated depreciation and amortization of $205,772 and $169,110 respectively 134,414 110,148 ------------ ------------ OTHER ASSETS Boston Restaurant Debentures 500,000 500,000 Senior Yellow Pages - net of allowance of $75,000 in 2001 75,000 150,000 Intangible Assets - Net of amortization of $6,344 and $939 respectively 88,273 83,564 ------------ ------------ Total Other Assets 663,273 733,564 ------------ ------------ TOTAL ASSETS $ 1,421,123 $ 2,603,043 ============ ============ LIABILITIES & STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 196,068 $ 166,162 Deferred revenue 20,340 27,025 Notes payable - officer -- 26,166 Software license payable 5,468 29,197 ------------ ------------ Total Current Liabilities 221,876 248,550 ------------ ------------ STOCKHOLDERS EQUITY Preferred stock variable rate, cumulative, convertible, non-voting, $0.01 par value, $1.00 liquidation value, authorized 5,000,000 shares; 20,000 35,000 issued and outstanding 2,000,000 and 3,500,000 shares respectively Common stock, $0.001 par value, authorized 20,000,000 shares; issued and outstanding 14,217,266 and 10,421,266 shares respectively 14,217 10,421 Additional Paid in Capital 4,463,657 4,417,953 Accumulated Deficit (3,298,627) (2,108,881) ------------ ------------ Total Stockholders Equity 1,199,247 2,354,493 ------------ ------------ Total Liabilities & Stockholders Equity $ 1,421,123 $ 2,603,043 ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- ----------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ REVENUES Commission Income $ 164,000 $ 38,637 $ 208,301 $ 179,882 Investment Advisory Fees 55,597 896,117 217,437 2,525,212 Tax and business service income 7,104 -- 57,500 -- Realized equity gain / (loss) from investments (200,941) -- (200,941) (5,322) ------------ ------------ ------------ ------------ Total Revenue 25,760 934,754 282,297 2,699,772 Selling, General and Administrative Costs 626,768 697,082 1,639,976 1,777,608 ------------ ------------ ------------ ------------ Net Operating Income (Loss) (601,008) 237,672 (1,357,679) 922,164 ------------ ------------ ------------ ------------ Other Income & Expenses Dividend and interest Income 19,302 40,739 71,096 111,171 Other Income 3,434 3,928 9,406 12,926 Unrealized equity gain / (loss) from investments 170,515 (57,273) 87,431 (308,376) ------------ ------------ ------------ ------------ Total Other Income (loss) 193,251 (12,606) 167,933 (184,279) ------------ ------------ ------------ ------------ Net Income (Loss) before income taxes (407,757) 225,066 (1,189,746) 737,885 Income tax provision -- 25,185 -- 39,153 ------------ ------------ ------------ ------------ Net Income (Loss) $ (407,757) $ 199,881 $ (1,189,746) $ 698,732 ============ ============ ============ ============ Basic earnings attributable to Common Stock $ (0.03) $ 0.01 $ (0.11) $ 0.05 per Common Share ============ ============ ============ ============ Diluted earnings attributable to Common Stock $ (0.03) $ 0.01 $ (0.11) $ 0.05 per Common Share ============ ============ ============ ============ Weighted-average number of Common shares outstanding: Basic 12,731,875 10,421,266 11,199,933 10,421,266 ============ ============ ============ ============ Diluted 12,731,875 10,421,266 11,199,933 10,421,266 ============ ============ ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- 2001 2000 ------------ ------------ CASH FLOWS - OPERATING ACTIVITIES: Net Income (loss) $ (1,189,746) $ 698,732 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 42,067 25,806 Valuation Adjustments (87,431) 308,376 Realized loss from investments 200,941 5,322 Changes in operating assets and liabilities: Investment management fees receivable 108,137 283,897 Prepaid expenses (19,587) (41,497) Other receivable (17,620) 56,985 Notes receivable - shareholders 38,360 (29,488) Accounts payable and other accrued expenses 29,906 56,008 Notes payable - Officer (26,166) -- Deferred investment advisory fees (6,685) 12,779 Software license payable (23,730) (21,922) ------------ ------------ Net Cash Provided By (Used In) Operating Activities (951,554) 1,354,998 ------------ ------------ CASH FLOWS - INVESTING ACTIVITIES Trading marketable securities 68,809 (895,026) Investment - Senior Yellow Pages -- (150,000) Intangible Assets (10,114) -- Capital expenditures (60,928) (20,075) ------------ ------------ Net Cash Provided by (Used In) Investing Activities (2,233) (1,065,101) ------------ ------------ CASH FLOWS - FINANCING ACTIVITIES Exercise of common stock options 87,000 -- Payment of preferred dividends (52,500) -- ------------ ------------ Net Cash Provided by Financing Activities 34,500 -- ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents (919,287) 289,897 Cash and cash equivalents, beginning of period 1,029,173 580,758 ------------ ------------ Cash and cash equivalents, end of period $ 109,886 $ 870,655 ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 1,602 $ 2,927 ============ ============ Income taxes paid $ 2,009 $ 12,880 ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== (CONTINUED) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Jordan American Holdings, Inc. and Subsidiaries ("JAHI"/the "Company") was incorporated in Florida in May 1989. JAHI historically conducted its investment advisory business under the name Equity Assets Management. In 2000, JAHI formed Equity Assets Management, Inc. ("EAM"), a wholly owned subsidiary, and moved its investment advisory business into that entity. EAM provides investment advisory and portfolio management services to individual investors, pooled accounts and its mutual fund with its customers located substantially in the United States. EAM is registered as an investment advisor under the Investment Advisers Act of 1940. The Company also owns 100% of the issued and outstanding common stock of IMPACT Financial Network, Inc. ("IFNI"), IMPACT Administrative Services, Inc. ("IASI") and IMPACT Tax and Business Services, Inc. ("ITABS"). IASI provides operational and administrative support to IMPACT Management Investment Trust ("IMIT"/the "Trust") (see Note 2). EAM's customer investment transactions are primarily brokered through IFNI, a registered broker-dealer in securities acting as a non-clearing introducing broker. IFNI also is the primary distributor for IMIT. ITABS, created in September 2000, provides tax preparation and tax planning services to individuals and small businesses (see Note 5). The accompanying consolidated financial statements include the accounts of JAHI and its subsidiaries. ITABS provides general and administrative services to its affiliates at rates substantially lower than the fair market value of those services. Through September 30, 2001, ITABS had inter-company revenue from these services amounting to $65,125. These and all other significant inter-company transactions have been eliminated during consolidation. In the opinion of management, the interim financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company at the date of the interim balance sheet and the results of operations for the interim periods covered. The results for interim periods are not necessarily indicative of results for a full year. The consolidated balance sheet as of December 31, 2000 has been derived from the audited consolidated balance sheet as of the that date. These consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. NOTE 2 - IMPACT MANAGEMENT INVESTMENT TRUST The Company formed IMIT, which is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company (mutual fund). Impact Total Return Portfolio (the "Portfolio") is the initial Series of the Trust. EAM is the investment advisor of the Trust and IFNI is the primary distributor of the Trust. As investment advisor of the Portfolio, the Company receives an annual investment advisory fee equal to 1.25% of the Portfolio's average daily net assets. Of this amount, 60 basis points are paid to the sub advisor of the Portfolio. 6 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== (CONTINUED) NOTE 3 - NOTES RECEIVABLE The Company owns a $500,000 variable rate convertible subordinated debenture from Boston Restaurant Associates, Inc. ("BRAI"). The principal balance of the debenture is due and payable on December 31, 2011. The debenture has a conversion price of $1.25 per share and bears interest at a rate of 14%. In connection with the purchase of the debenture, the Company also acquired, at no cost, warrants to subscribe for the purchase from BRAI up to 500,000 fully paid and nonassessable shares of BRAI's common stock. The purchase rights represented by the warrants are exercisable by the Company, in whole or in part, at any time through December 31, 2006, at an exercise price of $3.00 per share. In March 2000, the Company made a loan of $150,000 represented by an unsecured Convertible Subordinated Bridge Note, to an unaffiliated entity. The note bears interest at 10% and matured on May 31, 2001. The Company is entitled to receive a 4% equity interest in this entity if and when it completes a public offering of its securities. The note is convertible into Series A Convertible Preferred Stock of the entity. The note was not paid at maturity and the Company's management has estimated the total value of this note to be $75,000 at September 30, 2001. The carrying value of the above notes receivable approximates the fair market value as estimated by management, after considering such factors as current interest rates, liquidity, conversion terms and the credit worthiness of the borrowers. The Company's management has estimated the value of the BRAI warrants to be $-0- at September 30, 2001 and December 31, 2000. This determination was made considering primarily the current value of the underlying common stock and the current illiquidity of the warrants. NOTE 4 - STOCKHOLDERS' EQUITY At September 30, 2001 and December 31, 2000, the Company has stock warrants outstanding entitling the warrant holder to acquire 1,113,000 shares of common stock at $.50 per share expiring June 5, 2010. The Company also has outstanding Underwriter Warrants related to the initial public offering entitling a former officer to purchase 44,545 units (five shares of common stock and five stock warrants; two warrants entitle the holder to purchase one share of common stock for $.60 per share) of the Company at a price of $2.58 per unit expiring through January 8, 2011. JAHI has authorized 5,000,000 shares of $0.01 par value preferred stock. The Board of Directors is authorized to issue preferred stock in one or more series, to determine the rights thereto, and to fix the number of shares on any series of preferred stock and the designation of any such series. The Company issued 3,000,000 shares of 8% cumulative, convertible, non-voting preferred stock to a customer of EAM in a private placement offering. In connection with this offering, 750,000 shares of common stock were given to the Company to distribute to the preferred shareholder by three officers of the Company for no additional consideration. From February 1993 until June 30, 1998, the Company made semi-annual cash dividend payments on its cumulative convertible non-voting preferred stock at a rate of 8% per annum. The Company did not make any dividend payments on this stock in 1999 and 2000. On December 29, 2000, the Company entered into a preferred stock exchange agreement (the "Agreement") with its sole preferred shareholder (the "Shareholder"). The Shareholder was the owner of 3,000,000 shares of the Company's 8% Convertible 7 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== (CONTINUED) Redeemable Cumulative Preferred Stock (the "Outstanding Preferred Stock"). The Company was in arrears with respect to the payment of dividends on the Outstanding Preferred Stock, which arrearages totaled $600,000 as of December 31, 2000 (the "Dividend Arrearages"). The Agreement provided that the Company declare and pay a cash dividend of $100,000 on the Outstanding Preferred Stock and exchange 3,500,000 shares of a new 2000 Convertible Preferred Stock (the "New Preferred Stock") for the 3,000,000 shares of the Outstanding Preferred Stock and cancellation of the $500,000 balance of the Dividend Arrearages. The New Preferred Stock is convertible to JAHI common stock at the rate of one share of common stock for each $3.50 of the face amount of the New Preferred Stock and will have a dividend rate of 3% for each of the calendar years 2001 through 2003, 4% for calendar year 2004, 5% for calendar year 2005, 6% for calendar year 2006, 7% for calendar year 2007, and 8% for calendar year 2008 and thereafter. On August 6, 2001, the Company issued 3.1 million shares of common stock, par value $.001 per share in exchange for 1.5 million shares of preferred stock, par value $.01 per share. In addition, the Company modified the outstanding preferred stock to provide that the dividend rate for the remaining semi-annual payment for 2001 and for the two semi-annual payments for 2002 be set at 5.25%. In connection with the original preferred stock offering, the Company obtained "key man" life insurance on the Company's former president, in the amount of $3,750,000. The shareholder is the direct beneficiary and, upon the death of the Company's former president, would receive the insurance proceeds in redemption of the New Preferred Stock. In addition, the Company maintains life insurance on certain officers aggregating $1,000,000, with the Company as the primary beneficiary. NOTE 5 - RELATED PARTY TRANSACTIONS The Company has a loan to a former officer bearing interest at a rate of 10% per annum in the amount of $23,337 and $61,697 at September 30, 2001 and December 31, 2000, respectively. On November 30, 2000, the Company purchased certain assets of a tax preparation and tax planning services company from an officer and director of JAHI valued at $105,100 as determined by the Board of Directors of the Company. The purchase included a client database in the amount of $71,025 and goodwill of $13,478, which are included on the accompanying balance sheets as intangible assets. The Company issued 100,500 stock options exercisable at $0.20 per share through November 30, 2010 and valued at $20,100 as part of the purchase price. In 1994, a director and former officer of the Company established the Jordan Index Fund, L.P. (the "Fund"). The Fund engages in the speculative trading of stock index futures contracts, and may occasionally trade in equity securities and stock options. The Fund is administered by its general partner, Jordan Assets, Ltd. Jordan Assets, Ltd. is not a subsidiary of JAHI, although JAHI was registered as a principal of Jordan Assets, Ltd. with the Commodity Futures Trading Commission. All trading decisions for the Fund are made by Jordan Assets, Ltd. Certain administrative functions were provided to the Fund by JAHI in return for the fees earned by Jordan Assets, Ltd. No such fees were earned during 2001 and 2000. On July 15, 2001, JAHI resigned as a principal of Jordan Assets, Ltd. and no longer provides any services to the Fund. 8 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== (CONTINUED) NOTE 6 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONTINGENCIES In the normal course of business, the Company's client activities through its clearing broker involve the execution, settlement, and financing of various client securities transactions. These activities may expose the Company to off-balance sheet risk. In the event the client fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the client's obligations. In the Company's investment activities, the Company purchases securities for its own account and may incur losses if the market value of the securities declines subsequent to September 30, 2001. The Company's revenues are primarily derived from a percentage of the assets under management and performance fees based on the appreciation of those assets. Assets under management are impacted by both the extent to which the Company attracts new or loses existing clients and the appreciation or depreciation of the U.S. and international equity and fixed income markets. A downturn in general economic conditions could cause investors to cease using the services of the Company. The Company's financial instruments, including cash and cash equivalents, receivables and other assets, are carried at amounts that approximate fair value. The Company's marketable securities are carried at the September 30, 2001 market value. Payables and other liabilities are carried at amounts that approximate fair value. The Company has a substantial portion of its assets on deposit with banks and brokers. Assets deposited with banks and brokers are subject to credit risk. In the event of a bank's or broker's insolvency, recovery of Company assets on deposit may be limited to account insurance or other protection afforded such deposits. The Securities and Exchange Commission ("SEC") has completed an inspection of the Company's investment advisory and broker-dealer operations. As a result of the inspection, certain issues arose regarding possible violations. Management of the Company does not expect the resolution of this matter to have a material adverse effect on the Company's operations. The former President of the Company and his son filed a complaint against the Company and two of its officers seeking an injunction against current management based upon violation of the federal securities laws and breaches of the common law fiduciary duty of directors of a Florida corporation. The management of the Company does not believe the claims to be meritorious. 9 PART 1, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES Safe Harbor for Forward-Looking Statements Information found in this report contains forward-looking implications which may differ materially from actual results due to the success, or lack thereof, of JAHI's management decisions, marketing and sales effectiveness, investment decisions, and the management of clients' stock portfolios and pooled investments as influenced by market conditions, Federal Reserve Board policy, economic trends, political developments, domestic and international events and other factors. There can be no guarantee that any forward-looking implications discussed and/or referenced in this report will have any impact, positive or negative, upon the earnings, value and/or operations of the Company. Results of Operations EAM's assets under management were $20.9 million as of September 30, 2001, compared to $30.1 million under management on June 30, 2001. The net $9.2 million change in assets under management during the quarter resulted from investment losses and depreciation of $4.0 million and a net client cash outflow of $5.2 million. At September 30, 2001, $14.9 million of these assets were in performance fee accounts, and $6.0 million were in flat fee accounts. In an effort to improve the investment performance of the individually managed accounts, EAM entered into a Model Portfolio Agreement with Denali Advisors, LLC ("Denali"), an institutional money manager with approximately $400 million in assets under management, effective September 1, 2001. This model portfolio will be used in conjunction with the management of EAM's individually managed accounts with EAM paying Denali 30 basis points annually on accounts using this model portfolio. At September 30, 2001, $6.5 million in client accounts were operating under the model portfolio: $3.2 million in performance fee accounts and $3.3 million in flat fee accounts. Management anticipates additional client accounts will be placed under the new agreement in the next quarter. Under this new agreement, performance fee clients will be invoiced 50 basis points annually plus a percentage of the realized income achieved in the accounts. Under the old agreement EAM could not invoice clients for performance-based fees until the account value for the client surpassed its historical "high water mark". The new agreement will not require EAM to exceed the historical highs but will allow EAM to have a new performance based relationship with the client. In exchange for the client agreeing to these new terms, EAM will not invoice performance fees on the first 10% of realized income. The contracts for the flat fee clients using the model portfolio have not changed. IMIT's assets in the mutual funds were $4.3 million as of September 30, 2001, compared to $3.9 million under management on June 30, 2001. The net $0.4 million change in assets in the mutual funds during the quarter resulted from investment losses and depreciation of $0.5 million and positive cash flow of $0.9 million. THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000 The Company had a net loss for the three months ended September 30, 2001, of $407,757 or $0.03 per common share compared to a net income of $199,881 or $0.01 per common share for the same period in 2000. Basic and diluted earnings per common share for the three months ended September 30, 2001 and 2000 includes preferred stock dividends of $26,250 and dividends in arrears of $60,000, respectively, for each period. The change in the net income (loss) for this period compared to the same period last year stems primarily from significantly lower revenues this period compared to the same period last year offset by other income in the current quarter compared to the other loss in the same quarter last year. The Company had an operating loss of $601,008 for the three months ended September 30, 2001 compared to operating income of $237,672 for the same period in 2000. This decrease is primarily due to total revenue being significantly lower during this period when compared to the same quarter last year. 10 For the three months ended September 30, 2001, revenues totaled $25,760 compared to revenues of $934,754 for the same period in 2000, a decrease of approximately 97% due primarily to significantly decreased revenues from investment advisory fees and a realized equity loss from investments in 2001. Advisory fee revenue decreased for the three months ended September 30, 2001, to $55,597 compared to $896,117 for the same period in 2000, a decrease of approximately 94% due primarily to decreased revenues from performance fee based managed accounts. This decrease in performance fee revenues resulted from investment losses during the last 12-month period in the performance fee accounts. Most of these investment losses are attributed to the former investment advisor of EAM. Commission income increased for the three months ended September 30, 2001, to $164,000 compared to $38,637 for the same period in 2000, an increase of approximately 324% due primarily to more securities transactions resulting from the amount of securities being purchased and sold in client accounts. These securities transactions are incidental to management's investment advisory decisions based on technical and fundamental considerations of individual securities, market conditions and other factors. Equity losses from investments of $200,941 were realized during the three month period ended September 30, 2001; there were no realized gains/losses from investments during the same period in 2000. This loss stems primarily from the sale of an equity security purchased by a former officer of the Company. This security was purchased by the former officer at a price near its all time high and decreased substantially under his management throughout 2000 and the first half of 2001. Current management sold the security to avoid further likely losses. Selling, general, and administrative ("SG&A") expenses of $626,768 were incurred during the three month period ended September 30, 2001, compared to similar SG&A expenses of $697,082 for the same period in 2000. This decrease of approximately 10% was due primarily to significantly lower selling expenses during this period resulting from lower fees paid out to sales representatives. This decrease was offset by an increase in legal expenses, resulting primarily from litigation and a proxy battle initiated by a former officer who is also currently the largest shareholder of the Company. The Company benefits from the savings realized through the general and administrative services provided by ITABS to its affiliates at rates substantially lower than the fair market value of those services. The Company estimates savings of $19,500 in this area for the three month period ended September 30, 2001. Total other income (expenses) was $193,251 for the three months ended September 30, 2001, compared to ($12,606) for the same period in 2000. This change was primarily due to unrealized equity gains in the third quarter of 2001 compared to unrealized equity losses in the third quarter of 2000. NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000 The Company had a net loss for the nine months ended September 30, 2001, of ($1,189,746) or $0.11 per common share compared to net income of $698,732 or $0.05 per common share for the same period in 2000. Basic and diluted earnings per common share for the nine months ended September 30, 2001 and September 30, 2000 includes preferred stock dividends of $78,750 and dividends in arrears of $180,000, respectively, for each period. 11 The change in the net income (loss) for this period compared to the same period last year stems primarily from significantly lower revenues this period compared to the same period last year offset by other income in the current period compared to the other loss in the same period last year. The Company had an operating loss of ($1,357,679) for the nine months ended September 30, 2001 compared to operating income of $922,164 for the same period in 2000. This decrease is primarily due to total revenue being significantly lower during this period when compared to the same period last year. For the nine months ended September 30, 2001, revenues totaled $282,297 compared to revenues of $2,699,772 for the same period in 2000, a decrease of approximately 90%. The decrease in revenue can be primarily attributed to a decrease in advisory fees. Revenues from advisory fees for the nine months ended September 30, 2001 totaled $217,437 compared to revenues from the same source of $2,525,212 for the same period in 2000, a decrease of approximately 91% due primarily to decreased revenues from performance fee based managed accounts. This decrease in performance fee revenues resulted from investment losses during the last 12-month period in the performance fee accounts. Most of these investment losses are attributed to the former investment advisor of EAM. Commission income increased for the nine months ended September 30, 2001, to $208,301 compared to $179,882 for the same period in 2000, an increase of approximately 16% due primarily to more securities transactions resulting from the amount of securities being purchased and sold in client accounts. Equity losses from investments of $200,941 were realized during the nine month period ended September 30, 2001, compared to realized losses from investments of $5,322 for the same period in 2000. This increase in loss stems primarily from the sale of an equity security purchased by a former officer of the Company. This security was purchased by the former officer at a price near its all time high and decreased substantially under his management throughout 2000 and the first half of 2001. Current management sold the security to avoid further likely losses. SG&A expenses totaled $1,639,976 during the nine months ended September 30, 2001 compared to $1,777,608 in SG&A expenses for the same period in 2000. The decrease of approximately 8% was due primarily to significantly lower selling expenses during this period resulting from lower commissions paid out to sales representatives. This decrease was offset by an increase in legal expenses. Legal expenses increased for the nine months ended September 30, 2001, to $251,201 compared to $92,813 for the same period in 2000. The increase in legal expenses resulted primarily from litigation and a proxy battle initiated by a former officer who is also the largest shareholder. The Company benefits from the savings realized through the general and administrative services provided by ITABS to its affiliates at rates substantially lower than the fair market value of those services. The Company estimates savings of $58,500 in this area for the nine month period ended September 30, 2001. Total other income (expenses) was $167,933 for the nine months ended September 30, 2001 compared to ($184,279) for the same period in 2000. This increase was primarily due to unrealized equity gains of $87,431 for the nine months ended September 30, 2001 compared to unrealized equity losses of ($308,376) for the same period last year. Liquidity and Capital Resources At September 30, 2001, the Company had cash and cash equivalents of $109,886 versus $1,029,173 at December 31, 2000. This decrease was due primarily to the net loss for the nine months ended September 30, 2001. 12 At September 30, 2001, the Company had $418,293 in cash, accounts receivables and marketable securities compared to $1,553,035 at December 31, 2000. This decrease was due primarily to the net loss for the nine months ended September 30, 2001. Accounts payable and accrued expenses were $196,068 at September 30, 2001, compared to $166,162 at December 31, 2000. The increase in accounts payable and accrued expenses is primarily due to higher legal accounts payable at September 30, 2001 compared to December 31, 2000. Cash flows provided by (used in) operating activities for the nine months ended September 30, 2001, were ($951,554) compared to $1,354,998 for the same period in 2000 due primarily to changes in net income, valuation adjustments, realized losses from investments, and investment management fees receivable. Cash flows provided by (used in) investing activities for the nine months ended September 30, 2001, were ($2,233) compared to ($1,065,101) for the same period in 2000 due primarily to the investments made in marketable securities and Senior Yellow Pages, Inc. during the first nine months of 2000. Cash flows provided by (used in) financing activities for the nine months ended September 30, 2001, were $34,500 compared to $0 for the same period in 2000 due primarily to the exercise of employee stock options offset by the payment of preferred dividends. On August 6, 2001, a former officer of the Company exercised 696,000 common stock options at a price of $0.125 per share for a total of $87,000. Risk Factors, Trends & Uncertainties Total assets under management and corporate earnings may substantially increase or decrease due to (1) stock market conditions, including the onset of a long-term declining, or bear market; (2) performance returns as influenced by the Company's investment advisory decisions, operational expense and effectiveness of marketing efforts; (3) competition from mutual funds, other investment advisory companies and insurance companies; (4) interest rate changes and other actions taken by the Federal Reserve Board; (5) domestic and international economic and political conditions, high inflation and/or recession; (6) trends in business and finance; (7) international events; (8) acts of terrorism; and (9) other factors. The Company is registered with and subject to regulation by the SEC under the Investment Advisers Act of 1940 and, where applicable, under state advisory laws. The Company is also subject to regulation by the SEC under the Investment Company Act of 1940. The Company's affiliate broker-dealer is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act") and, where applicable, under state securities laws, and is regulated by the SEC, state securities administrators and the NASD. IASI is registered as a transfer agent under the Exchange Act and is regulated by the SEC. The privately held affiliate that manages the Fund is regulated by the Commodity Futures Trading Commission and the National Futures Association. By law, investment advisors and broker-dealers are fiduciaries and are required to serve their clients' interests with undivided loyalty. There is a potential conflict of interest because of the affiliation between EAM and IFNI. While the Company believes that its existing relationships are in compliance with applicable law and regulations, because of this potential conflict of interest, the SEC may closely examine these relationships. Many aspects of the financial services industry involve substantial liability risks, including exposure under federal and state securities laws in connection with the distribution of securities and investment advisor activities. Although the Company currently maintains errors and omission insurance policies insuring against this risk, such insurance does not necessarily protect the Company against loss in all events. 13 There can be no assurance that any changes to existing laws, regulations or rulings promulgated by government entities having jurisdiction over the Company's investment advisory, broker-dealer, investment company and commodities trading business will not have an adverse effect upon the business of the Company. In connection with a late 1997 examination of the Company, the SEC raised certain issues regarding possible violations of the federal securities laws in connection with the private placement of debentures of Boston Restaurant Associates, Inc. The matter has not been resolved and to the Company's knowledge the investigation is ongoing. Management of the Company does not expect the resolution of this matter to have any material effect on the Company's financial condition, results of operations or business. Negative stock market trends have impaired the Company's ability to gather new assets into the individually managed accounts. Negative investment performance within the individually managed accounts has impaired the Company's ability to earn performance-based revenues. Because of these negative trends, the Company may not generate sufficient revenues to continue current operations through the next twelve months. Management is currently seeking to sell the Boston Restaurant Debenture to an outside third party and may seek additional capital through the sale of equity to meet the cash requirements needed to sustain current operations over the next twelve months. No assurances can be given that management's efforts will be successful. PART 2, ITEM 1 LEGAL PROCEEDINGS JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES Item 1 of Part II of the Company's Form 10-QSB for the quarter ended June 30, 2001, disclosed the initiation by W. Neal Jordan on June 27, 2001, of litigation against the Company and Messrs. A.J. Elko and Charles R. Clark in the United States District Court for the Eastern District of Kentucky. 14 On October 2, 2001, the District Court issued a preliminary injunction to preclude, in connection with the Company's Annual Meeting of Shareholders scheduled to be held on October 4, 2001, the counting of the 3,100,000 shares of the Company's common stock issued on August 6, 2001, to the Kirkland S. & Rena B. Lamb Foundation in exchange for 1,500,000 shares of the Company's outstanding preferred stock. The Court denied without prejudice Mr. Jordan's motion for a preliminary injunction to prevent the Company from issuing any additional shares of the Company's common stock. The Court also denied the Company's motion to dismiss the litigation. On October 3, 2001, the Company appealed the District Court's issuance of the preliminary injunction to the United States Court of Appeals for the Sixth Circuit. On October 4, 2001, the Company filed an emergency motion for a stay of the District Court's preliminary injunction. That same day, a judge of the Court of Appeals issued an order enjoining the parties from holding any shareholders' meeting or conducting any shareholders' vote pending consideration by a regular three-judge motions panel of the appellate court of the Company's motion for a stay pending appeal of the Preliminary Injunction entered by the District Court. On October 25, 2001, the Court of Appeals granted the Company's motion to expedite the appeal. It has also issued an expedited briefing schedule for the appeal. On October 26, 2001, a three-judge panel of the Court of Appeals entered an order dissolving the temporary stay of the District Court's preliminary injunction granted on October 4, 2001, and denied the Company's motion for a stay of enforcement of the District Court's preliminary injunction while the appeal is pending. Because of the initial stay granted by the appellate court, the Company's Annual Meeting of Shareholders was not held on October 4 as had been scheduled. As required by applicable Florida corporate law, the Company will call a new shareholders' meeting and will set a new record date for that meeting. 15 SIGNATURES In accordance with the requirements 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. JORDAN AMERICAN HOLDINGS, INC. Dated: November 14, 2001 By: /s/ A.J. Elko ----------------------- A.J. Elko Chief Executive Officer Dated: November 14, 2001 By: /s/ Emmett A. Pais ----------------------- Emmett A. Pais, CPA Chief Financial Officer 16 -----END PRIVACY-ENHANCED MESSAGE-----