-----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, Day4YLhqDBZ2gM305hC3cueoL6i6VZDhLDm0h4PB3qBGJ0BWCWxdvLNnfuvYXn56 fpQpLdEcSxHdrCYQ1hP2Pg== 0001012709-02-000736.txt : 20020515 0001012709-02-000736.hdr.sgml : 20020515 ACCESSION NUMBER: 0001012709-02-000736 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 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: 02648651 BUSINESS ADDRESS: STREET 1: 333 WEST VINE STREET STREET 2: SUITE 206 CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 859-254-2240 MAIL ADDRESS: STREET 1: 333 WEST VINE STREET STREET 2: SUITE 206 CITY: LEXINGTON STATE: KY ZIP: 40507 FORMER COMPANY: FORMER CONFORMED NAME: CHRISTIAN PURCHASING NETWORK INC DATE OF NAME CHANGE: 19920703 10QSB 1 x10qsb-502.txt JORDAN AMERICAN HOLDINGS, INC. 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 March 31, 2002 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 May 1, 2002, 14,217,266 shares of the registrant's common stock were issued and outstanding. 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 ...................... 12 PART II ITEM 1 LEGAL Legal Proceedings ......................................... 13 2 PART I ITEM 1 FINANCIAL INFORMATION JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, A S S E T S 2002 2001 ------------ ------------ CURRENT ASSETS (Unaudited) (Audited) Cash & cash equivalents $ -- $ 91,984 Marketable Securities at market value 6,696 49,298 Investment advisory fee - net 24,928 16,394 Deposit with clearing broker 25,094 25,094 Receivable from stockholders 22,669 22,310 Prepaid expenses 45,499 83,407 Other receivable 91,369 55,291 ------------ ------------ Total current assets 216,255 343,778 ------------ ------------ FIXED ASSETS Property & equipment - net of accumulated depreciation and amortization of $ 229,615 and $ 217,923 114,107 124,689 ------------ ------------ OTHER ASSETS Boston Restaurant Debentures 500,000 500,000 Intangible Assets - Net of amortization of $ 10,172 and $ 8,258 respectively 84,445 86,359 ------------ ------------ Total Other Assets 584,445 586,359 ------------ ------------ Total Assets $ 914,807 $ 1,054,826 ============ ============ LIABILITIES & STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 182,328 $ 146,080 Deferred revenue 9,058 13,249 Notes payable - officer 16,400 -- ------------ ------------ Total Current Liabilities 207,786 159,329 ------------ ------------ STOCKHOLDERS EQUITY Preferred stock variable rate, cumulative, convertible, non-voting, $0.01 par value, $1.00 liquidation value, authorized 5,000,000 shares issued and outstanding 2,000,000 shares 20,000 20,000 Common stock, $0.001 par value, authorized 20,000,000 shares: issued and outstanding 14,217,266 shares 14,217 14,217 Additional Paid in Capital 4,463,657 4,463,657 Accumulated Deficit (3,790,853) (3,602,377) ------------ ------------ Total Stockholders Equity 707,021 895,497 ------------ ------------ Total Liabilities & Stockholders Equity $ 914,807 $ 1,054,826 ============ ============
See accompanying notes to consolidated financial statements. 3 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, ----------------------------- 2002 2001 ------------ ------------ REVENUES Commission income $ 79,070 $ 18,594 Investment advisory fees 64,732 125,120 Tax and business service income 32,870 28,744 Realized equity gain / (loss) from investments (25,934) -- ------------ ------------ Total Revenue 150,738 172,458 Selling, General and Administrative Costs 387,260 478,947 ------------ ------------ Net Operating Income (Loss) (236,522) (306,489) ------------ ------------ Other Income & Expenses Dividend and interest Income 18,103 28,293 Other Income 20 982 Unrealized equity gain / (loss) from investments 29,922 (75,195) ------------ ------------ Total Other Income (loss) 48,045 (45,920) ------------ ------------ Net Income (Loss) before income taxes (188,477) (352,409) Income tax provision -- -- ------------ ------------ Net Income (Loss) $ (188,477) $ (352,409) ============ ============ Basic earnings attributable to Common Stock per Common Share $ (0.02) $ (0.04) ============ ============ Diluted earnings attributable to Common Stock per Common Share $ (0.02) $ (0.04) ============ ============ Weighted -average number of Common shares outstanding: Basic 14,217,266 10,421,266 ============ ============ Diluted 14,217,266 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 THREE MONTHS ENDED MARCH 31, 2002 2001 ------------ ------------ CASH FLOWS - OPERATING ACTIVITIES: Net Income (Loss) $ (188,477) $ (352,409) Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 13,605 13,464 Valuation adjustments (29,922) 75,195 Realized loss from investments 25,934 Changes in operating assets and liabilities: Investment advisory fees (8,534) 3,480 Prepaid expenses 37,908 (21,840) Other receivable (36,078) (8,720) Receivable from shareholders (359) 2,502 Accounts payable and other accrued expenses 36,248 (37,500) Notes payable - Officer 16,400 (15,494) Deferred investment advisory fees (4,191) (7,682) Software license payable (7,753) ------------ ------------ Net Cash Provided By (Used In) Operating Activities (137,466) (356,757) ------------ ------------ CASH FLOWS - INVESTING ACTIVITIES Trading marketable securities 46,591 (12,000) Intangible Assets (10,114) Capital expenditures (1,109) (47,309) ------------ ------------ Net Cash Provided By (Used In) Investing Activities 45,482 (69,423) ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents (91,984) (426,180) Cash and Cash Equivalents, beginning of period 91,984 1,029,173 ------------ ------------ Cash and Cash Equivalents, end of period $ -- $ 602,993 ============ ============
See accompanying notes to consolidated financial statements. 5 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 March 31, 2002, ITABS had inter-company revenue from these services amounting to $17,250. 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, 2001 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, 2001. 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. IMPACT 25 Fund (the "Fund") is the second series of the Trust and became effective April 1, 2002. 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% and 1.20% of the Portfolio's and Fund's average daily net assets respectively. Of this amount, 60 basis points are paid to the sub advisor of the Portfolio. 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%. 6 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. The Company's management has estimated the value of the BRAI warrants to be $-0- at March 31, 2002 and December 31, 2001. 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 March 31, 2002 and December 31, 2001, 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 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, 7 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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%. The Company is in arrears with respect to the payment of dividends on the outstanding preferred stock in the amount of $52,500 as of December 31, 2001. 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 $2,500,000. The Company did not renew this insurance policy because the former president is no longer employed by the Company. In addition, the Company maintains life insurance on certain officers aggregating $1,500,000, 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 $22,669 and $22,310 at March 31, 2002 and December 31, 2001, respectively. A demand for payment has been made by the Company, but the former officer has not satisfied the note. The Company is considering its options with regards to the collection of this note. 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 March 2002, an officer of the Company provided a short-term loan to the Company in the amount of $16,400 in order to help the Company meet its short-term obligations. The loan was made interest free and is expected to be repaid within 90 days. 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. 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. 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. 8 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 within the individually managed accounts were $18.05 million as of March 31, 2002, compared to $19.32 million under management on December 31, 2001. The net $1.27 million change in assets under management during the quarter resulted from investment gains and appreciation of $.16 million and a net client cash outflow of $1.43 million. At March 31, 2002, $12.56 million of these assets were in performance fee accounts, and $5.49 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 March 31, 2002, $9.5 million in client accounts were operating under the model portfolio: $ 6.1 million in performance fee accounts and $3.4 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 $8.8 million as of March 31, 2002, compared to $6.6 million under management on December 31, 2001. The net $2.2 million change in assets in the mutual funds during the quarter resulted from investment gains and appreciation of $0.7 million and positive cash flow of $1.5 million. 10 THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001 The Company had a net loss for the three months ended March 31, 2002, of $188,477 or ($0.02) per common share compared to a net loss of $352,409 or ($0.04) per common share for the same period in 2001. The decrease in the net loss for this period compared to the net loss for the same period last year stems primarily from lower selling, general and administrative expenses and lower net trading losses despite lower revenues from performance fee based managed accounts during this period. The Company had an operating loss of $236,522 for the three months ended March 31, 2002 compared to an operating loss of $306,489 for the same period in 2001. This decrease in operating loss is primarily due to significantly lower selling, general and administrative expenses during this period when compared to the same quarter last year. For the three months ended March 31, 2002, revenues totaled $150,738 compared to revenues of $172,458 for the same period in 2001, a decrease of approximately 13% due primarily to significantly decreased revenues from fee based managed accounts. Advisory fee revenue decreased for the three months ended March 31, 2002, to $64,732 compared to $125,120 for the same period in 2001, a decrease of approximately 48% due primarily to significantly decreased revenues from investment advisory fees within the individually managed accounts. Commission income increased for the three months ended March 31, 2002, to $79,070 compared to $18,594 for the same period in 2001, an increase of approximately 325% due primarily to higher 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. Tax and business services income increased for the three months ended March 31, 2002 to $32,870 compared to $28,744 for the same period in 2001, an increase of approximately 14% due primarily to an increase in fees associated with the preparation of individual income tax returns and an increase in the number of individual returns prepared. Equity losses from investments of $25,934 were realized during the three month period ended March 31, 2002, compared to realized losses from investments of $-0- for the same period in 2001. Equity gains from investments of $29,922 were unrealized during the three month period ended March 31, 2002 compared to unrealized losses of $75,195 for the same period in 2001. Selling, general, and administrative ("SG&A") expenses of $387,260 were incurred during the three month period ended March 31, 2002, compared to similar SG&A expenses of $478,947 for the same period in 2001. This decrease of approximately 19% was due primarily to lower selling expenses and fewer employees during this period compared to the previous period. 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 March 31, 2002. Total other income (expenses) was $48,045 for the three months ended March 31, 2002, compared to ($45,920) for the same period in 2001. This change was primarily due to unrealized equity gains in this period compared to unrealized equity losses in the first quarter of 2001. 11 Liquidity and Capital Resources At March 31, 2001, the Company had cash and cash equivalents of $-0- versus $91,984 at December 31, 2001. This decrease was due primarily to the net loss for the three months ended March 31, 2002. Accounts payable and accrued expenses were $182,328 at March 31, 2002, compared to $146,080 at December 31, 2001. The increase in accounts payable and accrued expenses is primarily due to a decrease in the Company's working capital for the three months ended March 31, 2002 compared to the three months ended March 31, 2001. Cash flows used in by operating activities for the three months ended March 31, 2002, were ($137,466) compared to ($356,757) for the three months ended March 31, 2001 due primarily to changes in net income (loss) for the three months ended March 31, 2002. Cash flows provided (used in) by investing activities for the three months ended March 31, 2002, were 45,482 compared to ($69,423) for the three months period ended March 31, 2001 primarily due to gains on trading marketable securities during this period compared to losses for the previous period and lower capital expenditures during this period than in the first quarter of 2001. 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. 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 the Company 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. 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. 12 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 considering the sale of certain assets 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. 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. 13 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: May 15, 2002 By: /s/ A.J. Elko ----------------------- A.J. Elko Chief Executive Officer Dated: May 15, 2002 By: /s/ Emmett A. Pais ----------------------- Emmett A. Pais Chief Financial Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----