-----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, MEJFUrTcvjZOgN8ahe0hu0dnxYzbvGA3fPb20n4WE0tVlBctEA7zUo+NtLNW9akg VT6/BAbgiUcB8OZGAjLTRw== 0001012709-02-001499.txt : 20021113 0001012709-02-001499.hdr.sgml : 20021113 20021113170251 ACCESSION NUMBER: 0001012709-02-001499 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 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: 02820746 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-1102.txt JORDAN AMERICAN HOLDINGS 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, 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) 2933 Jacks Run Road, White Oak, PA 15131 (Address of principal executive offices) (412) 664-6012 (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 6, 2002, 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................................... 11 Liquidity and Capital Resources......................... 13 Risk Factors, Trends & Uncertainties.................... 14 PART 2 ITEM 1 Legal Proceedings....................................... 15 2 PART I ITEM 1 FINANCIAL INFORMATION JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, A S S E T S 2002 2001 ------------ ------------ CURRENT ASSETS (Unaudited) (Audited) Cash & cash equivalents $ 3,918 $ 91,984 Marketable Securities at market value -- 49,298 Investment advisory fee receivable - net 19,667 16,394 Deposit with clearing broker 25,094 25,094 Receivable from shareholders 23,427 22,310 Prepaid expenses 16,535 83,407 Other receivable 40,985 55,291 ------------ ------------ Total current assets 129,626 343,778 ------------ ------------ FIXED ASSETS Property & equipment - net of accumulated depreciation and amortization of $ 237,857 and $ 217,923 72,099 124,689 ------------ ------------ OTHER ASSETS Boston Restaurant Debentures 500,000 500,000 Intangible Assets - Net of amortization of $ 14,000 and $8,258 respectively 80,617 86,359 ------------ ------------ Total Other Assets 580,617 586,359 ------------ ------------ TOTAL ASSETS $ 782,342 $ 1,054,826 ============ ============ LIABILITIES & STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 190,809 $ 146,080 Deferred revenue 9,895 13,249 Note Payable (Note 2) 125,000 -- Note payable - officer 16,400 -- ------------ ------------ Total Current Liabilities 342,104 159,329 ------------ ------------ STOCKHOLDERS EQUITY Preferred stock variable rate, cumulative, convertible, non-voting, $0.01 par value, $1.00 liquidation value, authorized 5,000,000 shares; 20,000 20,000 issued and outstanding 2,000,000 shares 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 (4,057,636) (3,602,377) ------------ ------------ Total Stockholders Equity 440,238 895,497 ------------ ------------ Total Liabilities & Stockholders Equity $ 782,342 $ 1,054,826 ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ REVENUES Commission Income $ 46,621 $ 164,000 $ 214,234 $ 208,301 Investment Advisory Fees 41,332 55,597 145,179 217,437 Administrative service fees 5,827 -- 20,414 -- Tax and business service income 20,204 7,104 73,608 57,500 Realized loss on sale of fixed assets (2,650) -- (2,650) -- Reversal of prior gain on sale of Mutual Fund (265,000) -- -- -- Realized equity (loss) from investments -- (200,941) (27,225) (200,941) ------------ ------------ ------------ ------------ Total Revenue (153,666) 25,760 423,560 282,297 Selling, General and Administrative Costs 187,968 626,768 963,070 1,639,976 ------------ ------------ ------------ ------------ Net Operating Loss (341,634) (601,008) (539,510) (1,357,679) ------------ ------------ ------------ ------------ Other Income Interest Income 17,585 19,302 54,122 71,096 Other Income 175 3,434 207 9,406 Unrealized equity gain from investments -- 170,515 29,922 87,431 ------------ ------------ ------------ ------------ Total Other Income 17,760 193,251 84,251 167,933 ------------ ------------ ------------ ------------ Net Loss before income taxes (323,874) (407,757) (455,259) (1,189,746) Income tax provision -- -- -- -- ------------ ------------ ------------ ------------ Net Loss $ (323,874) $ (407,757) $ (455,259) $ (1,189,746) ============ ============ ============ ============ Basic earnings attributable to Common Stock per Common Share $ (0.02) $ (0.03) $ (0.04) $ (0.11) ============ ============ ============ ============ Diluted earnings attributable to Common Stock per Common Share $ (0.02) $ (0.03) $ (0.04) $ (0.11) ============ ============ ============ ============ Weighted-average number of Common shares outstanding: Basic 14,217,266 12,731,875 14,217,266 11,199,933 ============ ============ ============ ============ Diluted 14,217,266 12,731,875 14,217,266 11,199,933 ============ ============ ============ ============
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, ---------------------------- 2002 2001 ------------ ------------ CASH FLOWS - OPERATING ACTIVITIES: Net loss $ (455,259) $ (1,189,746) Adjustments to reconcile net income to cash (used in) operating activities: Depreciation and amortization 38,650 42,067 Valuation Adjustments (29,922) (87,431) Realized loss from investments 27,225 200,941 Realized loss from sale of assets 2,650 -- Changes in operating assets and liabilities: Investment management fees receivable (3,273) 108,137 Prepaid expenses 66,872 (19,587) Other receivable 14,306 (17,620) Notes receivable - shareholders (1,117) 38,360 Accounts payable and other accrued expenses 44,729 29,906 Deferred investment advisory fees (3,354) (6,685) Software license payable -- (23,730) ------------ ------------ Net Cash (Used In) Operating Activities (298,493) (925,388) ------------ ------------ CASH FLOWS - INVESTING ACTIVITIES Proceeds from trading marketable securities 51,995 68,809 Intangible Assets -- (10,114) Capital equipment - net of purchases and sales 17,032 (60,928) ------------ ------------ Net Cash Provided by (Used In) Investing Activities 69,027 (2,233) ------------ ------------ CASH FLOWS - FINANCING ACTIVITIES Notes payable 125,000 -- Notes payable - Officer 16,400 (26,166) Exercise of common stock options -- 87,000 Payment of preferred dividends -- (52,500) ------------ ------------ Net Cash Provided by Financing Activities 141,400 8,334 ------------ ------------ Net (Decrease) in Cash and Cash Equivalents (88,066) (919,287) Cash and cash equivalents, beginning of period 91,984 1,029,173 ------------ ------------ Cash and cash equivalents, end of period $ 3,918 $ 109,886 ============ ============ Supplemental disclosure of cash flow information: Interest Paid $ 693 $ 1,602 ============ ============
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; all significant intercompany 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. 6 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) EAM entered into an Asset Purchase Agreement with Schneider Capital Management, Inc. ("SCM") to sell EAM's business relating to the management of the IMPACT Total Return Portfolio's assets. The selling price of the Portfolio was $265,000; deposits of $125,000 were received prior to June 30, 2002, and the remaining portion being $140,000 was to be paid at the closing. In September 2002,SCM terminated their agreement with EAM and requested a return of their deposit, pursuant to which EAM intended to sell its business relating to the management of the Portfolio's assets. On October 21, 2002, IMIT's Trustees determined that the Portfolio is not presently economically viable to operate for EAM and does not have prospects to become economically viable for EAM in the future. Accordingly, the Trustees have requested that EAM develop a plan for the orderly liquidation 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%. 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 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, 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 September 30, 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 7 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) 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, 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 $105,000 as of September 30, 2002. 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 will not renew the life insurance on certain former officers aggregating $1,000,000, with the Company as the primary beneficiary. 8 JORDAN AMERICAN HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) NOTE 5 - RELATED PARTY TRANSACTIONS The Company made a loan to a stockholder and former officer bearing interest at a rate of 10% per annum in the amount of $23,427 and $22,310 at September 30, 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 the current calendar year. 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. 9 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 and does not expect the resolution of this matter to have a material adverse effect on the Company's operations. 10 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 $11.05 million as of September 30, 2002, compared to $15.56 million under management on June 30, 2002. The net $4.51 million change in assets under management during the quarter resulted from investment losses of $1.57 million and net cash outflows of $2.94 million. At September 30, 2002, $7.30 million of these assets were in performance fee accounts, and $3.63 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 is 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, 2002, $6.07 million of the $11.05 million in client accounts were operating under the model portfolio: $3.66 million in performance fee accounts and $2.41 million in flat fee accounts. 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 $5.2 million as of September 30, 2002, compared to $9.0 million under management on June 30, 2002. The net $3.8 million change in assets in the mutual funds during the quarter resulted from investment losses and depreciation of $2.1 million and net cash inflows of $1.7 million. THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2001 The Company had net loss for the three months ended September 30, 2002 of ($323,874) or ($0.02) per common share compared to a net loss of ($407,757) or ($0.03) per common share for the same period in 2001. 11 The Company had operating loss of ($341,634) for the three months ended September 30, 2002 compared to an operating loss of ($601,008) for the same period in 2001. This decrease in operating loss is primarily due to total revenue being significantly lower during this quarter when compared to the same quarter last year. For the three months ended September 30, 2002, revenues totaled ($153,666) compared to revenues of $25,760 for the same period in 2001, a decrease of approximately 696% due primarily to the reversal of the gain on the sale of the mutual fund (see Note 2) that had been recorded during the previous quarter. Advisory fee revenue decreased for the three months ended September 30, 2002, to $41,332 compared to $55,597 for the same period in 2001, an decrease of approximately 26% due primarily to decreased advisory fees from management fee accounts. Commission income decreased for the three months ended September 30, 2002, to $46,621 compared to $164,000 for the same period in 2001, an decrease of approximately 71% due primarily to less 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. Selling, general, and administrative ("SG&A") expenses of $187,968 were incurred during the three month period ended September 30, 2002, compared to SG&A expenses of $626,768 for the same period in 2001. This decrease of approximately 70% 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 September 30, 2002. Total other income was $17,760 for the three months ended September 30, 2002, compared to $193,251 for the same period in 2001. This change was primarily due to unrealized equity gains in the third quarter of 2001 compared to no gains in the same quarter this year. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001 The Company had a net loss for the nine months ended September 30, 2002 of ($455,259) or ($0.04) per common share compared to ($1,189,746) or ($0.11) per common share for the same period in 2001. The Company had an operating loss of ($539,510) for the nine months ended September 30, 2002 compared to an operating loss of ($1,357,679) for the same period in 2001. This decrease is primarily due to total revenue being higher along with a significant decrease in SG&A during this period when compared to the same period last year. For the nine months ended September 30, 2002, revenues totaled $423,560 compared to revenues of $282,297 for the same period in 2001, an increase of approximately 50%. The increase in revenue can be primarily attributed to the realized loss from investing and trading being significantly lower during this period when compared to the same period last year. 12 Revenues from advisory fees for the nine months ended September 30, 2002 totaled $145,179 compared to revenues from the same source of $217,437 for the same period in 2001, a decrease of approximately 33% 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. Performance fees are only earned when the fair market value of accounts exceed their historical highs. Revenues from commissions increased approximately 3% for the nine months ended September 30, 2002 compared to the same period in 2001 primarily due to more trading activity. Equity losses from investments of $27,225 were realized during the nine-month period ended September 30, 2002, compared to realize equity losses from investments of $200,941 for the same period in 2001. Equity gains from investments of $29,922 were unrealized during the nine-month period ended September 30, 2002 compared to unrealized gains of $87,431 for the same period in 2001. SG&A expenses totaled $963,070 during the nine months ended September 30, 2002 compared to $1,639,976 in selling, general and administrative expenses for the same period in 2001. The 41% decrease in SG&A expenses resulted primarily from lower selling expenses and fewer employees during this period compared to the previous period. Total other income was $84,251 for the nine months ended September 30, 2002 compared to $167,933 for the same period in 2001. This decrease was primarily due to unrealized equity gains in the first nine months of 2002 being significantly less when compared to the first nine months of 2001. Liquidity and Capital Resources At September 30, 2002, the Company had cash and cash equivalents of $3,918 versus $91,984 at December 31, 2001. This decrease was due primarily to the net loss for the nine months ended September 30, 2002. Accounts payable and accrued expenses were $190,809 at September 30, 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 operating capital for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001. Cash flows used in operating activities for the nine months ended September 30, 2002, were $(298,550) compared to ($925,388) for the same period in 2001 due primarily to changes in net loss. Cash flows provided by (used in) investing activities for the nine months ended September 30, 2002, were $69,027 compared to ($2,233) for the same period in 2001 due primarily to the proceeds from trading marketable securities and the sale of fixed assets. On May 29, 2002, EAM entered into an Asset Purchase Agreement with Schneider Capital Management, Inc. ("SCM") to sell EAM's business relating to the management of the IMPACT Total Return Portfolio's assets. SCM shall pay EAM $265,000 payable in the following manner: a $75,000 deposit was paid by SCM upon execution of the Letter of Intent dated May 6, 2002; a $50,000 deposit was paid upon execution of the Asset Purchase Agreement; and the remaining portion being $140,000 was to be paid at the closing. In September 2002, SCM terminated their agreement with EAM pursuant to which EAM intended to sell its business relating to the management of the Portfolio's assets. On October 21, 2002, IMIT's Trustees determined that the Portfolio is not presently economically viable and does not have prospects to become economically viable in the future. 13 Accordingly, the Trustees have requested that EAM develop a plan for the orderly liquidation of the Portfolio. 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. 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 14 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 Jordan v. JAHI - -------------- 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. On July 16, 2002, Jordan, in a letter to the U.S. Court of Appeals, requested that the Court immediately rule on the appeal citing concerns that the disputed shares might be voted at the next annual meeting before the Court of Appeals ruled on the disputed shares. On July 23, 2002, the Court of Appeals responded in a letter to Jordan indicating that the first available calendar, which has openings when the appeal might be scheduled for oral argument and decision is December 2 through December 13, 2002. The Court indicated that it could not guarantee that the appeal will be scheduled during this time, stating only that all previous calendar openings have been filled and the appeal will not be heard prior to that time. Because of the initial stay granted by the appellate court, the Company's Annual Meeting of Shareholders was not held on October 4, 2001 as had been scheduled San Filippo v. JAHI - ------------------- On June 10, 2002, former advisory clients of EAM, Nicholas and Karen San Filippo filed a civil 15 action complaint in the Superior Court of New Jersey against Jordan American Holdings, Inc., Impact Financial Network, Inc. and Wallace Neal Jordan. In their Complaint they allege that the actions of Wallace Neal Jordan, former portfolio manager of Equity Assets Management, constituted fraudulent representations and negligent servicing of their account that caused them to suffer financial loss. The Company intends to seek to settle the dispute via arbitration as called for in the Management Agreement between the two parties. Management of the Company does not expect the resolution of this matter to have any material effect of the Company's financial condition, results of operation, or business. 16 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: ____________ By: /s/ Richard Williams -------------------- Richard William Executive Committee Dated: ____________ By: /s/ Clare Gilchrist ------------------- Clare Gilchrist Executive Committee 17 -----END PRIVACY-ENHANCED MESSAGE-----