10QSB 1 sep04q.txt GUNDAKER/JORDAN AMERICAN HOLDINGS 9-30-04 10-QSB Gundaker/Jordan American Holdings 12-31-04 10-KSB United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 2004 Commission File Number: 0-18974 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. (Exact name of small business issuer as specified in its charter) Florida 65-0142815 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2458 Old Dorsett Road, Suite 118, Maryland Heights, MO 63043 (Address of principal executive offices) (660) 775-2589 (Issuer's telephone number) Jordan American Holdings, Inc. (Former Name of registrant as specified in its charter) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]. As of November 15, 2004, there were 14,217,266 shares of common stock, par value $0.001 per share, outstanding. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]. TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets as of September 30, 2004 and December 31, 2003 (unaudited) 3-4 Condensed Statements of Operations for the three and nine month periods ended September 30, 2004 and 2003 (unaudited) 5 Condensed Statements of Cash Flows for the nine month periods ended September 30, 2004 and 2003 (unaudited) 6 Condensed Statement of Stockholders' Equity (Deficit) for the nine month period ended September 30, 2004 (unaudited) 7 Notes to Condensed Financial Statements (unaudited) 8-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Item 3. Controls and Procedures 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 16 Certifications Exhibit 31 Exhibit 32 2 ITEM 1. FINANCIAL STATEMENTS GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED BALANCE SHEETS (Unaudited) September 30, December 31, 2004 2003 ------------- ------------ ASSETS CURRENT ASSETS Cash $ 9,951 $ 18,886 Investment advisory fees receivable - 984 Deposit with clearing broker 25,226 24,602 Interest receivable 9,654 31,759 Receivable from stockholders - 29,998 Other receivables 1,176 2,283 Prepaid expenses 332 1,030 ----------- ----------- Total current assets 46,339 109,542 FIXED ASSETS Property and equipment (net of accumulated depreciation of $28,730 and $27,125, respectively) 12,522 14,457 OTHER ASSETS Boston Restaurant debentures 300,000 350,000 ----------- ----------- TOTAL ASSETS $ 358,861 $ 473,999 =========== =========== The accompanying notes are an integral part of these financial statements. 3 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED BALANCE SHEETS (Unaudited) (continued) September 30, December 31, 2004 2003 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 200,432 $ 222,645 Payable to stockholder 392,519 - Deposits 163,833 156,333 Deferred revenues 1,301 1,034 ----------- ----------- Total current liabilities 758,085 380,012 STOCKHOLDERS' EQUITY (DEFICIT) 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 20,000 20,000 Common stock $0.001 par value, authorized, 20,000,000,000 shares: issued and outstanding 14,217,266 shares 14,217 14,217 Additional paid-in capital 4,463,657 4,463,657 Accumulated deficit (4,897,098) (4,403,887) ----------- ----------- Total Stockholders' Equity (Deficit) (399,224) 93,987 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 358,861 $ 473,999 =========== =========== The accompanying notes are an integral part of these financial statements. 4 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Nine Months Ending September 30, Ending September 30, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenue Commission income $ 4,050 $ 19,576 $ 41,450 $ 67,783 Investment advisory fees 2,154 - 11,749 - ---------- ---------- ---------- ---------- Total revenue 6,204 19,576 53,199 67,783 Operating expenses: General administrative expenses 514,885 58,351 581,597 292,659 ---------- ---------- ---------- ---------- Income (Loss) from operations (508,681) (38,775) (528,398) (224,876) Other income (expense): Dividend and interest income 10,302 16,094 35,252 47,929 Other income (net) - 6,427 75 22,727 ---------- ---------- ---------- ---------- Total other income 10,302 22,521 35,327 70,656 ---------- ---------- ---------- ---------- DISCONTINUED OPERATIONS Loss on disposals of assets - (32,074) - (32,074) Income (loss) before income tax (498,379) (48,328) (493,071) (186,294) Income taxes - (260) (140) (1,326) ---------- ---------- ---------- ---------- Net income (loss) $ (498,379) $ (48,588) $ (493,211) $ (187,620) ========== ========== ========== ========== Net income (loss) per share $ (0.04) $ (0.00) $ (0.03) $ (0.01) ========== ========== ========== ========== Weighted average shares of common stock outstanding 14,217,266 14,217,266 14,217,266 14,217,266 ========== ========== ========== ========== Diluted 14,217,266 14,217,266 14,217,266 14,217,266 ========== ========== ========== ==========
5 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ending September 30, September 30, 2004 2003 ------------- ------------- CASH FLOWS FROM OPERATIONS Net income (loss) $ (493,211) $ (187,620) Adjustments to reconcile net income (loss) to net cash flows from operations: Depreciation and amortization 2,415 6,718 Loss on disposal of assets - 108,901 Changes in operating assets and liabilities: Investment advisory fees 984 (3,931) Clearing broker (624) 2,627 Interest receivable 22,105 - Deposits payable - (131,333) Other receivables 1,106 (9,016) Receivable from shareholders 422,517 (38,873) Other assets 698 4,040 Accrued expenses and accounts payable (22,213) 166,728 Deferred revenue 267 (4,453) ----------- ------------ Net cash used by operating activities (65,956) (86,212) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from debenture and marketable securities 50,000 50,000 Capital expenditures (479) - ----------- ------------ Net cash provided by investing activities 49,521 50,000 CASH FLOWS FROM FINANCING ACTIVITIES Increase in deposit liability 7,500 - ----------- ------------ Net decrease in cash (8,935) (36,212) Cash, beginning of period 18,886 36,570 ----------- ------------ Cash, end of period $ 9,951 $ 358 =========== ============ The accompanying notes are an integral part of these financial statements. 6 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. STATEMENT OF STOCKHOLDERS' EQUITY For the Nine Months Ended September 30, 2004
Additional Total Preferred Stock Common Stock Paid-In Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity --------- ------- ---------- ------- ---------- ----------- ------------- Balance, December 31, 2003 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,403,887) $ 93,987 Net loss - - - - - (493,211) (493,211) --------- ------- ---------- ------- ---------- ----------- --------- Balance, September 30, 2004 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,897,098) $(399,224) ========= ======= ========== ======= ========== =========== =========
The accompanying notes are an integral part of these financial statements. 7 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2004 (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed financial statements of GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. ("the Company") are presented in accordance with the requirements for Form 10-Q and Article 10 of Regulation S-X and Regulation S-B. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (all of which were of a normal recurring nature) considered necessary to fairly present the financial position, results of operations, and cash flows of the Company on a consistent basis, have been made. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's Annual Financial Statements for the years ending December 31, 2003. Operating results for the nine months ending September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. The Company recommends that the accompanying condensed financial statements for the interim period be read in conjunction with Form 10-KSB for the year ending December 31, 2003. Use of estimates ---------------- The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates. Net Loss Per Share ------------------ Basic loss per weighted average common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Common stock equivalents are excluded from the computation for the nine months ended September 30, 2004, as their effect is anti-dilutive. 8 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2004 (Unaudited) NOTE 2 - AMENDMENT TO ARTICLES OF INCORPORATION On September 15, 2003, the Company held a shareholder meeting in which the name of the Company was changed to "Gundaker/Jordan American Holdings, Inc." The Board believes that the Company can develop more extensive brand-name recognition in the marketplace through the consistent use of the "Gundaker/Jordan" name. In addition, the total number of authorized common shares was increased from 20,000,000 to 20,000,000,000. These changes are retroactively presented in these condensed financial statements. NOTE 3 - GOING CONCERN The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered significant losses, has a working capital deficit as of the date of this report, and possesses minimal ongoing sources of income consisting primarily of trailing commissions. The Company hopes to obtain funding, via loans or private placements of stock to pay off debt and provide working capital. Management has no current plan to seek capital in the form of loans or stock private placements at this time. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately, to achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Management is seeking new capital and opportunities to revitalize the Company. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this report, including statements concerning the Company's future cash and financing requirements, and other statements contained herein regarding matters that are not historical facts, are forward looking statements; actual results may differ materially from those anticipated. Company Background and Change in Control ---------------------------------------- On November 2, 2002, Wallace Neal Jordan reclaimed control of Jordan American Holdings. At that point, the attempted hostile takeover of the company had failed, and the rebuilding and restructuring of the company began. The battle for control of the company had included a proxy battle, which was won decisively by Mr. Jordan and the shareholders against Charles Clark, A.J. Elko and the Lamb foundation. Mr. Jordan, subsequently negotiated the purchase from the previous preferred shareholders, the Lamb Foundation, of all of their interests in the company, two million shares of preferred stock and 3.85 million shares of common stock. The purchase of the Lamb Foundations interest was made by Gordon Gundaker, in the name of the Gordon A. Gundaker Revocable Trust, with a perpetual proxy for voting privileges granted to Mr. Jordan, and the right to purchase a 50% interest in the transaction also being granted to Mr. Jordan. At the time of the completion of the transaction with the Lamb Foundation, Mr. Jordan, via the proxy and his previous ownership interest, had voting control of over 50% of the common stock of the company. As a result, the need to solicit proxys in order to settle any dispute within the company is unnecessary. Mr. Jordan, the founder of the company and largest shareholder, controls the important decisions affecting the shareholder of the company. Since Mr. Jordan's focus and primary business interest is in creating value for the shareholders of the company and enhancing the market value of the company's stock and considering the severely detrimental result of the previous conflict relating to an attempt by others to control the company, its assets and its business, having full control of the company's future placed in Mr. Jordan's hands is considered a valuable improvement in the outlook for the company and its business. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations --------------------- The Company had a net loss for the three and nine month periods ended September 30, 2004, of $(498,379) and $(493,211) or ($0.04) and ($0.03) per common share compared to a three and nine month net loss of $(48,588) and $(187,622) or $(0.00) and ($0.01) per common share for the corresponding periods of the previous year. This increase in operating loss is primarily due to approximately $430,000 of legal fees attributable to the takeover attempt. The Company had an operating loss of $(508,681) and $(528,398) for the three and nine month periods ended September 30, 2004 compared to an operating loss $(38,775) and $(224,876) for the respective three and nine month periods ended September 30, 2003. This change in operating loss is primarily due to the legal fees for defense of the takeover attempt, as offset by the cost savings from the Company's relative inactivity during 2004 as compared with 2003. For the three and nine month periods ended September 30, 2004, revenues totaled $6,204 and $53,199 compared to revenues of $19,576 and $67,783 for the same quarter and year to date periods of 2003, a decrease of approximately 68% and 22% respectively, due primarily to the reduction of commissions received as the Company's inactivity for the current year continued. Selling, general, and administrative ("SG&A") expenses of $514,885 and $581,597 were incurred during the three and nine month periods ended September 30, 2004, compared to $58,351 and $292,659 for the comparative periods of the previous year. The increases were due primarily to the accrual of professional fees in the current quarter, offset by a decline in other operating costs. Total other income (expenses) was $10,302 and $35,327 for the three and nine month periods ended September 30, 2004, compared to $22,521 and $70,656 for the corresponding three and nine month periods in 2003. This change was primarily due to a variable rate of return on the company's investment in Boston Restaurant debentures, as well as a reduction in the principal amount owned. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources ------------------------------- Nine months ended September 30, 2004 2003 --------- --------- Operating activities $(65,956) $(86,544) Investing activities 49,521 50,000 Financing activities 7,500 - -------- -------- Net effect on cash $ (8,935) $(36,212) ======== ======== As of September 30, 2004 and the year ended December 31, 2003, the Company had a deficit in working capital of $711,746 and $270,469, respectively. 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. 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. The Company does not currently maintain errors and omission insurance policies insuring against this risk. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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. ITEM 3. CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer/Chief Financial Officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act. Based on this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 1 of Part II of the Company's Form 10-QSB for the quarter ended September 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 Ninth 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. This matter was concluded when Mr. Jordan was re-elected as the sole officer and director of the Company on November 2, 2002. On September 15, 2003, a meeting of shareholders was held to elect directors, to approve the change in name of the Company to Gundaker/Jordan American Holdings, Inc., and to approve an increase in the number of authorized common shares from 20,000,000 to 20,000,000,000. Item 2. Changes in Securities None 14 Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31 Certification of Chief Executive Officer and Chief Financial and Accounting Officer of the Company Accompanying Periodic Reports pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith) 32 Certification of Chief Executive Officer and Chief Financial and Accounting Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith) (b) Reports on Form 8-K. None. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. By: /s/ W. Neal Jordan Principal Executive Officer and Principal Financial and Accounting Officer Date: June 24, 2005 16