10QSB 1 mar05q.txt GUNDAKER/JORDAN AMERICAN HOLDINGS 3-31-05 10-QSB 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: March 31, 2005 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 April 29, 2005, 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 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page Condensed Balance Sheets as of March 31, 2005 and December 31, 2004 (unaudited) 3-4 Condensed Statements of Operations for the three month periods ended March 31, 2005 and 2004 (unaudited) 5 Condensed Statements of Cash Flows for the three month periods ended March 31, 2005 and 2004 (unaudited) 6 Condensed Statement of Stockholders' Equity (Deficit) for the three month period ended March 31, 2005 (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 14 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Certifications Exhibit 31 Exhibit 32 2 ITEM 1. FINANCIAL STATEMENTS GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED BALANCE SHEETS (Unaudited) March 31, December 31, 2005 2004 ----------- ----------- ASSETS CURRENT ASSETS Cash $ 7,886 $ 5,912 Investment advisory fees receivable 9,585 - Deposit with clearing broker 25,094 25,669 Interest receivable - 19,308 Other receivables 5,036 5,036 ----------- ----------- Total current assets 47,601 55,925 FIXED ASSETS Property and equipment (net of accumulated depreciation of $27,921 and $27,125, respectively) 9,707 10,463 ----------- ----------- TOTAL ASSETS $ 57,308 $ 66,388 =========== =========== The accompanying notes are an integral part of these financial statements. 3 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED BALANCE SHEETS (Unaudited) (continued) March 31, December 31, 2005 2004 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 365,296 $ 364,593 Shareholder payable 123,959 117,712 Deferred revenues 2,542 2,542 ----------- ----------- Total Current Liabilities 491,797 484,847 ----------- ----------- 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 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 (4,932,363) (4,916,333) ----------- ----------- Total Stockholders' Equity (434,489) (418,459) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,308 $ 66,388 =========== =========== The accompanying notes are an integral part of these financial statements. 4 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ending March 31, March 31, 2005 2004 ----------- ----------- Revenue Commission income $ 5,228 $ 23,171 Investment advisory fees 10,484 8,832 ----------- ----------- Total revenue 15,712 32,003 Operating expenses: General and administrative expenses 32,050 39,758 ----------- ----------- Loss from operations (16,338) (7,755) Other income (expense): Dividend and interest income 308 12,512 Other income (net) - 75 ----------- ----------- Total other income 308 12,587 ----------- ----------- Net income (loss) before income tax (16,030) 4,832 Income taxes - 107 ----------- ----------- Net income (loss) $ (16,030) $ 4,725 =========== =========== Net income (loss) per share $ (0.00) $ (0.00) =========== =========== Weighted average shares of common stock outstanding - Basic 14,217,266 14,217,266 =========== =========== Diluted 14,217,266 14,217,266 =========== =========== The accompanying notes are an integral part of these financial statements. 5 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ending March 31, March 31, 2005 2004 ----------- ----------- CASH FLOWS FROM OPERATIONS Net income (loss) $ (16,030) $ 4,725 Adjustments to reconcile net income (loss) to net cash flows from operations: Depreciation and amortization 756 796 Changes in operating assets and liabilities: Investment advisory fees (9,585) (9,888) Clearing broker 575 (5,822) Interest receivable 19,308 19,543 Other receivables - 7 Receivable from shareholders 6,247 (12,403) Accrued expenses and accounts payable 703 (17,860) Deferred revenue - 4,663 ----------- ----------- Net cash used by operating activities 1,974 (16,240) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures - (479) ----------- ----------- Net cash provided by investing activities - (479) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable plus accrued interest - 2,500 ----------- ----------- Net cash provided by investing activities - 2,500 ----------- ----------- Net increase (decrease) in cash 1,974 (14,219) Cash, beginning of period 5,912 18,886 ----------- ----------- Cash, end of period $ 7,886 $ 4,667 =========== =========== The accompanying notes are an integral part of these financial statements. 6 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. STATEMENT OF STOCKHOLDERS' EQUITY For the Three Months Ended March 31, 2005
Additional Total Preferred Stock Common Stock Paid-In Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity --------- ------- ---------- ------- ---------- ----------- ------------- Balance, December 31, 2004 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,916,333) $(418,459) Net loss - - - - - (16,030) (16,030) --------- ------- ---------- ------- ---------- ----------- --------- Balance, March 31, 2005 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,932,363) $(434,489) ========= ======= ========== ======= ========== =========== =========
The accompanying notes are an integral part of these financial statements. 7 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2005 (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 year ending December 31, 2004. Operating results for the three months ending March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. 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, 2004. 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 three months ended March 31, 2005, as their effect is anti-dilutive. 8 GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2005 (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. 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 month period ended March 31, 2005 of $(16,030) or $0.00 per common share compared to a net profit of $4,725 or ($0.00) per common share for the corresponding period of the previous year. For the current quarter, the Company is inactive, except for certain commissions and incidental expenses. 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. The Company had an operating loss of $(16,338) for the three months ended March 31, 2005 compared to an operating loss of $(7,755) for the three months ended March 31, 2004. This increase in operating loss is primarily due to significantly lower revenue during this period when compared to the same quarter last year. For the three months ended March 31, 2005, revenues totaled $15,712 compared to revenues of $32,003 for the same quarter of 2004, a decrease of approximately 51% due to decreased commission income during the quarter. Selling, general, and administrative ("SG&A") expenses of $ 32,050 were incurred during the three month period ended March 31, 2005, compared to $39,758 for the comparative period of the previous year. This decrease of approximately 19% was due primarily to a reduction in professional fees, and related reductions in general and administrative expense. Total other income (expenses) was $308 for the three months ended March 31, 2005, compared to $12,587 for 2004. The reduction in income relates to the variable interest rate on the Company's investment in Boston Restaurant debentures, which were sold in the fourth quarter of 2004. Liquidity and Capital Resources ------------------------------- Three months ended March 31, 2004 2005 --------- --------- Operating activities $ 1,974 $ (16,240) Investing activities - (479) Financing activities - 2,500 --------- --------- Net effect on cash $ 1,974 $ (14,219) ========= ========= As of March 31, 2005 and the year ended December 31, 2004, the Company had a deficit in working capital of $(444,196) and $(428,922), respectively. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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. 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. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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 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 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 Item 3. Defaults Upon Senior Securities None 14 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 The Company filed a report on Form 8-K on June 3, 2005, reporting a change of accountants to Richey May & Co, LLP. Richey May & Co, LLP have performed the audits for the years ended December 31, 2003 and 2004. 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