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Gundaker/Jordan American Holdings Inc – ‘10KSB’ for 12/31/04

On:  Wednesday, 6/29/05, at 4:40pm ET   ·   For:  12/31/04   ·   Accession #:  1263279-5-216   ·   File #:  0-18974

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/29/05  Gundaker/Jordan American Hol… Inc 10KSB      12/31/04    3:86K                                    Krys Boyle PC/FA

Annual Report — Small Business   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Gundaker/Jordan American Holdings 12-31-04 10-Ksb     35±   149K 
 2: EX-31       Certification per Sarbanes-Oxley Act (Section 302)     2±     8K 
 3: EX-32       Certification per Sarbanes-Oxley Act (Section 906)     1      6K 


10KSB   —   Gundaker/Jordan American Holdings 12-31-04 10-Ksb
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Item 1. Description of Business
"Operations
"Item 2. Description of Property
"Item 3. Legal Proceedings
"Item 4. Submission of Matters to A Vote of Security Holders
"Item 5. Market for Common Equity and Related Stockholder Matters
"Item 6. Management's Discussion and Analysis or Plan of Operations
"Item 7. Financial Statements
"Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"Item 8A. Controls and Procedures
"Item 8B. Other Information
"Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
"Item 10. Executive Compensation
"Item 11. Security Ownership of Certain Beneficial Owners and Management
"Item 12. Certain Relationships and Related Transactions
"Item 13. Exhibits and Reports on Form 8-K


U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 Commission File Number 0-18974 Gundaker/Jordan American Holdings, Inc. --------------------------------------- (Name of small business issuer in its charter) Florida 65-0142815 ------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 2458 Old Dorsett Road, Suite 118 Maryland Heights, MO 63043 -------------------- ----- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (660) 775-2589 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.001 par value ----------------------------- (Title of Class) 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 filing requirements for the past 90 days. Yes [ ] No [X] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The Company's revenues for fiscal year 2004 were $67,905. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Company is $0 as of December 31, 2004, multiplied by 14,217,266 shares of common stock. As of December 31, 2004, the Company had a total of 14,217,266 shares of common stock outstanding. -------------- *Affiliates for the purpose of this item refer to the officers, directors, and/or persons or firms owning 5% or more of the Company's common stock, both of record and beneficially. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference: INDEX PART 1 PAGE Item 1. Description of Business 3 Item 2. Description of Property 6 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 PART II Item 5. Market for Common Equity and Related Stockholder Matters 7 Item 6. Management's Discussion and Analysis or Plan of Operations 9 Item 7. Financial Statements 13 Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 13 Item 8A. Controls and Procedures 14 Item 8B. Other Information 14 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 14 Item 10. Executive Compensation 16 Item 11. Security Ownership of Certain Beneficial Owners and Management 17 Item 12. Certain Relationships and Related Transactions 18 Item 13. Exhibits and Reports on Form 8-K 18 2 PART I ITEM 1. DESCRIPTION OF BUSINESS General ------- Gundaker/Jordan American Holdings, Inc. ("We" or the "Company"), a Florida corporation incorporated in 1989. In 2003, we changed our name from Jordan American Holdings, Inc. We are a financial service company which provides client investment advisory and related securities brokerage services. We manage investment portfolios for individuals, trust, corporate pension plans, other corporate accounts, and foundations through our wholly owned subsidiary, Equity Assets Management, Inc. ("EAM"). In addition, we operate IMPACT Financial Network, Inc. ("IFNI"), a securities broker-dealer registered with the National Association of Securities Dealers, Inc., through which we receive commission revenues. Developments during the fiscal year 2004 within EAM and IFNI are described in the section below entitled "Operations." W. Neal Jordan was reinstated as the Chairman of the Board of Directors of the Company, as President and as Chief Executive Officer and Chief Investment Officer on November 2, 2002. He had been removed in 2001. During the fiscal year ended December 31, 2004, the Company was not involved in any bankruptcy, receivership or similar proceedings or any other material reclassifications, mergers or consolidations, and the Company did not acquire or dispose of any material amount of assets during such year. Operations ---------- Investment Advisory Services We conduct our investment advisory business through EAM. EAM is a state registered investment adviser with registration in the States of California, Florida, Missouri, New York, Texas, and Virginia. In 2004, EAM sought to remove its registration in the State of Colorado. The State of Colorado brought an administrative action against EAM, alleging that it had failed to comply with certain registration requirements imposed by Colorado. EAM settled this proceeding by agreeing that it and Mr. W. Neal Jordan, would not be registered in the State of Colorado as an investment adviser or investment adviser representative for a period of seven years. EAM is an investment advisory firm that specializes in the management of client accounts predominantly containing U.S. equity securities. Our target market includes high net worth individuals, trusts, corporate pension plans and other corporate accounts, foundations and institutional investors. The objective of the individually held portfolio is capital appreciation. EAM is compensated for its management of these accounts through two primary methods. EAM either receives a fixed advisory fee based on the value of assets under its management or an incentive-based advisory fee based upon the annual performance of the individual account. Incentive-based advisory fees on assets under management for our clients provide the largest portion of our revenues. Such revenues began declining in 2001 in a trend that has continued to date. Our assets under management have 3 also declined in recent years. At December 31, 2004, EAM managed 119 individual accounts with assets under management of approximately $3.9 million, down from 128 individual accounts and $4.6 million at 2003 year end. Approximately 30% of the assets under management in these accounts pay the fixed percentage of assets fee of approximately 1.9% annually. Approximately 70% of the assets under management in these accounts are billed on an incentive fee basis, whereby EAM receives 20% of the net realized and unrealized gains, including dividends and interest, in the account following each year of management. Incentive based advisory fees on assets under management for semi-affluent investors provide the largest portion of the Company's revenues, but have been declining since 2000. We believe that this trend may continue through 2005 and beyond. A semi-affluent investor generally has a total net worth greater than $1 million and less than $10 million. For the year ended December 31, 2004 no single client provided more than 5% of the Company's consolidated revenues. Accordingly, the loss of any single client would not have a material adverse effect on the Company's total investment management business. Additionally, because incentive-based fee contracts are billed on an annual basis for each respective client, there may be a delay in billing revenue for as long as eleven months from the time when actual account performance results were achieved. Thus, performance in these accounts may or may not benefit the revenues of the Company for nearly one year after such performance results were achieved, depending on the billing cycle of respective clients and the results of investments held in the portfolio during the interim period prior to the calculation of the billing. Incentive-based fees fluctuate depending on performance of the accounts being managed. Total assets under management and corporate earnings may substantially increase or decrease due to stock market conditions, investment results as influenced by EAM's investment advisory decisions, expenses and the related effectiveness of marketing efforts, and competition from other investment advisory companies and mutual funds. Other indirect influences, such as interest rate charges by the Federal Reserve Board, economic conditions such as high inflation and/or recession, international events, acts of terrorism, and other factors may also affect assets under management and EAM's earnings. The 1999 high-tech and .com boom, followed by the high-tech bust and market decline of 2000 to 2002 impacted most investment portfolios nationwide. We believe that the negative impact on the equities market during that period should benefit successful stock management companies as investors become aware of the need for professionalism in stock market-related investment programs. Securities Brokerage Service The Company also operates a registered broker-dealer, IMPACT Financial Network, Inc. ("IFNI"), which is a wholly owned-subsidiary of the Company and a member of the National Association of Securities Dealers, Inc. ("NASD") and the Securities Investor Protection Corporation ("SIPC"). Approximately 90% of EAM's individually managed accounts maintain brokerage accounts with IFNI for assets placed under EAM's management. IFNI is compensated for securities transactions on behalf of the Company's managed accounts by receipt of commissions for orders executed through Pershing & Co., a division of Donaldson, Lufkin, & Jenrette, a securities corporation. Pershing & Co., a member of SIPC, acts as clearing firm and custodian and processes all confirmations and monthly statements for EAM clients who choose 4 to hold their accounts with IFNI. Clients may decide to custody their accounts at another brokerage institution of their own choosing. Management believes that IFNI will continue to be a source of revenue for the Company primarily through the commissions earned on securities transactions. The Industry ------------ Revenues in the investment advisory business are determined primarily by fees based on the value of assets under management and on investment results. Therefore, the principal determinants of growth in the industry are the growth of individual assets under management and achieving positive investment performance results. In management's judgment, the major factors which influence growth in the industry are: (1) changes in the market value of securities; (2) net cash flow into or out of existing accounts; (3) gains of new or losses of existing accounts; and (4) the general stock market condition. Competition ----------- EAM competes to manage investment portfolios for individuals, trusts, corporate pension plans, other corporate accounts, and foundations. Management believes that the most important factors affecting competition in the investment advisory business are: (1) the abilities and reputations of investment advisors; (2) the differences in the investment results achieved by investment advisory firms; (3) the reputation and stability of a firm's workforce, especially of portfolio managers; (4) an effective marketing and business plan; and (5) quality of client services. EAM has many competitors, including other investment advisors, investment companies, broker-dealers and financial planners in addition to investment alternatives offered by insurance companies, banks, credit unions, securities dealers and other financial institutions. Many of these institutions possess large sales forces and significant financial resources, are able to engage in more extensive marketing and advertising than EAM and may offer accounts insured by the Federal Deposit Insurance Corporation. EAM has gone through an extended period of time wherein it has been essentially dormant. From 2002 through 2005, EAM has not sought additional clients and has not actively managed the portfolios of its customers. In order to remain competitive, EAM must distinguish its services and performance from those of its competitors. Regulation ---------- EAM is registered with and subject to regulation by the State of Missouri under that State's Investment Advisers Act and, where applicable, under the state advisory laws of California, Florida, New York, Texas and Virginia. EAM is also subject to regulation by the SEC under the Investment Advisers Act of 1940. IFNI 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. 5 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 EAM believes that its existing relationships are in compliance with applicable laws and regulations, because of this potential conflict of interest, the SEC and the various states in which EAM and IFNI are registered 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 have errors and omissions insurance policies insuring against these risks. 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. Employees --------- At March 1, 2005, the Company employed 2 full-time personnel, 1 of whom are executive officers of the Company. As of March 1, 2003 the Company employed 2 full time personnel, 1 of whom were executive officers. Those numbers in 2004 were 2 and 1 respectively. The Company utilizes the services of independent contractors to assist the employees in the operation of the Company's business. ITEM 2. DESCRIPTION OF PROPERTY The Company currently maintains its headquarters at 2458 Old Dorsett Road, Suite 118, Maryland Heights, Missouri 63043. The Company no longer has any satellite offices. Currently, the Company uses this space free of rent. The space is owned by Gordon Gundaker. During 2004, the Company paid $7,825 in rent to unrelated entities. ITEM 3. LEGAL PROCEEDINGS Wallace Neal Jordan, Gundaker/Jordan American Holdings and the shareholders of Gundaker/Jordan American Holdings have filed a legal action against Charles Clark, A.J. Elko and other parties to be named for damages incurred as a result of the attempted takeover of the Company by those parties. Proceedings are ongoing. Other than the foregoing, the Company is not a party to any material litigation, and management has no knowledge of any threatened material litigation against the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the security holders for vote in 2004. 6 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information ----------------------- The Company's common stock currently trades on the OTC Pink Sheets under the symbol "JAHIW.PK." In May 2003, the Company's symbol was changed from JAHI.OB, when the Company was removed from the Bulletin Board and placed in the Pink Sheets. The following are the high and low sales prices for our stock for the four-year period ended December 31, 2004. Such prices may represent high and low bid quotations or prices between dealers in securities and do not include retail markup, markdown, or commissions and may not necessarily represent actual transactions. Year Ended December 31, 2001 High Low ------------------------------------------------------------ First Quarter $0.18 $0.05 Second Quarter $0.10 $0.05 Third Quarter $0.15 $0.05 Fourth Quarter $0.11 $0.05 Year Ended December 31, 2002 High Low ------------------------------------------------------------ First Quarter $0.055 $0.03 Second Quarter $0.05 $0.03 Third Quarter $0.03 $0.01 Fourth Quarter $0.02 $0.006 Year Ended December 31, 2003 High Low ------------------------------------------------------------ First Quarter $0.00 $0.00 Second Quarter $0.00 $0.00 Third Quarter $0.00 $0.00 Fourth Quarter $0.00 $0.00 Year Ended December 31, 2004 High Low ------------------------------------------------------------ First Quarter $0.00 $0.00 Second Quarter $0.00 $0.00 Third Quarter $0.00 $0.00 Fourth Quarter $0.00 $0.00 On December 31, 2004, the closing price of the Company's common stock was $0.00. As of December 31, 2004, approximately 820,000 shares of its common stock were held in accounts of EAM clients, which represented approximately 5.8% of the Company's outstanding shares of common stock as of December 31, 2004. Wallace Neal Jordan owned approximately 30% of the Company's outstanding shares of common stock at December 31, 2004. 7 (b) Shareholders ---------------- At December 31, 2004, there were 14,217,266 outstanding shares of the Company's common stock and 870 shareholders of record. (c) Dividends -------------- Common The Company has not paid or declared cash dividends on its common stock since inception and does not anticipate paying dividends in the foreseeable future. At December 31, 2004, the Company's policy was to retain all earnings for application in its business. Payment of future cash dividends is at the discretion of the Board of Directors and will depend upon earnings, financial requirements of the Company and other such factors as the Board of Directors may deem relevant. Recent Sales of Unregistered Securities ------------------------------------------ There were no sales of securities in the year ended December 31, 2004 without registration under the Securities Act of 1933, as amended. SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS. The table set forth below presents the securities authorized for issuance with respect to compensation plans under which equity securities are authorized for issuance: [Download Table] Equity Compensation Plan Information -------------------------------------------------------------------------------- Number of securities to be issued upon Weighted average exercise of exercise price of Number of securities outstanding options, outstanding options, remaining available Plan Category warrants and rights warrants and rights for future issuance ------------- -------------------- --------------------- -------------------- Equity compensation plans approved by security holders. 347,250 $ 0.83 1,533,750 ------------------------------------------------------------------------------------ Equity compensation plans not approved by security holders. 184,000 $ 0.83 N/A ------------------------------------------------------------------------------------ Totals 531,250 -- ------------------------------------------------------------------------------------ 8 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS Safe Harbor for Forward-Looking Statements ------------------------------------------ Certain statements provided by us in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of such factors include, but are not limited to, the following: our auditors have determined that there is an uncertainty as to our ability to continue as a going concern, we will require additional capital in order to meet our cash needs during 2005, we have recently experienced significant changes at the senior management and Board of Directors levels, the performance of financial markets, the investment performance of our managed accounts, general economic conditions, competitive conditions and government regulations, including changes in tax rates. We caution readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Gundaker/Jordan American Holdings is the surviving company of what was originally the public company named the Christian Purchasing Network. When Wallace Neal Jordan merged his private companies into that public entity, the name of the public company was changed to Jordan American Holdings, and operations continued under that name until the name was changed to Gundaker/ Jordan American Holdings in 2003. The profitable operations within the public company have historically been the investment advisory firm and the broker-dealer -- Equity Assets Management, and Impact Financial Network. All attempts to diversify the Company's operations were unprofitable. In the year 2001, after years of attempts at diversification, Wallace Neal Jordan, as CEO, made the decision to halt the diversification efforts, stop the negative cash flow associated with those failed attempts to broaden the financial base of operations of the Company and focus on increasing the benefits to be derived from the business of portfolio management. The personnel associated with the unprofitable operations needed to be terminated, all unproductive facilities needed to be closed, and the Company needed to be downsized to the point of maximized profitability. That process was to begin on May 22, 2001. A new board of directors was to be installed, and the new business plan initiated at the annual meeting held on that date. Instead of the anticipated result on May 22, 2001, Mr. Jordan was removed from his positions by a vote of two-to-one (the two being parties intended to be terminated by the aborted annual meeting). His positions within the Company were assumed by others. Mr. Jordan spent the next 17 months in a legal battle to regain control of the Company, and within that 17 month period of Mr. Jordan's absence, the Company and its business were almost destroyed. On November 2, 2002, the Board of Directors of the Company voted Mr. Jordan back into the Company and placed the operations back into his hands. From November 2, 2002 to date, efforts within the Company have been directed toward identifying individuals who can contribute positively to the anticipated future success of the Company. One employee has been hired and trained, and other potential employees have been identified and are under 9 consideration. Having the right people within a company is a prerequisite to greatness in any business. In the money management business, the more prominent and visible the involved parties, the better the image and perception surrounding the company. We believe that the Company is in an excellent business, with the potential for the future to far exceed the positive result of the past. Our association with Gordon Gundaker, a successful realtor in St. Louis, Missouri, is a positive first step in that direction, and Mr. Gundaker is a substantial investor in the Company's stock. Since November of 2002, the time of Mr. Jordan's reinstatement into positions of control, any required financing of the business of the Company has been provided either from assets within the Company or by Mr. Jordan from his personal assets. Results of Operations --------------------- COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 2004 WITH FISCAL YEAR DECEMBER DECEMBER 31, 2003 Net loss for 2004 was $512,446 or $.04 per common share and share equivalent compared to a net loss of $314,211 or $.03 per common share and share equivalent for 2003. Revenues from investment advisory fees for 2004 totaled $20,664 compared to $25,734 for 2003, a decrease of 20%. Commission revenues decreased for 2004 to $47,241, as compared to $58,588 for 2003, a decrease of approximately 19%. This decrease was primarily due to decreased activity in the management of accounts, and increased focus on preparation for the future. Selling, general, and administrative ("SG&A") expenses of $85,471 were incurred during 2004, compared to SG&A expenses of $77,874 for 2003, an increase of approximately 10%. The increase in SG&A expenses stems primarily from the Company beginning to recommence operations. Other operating expenses declined during 2004, including salaries 31%, communications 64%, taxes and licenses 42%, and occupancy - 59%. Professional fees increased in 2004 to $457,692 from $161,747 in 2003, an increase of 183%. This increase is due to the Company's agreement to repay Mr. Jordan $450,000 in legal fees incurred in his proxy fight to regain control of the Company. Total other income (loss) was $45,028 for 2004, compared to $56,746 for 2003. The decrease in other income can be primarily attributed to a reduction of interest income. Liquidity and Capital Resources ------------------------------- At December 31, 2004, the Company had cash and cash equivalents of $5,912 versus $18,886 at December 31, 2003. This decrease is primarily due to Company working capital expenditures. Marketable securities were valued at $0 at December 31, 2004, as compared to $350,000 at December 31, 2003, a decrease of $350,000. The decrease in marketable securities is due to the Company's sale of $150,000 of those securities for cash, and a transfer of $200,000 of those securities to Mr. 10 Jordan in partial satisfaction of the amount owed to him for legal fees expended on behalf of the Company. A total of $117,712 remains payable to Mr. Jordan at December 31, 2004 for reimbursement of these fees. Net investment advisory fees receivable were $0 at December 31, 2004, as compared to $984 at December 31, 2003, a decrease of $984. This decrease can be primarily attributed to lessened business activities. Accounts payable and accrued expenses were $198,260 at December 31, 2004, as compared to $222,645 at December 31, 2003, a decrease of approximately 11%. The decrease in accounts payable and accrued expenses can be primarily attributed to cash advances by Mr. Jordan which were used to pay current expenses and certain outstanding vendor balances from 2003. Accruals are based upon actual expenses incurred as well as unbilled expenses. Accounts payable to stockholder increased from a receivable of $29,998 in 2003 to a payable of $117,712 in 2004. This is the result of Mr. Jordan having incurred additional shareholder advances of $102,290, offset by legal fees paid on behalf of the Company totaling $450,000, and the receipt of $200,000 in Boston Restaurant Debentures in partial settlement of the amount owed. All amounts are non-interest bearing and due on demand. At December 31, 2004, the Company had $5,912 in cash and marketable securities. Analysis of Cash Flows ---------------------- Cash used in operating activities increased to $373,993 in 2004 from $188,597 in 2003, primarily attributable to the increase in net loss. Cash provided in investing activities increased to $351,019 in 2004 compared to $145,913 cash provided by investing activities in 2003. The increase is primarily the result of sale for $350,000 of an investment in 2004. Cash provided by financing activities decreased to $10,000 in 2004 compared to $25,000 cash provided by financing activities in 2002. The current year amount is attributable to interest on the deposit liability. COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 2003 WITH FISCAL YEAR DECEMBER 31, 2002 Net loss for 2003 was $314,211 or $.02 per common share and share equivalent compared to a net loss of $487,299 or $.03 per common share and share equivalent for 2002. Total revenues decreased by $335,970, or 80%, from $420,292 in 2002 to $84,322 in 2003, as a result of decreased activity in the management of accounts. Investment advisory fees declined 84%, commission income declined 76%, and other income decreased 100% from 2002 to 2003. Operating expenses decreased $571,589, from $939,722 in 2002 to $368,133 in 2003, a decrease of 61%, as activities of the company were reduced in late 2002. Salaries declined 86%, commission expense 95%, communications 81%, taxes and licenses 73%, clearing costs 67%, occupancy 79%, depreciation 80% and other general and administrative expenses decreased 35%. These declines were offset by an increase in professional fees of $127,104, or 367% from 2002 11 to 2003. Included in professional fees in 2003 was a legal settlement with a customer totaling $75,000, as well as legal fees related to this settlement. Total other income (loss) was $56,746 for 2003, compared to $101,546 for 2002. The decrease in other income can be primarily attributed to loss on disposal of fixed assets, and a reduction in interest income resulting from the sale of a portion of the company's debenture holdings. Liquidity and Capital Resources ------------------------------- At December 31, 2003, the Company had cash and cash equivalents of $18,886 versus $36,570 at December 31, 2002. This decrease is primarily due to the Company's working capital expenditures. Marketable securities were valued at $350,000 at December 31, 2003, as compared to $500,000 at December 31, 2002, a decrease of approximately 30%. During 2003, the Company sold $150,000 of its investments in Boston Restaurant debentures and used the proceeds to satisfy legal fees. Net investment advisory fees receivable were $984.00 at December 31, 2003, as compared to $3,513 at December 31, 2002, a decrease of approximately 73%. This decrease can be primarily attributed to lessened business activities. Accounts payable and accrued expenses were $222,645 at December 31, 2003, as compared to $184,211 at December 31, 2002, an increase of approximately 21%. The increase in accounts payable and accrued expenses can be primarily attributed to the accrual of a remaining lease obligation for premises vacated by the Company - $20,000, the remaining obligation on a lease of a company auto - $13,000, and increased unpaid legal and accounting fees - $22,000, as offset by a reduction in vendor payables attributable to reduced business activities in 2003. Accruals are based upon actual expenses incurred as well as unbilled expenses. Deposits, which represent amounts received for the unconsummated sale of the assets of the investment advisory business, are accruing interest at 8% per year. The increase in deposits of $25,000 is made up of $10,000 in accrued interest and an additional $15,000 received in 2003 by the Company for stock, for which shares have not yet been issued. At December 31, 2003, the Company had $18,886 in cash and marketable securities. Analysis of Cash Flows ---------------------- Cash used in operating activities increased to $188,597 in 2003 from $168,448 in 2002. A decrease in net loss was offset by changes in operating assets and liabilities during 2003. Cash provided (used) in investing activities increased to $145,913 in 2003 compared to $(16,039) cash used by investing activities in 2002. The increase is primarily the result of sale for $150,000 of an investment in 2003. Cash provided by financing activities decreased to $25,000 in 2003 compared to $131,333 cash provided by financing activities in 2002. In 2002 the Company received $125,000 for the purchase of the assets of the investment 12 advisory business. The sale was never consummated, and the purchase deposit was converted to an interest bearing obligation in 2002. In 2003, the Company received cash for the purchase of shares which have not yet been issued. Recent Accounting Pronouncements -------------------------------- The following information is as of December 31, 2004. In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4". The statement requires abnormal amounts of freight, handling costs, idle facility expense and spoilage to be recognized as current period expenses. This statement will be effective for the Company as of January 1, 2006. The adoption of this statement is not expected to have a significant impact on the Company's results of operations, financial position or cash flows. In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment". This statement replaces SFAS No. 123, "Accounting for Stock Based Compensation" and supersedes ABP Opinion No. 25, "Accounting for Stock Issued to Employees". It establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. The statement requires companies to expense the fair value of employee stock options and other equity-based compensation, eliminating the alternative to use APB No. 25's intrinsic value method. The statement will be effective for the Company as of January 1, 2006. Management is evaluating the impact the adoption of SFAS No. 123R will have on the Company's financial position and results of operations. Future cash flows of the Company will not be impacted by the adoption of this standard. In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, and Amendment of APB No. 29". This statement amends and clarifies financial accounting for nonmonetary exchanges by requiring that most exchanges of productive assets be accounted for at fair value. With certain exceptions, companies can no longer account for nonmonetary exchanges at book value with no gain or loss recognized. This statement will be effective of January 1, 2006, and may impact the Company's consolidated financial position and results of operations in future periods if such nonmonetary exchanges occur. ITEM 7. FINANCIAL STATEMENTS Financial statements contained in this report reflect no change from the preceding year in any accounting principles or practices or in the method of application of those principles or practices. The report to the financial statements does contain a statement regarding doubt as to the Company's ability to continue as a going concern. Information with respect to this item is contained in the consolidated financial statements beginning on page F-1 of this report. Such information is incorporated herein by reference. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 ITEM 8A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures --------------------------------------------------- We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives. With the participation of management, our chief executive officer and interim chief financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the conclusion of the period ended December 31, 2004. Based upon this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission. Changes in Internal Controls ------------------------------ There were no significant changes in our internal controls or, to the knowledge of our management, in other factors that could significantly affect internal controls subsequent to the date of most recent evaluation of our disclosure controls and procedures utilized to compile information included in this filing. Within the twenty-four (24) months prior to the date of our most recent Financial Statements and through the date of this report, we have had no disagreements with our accountants on accounting or financial disclosure. ITEM 8B. OTHER INFORMATION. None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. Our directors and executive officer and their ages as of December 31, 2004 are as follows: NAME AGE POSITION ---- --- -------- W. Neal Jordan 64 Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Chief Investment Officer, Secretary and Director 14 W. NEAL JORDAN has been a Director of the Company since April 1993; and served as the Chairman of the Board of the Company from August 1, 1995 through June 1, 2001; as Chief Executive Officer of the Company from July 1999 through June 1, 2001, and from August 1995 until October 1997; and as Chief Investment Officer of the Company from October 1997 through June 1, 2001. In November 2002, Mr. Jordan was appointed as the Company's Chief Executive Officer, President, Chief Investment Officer, Chief Financial Officer, and Secretary. Mr. Jordan was President of "new" EAM from its formation in November 2000 through June 4, 2001. He had served as the President, Chief Executive Officer and Portfolio Manager of Equity Assets Management, Inc., a Florida corporation ("Old EAM"), from Old EAM's inception in 1972 until its merger into the Company in 1995. He was President of IFNI, which he founded in 1986, through June 4, 2001. This person has remained in his positions from November 2002 until the current date, June 24, 2005. AUDIT COMMITTEE FINANCIAL EXPERT We do not currently have an audit committee or an audit committee financial expert due to our recent change in the Board Members and management. We intend to appoint an audit committee in the near future. CODE OF ETHICS We have not yet prepared written code of ethics and employment standards for the Company. We have not prepared such a code due to our recent change in the Board Members and management. INDEMNIFICATION Our Articles of Incorporation and the Bylaws provide that we may indemnify our officers and directors for costs and expenses incurred in connection with the defense of actions, suits, or proceedings where the officer or director acted in good faith and in a manner he reasonably believed to be in our best interest and is a party to such actions by reason of his status as an officer or director. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. COMPLIANCE WITH SECTION 16(a) Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Commission initial reports of ownership and reports of changes in ownership of the Company's Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by the Commission's regulations to furnish the Company with copies of all Section 16(a) forms they filed. 15 ITEM 10. EXECUTIVE COMPENSATION The following table sets forth the total compensation paid to the Company's chief executive officers during the years 2004 and 2003. W. Neal Jordan has served as the Company's Chief Executive Officer, President, Chief Investment Officer, Chief Financial Officer, and Secretary since November 2002. Mr. Jordan was the Company's sole executive officer at the end of 2002 and in 2003 and 2004. [Download Table] SUMMARY COMPENSATION TABLE LONG TERM ANNUAL COMPENSATION COMPENSATION ---------------------------------------- SECURITIES OTHER ANNUAL UNDERLYING NAME AND YEAR SALARY BONUS COMPENSATION (1) OPTIONS PRINCIPAL POSITION ------------ ----- --------- -------- ----------------- ----------- W. Neal Jordan(2) 2004 -0- -0- -0- -0- 2003 -0- -0- -0- -0- 2002 -0- -0- -0- -0- ______________________ (1) The table does not include amounts for personal benefits extended to executive officers by the Company, such as, but not limited to, health or life insurance. The Company believes that the incremental cost of those annual benefits during 2002-2004 did not exceed the lesser of $50,000 or 10% of their total annual salary and bonus. (2) Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and Secretary EMPLOYMENT AGREEMENT Mr. Jordan does not currently have an employment agreement with the Company. DIRECTOR COMPENSATION The Company does not pay its Directors any cash compensation for attending Board meetings, although it does reimburse them for any out-of-pocket expenses they incur in connection with their duties. In addition, pursuant to the Company's 1991 Stock Option Plan, as amended (the "Plan"), mandatory grants of options to purchase the following number of shares of the Company's Common Stock are to be awarded to Directors on an annual basis: 12,500 shares for serving as a Director; 1,250 shares for serving on one or more committees, and 1,250 for serving as Chairman of one or more committees. Under the Plan, all options granted to Directors (i) have a maximum term of ten years from date of grant, (ii) have a minimum exercise price of 100% of the fair market value of the Company's common stock on the date of grant and (iii) vest immediately upon the date of grant. 16 Information Concerning Stock Options No options were granted in 2004. The following table sets forth certain information concerning the fiscal year-end value of the unexercised stock options held by Mr. Jordan. [Download Table] AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN THE UNEXERCISED OPTIONS AT 2004 MONEY OPTIONS AT 2004 FISCAL FISCAL YEAR END YEAR END (1) NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE -------------- ----------- ------------- ----------- ------------- W. Neal Jordan 334,095 -0- -0- -0- ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 31, 2004, certain information regarding the Company's common stock owned of record or beneficially by (i) each person who owns beneficially more than 5% of the Company's outstanding Common Stock; (ii) each of the Company's directors and its sole executive officer; and (iii) all directors and executive officers as a group. Unless otherwise indicated, the address of each beneficial holder named below is c/o Gundaker/Jordan American Holdings, Inc., 2458 Old Dorsett Road, Suite 118, Maryland Heights, Missouri 63043. NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS -------------------- -------------------- -------- W. Neal Jordan 8,534,751 (1) 60.0% Gordon A. Gundaker, Jr. Revocable Trust 3,850,000 (2) 27.1% All directors and officers as a group (2 persons) 8,614,501 60.7% --------------------- (1) Includes: (i) 334,095 shares issuable upon the exercise of the IPO Underwriter' warrants and stock purchase warrants included therein owned by Mr. Jordan and (ii) 3,850,000 shares of common stock held by the Gordon A. Gundaker, Jr., Revocable Trust (the "Trust"), which has granted Mr. Jordan an option to purchase 50% of such shares and an irrevocable proxy to vote such shares. Excludes (i) 550,600 shares held in certain irrevocable trusts established for Mr. Jordan's children and (ii) 571,428 shares issuable upon conversion of 2,000,000 shares of the Company's 2000 Variable Rate Convertible Cumulative Preferred Stock (the "2000 Preferred Stock") held by Mr. Gundaker with respect to which Mr. Jordan has an irrevocable proxy. The Preferred Stock is non-voting. 17 (2) Does not include 571,428 shares issuable upon conversion of 2,000,000 shares of the 2000 Preferred Stock held by the Trust. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS At December 31, 2003, Mr. Jordan owed the Company $29,998 pursuant to an unsecured demand note accruing interest at the rate of 10% per annum. During 2004, Mr. Jordan incurred additional shareholder advances, before advancing the Company a net amount totaling $347,710, including $450,000 in legal fees and other costs incurred and paid on the Company's behalf. These amounts are included in operating expenses for the year ended December 31, 2004, as the Company approved the reimbursement of these expenses during 2004. The Company transferred the remaining $200,000 in investment debentures to Mr. Jordan in partial repayment of the advances. At December 31, 2004, outstanding advances from Mr. Jordan amounted to $117,712. The advances are unsecured, non- interest bearing and due on demand. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index. (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 of the years ended December 31, 2003 and 2004. 18 EXHIBIT INDEX Exhibit Description ------- ----------- 3.1 Articles of Incorporation, as amended (2)(4) 3.2 Bylaws, as amended (2) 4.1 Specimen Certificate of Common Stock (2) 4.2 Specimen Warrant Certificate (2) 4.3 Form of Warrant Agreement, as amended (2) 4.4 Form of IPO Underwriter's Warrant (2) 4.5 Specimen Certificate of 2000 Variable Rate Convertible Cumulative Preferred Stock (4) 10.1 Employment Agreement between the Company and Wallace Neal Jordan (3) 10.2 Non-Competition Agreement between the Company and Wallace Neal Jordan (3) 21 Subsidiaries of the Company (4) 31 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1) 32 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (1) ____________________________ (1) Filed herewith. (2) Incorporated herein from certain exhibits to the Company's Registration Statement on Form S-1, File No. 33-31324, as declared effective by the Securities and Exchange Commission on June 5, 1990. (3) Incorporated herein from certain exhibits to the Company's Current Report on Form 8-K dated August 15, 1991. (4) Incorporated herein from certain exhibits to the Company's Report on Form 10-KSB for the year ended December 31, 2002. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Gundaker/Jordan American Holdings, Inc. and Subsidiaries We have audited the consolidated balance sheets of Gundaker/Jordan American Holdings, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gundaker/Jordan American Holdings, Inc. as of December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 13 to the financial statements, the Company's operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Richey May & Co., LLP Richey May & Co., LLP Englewood, Colorado June 24, 2005 F-1 Gundaker/Jordan American Holdings, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2004 and 2003 2004 2003 ----------- ----------- ASSETS ASSETS Cash and cash equivalents $ 5,912 $ 18,886 Investment advisory fees receivable - 984 Deposit with clearing broker 25,669 24,602 Interest receivable 19,308 31,759 Other receivables 5,036 2,283 Other assets - 1,030 Property, equipment and leasehold improvements, at cost; net of accumulated amortization and depreciation of $28,730 and $27,125 10,463 14,457 Receivable from stockholder - 29,998 Investment, convertible debenture - 350,000 ----------- ----------- TOTAL ASSETS $ 66,388 $ 473,999 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES Accounts payable and accrued expenses $ 198,260 $ 222,645 Deposits 166,333 156,333 Payable to stockholder 117,712 - Deferred investment advisory fees 2,542 1,034 ----------- ----------- Total liabilities 484,847 380,012 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) Variable rate, cumulative, convertible, non-voting preferred stock, $0.01 par value, $1.00 liquidation value; 5,000,000 shares authorized, 2,000,000 shares issued and outstanding 20,000 20,000 Common stock, $0.001 par value; 20,000,000,000 shares authorized, 14,217,266 shares issued and outstanding 14,217 14,217 Additional paid-in capital 4,463,657 4,463,657 Accumulated deficit (4,916,333) (4,403,887) ----------- ----------- Total stockholders' equity (deficit) (418,459) 93,987 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 66,388 $ 473,999 =========== =========== The accompanying notes are an integral part of the financial statements. F-2 Gundaker/Jordan American Holdings, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS For the years ending December 31, 2004 and 2003 2004 2003 ----------- ----------- REVENUE Investment advisory fees $ 20,664 $ 25,734 Commission income 47,241 58,588 ----------- ----------- Total revenue 67,905 84,322 ----------- ----------- OPERATING EXPENSES Salaries and related expenses 38,152 55,214 Commission expense - 6,352 Professional fees 457,692 161,747 Communications and data processing 3,324 9,168 Licenses, registrations and franchise taxes 5,788 9,929 Clearing costs 24,152 21,071 General and administrative 85,471 77,874 Depreciation and amortization 2,975 7,464 Occupancy and equipment 7,825 19,314 ----------- ----------- Total operating expenses 625,379 368,133 ----------- ----------- Operating loss (557,474) (283,811) ----------- ----------- OTHER INCOME (EXPENSE) Interest and dividends 45,093 64,012 Loss on disposal of fixed assets - (32,074) Other, net (65) 24,808 ----------- ----------- Total other income 45,028 56,746 ----------- ----------- Loss from continuing operations (512,446) (227,065) ----------- ----------- LOSS FROM DISCONTINUED OPERATIONS - (87,146) ----------- ----------- NET LOSS $ (512,446) $ (314,211) =========== =========== BASIC AND DILUTED NET LOSS PER COMMON SHARE Net loss from continuing operations $ (.04) $ (.02) =========== =========== Net loss from discontinued operations $ (.00) $ (.01) =========== =========== Net loss $ (.04) $ (.03) =========== =========== Basic and diluted weighted-average number of common shares outstanding 14,217,266 14,217,266 =========== =========== The accompanying notes are an integral part of the financial statements. F-3 Gundaker/Jordan American Holdings, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the years ending December 31, 2004 and 2003 [Enlarge/Download Table] Preferred Stock Common Stock Total $0.01 Par Value $0.001 Par Value Additional Stockholders --------- ------- ---------- ------- Paid-In Accumulated Equity Shares Amount Shares Amount Capital Deficit (Deficit) --------- ------- ---------- ------- ---------- ----------- ------------ BALANCES, December 31, 2002 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,089,676) $408,198 Net loss - - - - - (314,211) (314,211) --------- ------- ---------- ------- ---------- ----------- --------- BALANCES, December 31, 2003 2,000,000 20,000 14,217,266 14,217 4,463,657 (4,403,887) 93,987 Net loss - - - - - (512,446) (512,446) --------- ------- ---------- ------- ---------- ----------- --------- BALANCES, December 31, 2004 2,000,000 $20,000 14,217,266 $14,217 $4,463,657 $(4,916,333) $(418,459) ========= ======= ========== ======= ========== =========== ========= The accompanying notes are an integral part of the financial statements. F-4 Gundaker/Jordan American Holdings, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ending December 31, 2004 and 2003 2004 2003 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss from continuing operations $ (512,446) $ (314,211) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,975 7,464 Loss on disposal of assets - 32,074 Loss on assets held, discontinued operations - 62,724 Decrease (increase) in- Deposit with clearing broker (83) 3,119 Interest receivable 12,451 (31,759) Other receivables (2,753) 6,497 Investment advisory fees receivable - 2,529 Other assets 1,030 3,097 Receivable from shareholders 147,710 (6,173) (Decrease) increase in- Accounts payable and accrued expenses (24,385) 38,434 Deferred investment advisory fees 1,508 (3,495) ----------- ----------- Net cash used in continuing operations (373,993) (199,700) Net cash provided by discontinued operations - 11,103 ----------- ----------- Net cash used in operating activities (373,993) (188,597) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from convertible debenture 350,000 150,000 Proceeds from sale of fixed assets 1,500 - Capital expenditures (481) (4,087) ----------- ----------- Net cash provided by investing activities 351,019 145,913 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in deposit liabilities 10,000 25,000 ----------- ----------- Net cash provided by financing activities 10,000 25,000 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (12,974) (17,684) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 18,886 36,570 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,912 $ 18,886 =========== =========== The accompanying notes are an integral part of the financial statements. F-5 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Gundaker/Jordan American Holdings, Inc. and Subsidiaries ("JAHI") ("the Company") was incorporated in Florida in May 1989 under the name Jordan American Holdings, Inc. and subsequently changed its name to Gundaker/Jordan American Holdings, Inc. JAHI has conducted its investment advisory business under the name of Equity Assets Management. In 2001, JAHI announced the formation of a wholly-owned subsidiary named Equity Assets Management, Inc. ("EAM") 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 (which was dissolved in 2002) with its customers located mainly in the United States. EAM is registered as an investment advisor under the Investment Advisor Act of 1940. The Company also owns 100% of the issued and outstanding common stock of IMPACT Financial Network, Inc. ("IFNI"). EAM's customer investment transactions are primarily brokered through IFNI, a registered broker-dealer in securities acting as a non-clearing introducing broker. In addition, the Company owned 100% of IMPACT Administrative Services, Inc. ("IASI") until January 2003 and IMPACT Tax and Business Services, Inc. ("ITABS") until December 2002, at which times these businesses were disposed (see Notes 2, 5, and 9). IASI provided operational and administrative support to Impact Management Investment Trust. ITABS, provided 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 in consolidation. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DEPOSIT WITH CLEARING BROKER The Company has entered into an agreement with a clearing broker that requires a minimum restricted cash balance of $25,000. Due to the restricted nature of the cash deposit, it is not considered a cash equivalent for financial reporting purposes. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost and depreciated using the straight-line method, over estimated useful lives of three to seven years. Leasehold improvements are amortized over the lease term. Software is amortized using the straight-line method over three years. F-6 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LONG-LIVED ASSETS Potential impairment of long-lived assets is reviewed whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Impairment is recognized when the estimated future net cash flows (undiscounted and without interest charges) from the asset are less than the carrying amount of the asset. REVENUE RECOGNITION Commission income is recognized on a settlement date basis, which does not differ materially from the trade date basis of accounting. Interest income is accrued and credited to income based on the principal amount outstanding. Fixed investment advisory fees received in advance are deferred and amortized into income over the period in which services are performed. Investment advisory fees based on a percentage of the annual increase in the market value of a customer's portfolio (including interest and dividends) are recognized at the contract anniversary date. Fees due to sales representatives are recognized when such fees are earned. STATEMENTS OF CASH FLOWS For cash flow purposes, the Company considers cash and temporary investments with original maturities of three months or less, to be cash and cash equivalents. INCOME TAXES Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are limited to amounts considered to be realizable in future periods. EARNINGS PER SHARE Basic earnings per share is determined using net income divided by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Common stock equivalents are not included in the weighted average calculation since their effect would be anti-dilutive. Net loss per common share has been adjusted to reflect preferred stock dividends in arrears of $80,000 and $60,000 for the years ending December 31, 2004 and 2003, respectively. STOCK OPTIONS The Company accounts for stock options under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. The effect on net income or earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation has not been presented as no options were granted and therefore there is no effect for the years ended December 31, 2004 and 2003. F-7 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECLASSIFICATIONS Certain reclassifications have been made to prior year balances to conform to the current year financial statement presentation. RECENT ACCOUNTING PRONOUNCEMENTS In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4". The statement requires abnormal amounts of freight, handling costs, idle facility expense and spoilage to be recognized as current period expenses. This statement will be effective for the Company as of January 1, 2006. The adoption of this statement is not expected to have a significant impact on the Company's results of operations, financial position or cash flows. In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment". This statement replaces SFAS No. 123, "Accounting for Stock Based Compensation" and supersedes ABP Opinion No. 25, "Accounting for Stock Issued to Employees". It establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. The statement requires companies to expense the fair value of employee stock options and other equity-based compensation, eliminating the alternative to use APB No. 25's intrinsic value method. The statement will be effective for the Company as of January 1, 2006. Management is evaluating the impact the adoption of SFAS No. 123R will have on the Company's financial position and results of operations. Future cash flows of the Company will not be impacted by the adoption of this standard. In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, and Amendment of APB No. 29". This statement amends and clarifies financial accounting for nonmonetary exchanges by requiring that most exchanges of productive assets be accounted for at fair value. With certain exceptions, companies can no longer account for nonmonetary exchanges at book value with no gain or loss recognized. This statement will be effective of January 1, 2006, and may impact the Company's consolidated financial position and results of operations in future periods if such nonmonetary exchanges occur. 2. DEPOSIT LIABILITIES The Company formed Impact Management Investment Trust ("the Trust"), which was registered under the Investment Company Act of 1940 as a diversified, open-end management investment company (mutual fund). EAM was the investment advisor of the Trust and IFNI was the primary distributor of the Trust. In 2002, the Company entered into a transaction to sell the Trust to the Trust's sub advisor, Schneider Capital Management, Inc. ("Schneider"), and received a deposit on the sale of $125,000. The negotiations ceased and Schneider decided against purchasing the Trust. The Company subsequently liquidated the Trust in 2002. The deposit liability is due on demand and bears interest at 8% per annum. The outstanding balance includes accrued interest of $26,333 and $16,333 at December 31, 2004 and 2003, respectively. At December 31, 2004 and 2003, JAHI held a $15,000 deposit from an individual for an anticipated future stock subscription by the Company. F-8 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENT, CONVERTIBLE DEBENTURE The Company owned a 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, has a conversion price of $1.25 per share and bears interest at a rate of 14% per annum. During the year ended December 31, 2004, the Company sold $150,000 of the debenture and transferred $200,000 of the debenture to the majority stockholder in reduction of amount owed by the Company to the stockholder. During the year ended December 31, 2003, the Company sold $150,000 of the debenture. At December 31, 2003 the Company's investment in the debenture was $350,000. In connection with the purchase of the debenture, the Company also acquired, at no cost, warrants to subscribe for the purchase from BRAI of 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 that the BRAI warrants have no value at December 31, 2004 and 2003. This determination was made considering primarily the current value of the underlying common stock and the current illiquidity of the warrants. The cost carrying value of the convertible debenture 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. 4. STOCKHOLDERS' EQUITY At December 31, 2004 and 2003, 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 the Company's former president to purchase 44,545 units at a price of $2.58 per unit expiring through January 8, 2011. Each unit contains 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. 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 and one share of common stock to a customer of EAM in a private placement offering in 1993. 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. F-9 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. STOCKHOLDERS' EQUITY (CONTINUED) On December 31, 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 Arrearage"). 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 has 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. The New Preferred Stock is convertible at the option of the holder into fully paid and non-assessable shares of common stock at the rate of one share of common stock for each $3.50 in face amount of the New Preferred Stock. Unpaid and accrued dividends shall be credited to the conversion price. In August 2001, the Company issued 3,100,000 shares of common stock in exchange for 1,500,000 shares of the New Preferred Stock. In addition, the preferred stock agreement was modified to provide that the dividend rate for 2001 and 2002 was to be 5.25%. At December 31, 2004 and 2003, cumulative dividends in arrears totaled $297,500 and $217,500, respectively. 5. RELATED-PARTY TRANSACTIONS At December 31, 2003, the Company had a receivable from the majority stockholder of $29,998. The receivable was unsecured, bore interest at 10% per annum, and was due on demand. During 2004, the stockholder repaid the receivable and advanced the Company a net amount of $347,710, including $450,000 in legal fees and other costs incurred and paid on the Company's behalf. These amounts are included in operating expenses for the year ended December 31, 2004, as the Company approved the reimbursement of these expenses during 2004. The Company transferred the remaining $200,000 in investment, debentures to the stockholder in partial repayment of the net advances. At December 31, 2004 outstanding advances from the stockholder amounted to $117,712. The advances are unsecured, non-interest bearing and due on demand. On November 30, 2000, the Company purchased certain assets of a tax preparation and tax planning services company from an officer and shareholder of JAHI valued at $105,100 as determined by the Board of Directors of the Company. The Company issued 100,500 stock options valued at $20,100 as part of the purchase price. The subsidiary that purchased these assets was discontinued during 2002 (see Note 9). F-10 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. INCOME TAXES As of December 31, 2004 and 2003, the Company had approximately $4,644,000 and $4,132,000, respectively, of net operating loss carryforwards, expiring through the year 2024. A large portion of the net operating loss carryforwards were incurred prior to the 1991 reverse acquisition of JAHI and its subsidiaries and, as such, management of the Company anticipates restrictions on the use of these carryforwards due to provisions of the Internal Revenue Code. As of December 31, 2004 and 2003, the Company also had net capital loss carryforwards of approximately $597,000, which expire through 2007. The estimated deferred tax asset related to the net operating loss and capital loss carryforwards amounted to approximately $1,953,000 and $1,762,000 at December 31, 2004 and 2003, respectively. Based upon the Company's current operating losses and the uncertainty as to future taxable income and the realization of the deferred tax assets, a full valuation allowance has been provided for the Company's net deferred tax assets as of December 31, 2004 and 2003. 7. STOCK OPTIONS During August 1991, the Board of Directors of JAHI approved the Long-Term Incentive Plan ("the Plan"), a stock option plan. The aggregate number of shares of common stock that may be granted by the Company will not exceed a maximum of 2,000,000 shares during the period of the Plan. The option price per share shall be at least the fair market value (as determined by the Finance/Compensation Committee or, in lieu thereof, the Board of Directors) of the common stock on the date the stock option is granted. If at any time a stock option is granted, an employee owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its subsidiaries, then the terms of the stock option shall specify that the option price shall be at least 110% of the fair market value of the stock subject to the option, and shall be exercisable for up to five years from the date of the grant. In addition, the Plan provides for the mandatory grant of options to directors on a yearly basis commencing March 1, 1993. If for any reason a change in control of the Company occurs, or under the sole discretion of the Finance/Compensation Committee or, in lieu thereof, the Board of Directors, all shares subject to the stock option shall immediately become earned and exercisable. The Board of Directors may discontinue the Plan at any time, and may amend it from time to time. Certain amendments require stockholders' approval. F-11 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. STOCK OPTIONS (CONTINUED) The Company has also issued certain stock options outside of the Plan. Information with respect to all options is as follows: [Enlarge/Download Table] Long-term Weighted Incentive Other Exercise Average Plan Options Total Price Range Exercise Price --------- ------- --------- ------------- -------------- Balances at December 31, 2002 416,250 237,200 653,450 $0.13 - 2.00 $ 1.92 Granted - - - - - Forfeited and expired (17,500) (5,700) (23,200) 0.13 - 1.56 - ------- ------- ------- ------------ ------ Balances at December 31, 2003 398,750 231,500 630,250 0.13 - 2.00 0.83 Granted - - - - - Forfeited and expired (51,500) (47,500) (99,000) 0.75 - 2.00 - ------- ------- ------- ------------ ------ Balances at December 31, 2004 347,250 184,000 531,250 $0.13 - 2.00 $ 0.83 ======= ======= ======= ============ ====== Number of options exercisable at December 31, 2003 398,750 231,500 630,250 $0.13 - 2.00 $ 0.83 ======= ======= ======= ============ ====== Number of options exercisable at December 31, 2004 347,250 184,000 531,250 $0.13 - 2.00 $ 0.83 ======= ======= ======= ============ ====== At December 31, 2004 and 2003, 1,533,750 share options were available for future grant under the Plan. The following table summarizes additional information regarding all stock options and warrants outstanding at December 31, 2004: [Download Table] * Weighted- * Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average Exercise December 31, Contractual Exercise December 31, Exercise Prices 2003 Life Price 2003 Price ------------ -------------- ----------- -------- -------------- -------- $0.13 - 0.38 320,500 3.6 years $ 0.23 320,500 $ 0.24 0.50 - 1.00 1,282,500 4.5 years 0.57 1,282,500 0.57 1.02 - 1.50 141,750 1.1 years 1.23 141,750 1.23 1.56 - 2.58 44,545 1.9 years 2.19 44,545 2.19 --------- --------- 1,789,295 1,789,295 ======== ======== * Includes 1,258,045 stock options and warrants discussed in Notes 4 and 5. 8. LEASE EXPENSE The Company leases office space from unrelated entities under month-to-month agreements. Total rent expense for the years ended December 31, 2004 and 2003 was approximately $7,825 and $19,483 (net of sublease rentals of $7,200 for 2003), respectively. F-12 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. DISCONTINUED OPERATIONS During the year ended December 31, 2002, an officer and shareholder of the Company who was in charge of ITABS discontinued his employment with the Company. The Company originally purchased ITABS from this individual in November 2000 for $105,100 in cash and stock options of the Company (see Note 5). When this officer left the Company, the Company ceased its activities in this subsidiary. In addition, during the year ended December 31, 2003, the Company discontinued the operation of its subsidiary, IASI. IASI had no operations during 2003 and at the beginning of 2003, had liabilities in excess of its assets of $900. During 2003, the Company wrote off the assets held for disposal in ITABS of approximately $63,000 and incurred approximately $24,000 of other costs in disposing of the subsidiaries. 10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONTINGENCIES In the normal course of business, the Company's client activities ("clients") 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 looses 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 has assets on deposit with its clearing broker which are subject to credit risk. In the event of the broker's insolvency, recovery of Company assets on deposit may be limited to account insurance or other protection afforded such deposits. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments, including cash and cash equivalents, receivables, other assets, payables, and other liabilities, are carried at amounts that approximate fair value due to the short-term nature of those instruments. 12. REGULATORY REQUIREMENTS IFNI is a registered broker-dealer in securities with the Securities and Exchange Commission and, accordingly, is subject to Rule 15c3-1 of the Securities Exchange Act of 1934, as amended ("the net capital rule"). Pursuant to the net capital rule, IFNI is required to maintain a minimum net capital, as defined under such rule. F-13 Gundaker/Jordan American Holdings, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS (CONTINUED) 12. REGULATORY REQUIREMENTS (CONTINUED) At December 31, 2004, IFNI had net capital and net capital requirements of $20,010 and $5,000, respectively. The Company's net capital ratio (aggregate indebtedness to net capital) was 0.55 to 1. According to Rule 15c3-1, the Company's net capital ratio shall not exceed 15 to 1. Therefore, on a consolidated basis as of December 31, 2004 and 2003, net assets of $5,000 are not available for any purpose other than meeting IFNI's net capital requirements. 13. GOING CONCERN The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations that raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are to raise capital through the issuance of common stock and/or selling certain subsidiaries or assets of the Company. The accompanying consolidated financial statements do not include any adjustments relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company discontinue operations. F-14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. GUNDAKER/JORDAN AMERICAN HOLDINGS, INC. (Registrant) Dated: June 24, 2005 By: /s/ W. Neal Jordan ------------------------------------------ W. Neal Jordan, Chief Executive Officer, President, Chief Investment Officer, Chief Financial Officer, and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated. Dated: June 24, 2005 By: /s/ W. Neal Jordan ----------------------------------------- W. Neal Jordan, Chief Executive Officer, President, Chief Investment Officer, Chief Financial Officer, and Secretary

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10KSB’ Filing    Date    Other Filings
12/31/11
1/8/11
6/5/10
12/31/06
1/1/06
Filed on:6/29/0510KSB,  10QSB
6/24/05
6/3/058-K
3/1/05
For Period End:12/31/04
12/31/0310KSB
3/1/03
12/31/0210KSB,  DEF 14A,  NT 10-K,  PRE 14A
11/2/02
12/31/0110KSB,  NT 10-K
6/4/01
6/1/01
5/22/01DEF 14A,  PRE 14A
12/31/0010KSB40
11/30/00
8/1/95
3/1/93
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